Ashford Hospitality Prime, Inc. (Form: 10-K, Received: 03/16/2015 16:39:05)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K



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

For the fiscal year ended December 31, 2014



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

For the transition period from to

Commission file number: 001-35972

ASHFORD HOSPITALITY PRIME, INC.

(Exact name of registrant as specified in its charter)



Maryland		46-2488594
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)
14185 Dallas Parkway, Suite 1100 Dallas, Texas		75254
(Address of principal executive offices)		(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):



Large accelerated filer o		Accelerated filer þ

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

As of June 30, 2014 , the aggregate market value of 24,532,002 shares of the registrant’s common stock held by non-affiliates was approximately $420,969,000 .

As of March 12, 2015 , the registrant had 24,023,099 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement pertaining to the 2015 Annual Meeting of Stockholders are incorporated herein by reference into Part III of this Form 10-K.

ASHFORD HOSPITALITY PRIME, INC.

YEAR ENDED DECEMBER 31, 2014

INDEX TO FORM 10-K



		Page

PART I

Item 1.	Business	4

Item 1A.	Risk Factors	42

Item 1B.	Unresolved Staff Comments	66

Item 2.	Properties	67

Item 3.	Legal Proceedings	67

Item 4.	Mine Safety Disclosures	67

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	68

Item 6.	Selected Financial Data	71

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	72

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	97

Item 8.	Financial Statements and Supplementary Data	97

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	129

Item 9A.	Controls and Procedures	129

Item 9B.	Other Information	129

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	129

Item 11.	Executive Compensation	129

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	130

Item 13.	Certain Relationships and Related Transactions, and Director Independence	130

Item 14.	Principal Accounting Fees and Services	130

PART IV

Item 15.	Financial Statement Schedules and Exhibits	131

SIGNATURES

As used in this Annual Report on Form 10-K, unless the context otherwise indicates, the references to “we,” “us,” “our”, the “Company” or “Ashford Prime” refer to Ashford Hospitality Prime, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Prime Limited Partnership, a Delaware limited partnership, which we refer to as “our operating partnership” or “Ashford Prime OP.” “Ashford Trust” or “AHT” refer to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Ashford LLC” refers to Ashford Hospitality Advisors LLC, a Delaware limited liability company and a wholly-owned subsidiary of Ashford Inc., an affiliate of Ashford Trust “Remington” refers to Remington Lodging and Hospitality LLC, a Delaware limited liability company, a property management company owned by Mr. Monty J. Bennett, our chief executive officer and chairman, and his father, Mr. Archie Bennett, Jr., chairman emeritus of Ashford Trust. “Our TRSs” refers to our taxable REIT subsidiaries, including Ashford Prime TRS Corporation, a Delaware corporation, which we refer to as “Ashford Prime TRS,” and its subsidiaries, together with the two taxable REIT subsidiaries that lease our two hotels held in a consolidated joint venture and are wholly-owned by the joint venture.

This Annual Report on Form 10-K contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel® and Accor®.

FORWARD-LOOKING STATEMENTS

Throughout this Annual Report on Form 10-K and documents incorporated herein by reference, we make forward-looking statements that are subject to risks and uncertainties. Forward looking statements are generally identifiable by use of forward looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:


•	our business and investment strategy;


•	our projected operating results and dividend rates;


•	our ability to obtain future financing arrangements;


•	our understanding of our competition;


•	market trends;


•	projected capital expenditures;


•	anticipated acquisitions; and


•	the impact of technology on our operations and business.

Forward looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward looking statements are based on reasonable assumptions, taking into account all information currently available to us, our actual results and performance could differ materially from those set forth in our forward looking statements. Factors that could have a material adverse effect on our forward looking statements include, but are not limited to:


•	the factors referenced, including those set forth under the section captioned “Item 1. Business,” “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations;”


•	general volatility of the capital markets, the general economy or the hospitality industry, whether the result of market events or otherwise;


•	our ability to deploy the capital contributions we received in the spin-off and raise additional capital at reasonable costs to repay debts, invest in our properties and fund future acquisitions;


•	unanticipated increases in financing and other costs, including a rise in interest rates;


•	the degree and nature of our competition;


•	actual and potential conflicts of interest with Ashford Trust, Ashford LLC, Ashford Inc., Remington, our executive officers and our non-independent directors;


•	changes in personnel of Ashford LLC or the lack of availability of qualified personnel;


•	changes in governmental regulations, accounting rules, tax rates and similar matters;


•	legislative and regulatory changes, including changes to the Internal Revenue Code and related rules, regulations and interpretations governing the taxation of real estate investment trusts (“REIT”); and


•	limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes.

When considering forward looking statements, you should keep in mind the risk factors and other cautionary statements in this Annual Report on Form 10-K. The matters summarized under “Item 1A. Risk Factors”, and elsewhere, could cause our actual results and performance to differ significantly from those contained in our forward looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward looking statements, which reflect our views as of the date of this Annual Report on Form 10-K. Furthermore, we do not intend to update any of our forward looking statements after the date of this Annual Report on Form 10-K to conform these statements to actual results and performance, except as may be required by applicable law.

PART I

Item 1. Business

Our Company

We are an externally-advised Maryland corporation that invests primarily in high revenue per available room (“RevPAR”), luxury, upper-upscale and upscale hotels. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Two times the U.S. national average was $149 for the year ended December 31, 2014 . We have elected to be taxed as a REIT under the Internal Revenue Code beginning in the year ended December 31, 2013. We conduct our business and own substantially all of our assets through our operating partnership, Ashford Prime OP.

We were formed as a Maryland corporation in April 2013 and became a public company on November 19, 2013 when Ashford Trust, a NYSE-listed REIT, completed the spin-off of our company through the distribution of our outstanding common stock to the Ashford Trust stockholders. As of March 12, 2015 , Ashford Trust beneficially owned common units of Ashford Prime OP, representing 15.2% of our company on a fully-diluted basis.

We operate in the direct hotel investment segment of the hotel lodging industry. As of March 12, 2015 , we own interests in ten hotels in six states and the District of Columbia with 3,707 total rooms, or 3,472 net rooms, excluding those attributable to our partner. The hotels in our current portfolio are predominantly located in U.S. gateway markets with favorable growth characteristics resulting from multiple demand generators. We own eight of our hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity.

We are advised by Ashford LLC, a subsidiary of Ashford Inc., and an affiliate of Ashford Trust, through an advisory agreement. All of the hotels in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

Recent Developments

On October 27, 2014, our Board of Directors approved a share repurchase program under which the Company may purchase up to $100 million of the Company’s common stock from time to time. The repurchase program does not have an expiration date. The specific timing, manner, price, amount and other terms of the repurchases is at management’s discretion and depends on market conditions, corporate and regulatory requirements and other factors. The Company is not required to repurchase shares under the repurchase program, and may modify, suspend or terminate the repurchase program at any time for any reason. Under the repurchase program, we repurchased 927,915 shares of our common stock, for approximately $16.1 million , in the year ended December 31, 2014. Subsequent to December 31, 2014, we repurchased 471,064 shares of our common stock, for approximately $8.1 million . As of March 12 , 2015, we had purchased a cumulative 1.4 million shares of our common stock, for approximately $24.2 million since the program’s inception on November 4, 2014.

Our Investment and Growth Strategies

Our principal business objectives are to generate attractive returns on our invested capital and long-term growth in cash flow to maximize total returns to our stockholders. To achieve our objectives, we pursue the following strategies:

Pursue Focused Investment Strategy . Our strategy is to invest in premium branded and high quality independent hotels that are:


•	full-service and urban select-service hotels in the luxury, upper-upscale and upscale segments which are anticipated to generate RevPAR at least twice the average RevPAR for the U.S. lodging industry, as determined by Smith Travel Research, located predominately in U.S. gateway markets;


•	located outside of the U.S. that satisfy the same anticipated RevPAR criteria as our domestic hotels (after any applicable currency conversion), with a primary focus on international gateway markets; and


•	upper-upscale and luxury hotels in U.S. and international resort markets and meeting our stated RevPAR criteria.

We intend to concentrate our investments in markets where we believe there are significant growth opportunities and limited risk of additional supply. In determining anticipated RevPAR for a particular asset, we may take into account forecasts and other considerations, including without limitation, conversions or repositions of assets, capital plans, brand changes and other factors which may reasonably be forecasted to raise RevPAR after stabilization. Stabilization with respect to a hotel, after the completion of an initiative such as a capital plan, conversion or change of brand name or change of the business mix or other operating characteristics, is generally expected to occur within 12 to 24 months after the completion of the related renovation, reposition or brand change.

In connection with this investment strategy, we frequently evaluate opportunities to acquire additional hotels, either through direct ownership, joint ventures, partnership participations or similar arrangements. We may use cash or issue common units in Ashford Prime OP as currency for a transaction. Some or all of these acquisitions, if completed, may be material to our company, individually or in the aggregate. We may, from time to time, be party to letters of intent, term sheets and other non-binding agreements relating to potential acquisitions. We cannot assure you that we will enter into definitive acquisition agreements with respect to any potential acquisitions.

Active Asset Management Strategy . We rely on Ashford LLC to asset-manage the hotels in our portfolio, and will rely on Ashford LLC to asset-manage any hotel properties we may acquire in the future, to help maximize the operating performance, cash flow and value of each hotel. Asset management is intended to include actively “managing” the third-party property manager and holding them accountable to drive industry leading top line and bottom line operating performance. Ashford LLC aims to achieve this goal by benchmarking each asset’s performance compared to similar hotels within our portfolio. Ashford LLC also closely monitors all hotel operating expenses, as well as third-party vendor and service contracts. If expense levels are not commensurate with the property revenues, Ashford LLC works with the property manager to implement cost cutting initiatives. Ashford LLC is also very active in critiquing and proposing improved strategies for the sales, marketing and revenue management initiatives of the property manager as well as its ability to drive ancillary hotel revenues (for example, spa, food and beverage, parking, and Internet). In addition to supervising and directing the property manager, Ashford LLC works with the brands and management companies to negotiate favorable franchise agreement and property management agreement terms. Ashford LLC also actively participates in brand advisory committee meetings to provide feedback and input on new hotel brand initiatives.

Asset management functions include acquisition, renovation, financing and disposition of assets, operational accountability of managers, budget review, capital expenditures and property-level strategies as compared to the day-to-day management of our hotels, which is performed by our property managers.

Disciplined Capital Allocation Strategy . We intend to pursue a disciplined capital allocation strategy as it relates to the acquisition, operation, disposition and financing of assets in our portfolio and those that we may acquire in the future. Ashford LLC utilizes its extensive industry experience and capital markets expertise to influence the timing of capital deployment and recycling, and we may selectively sell hotels that are no longer consistent with our investment strategy or as to which returns appear to have been maximized. To the extent we sell hotels, we generally intend to redeploy the capital into investment opportunities that we believe will achieve higher returns.

Our Hotels

As of March 12, 2015 , we own interests in a high-quality, geographically diverse portfolio of ten hotels located in six states and the District of Columbia comprising 3,707 total rooms, or 3,472 net rooms, excluding those attributable to our joint venture partner. All of the hotels in our portfolio are located in top U.S. markets that exhibit strong growth characteristics resulting from multiple demand generators. Eight of the ten hotels in our portfolio operate under premium brands affiliated with Marriott International, Inc. (“Marriott”) and Hilton Worldwide, Inc. (“Hilton”). The material terms of these agreements are described below in “—Certain Agreements—Hotel Management Agreements.” The remaining two hotels are managed by Accor Business and Leisure Management, LLC (“Accor”) and Remington. Each of our properties is encumbered by loans as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness.” For 2014 , approximately 71% of the rooms revenue for the ten -hotel portfolio we owned at December 31, 2014 , was generated by transient business, approximately 27% was group sales and 2% was contract sales.

The following tables set forth additional information for our hotels (dollars in thousands, except ADR and RevPAR) for the year ended December 31, 2014 :



					Year Ended December 31, 2014
Hotel Property	Location	Total Rooms	% Owned		Occupancy		ADR		RevPAR		Hotel EBITDA ⁽¹⁾
Hilton La Jolla Torrey Pines ⁽²⁾	La Jolla, CA	394	75	%	84.50	%	$	178.35	$	150.71	$	10,942
The Capital Hilton	Washington, D.C.	547	75	%	84.76	%	219.56		186.11		15,183
Marriott Plano Legacy Town Center	Plano, TX	404	100	%	69.12	%	178.78		123.57		9,876
Seattle Marriott Waterfront	Seattle, WA	358	100	%	79.67	%	240.56		191.66		13,016
Courtyard San Francisco Downtown	San Francisco, CA	405	100	%	89.89	%	255.75		229.90		13,065
Courtyard Seattle Downtown	Seattle, WA	250	100	%	80.35	%	179.94		144.59		6,209
Courtyard Philadelphia Downtown	Philadelphia, PA	499	100	%	79.40	%	166.01		131.81		11,312
Renaissance Tampa International Plaza ⁽³⁾	Tampa, FL	293	100	%	80.38	%	161.82		130.07		5,649
Sofitel Chicago Water Tower	Chicago, IL	415	100	%	84.21	%	234.93		197.84		11,334
Pier House Resort	Key West, FL	142	100	%	85.18	%	374.92		319.37		6,701
Total / Weighted Average ⁽⁴⁾		3,707			81.62	%	$	209.96	$	171.37	$	103,287

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of Hotel EBITDA by property. We own the Hilton La Jolla Torrey Pines and The Capital Hilton in a joint venture. The Hotel EBITDA represents the total amount for each hotel, not our pro rata amount based on our ownership percentage.


⁽²⁾	Subject to a ground lease that expires in 2043.


⁽³⁾	Subject to a ground lease that expires in 2080.


⁽⁴⁾	Calculated on a portfolio basis for the ten hotels in our portfolio as of December 31, 2014 .

Hilton La Jolla Torrey Pines, La Jolla, CA

We own a 75% partnership interest in Ashford HHC Partners III LP, which is subject to a ground lease in the Hilton La Jolla Torrey Pines expiring in 2043. CHH Torrey Pines Hotel Partners LP, a subsidiary of Ashford HHC Partners III LP, leases the Hilton La Jolla Torrey Pines hotel to CHH Torrey Pines Tenant Corp. The remaining 25% partnership interest in Ashford HHC Partners III LP is owned by Hilton. The hotel opened in 1989 and is comprised of 394 guest rooms, including 229 king rooms, 153 queen/queen rooms, 10 one-bedroom suites and two parlor suites. Approximately $21.8 million was spent on capital expenditures since the acquisition of the property by Ashford HHC Partners III LP in 2007, which included lobby, restaurant and room renovations.

The hotel is located on the famous Torrey Pines Golf Course, with newly renovated guest rooms. Each room has a private balcony or patio with ocean, garden or golf course views. In addition to the attraction of the golf course, the hotel is located near the Torrey Pines State Nature Reserve with access to a number of outdoor activities, and numerous hospitals and research facilities are located near the hotel.

Additional property highlights include:


•	Meeting Space : Approximately 60,000 square feet of meeting space, including:


•	26,000 square feet of function space in 21 rooms to accommodate up to 1,500 people;


•	over 17,000 square feet of outdoor function space; and


•	the 6,203 square foot Fairway Pavilion Ballroom overlooking the 18th fairway of Torrey Pines Golf Course South Course.


•	Food and Beverage : The Hilton La Jolla Torrey Pines hosts the Torreyana Grill, an all-purpose three-meal restaurant with 295 seats and the Horizons Lounge with 60 seats.


•	Other Amenities : The hotel has a fitness center, outdoor pool, outdoor whirlpool, tennis courts, basketball court, business center, valet parking and a gift shop.

Location and Access. The hotel is located near the Pacific Ocean in a secluded area of the famous Torrey Pines golf course. The hotel is approximately 15 miles from the San Diego International Airport—Lindbergh Field.

Operating History. The following table shows certain historical information regarding the Hilton La Jolla Torrey Pines since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	394			394			394			394			394
Average Occupancy	84.5		%	78.2		%	75.8		%	75.9		%	73.0		%
ADR	$	178.35		$	168.43		$	166.41		$	157.27		$	153.44
RevPAR	$	150.71		$	131.76		$	126.19		$	119.39		$	111.96

Selected Financial Information. The following tables show certain selected financial information regarding the Hilton La Jolla Torrey Pines since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	36,393		$	31,767		$	30,934
Rooms Revenue	21,673			18,949			18,197
Hotel EBITDA ⁽¹⁾	10,942			8,992			8,898
EBITDA Margin	30.1		%	28.3		%	28.8		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property. We own the Hilton La Jolla Torrey Pines in a joint venture. The Hotel EBITDA amount for this hotel represents the total amount for this hotel, not our pro rata amount based on our 75% ownership percentage.

The Capital Hilton, Washington, D.C.

We own a 75% partnership interest in Ashford HHC Partners III LP, which has a fee simple interest in The Capital Hilton. CHH Capital Hotel Partners LP, a subsidiary of Ashford HHC Partners III LP, leases the Capital Hilton to CHH Capital Tenant Corp. The remaining 25% partnership interest in Ashford HHC Partners III LP is owned by Hilton. The hotel opened in 1943 and is comprised of 547 guest rooms, including 256 king rooms, 94 queen/queen rooms, 83 double/double rooms, 80 single queen rooms and 34 suites. Approximately $39.7 million was spent on capital expenditures since the acquisition of the property by Ashford HHC Partners III LP in 2007, which included renovations to the guest rooms, public space, meeting rooms, lobby and restaurant.

The hotel is strategically located at 16th and K Street, in close proximity to the White House. The hotel has significant historical connotations and is located near numerous Washington, D.C. attractions including the National Mall.

Additional property highlights include:


•	Meeting Space : Approximately 30,000 square feet of contiguous meeting space located on the same floor.


•	Food and Beverage : The Capital Hilton hosts (i) the Northgate Grill, a full service restaurant with 130 seats and (ii) the Statler Lounge, a lobby bar with 58 seats.


•	Other Amenities : The hotel has the MINT Health Club and Day Spa, gift shop, business center, valet parking and an executive lounge.

Location and Access . The hotel is conveniently located in the center of Washington, D.C., north of the White House and near the National Mall and numerous tourist attractions. By virtue of its size and clear signage, it is visible from both directions on 16th street. The hotel is approximately five miles from Ronald Reagan Washington National Airport.

Operating History . The following table shows certain historical information regarding The Capital Hilton hotel since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	547			544			544			544			544
Average Occupancy	84.8		%	83.7		%	82.3		%	82.2		%	70.8		%
ADR	$	219.56		$	216.40		$	213.93		$	212.17		$	210.71
RevPAR	$	186.11		$	181.03		$	176.09		$	174.16		$	149.24

Selected Financial Information . The following tables show certain selected financial information regarding The Capital Hilton hotel since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	50,920		$	50,790		$	49,162
Rooms Revenue	37,060			35,945			35,060
Hotel EBITDA ⁽¹⁾	15,183			15,603			15,285
EBITDA Margin	29.8		%	30.7		%	31.1		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property. We own The Capital Hilton in a joint venture. The Hotel EBITDA amount for this hotel represents the total amount for this hotel, not our pro rata amount based on our 75% ownership percentage.

Marriott Plano Legacy Town Center, Plano, TX

Our subsidiary, Ashford Plano-M LP, owns a fee simple interest in the Marriott Plano Legacy Town Center. The hotel opened in 2001 and is comprised of 404 guestrooms, including 220 king rooms, 136 double/double room, and 48 suites. Approximately $12.4 million was spent on capital expenditures since acquisition by Ashford Trust in 2007, which included major suite room, full meeting room and corridor renovations.

The hotel is located in west Plano in a prime location near high occupancy office buildings and Legacy Town Center, a master planned community featuring urban style housing, retail, dining and office space. The Shops at Legacy Town Center provide a “main street” style shopping experience with numerous patio dining options.

Additional property highlights include:


•	Meeting Space : Approximately 32,000 square feet of meeting space, including foyer space.


•	Food and Beverage : The Marriott Plano Legacy Town Center hosts (i) the Copper Bottom Grill, a full-service restaurant open for breakfast and lunch with 120 seats and (ii) Chaddick’s, a lounge offering food options after 2:00 p.m., with 103 seats, including outdoor seating.


•	Other Amenities : The hotel has a fitness center, outdoor pool, whirlpool and sauna, a business center, valet parking and gift shop.

Location and Access . The hotel is conveniently located in west Plano near Legacy Town Center, just off of the North Dallas Tollway. The hotel is approximately 23 miles from the Dallas/Fort Worth International Airport.

Operating History . The following table shows certain historical information regarding the Marriott Plano Legacy Town Center hotel since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	404			404			404			404			404
Average Occupancy	69.1		%	66.4		%	66.4		%	63.2		%	61.8		%
ADR	$	178.78		$	173.95		$	162.59		$	160.48		$	148.06
RevPAR	$	123.57		$	115.49		$	107.91		$	101.42		$	91.45

Selected Financial Information . The following tables show certain selected financial information regarding the Marriott Plano Legacy Town Center hotel since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	28,879		$	25,914		$	25,330
Rooms Revenue	18,222			17,171			15,869
Hotel EBITDA ⁽¹⁾	9,876			8,711			8,392
EBITDA Margin	34.2		%	33.6		%	33.1		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Seattle Marriott Waterfront, Seattle, WA

Our subsidiary, Ashford Seattle Waterfront LP, owns a fee simple interest in the Seattle Marriott Waterfront hotel. The hotel opened in 2003 and is comprised of 358 guestrooms, including 188 king rooms, 155 double/double rooms and 15 suites. Approximately $7.4 million was spent on capital expenditures since acquisition by Ashford Trust in 2007, which included a soft goods guestrooms and ballroom renovation.

The hotel is located on the Seattle Waterfront near Pike Place Market, a public market for locally produced food featuring unique shops. The hotel is also located near the Pier 66 cruise terminal, positioning it to take advantage of any cruise departures.

Additional property highlights include:


•	Meeting Space : Approximately 11,300 square feet of meeting space.


•	Food and Beverage : The Seattle Marriott Waterfront hosts (i) Hook and Plow, a full-service restaurant with 128 seats and (ii) Trolley Café and gift shop.


•	Other Amenities : The hotel has a fitness center, indoor/outdoor connected pool, whirlpool, business center, guest laundry facilities, valet parking and gift shop.

Location and Access . The hotel is conveniently located on the Seattle waterfront, just off of Highway 99/ Alaskan Way Viaduct. The hotel is approximately 15 miles from the Seattle/Tacoma International Airport.

Operating History . The following table shows certain historical information regarding the Seattle Marriott Waterfront hotel since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	358			358			358			358			358
Average Occupancy	79.7		%	77.8		%	77.7		%	74.8		%	73.4		%
ADR	$	240.56		$	219.09		$	200.34		$	189.63		$	178.96
RevPAR	$	191.66		$	170.45		$	155.64		$	141.92		$	131.27

Selected Financial Information . The following tables show certain selected financial information regarding the Seattle Marriott Waterfront hotel since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	32,104		$	29,635		$	27,195
Rooms Revenue	25,044			22,456			20,282
Hotel EBITDA ⁽¹⁾	13,016			11,815			10,521
EBITDA Margin	40.5		%	39.9		%	38.7		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Courtyard San Francisco Downtown, San Francisco, CA

Our subsidiary, Ashford San Francisco II LP, owns a fee simple interest in the Courtyard San Francisco Downtown. The hotel opened in 2001 and is comprised of 405 guestrooms, including 206 king rooms, 168 queen/queen room and 31 suites. Approximately $6.5 million was spent on capital expenditures since acquisition by Ashford Trust in 2007, which included a restaurant renovation and a guestroom soft goods renovation.

The hotel is located conveniently downtown in the heart of the SOMA district of San Francisco. The hotel is located near numerous businesses and attractions, including the Moscone Convention Center, AT&T Park, Union Square and the Metreon Complex.

Additional property highlights include:


•	Meeting Space : Approximately 9,900 square feet of meeting space.


•	Food and Beverage : The Courtyard San Francisco Downtown hosts (i) Whispers Bar and Grill, a dinner only restaurant with 50 seats, (ii) Jasmine’s, a breakfast only restaurant with 100 seats and (iii) a Starbucks coffee shop.


•	Other Amenities : The hotel has a fitness center, indoor pool and whirlpool, valet parking and an outdoor courtyard.

Location and Access . The hotel is located in downtown San Francisco and is easily accessible from Interstate 80. The hotel is approximately 14 miles from the San Francisco International Airport.

Operating History . The following table shows certain historical information regarding the Courtyard San Francisco Downtown since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	405			405			405			405			405
Average Occupancy	89.9		%	88.4		%	85.4		%	86.0		%	82.9		%
ADR	$	255.75		$	226.92		$	206.95		$	183.21		$	160.68
RevPAR	$	229.90		$	200.58		$	176.66		$	157.52		$	133.24

Selected Financial Information . The following tables show certain selected financial information regarding the Courtyard San Francisco Downtown since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	39,148		$	34,667		$	30,233
Rooms Revenue	33,984			29,895			26,043
Hotel EBITDA ⁽¹⁾	13,065			11,937			10,135
EBITDA Margin	33.4		%	34.4		%	33.5		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Courtyard Seattle Downtown, Seattle, WA

Our subsidiary, Ashford Seattle Downtown, owns a fee simple interest in the Courtyard Seattle Downtown. The hotel opened in 1999 and is comprised of 250 guestrooms, including 175 king rooms, 73 double/double rooms and two suites. Approximately $5.1 million was spent on capital expenditures since acquisition by Ashford Trust in 2007, which included guestrooms and restaurant renovations.

The hotel is located on Lake Union, with beautiful water views and access to numerous outdoor activities. The hotel is also located near the Space Needle, Seattle Center, Key Arena and Pacific Science Center, as well as numerous corporate offices including Amazon’s corporate headquarters and campus.

Additional property highlights include:


•	Meeting Space : Approximately 2,300 square feet of meeting space.


•	Food and Beverage : The Courtyard Seattle Downtown hosts (i) Regatta View Restaurant, an all-purpose restaurant open for breakfast and dinner with 146 seats and (ii) the Lobby Bar and Grill, with 96 seats.


•	Other Amenities : The hotel has a fitness center, indoor pool and whirlpool, a sundries shop, guest laundry facilities, business center and a covered parking garage.

Location and Access . The hotel is located in downtown Seattle on the Western Shore of Lake Union on Westlake Avenue. The hotel is accessible from Interstate 5 and has easy access to the Seattle streetcar system and monorail. The hotel is approximately 17 miles from the Seattle-Tacoma International Airport.

Operating History . The following table shows certain historical information regarding the Courtyard Seattle Downtown since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	250			250			250			250			250
Average Occupancy	80.4		%	76.0		%	72.0		%	69.9		%	66.8		%
ADR	$	179.94		$	160.83		$	148.58		$	139.81		$	133.01
RevPAR	$	144.59		$	122.16		$	107.02		$	97.68		$	88.89

Selected Financial Information . The following tables show certain selected financial information regarding the Courtyard Seattle Downtown since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	15,339		$	13,129		$	11,423
Rooms Revenue	13,194			11,239			9,739
Hotel EBITDA ⁽¹⁾	6,209			5,413			4,860
EBITDA Margin	40.5		%	41.2		%	42.5		%

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⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Courtyard Philadelphia Downtown, Philadelphia, PA

Our subsidiary, Ashford Philadelphia Annex LP, owns a fee simple interest in the Courtyard Philadelphia Downtown. The hotel opened in 1999 and is comprised of 499 guestrooms, including 238 king rooms, 124 queen/queen rooms, 77 double/double rooms and 60 suites. Approximately $21.7 million was spent on capital expenditures since acquisition in 2007, which included a lobby bistro renovation and extensive guest rooms, bathrooms, suites and hallways renovation.

The hotel is located in the center of Philadelphia’s downtown business district, across the street from city hall and a block away from the Philadelphia Convention Center. The hotel is a historic landmark itself, on the national register of historic places, and is convenient to the historical district, the University of Pennsylvania and Independence Hall.

Additional property highlights include:


•	Meeting Space : Approximately 11,000 square feet of meeting space.


•	Food and Beverage : The Courtyard Philadelphia Downtown hosts (i) Nineteen 26, an all-purpose restaurant and (ii) a Starbucks coffee shop.


•	Other Amenities : The hotel has a fitness center, sundries shop/market, indoor pool and whirlpool, business center, guest laundry facilities, valet parking and gift shop.

Location and Access . The hotel is located in downtown Philadelphia and is accessible from Interstate 636. The hotel’s corner location and clear signage make it easily visible from both directions on Juniper Street. The hotel is approximately 10 miles from the Philadelphia International Airport.

Operating History . The following table shows certain historical information regarding the Courtyard Philadelphia Downtown since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	499			498			498			498			498
Average Occupancy	79.4		%	76.6		%	77.9		%	78.1		%	75.7		%
ADR	$	166.01		$	165.02		$	161.20		$	147.17		$	133.53
RevPAR	$	131.81		$	126.33		$	125.56		$	114.92		$	101.09

Selected Financial Information . The following tables show certain selected financial information regarding the Courtyard Philadelphia Downtown since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	29,379		$	28,176		$	27,476
Rooms Revenue	23,997			23,151			22,761
Hotel EBITDA ⁽¹⁾	11,312			10,371			9,805
EBITDA Margin	38.5		%	36.8		%	35.7		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Renaissance Tampa International Plaza, Tampa, FL

We are subject to a ground lease in the Renaissance Tampa International Plaza which expires in 2080. The hotel opened in 2004 and is comprised of 293 guestrooms, including 173 king rooms, 114 double/double rooms and six suites. Approximately $3.9 million was spent on capital expenditures since acquisition by Ashford Trust in 2007, which included a meeting space renovation and a fitness center expansion.

The hotel is located within Tampa International Plaza, which provides many fine dining and retail options immediately adjacent to the hotel. The hotel is also located near the shopping of the Westshore business market and is close to the Tampa International Airport.

Additional property highlights include:


•	Meeting Space : Approximately 12,500 square feet of meeting space.


•	Food and Beverage : The Renaissance Tampa International Plaza hosts (i) the Pelagia Trattoria, an all-purpose restaurant and (ii) Gabriella’s, a lobby bar and restaurant.


•	Other Amenities : The hotel has a fitness center, outdoor pool and whirlpool, a gift shop, valet parking and a business center.

Location and Access . The hotel is in Tampa International Plaza and is approximately two miles from the Tampa International Airport.

Operating History . The following table shows certain historical information regarding the Renaissance Tampa International Plaza since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	293			293			293			293			293
Average Occupancy	80.4		%	77.6		%	78.0		%	75.9		%	73.3		%
ADR	$	161.82		$	153.70		$	154.68		$	149.43		$	139.68
RevPAR	$	130.07		$	119.31		$	120.57		$	113.40		$	102.39

Selected Financial Information . The following tables show certain selected financial information regarding the Renaissance Tampa International Plaza since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	20,727		$	19,397		$	19,435
Rooms Revenue	13,910			12,865			12,860
Hotel EBITDA ⁽¹⁾	5,649			5,065			5,144
EBITDA Margin	27.3		%	26.1		%	26.5		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Sofitel Chicago Water Tower, Chicago, IL

On February 24, 2014, we acquired a fee simple interest in the Sofitel Chicago Water Tower. The hotel opened in 2002 and is comprised of 415 guestrooms, including 32 suites. Approximately $388,000 was spent on capital expenditures since acquisition by us in 2014.

The hotel is located one block west of Chicago’s Magnificent Mile on a 0.6 acre parcel in an area of Chicago known as the Gold Coast. The 32-story building was designed by French architect Jean-Paul Viguier and has views of Lake Michigan and the Chicago skyline. It is located in the heart of the Gold Coast neighborhood, proximate to some of Chicago’s largest demand generators, on the corner of Chestnut Street and Wabash Avenue just across Connors Park from Rush Street.

Additional property highlights include:


•	Meeting Space : Approximately 10,000 square feet of conference space.

•

Food and Beverage : The Sofitel Chicago Water Tower includes (i) the Café des Architectes, a contemporary, Michelin Guide recommended restaurant featuring modern French cuisine; (ii) Le Bar, a modern cocktail lounge; (iii) La Tarrasse, an outdoor patio and lounge serving the cuisine of Café des Architectes; and (iv) Cigale, a restaurant space featuring an exhibition kitchen and frontage on Wabash Avenue overlooking Connors Park (currently utilized only for event space).


•	Other Amenities : The hotel has a fitness center, a business center and valet parking.

Location and Access . The hotel is located one block west of Chicago’s Magnificent Mile on a 0.6 acre parcel in an area of Chicago known as the Gold Coast. The hotel has easy access to the Chicago “L” train and is located approximately 18 miles from O’Hare International Airport and 13 miles from Midway International Airport.

Operating History . The following table shows certain historical information regarding the Sofitel Chicago Water Tower since 2011:



	Year Ended December 31,
	2014			2013			2012 ⁽¹⁾			2011
Rooms	415			415			415			415
Average Occupancy	84.2		%	82.0		%	78.1		%	72.9		%
ADR	$	234.93		$	222.06		$	219.86		$	205.30
RevPAR	$	197.84		$	182.13		$	171.66		$	149.60

__________________


⁽¹⁾	2012 is comprised of the following periods:



	Nov 1-Dec 31, 2012		Jan 1-Oct 31, 2012
ADR	$	211.85	$	221.38
RevPAR	$	159.00	$	174.20

Selected Financial Information . The following table shows certain selected financial information regarding the Sofitel Chicago Water Tower since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012 ⁽¹⁾
Total Revenue	$	36,635		$	40,563		$	39,253
Rooms Revenue	25,534			27,586			26,074
Hotel EBITDA ⁽²⁾	11,334			9,881			9,580
Hotel EBITDA Margin	30.9		%	24.4		%	24.4		%

__________________


⁽¹⁾	2012 is comprised of the following periods:



	Nov 1-Dec 31, 2012			Jan 1-Oct 31, 2012
Total Revenue	$	6.225		$	33.03
Rooms Revenue	4.028			22.049
Hotel EBITDA ⁽²⁾	1.214			8.366
Hotel EBTDA Margin	19.5		%	25.3		%


⁽²⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Pier House Resort, Key West, FL

On March 1, 2014, we acquired a fee simple interest in the Pier House Resort from Ashford Trust pursuant to an option agreement that we entered into in connection with the spin-off. The hotel opened in 1968 and is comprised of 142 guestrooms, including 79 king rooms, 42 queen/queen rooms and 21 suites. Approximately $2.2 million was spent on capital expenditures since acquisition by Ashford Trust in May 2013, which included spa and fitness center renovations.

The hotel is located on a six acre compound in Key West, Florida. In addition to its secluded private beach, the hotel is well situated at the north end of Duval Street providing easy access to the heart of Key West and its many demand generators.

Additional property highlights include:


•	Meeting Space : Approximately 2,600 square feet of conference space.


•	Food and Beverage : The Pier House Resort provides an al fresco beach bar, the 150 Harbour View Café and a 41 seat piano bar as well as the 20 seat Chart Room.


•	Other Amenities : The hotel has a full service spa, a private beach, a heated outdoor pool, valet parking and a private dock for charter pick-ups.

Location and Access . The hotel is located on a six acre compound in the historic district of Key West, Florida, on Duval Street, at the Gulf of Mexico. Key West, which is the southernmost point of the Florida peninsula, is 160 miles south of Miami. Key West, Marathon and Miami airports are all within driving distance.

Operating History . The following table shows certain historical information regarding the Pier House Resort since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	142			142			142			142			142
Average Occupancy	85.2		%	84.6		%	82.5		%	81.1		%	77.3		%
ADR	$	374.92		$	357.86		$	332.71		$	319.06		$	308.90
RevPAR	$	319.37		$	302.76		$	275.50		$	258.62		$	238.71

Selected Financial Information . The following table shows certain selected financial information regarding the Pier House Resort since 2012 (dollars in thousands):



	Year Ended December 31,
	2014			2013			2012
Total Revenue	$	17,669		$	20,239		$	18,691
Rooms Revenue	13,877			15,692			14,318
Hotel EBITDA ⁽¹⁾	6,701			7,567			5,531
EBITDA Margin	37.9		%	37.4		%	29.6		%

__________________


⁽¹⁾	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income to Hotel EBITDA by property.

Our Option Hotel

Crystal Gateway Marriott, Arlington, VA

In connection with the spin-off, we entered into an option agreement to acquire the Crystal Gateway Marriott from Ashford Trust. The Crystal Gateway Marriott option agreement provides us with an option to acquire the Crystal Gateway Marriott beginning six months from the spin-off date and extending for 12 months from such date. The option expires on May 19, 2015. In light of current market conditions, the cost of our capital, and other investment opportunities, as well as the recent announcement of our stock repurchase plan, we do not currently plan to exercise this option, although we may reconsider this decision at any time. The purchase price, payable in common units of our operating partnership, will be equal to the fair market value at the time the option is exercised, based on an appraisal process.

The hotel opened in 1982 and is comprised of 697 guestrooms, including 340 king rooms, 353 double/double rooms and four suites. Approximately $33.4 million was spent on capital improvements since acquisition by Ashford Trust in 2006, which included major guest room renovations.

The hotel is centrally located in Crystal City, above a Washington, D.C. Metro Station, with access to Ronald Reagan Washington National Airport. The hotel is situated near the Crystal City Shops, a network of outdoor storefront shopping including numerous restaurants and a theater, as well as Arlington National Cemetery and other Washington, D.C. attractions.

Additional property highlights include:


•	Meeting Space : Approximately 34,300 square feet of meeting space, including a multi-faceted and functional single floor meeting room that is accessible from all guest rooms.


•	Food and Beverage : The Crystal Gateway Marriott hosts (i) Restaurant Mez, a full service restaurant with 120 seats, (ii) the Atrium, a dinner only restaurant/bar with 96 seats and (iii) a grab and go Einstein’s Bagels.


•	Other Amenities : The hotel has an indoor/outdoor connected pool, whirlpool, fitness center, sundries shop, valet parking and business center.

Location and Access . The hotel benefits from convenient access. By virtue of the building’s height and clear signage, the Crystal Gateway Marriott hotel is highly visible from either direction on Jefferson Davis Highway. The Crystal Gateway Marriott is located near the Pentagon building and approximately three miles from Ronald Reagan Washington National Airport.

Operating History . The following table shows certain historical information regarding the Crystal Gateway Marriott since 2010 :



	Year Ended December 31,
	2014			2013			2012			2011			2010
Rooms	697			697			697			697			697
Average Occupancy	76.0		%	73.3		%	75.1		%	73.7		%	75.9		%
ADR	$	174.25		$	174.00		$	182.39		$	186.69		$	188.30
RevPAR	$	132.40		$	127.48		$	136.97		$	137.60		$	142.97

Selected Financial Information . The following table shows certain selected financial information regarding the Crystal Gateway Marriott since 2012 (dollars in thousands):



	Year Ended December 31,
	2014		2013		2012
Total Revenue	$	50,670	$	50,372	$	51,641
Rooms Revenue	33,682		32,698		34,750

Right of First Offer Agreement

In connection with the spin-off, we entered into a right of first offer agreement with Ashford Trust for 12 hotels currently held by Ashford Trust. For a detailed discussion of the right of first offer agreement, see “—Certain Agreements—Right of First Offer Agreement.”

The hotels currently held by Ashford Trust and subject to the right of first offer are as follows:




Hotel Property	Location	Total Rooms	% Owned	RevPAR for Year Ended December 31, 2014
Crowne Plaza Beverly Hills ⁽¹⁾	Beverly Hills, CA	258	100%	$	142.12
Embassy Suites Crystal City	Arlington, VA	267	100%	151.67
Crowne Plaza Key West	Key West, FL	160	100%	223.36
Hyatt Coral Gables	Coral Gables, FL	250	100%	152.69
One Ocean Jacksonville	Jacksonville, FL	193	100%	144.27
Houston Embassy Suites	Houston, TX	150	100%	140.73
Portland Embassy Suites	Portland, OR	276	100%	164.07
Ritz-Carlton Atlanta	Atlanta, GA	444	72% ⁽²⁾	141.67
Hilton Boston Back Bay	Boston, MA	390	72% ⁽²⁾	203.80
Courtyard Boston Downtown	Boston, MA	315	72% ⁽²⁾	153.61
The Churchill	Washington, DC	173	72% ⁽²⁾	130.47
The Melrose	Washington, DC	240	72% ⁽²⁾	147.98

__________________


⁽¹⁾	Ashford Trust has entered into a franchise agreement to convert this hotel to a Marriott after the expiration of the existing Crowne Plaza license agreement in March 2015. The conversion is expected to be completed in the first half of 2015.

⁽²⁾

These hotels are owned by a joint venture in which Ashford Trust holds an approximate 71.74% common equity interest and a $25.0 million preferred equity interest. On December 19, 2014, Ashford Trust signed a definitive agreement under which they agreed to acquire the remaining 28.26% ownership interest of the Highland Hospitality portfolio from its joint venture partner. To the extent Ashford Trust controls the right to sell these hotels, the right of first offer agreement between us and Ashford Trust will extend to these properties.

Asset Management

The senior management team, provided to us by Ashford LLC, provided all asset management services for our properties prior to the spin-off and continues to do so, including for the properties we acquired after the spin-off. The team of professionals provided by Ashford LLC proactively works with our third-party hotel management companies to maximize profitability at each of our hotels. The asset management team monitors the performance of our hotels on a daily basis and holds frequent ownership meetings with personnel at the hotels and key executives with the brands and management companies. The asset management team works closely with our third-party hotel management companies on key aspects of each hotel’s operation, including, among others, revenue management, market positioning, cost structure, capital and operational budgeting as well as the identification of return on investment initiatives and overall business strategy. In addition, we retain approval rights on key staffing positions at many of our hotels, such as the hotel’s general manager and director of sales. We believe that our strong asset management process helps to ensure that each hotel is being operated to our and our franchisors’ standards, that our hotels are being adequately maintained in order to preserve the value of the asset and the safety of the hotel to customers, and that our hotel management companies are maximizing revenue and enhancing operating margins. See “—Certain Agreements—The Advisory Agreement.”

Third-Party Agreements

Hotel Management Agreements . Nine of our hotels are operated pursuant to a hotel management agreement with one of three brand hotel management companies. Each hotel management company receives a base management fee and is also eligible to receive an incentive management fee if hotel operating income, as defined in the respective management agreement, exceeds certain thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after we have received a priority return on our investment in the hotel. See “—Certain Agreements—Hotel Management Agreements.”

Franchise Agreements . None of our hotels operate under franchise agreements. The hotel management agreements with Marriott, Hilton or Sofitel allow nine of our hotels to operate under the Marriott, Hilton or Sofitel brand names, as applicable, and provide benefits typically associated with franchise agreements and licenses, including, among others, the use of the Marriott, Hilton or Sofitel, as applicable, reservation system and guest loyalty and reward program. Any intellectual property and trademarks of Marriott, Hilton or Sofitel, as applicable are exclusively owned and controlled by the applicable manager or an affiliate of such manager who grants the manager rights to use such intellectual property or trademarks with respect to the applicable hotel.

In addition, we are a party to a Mutual Exclusivity Agreement and a Master Management Agreement with Remington. See “—Certain Agreements—Remington Master Management Agreement” and “—Mutual Exclusivity Agreement.”

Ground Leases

Two of our hotels are subject to ground leases that cover all of the land underlying the respective hotel. See “—Certain Agreements—Ground Leases” for more information related to our ground leases.

Our Financing Strategy

As part of our separation from Ashford Trust, we assumed mortgage indebtedness secured by the eight hotels we acquired in the spin-off, which totaled $621.9 million (including the indebtedness secured by the two hotels we own through a consolidated joint venture) as of December 31, 2013. We partially financed the acquisition of the Sofitel Chicago Water Tower through a mortgage loan of $80.0 million. In connection with our acquisition of the Pier House Resort, we assumed $69.0 million of property level debt from Ashford Trust. As of March 12, 2015, our property-level indebtedness was approximately $764.3 million, with a weighted average interest rate of 4.5% per annum. As of December 31, 2014, approximately 54.7% of our mortgage debt bears interest at fixed rates averaging 6.08% and the remaining 45.3% bears interest at the variable rate of LIBOR plus 3.0%. At December 31, 2014, we held interest rate caps on our variable-rate debt with an aggregate notional amount of $297.5 million which effectively cap our interest rate at 5.9%. We intend to continue to use a mix of fixed and variable-rate debt, and we may, if appropriate, enter into interest rate hedges.

Our objective, over time, is to effectively deleverage our portfolio by acquiring additional hotels and applying less leverage than we had upon completion of the spin-off. Alternatively, we may deleverage via retaining excess cash to reduce our net debt. We expect to achieve and maintain a net debt and preferred equity-to-EBITDA ratio of 5.0x or less. We define net debt and preferred equity as the outstanding principal amount of our consolidated indebtedness plus the liquidation preference of any outstanding preferred equity, less cash, cash equivalents and marketable securities. We intend to finance our long-term growth and liquidity needs with operating cash flow, equity issuances of both common and preferred stock, joint ventures and secured and unsecured debt financings having staggered maturities. We may also issue common units in our operating partnership to acquire properties from sellers who seek a tax-deferred transaction.

Certain Agreements

The Advisory Agreement

We are advised by Ashford LLC, a subsidiary of Ashford Inc. Pursuant to our advisory agreement, Ashford LLC acts as our advisor, responsible for implementing our investment strategies and decisions and the management of our day-to-day operations, subject to the supervision and oversight of our board. We rely on Ashford LLC to provide, or obtain on our behalf, the personnel and services necessary for us to conduct our business, and we have no employees of our own. All of our officers are also employees of Ashford LLC. The executive offices of Ashford LLC are located at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254, and the telephone number of Ashford LLC’s executive offices is (972) 490-9600.

Pursuant to the terms of our advisory agreement, Ashford LLC and its affiliates provide us with our management team, along with appropriate support personnel as Ashford LLC deems reasonably necessary. Ashford LLC and its affiliates are not obligated to dedicate any of their respective employees exclusively to us, nor are Ashford LLC, its affiliates or any of their employees obligated to dedicate any specific portion of its or their time to our business except as necessary to perform the service required of them in their capacity as our advisor. Ashford LLC is at all times subject to the supervision and oversight of our board. So long as Ashford LLC is our advisor, our governing documents require us to include two persons designated by Ashford LLC as candidates for election as director at any stockholder meeting at which directors are to be elected. Such nominees may be executive officers of our advisor. The advisory agreement requires Ashford LLC to manage our business affairs in conformity with the policies and the guidelines that are approved and monitored by our board. Additionally, Ashford LLC must refrain from taking any action that would (a) adversely affect our status as a REIT, (b) subject us to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (c) knowingly and intentionally violate any law, rule or regulation of any governmental body or agency having jurisdiction over us, (d) violate any of the rules or regulations of any exchange on which our securities are listed or (e) violate our charter, bylaws or resolutions of our board of directors, all as in effect from time to time.

Duties of Ashford LLC. Subject to the supervision of our board of directors, Ashford LLC is responsible for our day-to-day operations, including all of our subsidiaries and joint ventures, and shall perform (or cause to be performed) all services necessary to operate our business as outlined in the advisory agreement. Those services include sourcing and evaluating hotel acquisition and disposition opportunities, asset managing the hotels in our portfolio and overseeing the property managers, handling all of our accounting, treasury and financial reporting requirements, and negotiating terms of loan documents for our debt financings, as well as other duties and services outlined in the advisory agreement.

Any increase in the scope of duties or services to be provided by Ashford LLC must be jointly approved by us and Ashford LLC and will be subject to additional compensation.

Ashford LLC also has the power to delegate all or any part of its rights and powers to manage and control our business and affairs to such officers, employees, affiliates, agents and representatives of Ashford LLC or our company as it may deem appropriate. Any authority delegated by Ashford LLC to any other person is subject to the limitations on the rights and powers of our advisor specifically set forth in the advisory agreement or our charter.

Ashford LLC also acknowledges receipt of our code of business conduct and ethics, code of conduct for the chief executive officer, chief financial officer and chief accounting officer and policy on insider trading and agrees to require its employees who provide services to us to comply with the codes and the policy.

Limitations on Liability and Indemnification. The advisory agreement provides that Ashford LLC has no responsibility other than to render the services and take the actions described in the advisory agreement in good faith and with the exercise of due care and will not be responsible for any action our board of directors takes in following or declining to follow any of Ashford LLC’s advice or recommendations. The advisory agreement provides that Ashford LLC (including its officers, directors, managers, employees and members) will not be liable for any act or omission by it (or them) performed in accordance with and pursuant to the advisory agreement, except by reason of acts constituting gross negligence, bad faith, willful misconduct or reckless disregard of duties under the advisory agreement.

We have agreed to indemnify and hold harmless Ashford LLC (including its partners, directors, officers, stockholders, managers, members, agents, employees and each other person or entity, if any, controlling Ashford LLC) to the full extent lawful, from and against any and all losses, claims, damages or liabilities of any nature whatsoever with respect to or arising from Ashford LLC’s acts or omission (including ordinary negligence) in its capacity as such, except with respect to losses, claims, damages or liabilities with respect to or arising out of Ashford LLC’s gross negligence, bad faith or willful misconduct, or reckless disregard of its duties under the advisory agreement (for which Ashford LLC will indemnify us).

Term and Termination. The term of our advisory agreement is 20 years from the effective date of the advisory agreement, with automatic five-year renewal terms unless previously terminated as described below. Following the 20-year initial term, the advisory agreement may be terminated by us with 180 days’ prior written notice prior to the expiration of the then-current term, on the affirmative vote of at least two-thirds of our independent directors based upon a good faith finding that either (a) there has been unsatisfactory performance by Ashford LLC that is materially detrimental to us and our subsidiaries taken as a whole, or (b) the base fee and/or incentive fee is not fair (and Ashford LLC does not offer to negotiate a lower fee that at least a majority of our independent directors determine is fair). If the reason for non-renewal specified by us in our termination notice is (b) in the preceding sentence, then Ashford LLC may, at its option, provide a notice of proposal to renegotiate the base fee and incentive fee not less than 150 days prior to the pending termination date. Thereupon, each party has agreed to use its commercially reasonable efforts to negotiate in good faith to find a resolution on fees within 120 days following our receipt of the renegotiation proposal. If a resolution is achieved between Ashford LLC and at least a majority of our independent directors within the 120-day period, then the advisory agreement will continue in full force and effect with modification only to the agreed upon base fee and/or incentive fee, as applicable.

If no resolution on fees is reached within the 120-day period, if we terminate the advisory agreement because of unsatisfactory performance by Ashford LLC, or if we terminate the advisory agreement upon a change in control of us and such change of control transaction is conditioned upon the termination of the advisory agreement (which is permissible with 60 days’ notice) we would be required to pay a termination fee equal to either:


•	if Ashford Inc.’s common stock is not publicly traded, 14 times the earnings of Ashford LLC attributable to our advisory agreement less costs and expenses, including taxes, (the “net earnings”) for the 12 months preceding termination of the advisory agreement; or

•

if at the time of the termination notice, Ashford Inc.’s common stock is publicly traded separate from the common stock of Ashford Trust, 1.1 multiplied by the greater of (i) 12 times the net earnings of Ashford LLC for the 12 months preceding the termination of the advisory agreement or (ii) the earnings multiple (based on net earnings after taxes) for Ashford Inc.’s common stock for the 12 months preceding the termination of the advisory agreement multiplied by the net earnings of Ashford LLC for the same 12 month period; or (iii) the simple average of the earnings multiples (based on net earnings after taxes) for Ashford Inc.’s common stock for each of the three fiscal years preceding the termination of the advisory agreement, multiplied by the net earnings of Ashford LLC for the 12 months preceding the termination of the advisory agreement;

plus, in either case, a gross-up amount for federal and state tax liability, based on an assumed tax rate of 40%. Any such termination fee will be payable on or before the termination date.

We may also terminate the advisory agreement at any time, including during the 20-year initial term, without the payment of a termination fee under the following circumstances:

•

upon a default by Ashford LLC in the performance or observance of any material term, condition or covenant under the advisory agreement; provided, however, that we must, before terminating the advisory agreement, give written notice of the default to Ashford LLC and provide it with an opportunity to cure the default within 60 days, or if such default is not reasonably susceptible to cure within 60 days, such additional cure period as is reasonably necessary to cure the default so long as Ashford LLC is diligently and in good faith pursuing such cure;

•

immediately upon providing written notice to Ashford LLC, following a voluntary or involuntary bankruptcy event of Ashford LLC, provided Ashford LLC does not file a motion to assume the advisory agreement with the appropriate court within 120 days of the commencement of such case or proceeding; or an involuntary bankruptcy event that remains undismissed and unstayed for a period exceeding 120 days;


•	immediately, upon the commencement of an action for dissolution of our advisor;


•	immediately upon providing written notice to Ashford LLC, following its conviction (including a plea or nolo contendere) of a felony;

•

immediately upon providing written notice to Ashford LLC, if it commits an act of fraud against us, misappropriates our funds or acts in a manner constituting willful misconduct, gross negligence or reckless disregard in the performance of its material duties under the advisory agreement (including a failure to act); provided, however, that if any such actions or omissions are caused by an employee and/or an officer of Ashford LLC (or an affiliate of Ashford LLC) and Ashford LLC takes all reasonable necessary and appropriate action against such person and cures the damage caused by such actions or omissions within 45 days of Ashford LLC’s actual knowledge of its commission or omission, we will not have the right to terminate the advisory agreement; and


•	immediately upon providing written notice to Ashford LLC following certain changes of control of Ashford LLC, exclusive of any change of control that is an assignment permitted as described in “—Assignment” below or a change of control of Ashford Trust at any time that Ashford LLC remains under the control of Ashford Trust.

Upon any termination of the advisory agreement, Ashford LLC is expected to cooperate with and assist us, in executing an orderly transition of the management of our assets to a new advisor, providing a full accounting of all accounts held in the name of or on behalf of us, returning any funds held on behalf of us and returning any and all of our books and records. We are responsible for paying all accrued fees and expenses. We will be subject to certain non-solicitation obligations with respect to Ashford LLC’s employees upon any termination of the advisory agreement other than termination as a result of a change of control of our advisor.

Following the 20-year initial term, Ashford LLC may terminate the advisory agreement prior to the expiration of the then-current term with 180 days’ prior written notice. Additionally, Ashford LLC may terminate the advisory agreement if we default in the performance or observance of any material term, condition or covenant under the advisory agreement; provided, however, before terminating the advisory agreement, Ashford LLC must give us written notice of the default and provide us with an opportunity to cure the default within 45 days, or if such default is not reasonably susceptible to cure within 45 days, such additional cure period as is reasonably necessary to cure the default (not to exceed 90 days) so long as we are diligently and in good faith pursuing such cure. In the event of such a termination, Ashford LLC will be entitled to all accrued fees and expenses.

Fees and Expenses.

•

Base Fee. The total quarterly base fee is equal to 0.70% per annum of the total market capitalization of our company, subject to a minimum quarterly base fee. The “total market capitalization” for purposes of determining the base fee is calculated on a quarterly basis as (i) the average of the volume-weighted average price per share of our common stock for each trading day of the preceding quarter multiplied by the average number of shares of our common stock outstanding during such quarter, on a fully-diluted basis (assuming all common units and long term incentive partnership units in the operating partnership which have achieved economic parity with common units in the operating partnership have been redeemed for our common stock), plus (ii) the quarterly average of the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt), plus (iii) the quarterly average of the liquidation value of our outstanding preferred equity. The minimum base fee each quarter is equal to the greater of (i) 90% of the base fee paid for the same quarter in the prior year and (ii) the “G&A ratio” multiplied by our total market capitalization. The “G&A ratio” is calculated as the simple average of the ratios of total general and administrative expenses, including any dead deal costs, less any non-cash expenses, paid in the applicable quarter by each member of a select peer group, divided by the total market capitalization of such peer group member. Our peer group for purposes of our advisory fees includes: Strategic Hotels and Resorts, Inc., Chesapeake Lodging Trust, DiamondRock Hospitality Co., Lasalle Hotel Properties, Pebblebrook Hotel Trust and Sunstone Hotel Investors, Inc. This peer group may be adjusted from time-to-time by mutual agreement of Ashford LLC and a majority of our independent directors, negotiating in good faith. The base fee is payable in cash on a quarterly basis.

•

Incentive Fee. In each year that our TSR exceeds the “average TSR of our peer group” we have agreed to pay an incentive fee. For purposes of this calculation, our TSR will be calculated using a year-end stock price equal to the closing price of our common stock on the last trading day of the year as compared to the closing stock price of our common stock on the last trading day of the prior year, assuming all dividends on the common stock are reinvested into additional shares of common stock. The average TSR for each member of our peer group is calculated in the same manner, and the simple average for our entire peer group is the “average TSR for our peer group.” If our TSR exceeds the average TSR for our peer group, Ashford LLC will be paid an incentive fee.

The annual incentive fee is calculated as (i) 5% of the amount (expressed as a percentage but in no event greater than 25%) by which our annual TSR exceeds the average TSR for our peer group, multiplied by (ii) the fully diluted equity value of our company at December 31 of the applicable year. To determine the fully diluted equity value, we will assume that all units in our operating partnership, including LTIP units that have achieved economic parity with the common units, if any, are redeemed for our common stock and that the per share value of each share of our common stock is equal to the closing price of our stock on the last trading day of the year.

The incentive fee, if any, subject to the FCCR Condition (defined below), is payable in arrears in three equal annual installments with the first installment payable on January 15 following the applicable year for which the incentive fee relates and on January 15 of the next two successive years. Notwithstanding the foregoing, upon any termination of the advisory agreement for any reason, any unpaid incentive fee (including any incentive fee installment for the stub period ending on the termination date) will become fully earned and immediately due and payable without regard to the FCCR Condition defined below. Except in the case when the incentive fee is payable on the date of termination of the advisory agreement, up to 50% of the incentive fee may be paid in our common stock or in common units of our operating partnership, at our discretion, with the balance payable in cash unless at the time for payment of the incentive fee, Ashford LLC owns common stock or common units in an amount greater than or equal to three times the base fee for the preceding four quarters or payment in such securities would cause the advisor to be subject to the provision of the Investment Company Act of 1940, in which case the entire incentive fee will be payable in cash.

Upon the determination of the incentive fee, except in the case of any termination of the advisory agreement in which case the incentive fee for the stub period and all unpaid installments of an incentive fee shall be deemed earned and fully due and payable, each one-third installment of the incentive fee shall not be deemed earned by advisor or otherwise payable by us unless we, as of the December 31 immediately preceding the due date for the payment of the incentive fee installment, has a FCCR of .20x or greater (the “FCCR Condition”). For purposes of this calculation, “FCCR” means our fixed charge coverage ratio, which is the ratio of adjusted EBITDA for the previous four consecutive fiscal quarters to fixed charges, which includes all (i) our and our subsidiaries’ interest expense, (ii) our and our subsidiaries’ regularly scheduled principal payments, other than balloon or similar principal payments which repay indebtedness in full and payments under cash flow mortgages applied to principal, and (iii) preferred dividends paid by us.

•

Equity Compensation. To incentivize employees, officers, consultants, non-employee directors, affiliates and representatives of Ashford LLC to achieve our goals and business objectives, as established by our board of directors, in addition to the base fee and the incentive fee described above, our board of directors has the authority to make annual equity awards to Ashford LLC or directly to employees, officers, consultants and non-employee directors of Ashford LLC, based on our achievement of certain financial and other hurdles established by our board of directors. These annual equity awards are intended to provide an incentive to Ashford LLC and its employees to promote the success of our business. The compensation committee of our board of directors has full discretion regarding the grant of any annual equity awards to be provided to Ashford LLC and its employees, and other than the overall limitation on the total number of shares that are authorized to be granted under the 2013 Equity Incentive Plan and the Advisor Equity Incentive Plan, there are no limitations on the amount of these annual equity awards.

•

Expense Reimbursement. Ashford LLC is responsible for all wages, salaries, cash bonus payments and benefits related to its employees providing services to us (including any of our officers who are also officers of Ashford LLC), with the exception of any equity compensation that may be awarded by us to the employees of Ashford LLC who provide services to us, the provision of certain internal audit services and the international office expenses described below. We are responsible to pay or reimburse Ashford LLC monthly for all other costs incurred by it on our behalf or in connection with the performance of its services and duties to us, including, without limitation, tax, legal, accounting advisory, investment banking and other third- party professional fees, director fees and insurance (including errors and omissions insurance and any other insurance required pursuant to the terms of the advisory agreement), debt service, taxes, insurance, underwriting, brokerage, reporting, registration, listing fees and charges, travel and entertainment expenses, conference sponsorships, transaction diligence and closing costs, dead deal costs, dividends, office space, the cost of all equity awards or compensation plans established by us, including the value of awards made by us to Ashford LLC’s employees, and any other costs which are reasonably necessary for the performance by Ashford LLC of its duties and functions. In addition, we pay a pro rata share of Ashford LLC’s office overhead and administrative expenses incurred in the performance of its duties and functions under the advisory agreement. There is no specific limitation on the amount of such reimbursements.

In addition to the expenses described above, we are required to reimburse Ashford LLC monthly for our pro rata share (as reasonably agreed to between Ashford LLC and a majority of our independent directors or our audit committee, chairman of our audit committee or lead director) of (i) employment expenses of Ashford LLC’s internal audit managers and other Ashford LLC employees who are actively engaged in providing internal audit services to us, (ii) the reasonable travel and other out-of-pocket expenses of Ashford LLC relating to the activities of its internal audit employees and the reasonable third-party expenses which Ashford LLC incurs in connection with its provision of internal audit services to us and (iii) all reasonable international office expenses, overhead, personnel costs, travel and other costs directly related to Ashford LLC’s non-executive personnel who are located internationally or that oversee the operations of international assets or related to our advisor’s personnel that source, investigate or provide diligence services in connection with possible acquisitions or investments internationally. Such expenses shall include but are not limited to, salary, wage payroll taxes and the cost of employee benefit plans.


•	Additional Services. If, and to the extent that, we request Ashford LLC to render services on our behalf other than those required to be rendered by it under the advisory agreement, such additional services shall be compensated separately at market rates, as defined in the advisory agreement.

Assignment. Ashford LLC may assign its rights under the agreement without our approval to any affiliate. It may also assign its rights under the agreement without our approval to a publicly-traded company newly formed through a spin-off, carve-out, split-off or similar distribution of our advisor, its property and affairs to its or Ashford Trust’s stockholders.

The Ashford Trademark. Ashford LLC and its affiliates have a proprietary interest in the “Ashford” trademark, and Ashford LLC agreed to license its use to us. If at any time we cease to retain Ashford LLC or one of its affiliates to perform advisory services for us, within 60 days following receipt of written request from Ashford LLC, we must cease to conduct business under or use the “Ashford” name or logo, as well as change our name and the names of any of our subsidiaries to a name that does not contain the name “Ashford.”

Relationship with the Advisor. Ashford LLC is a subsidiary of Ashford Inc. and advises us and Ashford Trust. As of March 12, 2015, Ashford Trust holds 30.0% of the equity of Ashford Inc., Ashford LLC’s parent company, on a fully diluted basis. Ashford LLC, its equityholders and employees are permitted to have other advisory clients, which may include other REITs operating in the real estate industry. If we materially revise our initial investment guidelines without the express written consent of Ashford LLC, Ashford LLC will use its best judgment to allocate investment opportunities to us and other entities it advises, taking into account such factors as it deems relevant, in its discretion, subject to any then existing obligations of Ashford LLC to such other entities. We have agreed that we will not revise our initial investment guidelines to be directly competitive with Ashford Trust as of the date of our initial advisory agreement. The advisory agreement gives us the right to equitable treatment with respect to other clients of Ashford LLC, but does not give us the right to preferential treatment, except that Ashford LLC and Ashford Trust have agreed that, so long as we have not materially changed our initial investment guidelines without the express consent of Ashford LLC, any individual hotel investment opportunities that satisfy our investment focus will be presented to our board of directors, who will have up to 10 business days to accept such opportunity prior to it being available to Ashford Trust or any other entity advised by Ashford LLC.

To minimize conflict between us and Ashford Trust, the advisory agreement requires us to designate an investment focus by targeted RevPAR, segments, markets and other factors or financial metrics. After consultation with Ashford LLC, we may modify or supplement our investment guidelines from time to time by giving written notice to Ashford LLC; however, if we materially change our investment guidelines without the express consent of Ashford LLC, Ashford LLC will use its best judgment to allocate investment opportunities to us and Ashford Trust, taking into account such factors as it deems relevant, in its discretion, subject to any then existing obligations of Ashford LLC to other entities. In the advisory agreement, we declared our initial investment guidelines to be hotel real estate assets primarily consisting of equity or ownership interests, as well as debt investments when such debt is acquired with the intent of obtaining an equity or ownership interest, in:

•

full service and urban select service hotels with trailing 12 month average RevPAR or anticipated 12 month average RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined with reference to the most current Smith Travel Research reports, generally in the 20 most populous metropolitan statistical areas, as estimated by the United States Census Bureau and delineated by the U.S. Office of Management and Budget;


•	upscale, upper-upscale and luxury hotels meeting the RevPAR criteria set forth above and situated in markets that may be generally recognized as resort markets; and

•

international hospitality assets predominantly focused in areas that are general destinations or in close proximity to major transportation hubs or business centers, such that the area serves as a significant entry or departure point to a foreign country or region of a foreign country for business or leisure travelers and meet the RevPAR criteria set forth above (after any applicable currency conversion to U.S. dollars).

When determining whether an asset satisfies our investment guidelines, Ashford LLC must make a good faith determination of projected RevPAR, taking into account historical RevPAR as well as such additional considerations as conversions or reposition of assets, capital plans, brand changes and other factors that may reasonably be forecasted to raise RevPAR after stabilization of such initiative.

If we elect to spin-off, carve-out, split-off or otherwise consummate a transfer of a division or subset of assets for the purpose of forming a joint venture, a newly created private platform or a new publicly traded company to hold such division or subset of assets constituting a distinct asset type and/or investment guidelines, we have agreed that any such new entity will be advised by Ashford LLC pursuant to an advisory agreement containing substantially the same material terms set forth in our advisory agreement.

If we desire to engage a third party for services or products (other than services exclusively required to be provided by our property managers), Ashford LLC has the exclusive right to provide such services or products at typical market rates provided that we are able to control the award of the applicable contract. Ashford LLC will have at least 20 days after we give notice of the terms and specifications of the products or services that we intend to solicit to provide such services or products at market rates, as determined by reference to fees charged by third-party providers who are not discounting their fees as a result of fees generated from other sources. If a majority of our independent directors determine that Ashford LLC’s pricing proposal is not at market rates, we are required to engage a consultant to determine the market rate for the services or products in question. We will be required to pay for the services of the consultant and to engage Ashford LLC at the market rates determined by the consultant if the consultant finds that the proposed pricing of Ashford LLC was at or below market rates. Alternatively, Ashford LLC will pay the consultant’s fees and will have the option to provide the services or product at the market rates determined by the consultant should the consultant find that the proposed pricing was above market rates.

\ Hotel Management Agreements

For us to qualify as a REIT, we cannot directly or indirectly operate any of our hotels. Third parties must operate our hotels. Our hotels are leased to TRS lessees, which in turn have engaged property managers to manage our hotels. Each of our hotels other than the Pier House Resort are operated pursuant to a hotel management agreement with one of three independent hotel management companies, Hilton Management LLC, Marriott Hotel Services, Inc. or its affiliates, Courtyard Management Corporation and Renaissance Hotel Management Company, LLC, and Accor. Courtyard by Marriott and Renaissance are both registered trademarks of Marriott International, Inc. The Pier House Resort is operated by Remington.

The terms of each of the hotel management agreements as well as any remaining extension, are set forth in the table below:



Hotel	Effective Date	Expiration Date	Extension Options By Manager
Hilton La Jolla Torrey Pines	12/17/2003	12/31/2023	three 10-year options
The Capital Hilton	12/17/2003	12/31/2023	three 10-year options
Marriott Plano Legacy Town Center	8/15/2003	12/31/2023	two 10-year options
Seattle Marriott Waterfront	5/23/2003	12/31/2026	five 10-year options
Courtyard San Francisco Downtown	6/14/2002	12/31/2027	five 5-year options
Courtyard Philadelphia Downtown	12/3/2011	12/31/2041	two 10-year options
Courtyard Seattle Downtown	1/4/2003	12/31/2026	one 10-year option
Renaissance Tampa International Plaza	4/9/2003, with 8/9/2004 opening date	12/28/2029	five 10-year options
Sofitel Chicago Water Tower	3/30/2006	12/31/2030	three 10-year options
Pier House Resort	5/14/2013	05/14/2023	three 7-year and one 4-year option

Each hotel management company receives a base management fee (expressed as a percentage of gross revenues) ranging from 3.0%–7.0%, as well as an incentive management fee calculated as a percentage of hotel operating income, in certain cases after funding of certain requirements, including the capital renewal reserve, and in certain cases after we have received a priority return on our investment in the hotel (referred to as the owner’s priority), as summarized in the chart below:

Hotel

Management Fee ⁽¹⁾

Incentive Fee

Marketing Fee

Owner’s Priority ⁽²⁾

Owner’s
Investment ⁽²⁾

Hilton La Jolla Torrey Pines

20% of operating cash flow (after deduction for capital renewals reserve and owner’s priority)

Reimbursement of hotel’s pro rata share of group services

11.5% of owner’s total investment

$106,500,000

The Capital Hilton

20% of operating cash flow (after deduction for capital renewals reserve and owner’s priority)

Reimbursement of hotel’s pro rata share of group services

11.5% of owner’s total investment

$132,100,000

Marriott Plano Legacy Town Center ⁽³⁾

35% of the excess of operating profit (after deduction for contributions to the FF&E reserve) over owner’s priority

Reimbursement of the hotel’s pro rata share of chain services, capped at 2.1% of gross revenues per fiscal year

11% of owner’s investment (that includes owner funded capital expenditures)

$56,811,510

Hotel

Management Fee ⁽¹⁾

Incentive Fee

Marketing Fee

Owner’s Priority ⁽²⁾

Owner’s
Investment ⁽²⁾

Seattle Marriott Waterfront ⁽³⁾

After payment of owner’s 1st priority, remaining operating profit is split between owner and manager, such that manager receives 30% of remaining operating profit that is less than the sum of $15,133,000 plus 10.75% of owner- funded capital expenses, and 50% of the operating profit in excess of such sum.

Reimbursement of the hotel’s pro rata share of chain services, capped at 2.2% of gross revenues per fiscal year

Owner’s 1st Priority: 10.75% of owner’s investment
Owner’s 2nd Priority: After payment of the owner’ 1st priority, remaining operating profit is split between owner and manager, such that owner receives 70% of remaining operating profit that is less than the sum of $15,133,000 plus 10.75% of owner- funded capital expenses, and 50% of the operating profit in excess of such sum.

$88,899,926

Courtyard San Francisco Downtown

50% of the excess of operating profit (after deduction for contributions to the FF&E reserve) over owner’s priority

System wide contribution to the marketing fund (2% of guest room revenues on the effective date).

$9,500,000 plus 11.5% of owner funded capital expenses

Not applicable

Courtyard Philadelphia Downtown

6.5%

20% of the excess of operating profit (after deduction for contributions to the FF&E reserve) over owner’s priority

System wide contribution to the marketing fund (2% of guest room revenues on the effective date).

2011—$5 million

2012—$5.5 million 2013—$6 million

2014—$6.5 million Thereafter—$7 million Plus 10.25% of owner funded capital expenses after the beginning of 2016.

Not applicable

Courtyard Seattle Downtown ⁽³⁾

50% of the excess of operating profit (after deduction for contributions to the FF&E reserve) over owner’s priority

System wide contribution to the marketing fund (2% of guest room revenues on the effective date).

$3,669,624 plus 10.25% of owner funded capital expenses

Not applicable

Renaissance Tampa International Plaza

3.5%

First Incentive Fee: 100% of operating profit (after deduction for contributions to the FF&E reserve) after Owner’s First Priority until an aggregate amount of $2 million is paid to manager. Second Incentive Fee: After payment of owner’s 1st priority and manager’s first incentive fee, remaining operating profit is split between owner and manager, such that manager receives 30% of remaining operating profit that is less than the sum of 6,675,000 plus 15% of owner-funded capital expenses, and 40% of the operating profit in excess of such sum.

Reimbursement of the hotel’s pro rata share of chain services, capped at 2.8% of gross revenues per fiscal year

Owner’s 1st Priority: 11.25% of owner’s investment

Owner’s 2nd Priority: After payment of the owner’s 1st priority and manager’s fee, remaining operating profit is split between owner and manager, such that owner receives 70% of remaining operating profit that is less than the sum of $6,675,000 plus 15% of owner- funded capital expenses, and 60% of the operating profit in excess of such sum.

$44,500,000

Hotel

Management Fee ⁽¹⁾

Incentive Fee

Marketing Fee

Owner’s Priority ⁽²⁾

Owner’s
Investment ⁽²⁾

Sofitel Chicago Water Tower

20% of the amount by which the hotel’s annual net operating income exceeds a threshold amount (equal to 8% of our total investment in the hotel), capped at 2.5% of gross hotel revenues

2% of gross hotel revenues

Not applicable

153,000,000

Pier House Resort

The lesser of 1% of gross revenues or the amount by which actual house profit exceeds budgeted house profit.

Not applicable

__________________


⁽¹⁾	Management fee is expressed as a percentage of gross hotel revenue


⁽²⁾	Owner’s priority and owner’s investment amounts disclosed in the table are based on the most recent certification provided to us by the applicable manager. These amounts will continue to increase over time by the amount of additional owner-funded capital expenses.


⁽³⁾	The management agreements allow for future reductions in the management fee in the event certain competitive hotels are built.

The hotel management agreements allow each hotel to operate under the Marriott, Hilton or Sofitel brand names, as applicable, and provide benefits typically associated with franchise agreements, including, among others, the use of the Marriott, Hilton or Sofitel, as applicable, reservation system and guest loyalty and reward program. Any intellectual property and trademarks of Marriott, Hilton or Sofitel, as applicable, are exclusively owned and controlled by the applicable manager or an affiliate of such manager who grants the manager rights to use such intellectual property or trademarks with respect to the applicable hotel.

Our TRS lessees, as lessees of the respective hotels, have entered into hotel management agreements with Hilton Management LLC for two of the hotels, Marriott Hotel Services, Inc. or its affiliates (Courtyard Management Corporation and Renaissance Hotel Management Company, LLC) for six of the hotels, Accor for one of the hotels and Remington for one of the hotels. Below is a summary of the principal terms of the hotel management agreements with Hilton, Marriott and Accor.

Marriott Management Agreements

Term. The remaining base term of each of our six Marriott management agreements ranges from 9 to 30 years, expiring between December 30, 2023 and December 31, 2041. Each of these agreements has remaining automatic extension options at the discretion of the manager, ranging from one 10-year extension to five 10-year extensions.

Events of Default. An “Event of Default” under the Marriott hotel management agreements is generally defined to include the bankruptcy or insolvency of either party, the failure to make a payment under the hotel management agreement and failure to cure such non-payment after due notice, and a breach by either party of any other covenants or obligations in the hotel management agreement which continues beyond the applicable notice and grace period.

Termination Upon Event of Default. A non-defaulting party may terminate the hotel management agreement upon an Event of Default (as defined in the applicable hotel management agreement) generally after the expiration of any notice and cure periods; provided, however, the hotel management agreement may not be terminated by the non-defaulting party unless and until such Event of Default has a material adverse effect on the non-defaulting party. In the case of the Courtyard Philadelphia Downtown, if the defaulting party contests such Event of Default or such material adverse effect, we may not terminate unless a court of competent jurisdiction has issued a final, binding and non-appealable order finding that the Event of Default has occurred and that the default resulted in a material adverse effect.

Early Termination for Casualty . The termination provisions for our hotels in the event of casualty are summarized as follows:


•	Courtyard Philadelphia Downtown: If damage or destruction to the hotel from any cause materially and adversely affects the operation of the hotel and we fail to promptly commence and complete the repair, rebuilding or replacement of the same to bring it back to substantially its prior condition, manager may, at its option, terminate the management agreement by written notice.

•

Marriott Plano Legacy Town Center; Courtyard San Francisco Downtown; Seattle Marriott Waterfront; Courtyard Seattle Downtown; Renaissance Tampa International Plaza: If the hotel suffers a total casualty (meaning the cost of the damage to be repaired or replaced would be equal to 30% or more of the then total replacement cost of the hotel), then either party may terminate the hotel management agreement.

Early Termination for Condemnation. If all or substantially all of the hotel is taken in any condemnation or similar proceeding, or a portion of the hotel is so taken, and the result is that it is unreasonable to continue to operate the hotel in accordance with the hotel management agreement, the hotel management agreement shall terminate.

Performance Termination. All of the Marriott hotel management agreements are structured to provide us with a right to terminate the hotel management agreement without the payment of a termination fee if manager fails to achieve certain criteria relating to the performance of the hotel managed by Marriott. The performance period is measured with respect to any two consecutive fiscal years, except that for the Courtyard Philadelphia Downtown, the performance period will not include any fiscal year prior to 2015, and for the Courtyard Seattle Downtown, the performance period will not include any period prior to 2013. The performance criteria generally includes each of the following: (i) operating profit for each such fiscal year is less than the applicable performance termination threshold (as defined in the hotel management agreement) which ranges from 9.5% to 10.25% of the approximate total investment in the hotel, and in the case of the Courtyard Philadelphia Downtown is 85% of the owner’s priority return (as defined in the hotel management agreement), (ii) the RevPAR penetration index of the hotel during each such fiscal year is less than the revenue index threshold (as such terms are defined in the hotel management agreements) which range from 0.85 to 1.00, and (iii) the fact that the criteria set forth in (i) or (ii) is not the result of an extraordinary event or force majeure, any major renovation of the hotel adversely affecting a material portion of the income generating areas (or any major renovation with respect to the Courtyard Philadelphia Downtown), or any default by us under the hotel management agreement. The manager has a right to avoid a performance termination by paying to us the total amount by which the operating profit for each of the fiscal years in question was less than the performance termination threshold for such fiscal years, or in the case of Courtyard Philadelphia Downtown, by waiving base management fees until such time as the total amount of waived base management fees equals the shortfall of operating profit for each of the fiscal years in question to the performance termination threshold for such fiscal years.

Limitation on Termination Rights. Our ability to exercise termination rights is subject to certain limitations if the manager or any of its affiliates are providing certain credit enhancements, loans or fundings as described in the hotel management agreement, or in certain cases, if manager’s incentive management fee is outstanding.

Assignment and Sale. Each Marriott management agreement provides that we cannot sell the applicable hotel to any unrelated third party or engage in certain change of control actions if (i) we are in default under the hotel management agreement, (ii) such party is known to be of bad moral character or has been convicted of a felony or is in control of or controlled by persons who have been convicted of felonies, (iii) such party does not (in the reasonable judgment of manager) have sufficient financial resources and liquidity to fulfill our obligations under the hotel management agreement, (iv) such party has an ownership interest, either directly or indirectly, in a brand or group of hotels totaling at least 10 hotels and such brand or group competes with manager or Marriott or any affiliate thereof, or (v) with respect to the Courtyard Philadelphia Downtown, such party is a “specially designated national or blocked person” as designated by the applicable governmental entity. Any sale of the property (which includes any equity transfer, whether directly or indirectly) is subject to certain conditions, including the provision of notice of such sale to the manager.

Right of First Offer. All of the Marriott management agreements provide Marriott with a right of first negotiation with respect to a sale of the hotel (which includes the equity transfer of a controlling interest in the owner of the hotel, whether directly or indirectly). A sale or transfer to an affiliate is specifically excluded from this right. After notice of a proposed sale to the manager, we have a specified time period, ranging from 20 to 45 days, to negotiate an acceptable purchase and sale agreement. If after such time period no agreement is signed, we are free to sell or lease the hotel to a third party, subject to certain conditions, such as providing notice of sale to manager (with certain details regarding the terms of sale). Manager then has a specified time period, ranging from 20 to 45 days, depending on our compliance with the assignment and sale provisions above, to either consent to such sale or not consent to such sale. If manager does not timely respond or does not consent to such sale, certain of the management agreements provide that the sale must occur 180 days after provision of the notice of sale or the notice of sale is deemed void and we must provide a new notice to manager.

Hilton Management Agreements

Term . The base term of each of our two Hilton management agreements was 10 years, expiring December 31, 2013. Each of these agreements has been extended through December 31, 2023 and has three 10-year automatic extension options remaining, at the discretion of the manager.

Events of Default. An “Event of Default” under the Hilton hotel management agreements is generally defined to include the bankruptcy or insolvency of either party, the failure to make a payment under the hotel management agreement and failure to cure such non-payment after due notice, a breach by either party of any other covenants or obligations in the hotel management agreement which continues beyond the applicable notice and grace period, failure to maintain certain alcohol licenses and permits under certain circumstances, failure by us to provide manager with sufficient working capital to operate the hotel after due notice and a termination of our operating lease due to our default under the operating lease.

Termination Upon Event of Default. If an event of default occurs and continues beyond any applicable notice and cure periods set forth in the hotel management agreement, the non-defaulting party generally has, among other remedies, the option of terminating the applicable hotel management agreement upon written notice to the defaulting party.

Performance Termination. Each of the Hilton management agreements provide us with a right to terminate the hotel management agreement without the payment of a termination fee if the manager fails to achieve certain criteria relating to the performance of the hotel managed by Hilton. The performance period is measured with respect to any two consecutive fiscal years. The performance criteria are: (i) the hotel’s operating cash flow (before deducting our priority return) does not equal or exceed 85% of the our priority return (as defined in the hotel management agreement); and (ii) the hotel’s yield index is below the base yield index (as such terms are defined in the hotel management agreement), which is 90%. The manager has a right to avoid a performance termination by paying to us an amount within 30 days of due notice equal to the deficiency set forth in subparagraph (i) above to cure such performance default, but in no event may manager exercise such cure with respect to more than four full operating years during the initial term or with respect to more than four full operating years during any single extension term. The amount of any shortfall payable by manager to us shall be reduced to the extent of any portion attributable to a force majeure event, performance of certain capital renewals and major capital improvements adversely affecting a material portion of the income generating areas of the hotel, or certain uncontrollable expenses that could not have been reasonably anticipated by manager.

Early Termination for Casualty. In the event the applicable hotel is substantially damaged by fire or other casualty such that it cannot be restored within 240 days, or in the event our lender doesn’t provide adequate insurance proceeds to restore the hotel, we may terminate the hotel management agreement. If we undertake to restore the hotel or if we are required to restore the hotel because it was not substantially damaged and fail to commence such repairs within 60 days of receiving sufficient insurance proceeds to complete such work, or fail to complete such repairs within 240 days of the casualty, the manager may terminate the agreement. We have no obligation to restore the premises, however, if the casualty occurs in the last five years of the third renewal term or thereafter.

Early Termination for Condemnation. If all or substantially all of the applicable hotel is taken in any condemnation or similar proceeding which, in our reasonable opinion, makes it infeasible to restore or continue to operate the hotel in accordance with the hotel management agreement, the hotel management agreement shall terminate. If it is reasonably feasible to restore the premises and operate the hotel and we fail to complete the restoration within two years of the taking, the manager may terminate the agreement. We have no obligation to restore the premises, however, if the taking occurs in the last five years of the third renewal term or thereafter.

Assignment and Sale. Each Hilton management agreement provides that we cannot sell the applicable hotel to any unrelated third party, which includes the transfer of an equity interest, or engage in certain change of control actions (i) if such party has an ownership interest, either directly or indirectly, in a brand of hotels totaling at least 10 hotels and such brand competes with the manager or Hilton or any affiliate thereof; (ii) if such party is known to be of ill repute or an unsuitable business associate (per gaming industry regulations where the manager holds a gaming license); (iii) if such party does not have the ability to fulfill our financial obligations under the hotel management agreement; or (iv) if certain conditions are not satisfied, including cure of any existing or potential defaults, receipt of evidence of proper insurance coverage, payment of fees and expenses which will accrue to the manager through the date of closing, and provision of sufficient notice of the contemplated sale to the manager.

Right of First Offer. Each of the Hilton management agreements provides the manager with a right of first negotiation with respect to a sale of the hotel (which includes any equity transfer, whether directly or indirectly) or lease of the hotel (if applicable). After notice of a proposed sale or lease to the manager, the manager has 30 days to elect or decline to exercise its right to purchase or lease. If manager makes an election to purchase or lease, the parties have 30 days to execute an agreement for purchase (or lease, if applicable) and an additional 30 days to consummate the purchase or lease (if applicable). If the manager declines to exercise its right to purchase or lease, the sale or lease must occur within 180 days at greater than 90% of the price or the notice of sale must be renewed to manager.

Accor Management Agreement

In connection with our acquisition of the Sofitel Chicago Water Tower, our TRS lessee, as lessee of the hotel, assumed a management agreement with Accor that allows us to operate under the Sofitel brand name and utilize Accor’s services and experience in connection with the management and operation of the Sofitel Chicago Water Tower. The material terms of the agreement are summarized as follows:

Term. The initial term of the management agreement expires on December 31, 2030 and automatically renews for three consecutive 10-year renewal terms, unless the manager terminates the agreement by written notice at least 180 days prior to the expiration of the then-current term.

Management Fees . We pay the manager certain fees, including but not limited to:


•	A base management fee of 3% of gross hotel revenues, to be paid monthly;


•	An incentive management fee equal to 20% of the amount by which the hotel’s annual net operating income exceeds a threshold amount (equal to 8% of our total investment in the hotel), capped at 2.5% of gross hotel revenues; and


•	A global sales and marketing fee equal to 2% of gross hotel revenues.

Events of Default. An “Event of Default” is generally defined to include the failure to make a payment under the management agreement and failure to cure such non-payment after the applicable notice and cure period, the bankruptcy or insolvency of either party, a failure by either party to maintain at all times all of the insurance required to be maintained by such party and failure to cure such default after the applicable notice and cure period, the failure by either party to perform any of the material covenants in the hotel management agreement which continues beyond the applicable notice and cure period and a transfer of the agreement by either party in violation of the provisions of the agreement. The occurrence of an Event of Default prevents the defaulting party from transferring the agreement without the consent of the non-defaulting party.

Termination. A non-defaulting party may terminate the hotel management agreement if the defaulting party (i) has breached any material representation or fails to perform any material provision of the agreement or (ii) becomes insolvent or bankrupt, in each case after the expiration of any applicable notice and cure period. In addition, the manager may terminate the agreement if we default under a mortgage relating to the hotel and fail to cure such default within the times provided.

Performance Termination. We have the right to terminate the hotel management agreement without the payment of a termination fee if the manager fails to achieve certain criteria relating to the performance of the hotel managed by Accor. The performance period is measured with respect to any two consecutive operating years. The performance criteria are: (i) the RevPAR for the hotel is less than 90% of the RevPAR for the hotel’s competitive set for each such operating year and (ii) the adjusted net operating income less the hurdle amount of $9.0 million plus 8% of any amounts we spent on capital expenditures is a negative number (i.e. less than zero) for each such operating year, provided that for any operating year in which the operation of the hotel is materially and adversely affected by a force majeure event, a refurbishing program or major capital improvements, the RevPAR for the hotel and the adjusted net operating income for such operating years shall be adjusted equitably. The manager will have a right up to three times in any eight-year period to avoid a performance termination by paying to us a cure amount that equals, for any operating year, the lower of (i) the amount by which the adjusted net operating income is less than zero and (ii) the amount that we would have been entitled to receive as a distribution from the hotel had the hotel not had a RevPAR shortfall.

Early Termination for Condemnation. If all of the hotel, or a portion of the hotel that in our reasonable opinion makes it imprudent or unsuitable to use and operate the remaining portion of the hotel in accordance with the standards maintained by the Sofitel brand, is taken in any condemnation or similar proceeding, we may terminate the agreement.

Early Termination for Casualty . If a material part of the hotel is damaged or destroyed by fire or other casualty, then we may terminate the agreement and elect not to restore the hotel. If we elect to restore the hotel, we must commence such process within 120 days after the date of the casualty and diligently proceed with the restoration of the hotel so that it meets the standards maintained by the Sofitel brand. If we fail to complete the restoration within two years after the date of the casualty, then for so long as such failure continues, the manager may terminate the management agreement. If we or the manager terminate the management agreement because of a casualty, if we have not restored the hotel and desire to lease or sell it, we must first offer to sell the hotel to the manager. If we repair, rebuild or replace the premises within five years, the manager may reinstate the agreement.

Assignment and Sale. So long as we are not in default under the management agreement and any advances made by the manager on our behalf would be repaid in connection with the sale, we may sell the Sofitel Chicago Water Tower and assign the management agreement (including as a result of a change of control) without the consent of the manager to any of our affiliates or to any person that (i) is not a competitor of the manager (as defined in the management agreement), (ii) is not generally recognized in the community as being a person of ill repute or with whom a prudent business person would not wish to associate in a commercial venture and (iii) has a minimum net worth required by the management agreement, if the assignee expressly assumes the management agreement.

Remington Master Management Agreement

As described below under “—Mutual Exclusivity Agreement,” we entered into a mutual exclusivity agreement with Remington upon completion of the spin-off. Remington manages the Pier House Resort. Remington is owned 100% by Mr. Monty J. Bennett, our chief executive officer and chairman of our board of directors and the chief executive officer and chairman of the board of directors of Ashford Trust, and his father, Mr. Archie Bennett, Jr. Pursuant to this agreement, we have agreed to engage Remington for the property management, project management, development and certain other work for all hotels we acquire, unless our independent directors either (i) unanimously vote not to engage Remington, or (ii) based on special circumstances or past performance, by a majority vote elect not to engage Remington because, in their reasonable business judgment, they have determined that it would be in our best interest not to engage Remington or that another manager or developer could perform the duties materially better. We believe Remington to be one of the premier third-party property managers in the country, and our mutual exclusivity agreement with Remington offers us a unique competitive advantage over other lodging REITs.

The following summarizes the terms of the master management agreement that we have agreed will control to the extent that Remington manages future properties that we acquire and that will control with respect to the project management of each of our properties, unless otherwise provided for in a hotel’s management agreement, including our eight initial properties contributed to us in connection with the spin-off. This summary is qualified in its entirety by reference to the master management agreement filed as an exhibit to this Annual Report on Form 10-K.

Term. The master management agreement provides for an initial term of 10 years as to each hotel governed by the agreement. The term may be renewed by Remington, at its option, subject to certain performance tests, for three successive periods of seven years each and, thereafter, a final term of four years, provided that at the time the option to renew is exercised, Remington is not then in default under the master management agreement. If at the time of the exercise of any renewal period, Remington is in default, then the exercise of the renewal option will be conditional on timely cure of such default, and if such default is not timely cured, then our TRS lessee may terminate the management agreement regardless of the exercise of such option and without the payment of any fee or liquidated damages. If Remington desires to exercise any option to renew, it must give our TRS lessee written notice of its election to renew the master management agreement no less than 90 days before the expiration of the then current term of the master management agreement.

Amounts Payable under the Remington Master Management Agreement. Remington receives a base management fee, and if the hotels meet and exceed certain thresholds, an additional incentive fee. The base management fee for each hotel will be due monthly and will be equal to the greater of:


•	$13,082.26 (increased annually based on consumer price index adjustments); or


•	3% of the gross revenues associated with that hotel for the related month.

The incentive management fee, if any, for each hotel will be due annually in arrears within 90 days of the end of the fiscal year and will be equal to the lesser of (i) 1% of gross revenues and (ii) the amount by which the actual house profit (gross operating profit of the applicable hotel before deducting management fees or franchise fees) exceeds the target house profit as set forth in the annual operating budget approved for the applicable fiscal year. If, however, based on actual operations and revised forecasts from time to time, it is reasonably anticipated that the incentive fee is reasonably expected to be earned, the applicable TRS lessee will consider payment of the incentive fee pro rata on a quarterly basis.

The incentive fee is designed to encourage Remington to generate higher house profit at each hotel by increasing the fee due to Remington when the hotels generate house profit above certain threshold levels. Any increased revenues will generate increased lease payments under the percentage leases and should thereby benefit our stockholders.

Termination. The master management agreement may be terminated as to one or more of the hotels earlier than the stated term if certain events occur, including:


•	a sale of a hotel;


•	the failure of Remington to satisfy certain performance standards;


•	for the convenience of our TRS lessee;


•	in the event of a casualty to, condemnation of, or force majeure involving a hotel; or


•	upon a default by Remington or us that is not cured prior to the expiration of any applicable cure periods.

In certain cases of early termination of the master management agreement with respect to one or more of the hotels, we must pay Remington termination fees, plus any amounts otherwise due to Remington pursuant to the terms of the master management agreement. We will be obligated to pay termination fees in the circumstances described below, provided that Remington is not then in default, subject to certain cure and grace periods:

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Sale. If any hotel subject to the Remington master management agreement is sold during the first 12 months of the date such hotel becomes subject to the master management agreement, our TRS lessee may terminate the master management agreement with respect to such sold hotel, provided that it pays to Remington an amount equal to the management fee (both base fees and incentive fees) estimated to be payable to Remington with respect to the applicable hotel pursuant to the then current annual operating budget for the balance of the first year of the term. If any hotel subject to the Remington master management agreement is sold at any time after the first year of the term and the TRS lessee terminates the master management agreement with respect to such hotel, our TRS lessee will have no obligation to pay any termination fees.

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Casualty. If any hotel subject to the Remington master management agreement is the subject of a casualty during the first year of the initial 10-year term and the TRS lessee elects not to rebuild, then we must pay to Remington the termination fee, if any, that would be owed if the hotel had been sold. However, after the first year of the initial 10-year term, if a hotel is the subject of a casualty and the TRS lessee elects not to rebuild the hotel even though sufficient casualty insurance proceeds are available to do so, then the TRS lessee must pay to Remington a termination fee equal to the product obtained by multiplying (i) 65% of the aggregate management fees (both base fees and incentive fees) estimated to be paid to Remington with respect to the applicable hotel pursuant to the then current annual operating budget (but in no event less than the management fees for the preceding full fiscal year) by (ii) nine.


•	Condemnation or Force Majeure. In the event of a condemnation of, or the occurrence of any force majeure event with respect to, any of the hotels, the TRS lessee has no obligation to pay any termination fees if the master management agreement terminates as to those hotels.

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Failure to Satisfy Performance Test. If any hotel subject to the Remington master management agreement fails to satisfy a certain performance test, the TRS lessee may terminate the master management agreement with respect to such hotel, and in such case, the TRS lessee must pay to Remington an amount equal to 60% of the product obtained by multiplying (i) 65% of the aggregate management fees (both base fees and incentive fees) estimated to be paid to Remington with respect to the applicable hotel pursuant to the then current annual operating budget (but in no event less than the management fees for the preceding full fiscal year) by (ii) nine. Remington will have failed the performance test with respect to a particular hotel if during any fiscal year during the term (i) such hotel’s gross operating profit margin for such fiscal year is less than 75% of the average gross operating profit margins of comparable hotels in similar markets and geographical locations, as reasonably determined by Remington and the TRS lessee, and (ii) such hotel’s RevPAR yield penetration is less than 80%. Upon a performance test failure, the TRS lessee must give Remington two years to cure. If, after the first year, the performance test failure has not been cured, then the TRS lessee may, in order not to waive any such failure, require Remington to engage a consultant with significant hotel lodging experience reasonably acceptable to both Remington and the TRS lessee, to make a determination as to whether or not another management company could manage the hotel in a materially more efficient manner. If the consultant’s determination is in the affirmative, then Remington must engage such consultant to assist with the cure of such performance failure for the second year of the cure period after that failure. If the consultant’s determination is in the negative, then Remington will be deemed not to be in default under the performance test. The cost of such consultant will be shared by the TRS lessee and Remington equally. If Remington fails the performance test for the second year of the cure period and, after that failure, the consultant again makes a finding that another management company could manage the hotel in a materially more efficient manner than Remington, then the TRS lessee has the right to terminate the management agreement with respect to such hotel upon 45 days’ written notice to Remington and to pay to Remington the termination fee described above. Further, if any hotel subject to the Remington management agreement is within a cure period due to a failure of the performance test, an exercise of a renewal option shall be conditioned upon timely cure of the performance test failure, and if the performance failure is not timely cured, the TRS lessee may elect to terminate the management agreement without paying any termination fee.

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For Convenience. With respect to any hotel managed by Remington pursuant to the Remington master management agreement, if the TRS lessee elects for convenience to terminate the management of such hotel, at any time, including during any renewal term, the TRS lessee must pay a termination fee to Remington, equal to the product of (i) 65% of the aggregate management fees for such hotel (both base fees and incentive fees) estimated to be payable to Remington with respect to the applicable hotel pursuant to the then current annual operating budget (but in no event less than the management fees for the preceding full fiscal year) and (ii) nine. With respect to any non-managed hotel for which services are provided pursuant to the Remington master management agreement, if the TRS lessee elects for convenience to terminate the master management agreement with respect to such non-managed hotel, at any time, including during any renewal term, the TRS lessee must pay a termination fee to Remington, equal to the product of (i) 65% of the aggregate project management fees and market service fees estimated for the non-managed hotel for the then current fiscal year in which such termination is to occur (but in no event less than the project management fees and market service fees for the preceding full fiscal year) by (ii) nine.

If the master management agreement terminates as to all of the hotels covered in connection with a default under the master management agreement, the mutual exclusivity agreement can also be terminated at the non-defaulting party’s election. See “—Mutual Exclusivity Agreement.”

Maintenance and Modifications. Remington must maintain each hotel in good repair and condition and make such routine maintenance, repairs and minor alterations as it deems reasonably necessary. The cost of all such maintenance, repairs and alterations will be paid by the TRS lessee.

Insurance. Remington must coordinate with the TRS lessee the procurement and maintenance of all workers’ compensation, employer’s liability, and other appropriate and customary insurance related to its operations as a property manager, the cost of which is the responsibility of the TRS lessee.

Assignment and Subleasing. Neither Remington nor the TRS lessee may assign or transfer the master management agreement without the other party’s prior written consent. However, Remington may assign its rights and obligations to an affiliate that satisfies the eligible independent contractor requirements and is “controlled” by Mr. Monty J. Bennett, his father Mr. Archie Bennett, Jr., or their respective family partnerships or trusts, the sole members or beneficiaries of which are at all times lineal descendants of Messrs. Monty or Archie Bennett, Jr. (including step children) and spouses. “Controlled” means (i) the possession of a majority of the capital stock (or ownership interest) and voting power of such affiliate, directly or indirectly, or (ii) the power to direct or cause the direction of the management and policies of such affiliate in the capacity of chief executive officer, president, chairman, or other similar capacity where they are actively engaged or involved in providing such direction or control and spend a substantial amount of time managing such affiliate. No assignment will release Remington from any of its obligations under the master management agreement.

Damage to Hotels. If any of our insured properties is destroyed or damaged, the TRS lessee is obligated, subject to the requirements of the underlying lease, to repair or replace the damaged or destroyed portion of the hotel to the same condition as existed prior to such damage or destruction. If the lease relating to such damaged hotel is terminated pursuant to the terms of the lease, the TRS lessee has the right to terminate the master management agreement with respect to such damaged hotel upon 60 days’ written notice. In the event of a termination, neither the TRS lessee nor Remington will have any further liabilities or obligations under the master management agreement with respect to such damaged hotel, except that we may be obligated to pay to Remington a termination fee, as described above. If the management agreement remains in effect with respect to such damaged hotel, and the damage does not result in a reduction of gross revenues at the hotel, the TRS lessee’s obligation to pay management fees will be unabated. If, however, the master management agreement remains in effect with respect to such damaged hotel, but the damage does result in a reduction of gross revenues at the hotel, the TRS lessee will be entitled to partial, pro rata abatement of the management fees while the hotel is being repaired.

Condemnation of a Property or Force Majeure. If all or substantially all of a hotel is subject to a total condemnation or a partial taking that prevents use of the property as a hotel, the Remington master management agreement, with respect to such hotel, will terminate, subject to the requirements of the applicable lease. In the event of termination, neither the TRS lessee nor Remington will have any further rights, remedies, liabilities or obligations under the Remington master management agreement with respect to such hotel. If any partial taking of a property does not make it unreasonable to continue to operate the hotel, there is no right to terminate the master management agreement. If there is an event of force majeure or any other cause beyond the control of Remington that directly involves a hotel and has a significant adverse effect upon the continued operations of that hotel, then the Remington management agreement may be terminated by the TRS lessee. In the event of such a termination, neither the TRS lessee nor Remington will have any further rights, remedies, liabilities or obligations under the Remington master management agreement with respect to such hotel.

Annual Operating Budget. The master management agreement provides that not less than 45 days prior to the beginning of each fiscal year during the term of the master management agreement, Remington will submit to the TRS lessee for each of the hotels, an annual operating budget setting forth in detail an estimated profit and loss statement for each of the next 12 months (or for the balance of the fiscal year in the event of a partial first fiscal year), including a schedule of hotel room rentals and other rentals and a marketing and business plan for each of the hotels. The budget is subject to the TRS lessee approval, which may not be unreasonably withheld. The budget may be revised from time to time, taking into account such circumstances as the TRS lessee deems appropriate or as business and operating conditions shall demand, subject to the reasonable approval of Remington.

Capital Improvement Budget. Remington must prepare a capital improvement budget of the expenditures necessary for replacement of furniture, fixtures and equipment and building repairs for the hotels during the following fiscal year and provide such budget to the relevant TRS lessee and landlord for approval at the same time Remington submits the proposed annual operating budget for approval by TRS lessee. Remington will, in accordance with the capital improvement budget, make such substitutions and replacements of or renewals to furniture, fixtures and equipment and non-routine repairs and maintenance as it deems necessary to maintain our hotels. Remington may not make any other expenditures for these items without the relevant TRS lessee and landlord approval, except expenditures which are provided in the capital improvements budget or are required by reason of any (i) emergency, (ii) applicable legal requirements, (iii) the terms of any franchise agreement or (iv) are otherwise required for the continued safe and orderly operation of our hotels. The cost of all such changes, repairs, alterations, improvements, renewals, or replacements will be paid from the capital improvement reserve or other monies advanced by the TRS lessee.

Service and Project Management Fees. The master management agreement provides that each TRS lessee will pay Remington a project management fee equal to 4% of the total project costs associated with the implementation of the approved capital improvement budget for a hotel until such time that the capital improvement budget and/or renovation project costs involve expenditures in excess of 5% of gross revenues of such hotel, whereupon the project management fee will be 3% of total project costs in excess of the 5% of gross revenue threshold. In addition, each TRS lessee will pay Remington additional fees at then-current market rates for other services beyond managing the hotels or implementing the capital improvement budget. These other services include: (i) construction management, (ii) interior design assistance involved in implementing the capital improvement budget, (iii) managing architects for the implementation of the capital improvement budget, overseeing all conceptual designs and reviewing plans, drawings, shop drawings and other matters necessary for the proper implementation of the capital improvement budget, (iv) purchasing of furniture, fixtures, and equipment, (v) managing freight selection and shipping processes of furniture, fixtures, and equipment, (vi) the warehousing of goods delivered at the job site, inspection of materials delivered, and the filing of claims associated with the delivery of defective or damaged goods and (vii) management and oversight of the installation of furniture, fixtures and equipment.

The fees for the additional services will be consistent with the approved capital improvement budget and will be deemed approved by the TRS lessee and landlord unless a majority of our independent directors determine that such fees for the additional services are not in line with market rates for similar services. In the event that the majority of our independent directors determine that the fees for the additional services are not market, the TRS lessee and Remington will engage a consultant reasonably satisfactory to both parties to provide then current market information with respect to the proposed fees and a written recommendation as to whether such fees are market rates or not. If the consultant determines that such fees as proposed by Remington are market, then the landlord will pay any consultant fees incurred by such consultant in making the determination. If the consultant’s recommendation does not support the fees as proposed by Remington, then Remington will pay the consultant’s fees incurred in connection with the determination and may, at its election, perform such service for fees consistent with the market research and recommendation of the consultant or elect not to provide such services and no termination fee will be payable. If Remington elects not to provide project related services for a non-managed hotel, no termination fee will be payable.

If the TRS lessee elects, for convenience, to terminate the project management and other market services being provided by Remington with respect to a hotel property (not taking into consideration any property management services), we must pay a termination fee to Remington equal to the product of (i) 65% of the project management fees and market service fees estimated to be payable to Remington with respect to the applicable hotel pursuant to the then current capital budget (but in no event less than the aggregate project management fees and market services fees for the preceding full fiscal year) and (ii) nine.

Indemnity Provisions. Remington has agreed to indemnify each TRS lessee against all damages not covered by insurance that arise from: (i) the fraud, willful misconduct or gross negligence of Remington subject to certain limitations; (ii) infringement by Remington of any third party’s intellectual property rights; (iii) employee claims based on a substantial violation by Remington of employment laws or that are a direct result of the corporate policies of Remington; (iv) the knowing or reckless placing, discharge, leakage, use or storage of hazardous materials in violation of applicable environmental laws on or in any of our hotels by Remington; or (v) the breach by Remington of the master management agreement, including action taken by Remington beyond the scope of its authority under the master management agreement, which is not cured.

Except to the extent indemnified by Remington as described in the preceding paragraph, each TRS lessee will indemnify Remington against all damages not covered by insurance and that arise from: (i) the performance of Remington’s services under the master management agreement; (ii) the condition or use of our hotels; (iii) certain liabilities to which Remington is subjected, including pursuant to the WARN Act, in connection with the termination of the master management agreement; (iv) all employee cost and expenses; or (v) any claims made by an employee of Remington against Remington that are based on a violation or alleged violation of the employment laws.

Events of Default. Events of default under the Remington master management agreement include:


•	The TRS lessee or Remington files a voluntary bankruptcy petition, or experiences a bankruptcy-related event not discharged within 90 days.


•	The TRS lessee or Remington fails to make any payment due under the master management agreement, subject to a 10-day notice and cure period.


•	The TRS lessee or Remington fails to observe or perform any other term of the management agreement, subject to a 30-day notice and cure period. There are certain instances in which the 30-day notice and cure period can be extended to up to 120 days.


•	Remington does not qualify as an “eligible independent contractor” as such term is defined in Section 856(d)(9) of the Internal Revenue Code.

If an event of default occurs and continues beyond any grace period, the non-defaulting party will have the option of terminating the Remington management agreement, on 30 days’ notice to the other party.

Option Agreement

Upon the completion of the spin-off, we entered into an option agreement to acquire the Crystal Gateway Marriott from Ashford Trust. The Crystal Gateway option agreement provides us with an option to acquire the Crystal Gateway Marriott beginning six months from the spin-off date and extending for 12 months from such date. The expiration date of the option is May 19, 2015. In light of current market conditions, the cost of our capital, and other investment opportunities, as well as the recent announcement of our stock repurchase plan, we do not currently plan to exercise this option, although we may reconsider this decision at any time.

The purchase price will be equal to the fair market value at the time the option is exercised, based on an appraisal prepared by a nationally recognized appraiser jointly selected by us and Ashford Trust, subject to adjustment as provided in the option agreement and is payable in common units of our operating partnership only. If we exercise our right to purchase this property, Ashford Trust can terminate the option agreement if the value of the common units in our operating partnership payable in connection with such exercise (measured by the value of our common stock) decreases by more than 20% between the option exercise date and the closing date.

Under the terms of a tax reporting and protection agreement entered into when Ashford Trust OP acquired the Crystal Gateway Marriott in Arlington, Virginia, Ashford Trust OP will be required to pay certain tax liabilities of partners of the original contributor if the indebtedness related to the Crystal Gateway Marriott is reduced, or the hotel is disposed of, in a taxable transaction before July 13, 2016. We have agreed that if we exercise our option to acquire the Crystal Gateway Marriott, we will indemnify Ashford Trust OP for any tax liability that Ashford Trust OP is required to pay under the existing tax reporting and protective agreement. The potential tax liability generally consists of the aggregate federal, state and local income tax liability incurred by the partners of the original contributor to Ashford Trust (using an assumed combined federal, state and local income tax rate at the then-highest applicable marginal rate for such contributor) with respect to the gain allocated to the contributor under Section 704(c) of the Internal Revenue Code.

The terms of the existing tax reporting and protection agreement require us to gross up the tax indemnity payment for the amount of income taxes due as a result of the tax indemnity payment. No tax indemnity payment will be due if we acquire the hotel and then dispose of it in a tax-deferred transaction, such as a like-kind exchange under Section 1031 of the Internal Revenue Code. The existing tax reporting and protection agreement also requires Ashford Trust OP to use commercially reasonable efforts to maintain non-recourse indebtedness in the amount of at least $43.3 million through July 13, 2016, which will allow the partners of the original contributor to continue to defer recognition of gain in connection with the contribution of the Crystal Gateway Marriott to Ashford Trust. We have agreed to use such commercially reasonable efforts to maintain the minimum non-recourse indebtedness if we exercise our option to acquire this hotel.

Right of First Offer Agreement

The right of first offer agreement provides us the first right to acquire each of the subject hotels, to the extent the board of directors of Ashford Trust determines to market and sell the hotel, subject to any prior rights of the managers of the hotel or other third parties and the limitation noted in the footnote to the table above with respect to hotels in a joint venture. In addition, so long as we do not materially change our initial investment guidelines without the express consent of Ashford LLC, the right of first offer agreement extends to hotels later acquired by Ashford Trust that satisfy our initial investment guidelines. We believe this right of first offer provides us with significant external growth opportunities.

If Ashford Trust decides to offer for sale an asset that fits our investment guidelines, it must give us a written notice describing the sale terms and granting us the right to purchase the asset at a purchase price equal to the price set forth in the offer. We will have 30 days to agree to the terms of the sale, failing which Ashford Trust will be free to sell the asset to any person upon substantially the same terms as those contained in the written notice for 180 days, but not for a price less than 95% of the offered purchase price. If during such 180-day period, Ashford Trust desires to accept an offer that is not on substantially the same terms as those contained in the written notice or that is less than 95% of the offered purchase price, Ashford Trust must give us written notice of the new terms and we will have 10 days in which to agree to the terms of the sale. If Ashford Trust does not close on the sale or refinancing of the asset within 180 days following the expiration of the initial 30-day period, the right to purchase the asset will be reinstated on the same terms.

Likewise, we have agreed to give Ashford Trust a right of first offer with respect to any properties that we acquire in a portfolio transaction, to the extent our board of directors determines it is appropriate to market and sell such assets and we control the disposition, provided such assets satisfy Ashford Trust’s investment guidelines. Any such right of first offer granted to Ashford Trust will be subject to certain prior rights, if any, granted to the managers of the related properties or other third parties.

The right of first offer agreement has an initial term of 10 years and is subject to automatic one year renewal periods unless one party notifies the other at least 180 days prior to the expiration of the current term that it does not intend to renew the agreement. The agreement may be terminated by either party (i) upon a default of the other party upon giving notice of such default and the defaulting party fails to cure within 45, or in some circumstances up to 90, days subject to certain exclusions, and (ii) if the other party experiences specified bankruptcy events. Also, if we materially modify our initial investment guidelines without consent of Ashford Trust (which consent may be withheld in its sole discretion), our right of first refusal for any assets owned or later acquired by Ashford Trust and its affiliates, other than the initial assets subject to the right of first offer agreement, will terminate unless otherwise agreed by the parties. Further, the agreement will automatically terminate upon a termination of our advisory agreement or upon a change of control of either us or Ashford Trust, excluding any change of control that may occur as a result of a spin-off, carve-out, split-off or other similar event.

TRS Leases

Six of the hotels we acquired from Ashford Trust in connection with the spin-off are owned by our operating partnership and leased to subsidiaries of Ashford Prime TRS. Two of our hotels are held in a joint venture in which we have a 75% equity interest. The two hotels owned by the joint venture are leased to subsidiaries of the joint venture, which two subsidiaries we have elected to treat as TRSs. In connection with the spin-off, Ashford Prime TRS acquired three subsidiaries, each of which is a TRS that collectively lease six of our properties. In 2014, Prime TRS formed two new subsidiaries to lease the two hotels acquired during the year. Ashford Prime TRS has elected to be treated as a TRS. We intend to lease all hotels we acquire in the future, other than pursuant to sale-leaseback transactions with unrelated third parties, to a TRS lessee, pursuant to the terms of leases that are generally similar to the terms of the existing leases. Ashford LLC will negotiate the terms and provisions of each future lease, considering such things as the purchase price paid for the hotel, then current economic conditions and any other factors deemed relevant at the time.

Term. The leases for each of the hotels we acquired from Ashford Trust in connection with the spin-off includes a term of five years, which began on January 1, 2013, except in the case of the Courtyard Philadelphia Downtown, the term began on December 2, 2011 and expires on December 31, 2016. The lease for the Pier House Resort began on May 14, 2013 and expires on December 31, 2017 and the lease for the Sofitel Chicago Water Tower began on February 24, 2014 and expires on December 31, 2018. The leases may be terminated earlier than the stated term if certain events occur, including specified damages to the related hotel, a condemnation of the related hotel or the sale of the related hotel, or an event of default that is not cured within any applicable cure or grace periods. The lessor must pay a termination fee to the TRS lessee if and to the extent the TRS lessee is obligated to pay a termination fee to the managers as a result of the termination of the lease.

Amounts Payable Under Leases. The leases generally provide for each TRS lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any. The percentage rent for each hotel equals: (i) an agreed percentage of gross revenue that exceeds a threshold amount, less (ii) all prior percentage rent payments.

Maintenance and Modifications. Each TRS lessee is required to establish and fund, in respect of each fiscal year during the terms of the leases, a reserve account, in the amount of at least 4% of gross revenues per year to cover the cost of capital expenditures, which costs will be paid by our operating partnership. Each TRS lessee shall be required to make (at our sole cost and expense) all capital expenditures required in connection with emergency situations, legal requirements, maintenance of the applicable franchise agreement, the performance by lessee of its obligations under the lease and other permitted additions to the leased property. We also have the right to make additions, modifications or improvements so long as our actions do not significantly alter the character or purposes of the property, significantly detract from the value or operating efficiency of the property, significantly impair the revenue producing capability of the property or affect the ability of the lessee to comply with the terms of their lease. All capital expenditures relating to material structural components involving expenditures of $1 million or more are subject to the approval of our operating partnership. Each TRS lessee is responsible for all routine repair and maintenance of the hotels, and our operating partnership will be responsible for non-routine capital expenditures.

We own substantially all personal property (other than inventory, linens and other nondepreciable personal property) not affixed to, or deemed a part of, the real estate or improvements on our hotels, unless ownership of such personal property would cause the rent under a lease not to qualify as “rents from real property” for REIT income test purposes. See “Federal Income Tax Consequences of Our Status as a REIT—Income Tests.”

Insurance and Property Taxes. We pay real estate and personal property taxes on the hotels (except to the extent that personal property associated with the hotels is owned by the applicable TRS lessee). We pay for property and casualty insurance relating to the hotel properties and any personal property owned by us. Each TRS lessee pays for all insurance on its personal property, comprehensive general public liability, workers’ compensation, vehicle, and other appropriate and customary insurance. Each TRS lessee must name us as an additional insured on any policies it carries.

Assignment and Subleasing. The TRS lessees are not permitted to sublet any part of the hotels or assign their respective interests under any of the leases without our prior written consent, which cannot be unreasonably withheld. No assignment or subletting will release any TRS lessee from any of its obligations under the leases.

Damage to Hotels. If any of our insured hotels is destroyed or damaged, whether or not such destruction or damage prevents use of the property as a hotel, the applicable TRS lessee will have the obligation, but only to the extent of insurance proceeds that are made available, to restore the hotel. All insurance proceeds will be paid to our operating partnership (except such proceeds payable for loss or damage to the TRS lessee’s personal property) and be paid to the applicable TRS lessee for the reasonable costs of restoration or repair. Any excess insurance proceeds remaining after the cost of repair or restoration will be retained by us. If the insurance proceeds are not sufficient to restore the hotel, the TRS lessee or we have the right to terminate the lease upon written notice. In that event, neither we nor the TRS lessee will have any further liabilities or obligations under the lease, except that, if we terminate the lease, we have to pay the TRS lessee termination fees, if any, within 45 days that become due under the management agreement. If the lease is so terminated, we will keep all insurance proceeds received as a result of such destruction or damage. If the lease is terminated by a TRS lessee, we have the right to reject the termination of the lease and to require the TRS lessee to restore the hotel, provided we agree to pay for all restoration costs in excess of available insurance proceeds. In that event, the related lease will not terminate and we will pay all insurance proceeds to the TRS lessee.

If the cost of restoration exceeds the amount of insurance proceeds, we will contribute any excess amounts necessary to complete the restoration to the TRS lessee before requiring the work to begin. In the event of damage or destruction not covered by insurance, our obligations, as well as those of the applicable TRS lessee, will be the same as in the case of inadequate insurance proceeds. However, regardless of insurance coverage, if damage or destruction rendering the property unsuitable for its primary intended purpose occurs within 24 months of the end of the lease term, we may terminate the lease with 30 days’ notice. If the lease remains in effect and the damage does not result in a reduction of gross revenues at the hotel, the TRS lessee’s obligation to pay rent will be unabated. If, however, the lease remains in effect but the damage does result in a reduction of gross revenues at the hotel, the TRS lessee will be entitled to a certain amount of rent abatement while the hotel is being repaired. We will keep all proceeds from loss of income insurance.

Condemnation. If any of our hotels is subject to a total condemnation or a partial taking that prevents use of the property as a hotel, we and the TRS lessee each have the option to terminate the related lease. We will share in the condemnation award with the TRS lessee in accordance with the provisions of the related lease. If any partial taking of a hotel does not prevent use of the property as a hotel, the TRS lessee is obligated to restore the untaken portion of the hotel to a complete architectural unit but only to the extent of any available condemnation award. If the condemnation award is not sufficient to restore the hotel, the TRS lessee or we have the right to terminate the lease upon written notice. If the lease is terminated by the TRS lessee, we have the right to reject the termination of the lease within 30 days and to require the TRS lessee to restore the hotel, provided we agree to pay for all restoration costs in excess of the available condemnation award. We will contribute the cost of such restoration to the TRS lessee. If a partial taking occurs, the base rent will be abated to some extent, taking into consideration, among other factors, the number of usable rooms, the amount of square footage, or the revenues affected by the partial taking.

Events of Default. Events of Default under the leases include:


•	The TRS lessee fails to pay rent or other amounts due under the lease, provided that the TRS lessee has a 10-day cure period after receiving a written notice from us that such amounts are due and payable before an event of default would occur.


•	The TRS lessee does not observe or perform any other term of a lease, provided that the TRS lessee has a 30-day cure period after receiving a written notice from us that a term of the lease has been violated before an event of default of default would occur. There are certain instances in which the 30-day grace period can be extended to a maximum of 120 days.


•	The TRS lessee is the subject of a bankruptcy, reorganization, insolvency, liquidation or dissolution event.


•	The TRS lessee voluntarily ceases operations of the hotels for a period of more than 30 days, except as a result of damage, destruction, condemnation, or certain specified unavoidable delays.


•	The default of the TRS lessee under the management agreement for the related hotel because of any action or failure to act by the TRS lessee and the TRS lessee has failed to cure the default within 30 days.

If an event of default occurs and continues beyond any grace period, we have the option of terminating the related lease. If we decide to terminate a lease, we must give the TRS lessee 10 days’ written notice. Unless the event of default is cured before the termination date we specify in the termination notice, the lease will terminate on the specified termination notice. In that event, the TRS lessee will be required to surrender possession of the related hotel and pay liquidated damages at our option, as provided by the applicable lease.

Termination of Leases. Our operating partnership generally has the right to terminate any lease prior to the expiration date so long as we pay a termination fee. The termination fee is equal to any termination fee due to a manager under the management agreement.

Indemnification. Each TRS lessee is required to indemnify us for claims arising out of (i) accidents occurring on or about the leased property, (ii) any past, present or future use or condition of the hotel by TRS lessee or any of its agents, employees or invitees, (iii) any impositions that are the obligation of the TRS hotel by lessee, (iv) any failure of the TRS lessee to perform under the lease, and (v) the non-performance of obligations under any sub-lease by the landlord thereunder. We are required to indemnify each TRS lessee for any claim arising out of our gross negligence or willful misconduct arising in connection with the lease and for any failure to perform our obligations under the lease. All indemnification amounts must be paid within 10 days of a determination of liability.

Breach by Us. If we breach any of the leases, we will have 30 days from the time we receive written notice of the breach from the TRS lessee to cure the breach. This cure period may be extended in the event of certain specified, unavoidable delays.

Ground Leases

Two of our hotels are subject to ground leases that cover the land underlying the respective hotels.

Renaissance Tampa International Plaza. The Renaissance Tampa International Plaza is subject to a land sublease with an initial term that expires December 30, 2080. We paid minimum rent of $300,000 per year through July 31, 2014, and effective as of August 1, 2014, our annual rent increased to $350,000 per year. In addition, we paid percentage rent in the amount of 2% of gross revenues (less the minimum rent paid) through July 31, 2014 and this amount increased to 3% beginning August 1, 2014. The lease may be assigned at any time to an affiliate, a successor corporation by merger, or a third party which has a net worth of at least $10 million, provided that we give landlord notice of any such assignment, which notice shall include the name of the assignee.

Hilton La Jolla Torrey Pines. The Hilton La Jolla Torrey Pines is subject to a ground lease with the City of San Diego and expires June 30, 2043. Rent is payable monthly and is the greater of minimum rent or percentage rent, determined monthly, with annual true-up. Commencing January 1, 1993 and every five years thereafter, minimum rent is adjusted to be 80% of the annual average of actual rents paid or accrued during the preceding five-year period, but in no event may such rent be adjusted downwards. Percentage rent is determined from a percentage of room and banquet rental revenue, food and beverage sales, alcohol sales, lobby, gift shop and coin operated machine and telephone sales and other authorized uses. Percentage rent is adjusted at least six months prior to the end of the 30th lease year (December 31, 2017) and thereafter at least six months prior to each 10th year by mutual agreement to provide fair rental to landlord. The lease may be assigned with the landlord’s prior written consent (not to be unreasonably withheld), provided that the hotel is operated by a competent manager. The landlord will not withhold its consent if the assignee is a qualified assignee (defined to be a party, including a successor, who has a net worth not less than us and who is in good standing and has a good reputation within the community) and we satisfy certain other conditions, including that we provide 30 days’ notice of such assignment, certain financial and other information regarding assignee and an acceptable form of assumption agreement, and that there are no uncured defaults under the lease.

Mutual Exclusivity Agreement

Upon completion of the spin-off, we and Ashford Prime OP entered into a mutual exclusivity agreement with Remington that was consented and agreed to by Mr. Monty J. Bennett, regarding lodging investment opportunities any of us identifies in the future.

Term. The initial term of the mutual exclusivity agreement is 10 years. This term automatically extends for three additional renewal periods of seven years each and a final renewal period of four years, for a total of up to 35 years. The agreement may be sooner terminated because of:


•	an event of default (see “—Events of Default”),


•	a party’s early termination rights (see “—Early Termination”), or


•	a termination of all Remington management agreements between the TRS lessee and Remington because of an event of default under the management agreements that affects all properties (see “—Relationship with Management Agreement”).

Modification of Investment Guidelines. In the event that we materially modify our initial investment guidelines without the written consent of Remington, which consent may be withheld at its sole and absolute discretion, and may further be subject to the consent of Ashford Trust Parties, the Remington parties will have no obligation to present or offer us investment opportunities at any time thereafter. Instead, the Remington parties, subject to the superior rights of the Ashford Trust parties or any other party with which the Remington parties may have an existing agreement, shall use their reasonable discretion to determine how to allocate investment opportunities it identifies. In the event we materially modify our investment guidelines without the written consent of Remington, the Ashford Trust parties will have superior rights to investment opportunities identified by the Remington parties, and we will no longer retain preferential treatment to investment opportunities identified by the Remington parties. A material modification for this purpose means any modification of our initial investment guidelines to be competitive with Ashford Trust’s investment guidelines.

Our Exclusivity Rights. Remington and Mr. Monty Bennett have granted us a first right of refusal to pursue certain lodging investment opportunities identified by Remington or its affiliates (including Mr. Bennett), including opportunities to buy hotel properties, to buy land and build hotels, or to otherwise invest in hotel properties that satisfy our initial investment guidelines and are not considered excluded transactions pursuant to the mutual exclusivity agreement. If investment opportunities are identified and are subject to the mutual exclusivity agreement, and we have not materially modified our initial investment guidelines without the written consent of Remington, then Remington, Mr. Bennett and their affiliates, as the case may be, will not pursue those opportunities (except as described below) and will give us a written notice and description of the investment opportunity, and we will have 10 business days to either accept or reject the investment opportunity. If we reject the opportunity, Remington may then pursue such investment opportunity, subject to a right of first refusal in favor of Ashford Trust pursuant to an existing agreement between Ashford Trust and Remington, on materially the same terms and conditions as offered to us. If the terms of such investment opportunity materially change, then Remington must offer the revised investment opportunity to us, whereupon we will have 10 business days to either accept or reject the opportunity on the revised terms.

Reimbursement of Costs. If we accept an investment opportunity from Remington, we will be obligated to reimburse Remington or its affiliates for the actual out-of-pocket and third-party costs and expenses paid by Remington or its affiliates in connection with such investment opportunity, including any earnest money deposits, but excluding any finder’s fee, brokerage fee, development fee or other compensation paid by Remington or its affiliates. Remington must submit to us an accounting of the costs in reasonable detail.

Exclusivity Rights of Remington. If we elect to pursue an investment opportunity that consists of the management and operation of a hotel property, and/or the construction, development, project management or the performance of project related services, we will hire Remington to provide such services unless our independent directors either (i) unanimously elect not to engage Remington, or (ii) by a majority vote, elect not to engage Remington because they have determined, in their reasonable business judgment, (A) special circumstances exist such that it would be in our best interest not to engage Remington for the particular hotel, or (B) based on the prior performance of Remington, another manager or developer could perform the duties materially better than Remington for the particular hotel. In return, Remington has agreed that it will provide those services.

Excluded Investment Opportunities. The following are excluded from the mutual exclusivity agreement and are not subject to any exclusivity rights or right of first refusal:


•	With respect to Remington, an investment opportunity where our independent directors have unanimously voted not to engage Remington as the manager or developer.


•	With respect to Remington, an investment opportunity where our independent directors, by a majority vote, have elected not to engage Remington as the manager or developer based on their determination, in their reasonable business judgment, that special circumstances exist such that it would be in our best interest not to engage Remington with respect to the particular hotel.

•

With respect to Remington, an investment opportunity where our independent directors, by a majority vote, have elected not to engage Remington as the manager or developer because they have determined, in their reasonable business judgment, that another manager or developer could perform the management, development or other duties materially better than Remington for the particular hotel, based on Remington’s prior performance.


•	Existing hotel investments of Remington or its affiliates with any of their existing joint venture partners, investors or property owners.


•	Existing bona fide arm’s length third-party management arrangements (or arrangements for other services such as project management) of Remington or any of its affiliates with third parties other than us and our affiliates.


•	Like-kind exchanges made pursuant to existing contractual obligations by any of the existing joint venture partners, investors or property owners in which Remington or its affiliates have an ownership interest, provided that Remington provides us with notice 10 days’ prior to such transaction.


•	Any hotel investment that does not satisfy our initial investment guidelines.

Management or Development. If we hire Remington to manage or operate a hotel or construct hotel improvements, it will be pursuant to the terms of the form of management agreement agreed to between us and Remington. If we hire Remington to develop and construct a hotel, the terms of the development and construction will be pursuant to a form of development agreement that has been agreed to by us and Remington.

Events of Default. Each of the following is a default under the mutual exclusivity agreement:


•	we or Remington experience a bankruptcy-related event;


•	we fail to reimburse Remington as described under “—Reimbursement of Costs,” subject to a 30-day cure period; and


•	we or Remington does not observe or perform any other term of the agreement, subject to a 30-day cure period (which may be increased to a maximum of 120 days in certain instances).

If a default occurs, the non-defaulting party will have the option of terminating the mutual exclusivity agreement subject to 30 days’ written notice and pursuing its rights and remedies under applicable law.

Early Termination. Remington has the right to terminate the exclusivity rights granted to us if:


•	Mr. Monty J. Bennett is removed as our chief executive officer or as chairman of our board of directors or is not re-appointed to either position, or he resigns as chief executive officer or chairman of our board of directors;


•	we terminate the Remington exclusivity rights pursuant to the terms of the mutual exclusivity agreement; or


•	our advisory agreement with Ashford LLC is terminated for any reason pursuant to its terms and Mr. Monty J. Bennett is no longer serving as our chief executive officer and chairman of our board of directors.

We may terminate the exclusivity rights granted to Remington if:


•	Remington fails to qualify as an “eligible independent contractor” as defined in Section 856(d)(9) of the Internal Revenue Code and for that reason, we terminate the master management agreement with Remington;


•	Remington is no longer “controlled” by Mr. Monty Bennett or his father Mr. Archie Bennett, Jr. or their respective family partnership or trusts, the sole members of which are at all times lineal descendants of Mr. Archie Bennett, Jr. or Mr. Monty Bennett (including step children) and spouses;

•

we experience a change in control and terminate the master management agreement between us and Remington and have paid a termination fee equal to the greater of (a) the product of (i) 65% of the aggregate management fees for such hotel (both base fees and incentive fees) estimated to be payable to Remington with respect to the applicable hotel pursuant to the then current annual operating budget (but in no event less than the management fees for the preceding full fiscal year) and (ii) nine, or (b) the product of (i) 65% of the project management fees and market services fees estimated to be payable to Remington with respect to the applicable hotel pursuant to the then current capital improvement budget (but in no event less than the aggregate project management fees and market service fees, for the preceding full fiscal year) and (ii) nine;


•	the Remington parties terminate our exclusivity rights pursuant to the terms of the mutual exclusivity agreement; or


•	our advisory agreement with Ashford LLC is terminated for any reason pursuant to its terms and Mr. Monty J. Bennett is no longer serving as our chief executive officer and chairman of our board of directors.

Assignment. The mutual exclusivity agreement may not be assigned by any of the parties to the agreement without the prior written consent of the other parties, provided that Remington can assign its interest in the mutual exclusivity agreement, without the written consent of the other parties, to a “manager affiliate entity” as that term is defined in the agreement, so long as such affiliate qualifies as an “eligible independent contractor” at the time of such transfer.

Relationship with Management Agreement. The rights provided to us and to Remington in the mutual exclusivity agreement may be terminated if the master management agreement between us and Remington terminates in its entirety because of an event of default as to all of the then-managed properties. A termination of Remington’s management rights with respect to one or more hotels (but not all hotels) does not terminate the mutual exclusivity agreement. A termination of the mutual exclusivity agreement does not terminate any management agreement either in part or in whole, and the management agreements would continue in accordance with their terms as to the hotels covered, despite a termination of the mutual exclusivity agreement.

Licensing Agreement

Upon completion of the spin-off, we entered into a licensing agreement with Ashford Trust pursuant to which Ashford Trust has granted us a non-exclusive, perpetual, royalty-free license to use certain trademarks associated with the “Ashford Hospitality Prime, Inc.” name. The license agreement terminates immediately if we end our advisory relationship with Ashford LLC or one of its affiliates.

Investment Management Agreement

On November 10, 2014, AHP SMA, LP, our wholly-owned subsidiary (“AHP SMA”), entered into an investment management agreement with Ashford Investment Management LLC, an indirect subsidiary of Ashford Inc. (“AIM”), pursuant to which AIM will serve as the investment manager for certain designated assets of AHP SMA and will be responsible for the investment and reinvestment of those assets in accordance with certain investment guidelines set forth therein. As of December 31, 2014, there were no designated assets managed by AIM.

AHP SMA has delegated to AIM all of its powers, duties and responsibilities with regard to the investment and reinvestment of the designated assets and appointed AIM as its agent in fact with full authority to buy, sell or otherwise effect investment transactions for the designated assets. AHP SMA retains no rights to dispose or vote the securities related to the designated assets.

AIM is not compensated for its services pursuant to the investment management agreement; however, AHP SMA will reimburse AIM for certain expenses related to the investment management services provided by AIM under the agreement.

Termination. Each of AIM or AHP SMA may terminate the investment management agreement at any time upon 45 days’ prior written notice to the other party; however, AIM and AHP SMA may mutually terminate the investment management agreement at any time.

Death, Disability or Departure. In the event of the death, disability or departure of J. Robison Hays III or Monty J. Bennett from AIM, or the failure of either J. Robison Hays III, our Senior Vice President - Corporate Finance and Strategy, or Monty J. Bennett to perform his duties for AIM for a period of 90 consecutive days, AHP SMA will have the special opportunity to withdraw assets from the accounts managed by AIM as of the end of each calendar month for a three-month period and in accordance with the withdrawal terms set forth in the investment management agreement.

Assignment. The investment management agreement may not be assigned by any of the parties to the agreement without the prior written consent of the other parties, provided that AIM can assign its interest in the investment management agreement, without the written consent of AHP SMA, to an affiliate.

Relationship with Our Executive Officers and Ashford LLC. Mr. Monty J. Bennett owns (i) 25% of AIM Holdco, LP, a Delaware limited liability company that is the sole member of AIM (“AIM Holdco”), and (ii) 25% of AIM Performance Holdco, LP, a Delaware limited partnership that owns a 99.99% limited partnership interest in the general partner of AIM (“AIM Performance Holdco”). Mr. J. Robison Hays III owns (i) 15% of AIM Holdco and (ii) 15% of AIM Performance Holdco. Ashford LLC holds the remaining equity interests in each of AIM Holdco and AIM Performance Holdco. The collective 40% equity interest held by Messrs. Bennett and Hays in AIM Holdco results in an indirect ownership of a 40% equity interest in AIM or any affiliates that are created by Ashford LLC to serve as investment advisors to private funds. Similarly, the collective 40% equity interest held by Messrs. Bennett and Hays in AIM Performance Holdco results in an indirect ownership of a 40% equity interest in the general partner of AIM, AIM GP, or any affiliate that are created by Ashford LLC to serve as the general partner of such private funds. The equity interests held by Messrs. Bennett and Hays are economically equivalent to the equity interests held by Ashford LLC in such entities.

Regulation

General

Our hotels are subject to various U.S. federal, state and local laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements. We believe that each of our hotels has the necessary permits and approvals to operate its business.

Americans with Disabilities Act

Our hotels must comply with applicable provisions of the Americans with Disabilities Act of 1990 (the “ADA”), to the extent that such hotels are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our hotels where such removal is readily achievable. We believe that our hotels are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, non-compliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our hotels and to make alterations as appropriate in this respect.

Environmental Matters

Under various laws relating to the protection of the environment, a current or previous owner or operator (including tenants) of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances at that property and may be required to investigate and clean up such contamination at that property or emanating from that property. These costs could be substantial and liability under these laws may attach without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. The presence of contamination or the failure to remediate contamination at our hotels may expose us to third-party liability or materially and adversely affect our ability to sell, lease or develop the real estate or to incur debt using the real estate as collateral.

Our hotels are subject to various federal, state, and local environmental, health and safety laws and regulations that address a wide variety of issues, including, but not limited to, storage tanks, air emissions from emergency generators, storm water and wastewater discharges, lead-based paint, mold and mildew and waste management. Our hotels incur costs to comply with these laws and regulations and could be subject to fines and penalties for non-compliance.

Some of our hotels may contain or develop harmful mold or suffer from other adverse conditions, which could lead to liability for adverse health effects and costs of remediation. The presence of significant mold or other airborne contaminants at any of our hotels could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected hotel or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from guests or employees at our hotels and others if property damage or health concerns arise.

Insurance

We carry comprehensive general liability, fire, extended coverage, business interruption, rental loss coverage and umbrella liability coverage on all of our hotels and earthquake, wind, flood and hurricane coverage on hotels in areas where we believe such coverage is warranted, in each case with limits of liability that we deem adequate. Similarly, we are insured against the risk of direct physical damage in amounts we believe to be adequate to reimburse us, on a replacement basis, for costs incurred to repair or rebuild each hotel, including loss of rental income during the reconstruction period. We have selected policy specifications and insured limits which we believe to be appropriate given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance for generally uninsured losses, including, but not limited to losses caused by riots, war or acts of God. In the opinion of our management, our hotels are adequately insured.

Competition

The hotel industry is highly competitive and the hotels in which we invest are subject to competition from other hotels for guests. Competition is based on a number of factors, most notably convenience of location, brand affiliation, price, range of services, guest amenities or accommodations offered and quality of customer service. Competition is often specific to the individual markets in which our properties are located and includes competition from existing and new hotels. We believe that hotels, such as our hotels that are affiliated with leading national brands, such as the Marriott, Hilton or Accor brands, will enjoy the competitive advantages associated with operating under such brands. Increased competition could have a material adverse effect on the occupancy rate, average daily room rate and rooms revenue per available room of our hotels or may require us to make capital improvements that we otherwise would not have to make, which may result in decreases in our profitability.

Our principal competitors include other hotel operating companies, ownership companies (including hotel REITs) and national and international hotel brands. We face increased competition from providers of less expensive accommodations, such as select service hotels or independent owner-managed hotels, during periods of economic downturn when leisure and business travelers become more sensitive to room rates.

We face competition for the acquisition of hotels from institutional pension funds, private equity funds, REITs, hotel companies and others who are engaged in the acquisition of hotels. Some of these competitors have substantially greater financial and operational resources and access to capital than we have and may have greater knowledge of the markets in which we seek to invest. This competition may reduce the number of suitable investment opportunities offered to us and decrease the attractiveness of the terms on which we may acquire our targeted hotel investments, including the cost thereof.

Employees

We have no employees. Our appointed officers and employees are provided by Ashford LLC. Services which would otherwise be provided by employees are provided by Ashford LLC and by our executive officers. Ashford LLC has approximately 92 full time employees. These employees directly or indirectly perform various acquisition, development, asset management, capital markets, accounting, tax, risk management, legal, redevelopment, and corporate management functions pursuant to the terms of our advisory agreement.

Seasonality

Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. We anticipate that our cash flows from the operations of our properties will be sufficient to enable us to make quarterly distributions to maintain our REIT status. To the extent that cash flows from operations are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize other cash on hand or borrowings to fund required distributions. However, we cannot make any assurances that we will make distributions in the future.

Access to Reports and Other Information

We maintain a website at www.ahpreit.com. On our website, we make available free-of-charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission (“SEC”). In addition, our Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, Corporate Governance Guidelines, and Board Committee Charters are also available free-of-charge on our website or can be made available in print upon request.

All reports filed with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E. Washington, DC 20549-1090. Further information regarding the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. In addition, all of our filed reports can be obtained at the SEC’s website at www.sec.gov.

Item 1A. Risk Factors

Risks Related to Our Business and Properties

Our business is significantly influenced by the economies and other conditions in the specific markets in which we operate, particularly in the metropolitan areas where we have high concentrations of hotels.

Our hotels are located in the Washington DC, San Francisco, San Diego, Seattle, Dallas, Philadelphia, Tampa, Chicago and Key West metropolitan areas. As a result, we are particularly susceptible to adverse market conditions in these areas, including industry downturns, relocation of businesses and any oversupply of hotel rooms or a reduction in lodging demand. Adverse economic developments in the markets in which we have a concentration of hotels, or in any of the other markets in which we operate, or any increase in hotel supply or decrease in lodging demand resulting from the local, regional or national business climate, could adversely affect our business, operating results and prospects.

Our investments are concentrated in the hotel industry, and our business would be adversely affected by an economic downturn in that sector.

All of our investments are concentrated in the hotel industry. This concentration may expose us to the risk of economic downturns in the hotel real estate sector to a greater extent than if our properties were more diversified across other sectors of the real estate industry.

The financial crisis and general economic slowdown, which began in late 2007, harmed the operating performance of the hotel industry generally. If these or similar events recur, our business may be harmed by declines in occupancy, average daily room rates and/or other operating revenues.

The performance of the lodging industry has been closely linked with the performance of the general economy and, specifically, growth in the U.S. GDP. We invest in hotels that are classified as luxury, upper-upscale and upscale. In an economic downturn, these types of hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates. This characteristic may result from the fact that luxury, upper-upscale and upscale hotels generally target business and high-end leisure travelers. In periods of economic difficulties, business and leisure travelers may seek to reduce travel costs by limiting travel or seeking to reduce costs on their trips. Any economic recession will likely have an adverse effect on our business, operating results and prospects.

We face risks related to changes in the global economic and political environment, including capital and credit markets.

Our business may be harmed by global economic conditions, which recently have been volatile. Political crises in individual countries or regions, including sovereign risk related to a deterioration in the creditworthiness of or a default by local governments, has contributed to this volatility. If the global economy experiences continued volatility or significant disruptions, such disruptions or volatility could hurt the U.S. economy and our business. More specifically, in addition to experiencing reduced demand for business and leisure travel because of a slow-down in the general economy, we could be harmed by disruptions resulting from tighter credit markets or by illiquidity resulting from an inability to access credit markets to obtain cash to support operations or make distributions to our stockholders as a result of global or international developments.

Failure of the hotel industry to exhibit sustained improvement or to improve as expected may adversely affect us.

A substantial part of our business plan is based on our belief that the lodging markets in which we invest will experience improving economic fundamentals in the future, despite the fact that fundamentals have already substantially improved over the last several years. In particular, our business strategy is dependent on our expectation that key industry performance indicators, especially RevPAR, will continue to improve. However, hotel industry fundamentals may not continue to improve and could deteriorate. In the event conditions in the industry do not sustain improvement or improve as we expect, or deteriorate, we may be adversely affected.

We invest in the luxury, upper-upscale and upscale segments of the lodging market, which are highly competitive and generally subject to greater volatility than most other market segments and could negatively affect our profitability.

The luxury, upper-upscale and upscale segments of the hotel business are highly competitive. Our hotel properties compete on the basis of location, room rates, quality, amenities, service levels, reputation and reservations systems, among many factors. There are many competitors in the luxury, upper-upscale and upscale segments, and many of these competitors may have substantially greater marketing and financial resources than we have. This competition could reduce occupancy levels and rooms revenue at our hotels. Over-building in the lodging industry may increase the number of rooms available and may decrease occupancy and room rates. In addition, in periods of weak demand, as may occur during a general economic recession, our profitability may be negatively affected by the relatively high fixed costs of operating luxury, upper-upscale and upscale hotels. If our hotels cannot compete effectively for guests, they will earn less revenue, which would result in lower cash available for us to meet debt service obligations, operating expenses, and make requisite distributions to stockholders.

Because we depend upon Ashford LLC and its affiliates to conduct our operations, any adverse changes in the financial condition of Ashford LLC or its affiliates or our relationship with them could hinder our operating performance.

We depend on Ashford LLC to manage our assets and operations. Any adverse changes in the financial condition of Ashford LLC or its affiliates or our relationship with Ashford LLC could hinder its ability to manage us successfully.

We depend on Ashford LLC’s key personnel with long-standing business relationships. The loss of Ashford LLC’s key personnel could threaten our ability to operate our business successfully.

Our future success depends, to a significant extent, upon the continued services of Ashford LLC’s management team. In particular, the hotel industry experience of Messrs. Monty J. Bennett, Douglas A. Kessler, David A. Brooks, Deric S. Eubanks, Jeremy Welter, Mark L. Nunneley, and J. Robison Hays III, and the extent and nature of the relationships they have developed with hotel franchisors, operators, and owners and hotel lending and other financial institutions are critically important to the success of our business. The loss of services of one or more members of Ashford LLC’s management team could harm our business and our prospects.

The amount of fees and incentives paid to Ashford LLC may exceed the average of internalized expenses of our industry peers and the fees and incentives paid by other externally managed REITs to their advisors.

Pursuant to the advisory agreement between us and Ashford LLC, we pay Ashford LLC a quarterly base fee as well as an annual incentive fee based on total stockholder return versus our peer group. Because a portion of such fees are contingent on our performance, the fees we pay to Ashford LLC may fluctuate over time. In addition, the amount of the base fee is based on our total market capitalization, which is defined to include the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt); and therefore, the fee increases as our indebtedness increases. The base advisory fees paid by many other externally managed REITs are based on measures other than total market capitalization, as defined in our advisory agreement. We did not conduct arm’s-length negotiations of the terms of our advisory agreement, which we entered into in connection with the spin-off. The fees payable under our advisory agreement may not be as favorable to us as if they had been negotiated on an arm’s-length basis with unaffiliated third parties. As a result, and due to the structure of our base fee and incentive fee arrangements with Ashford LLC, there may be times when the total amount of fees and incentives paid to Ashford LLC exceeds the average of internalized expenses of our industry peers and the fees and incentives paid by other externally managed REITs to their advisors.

Our prior operating history is limited, and the prior performance of Ashford Trust is not indicative of our future performance.

We have no operating history prior to November 19, 2013, the date the spin-off was completed. The performance of Ashford Trust or other real estate programs operated by Ashford LLC should not be relied on to predict our future performance. The historical results of Ashford Trust are not indicative of our future results or market prices of our common stock. There are significant differences between Ashford Trust and us, and our financial condition and results of operations could vary significantly for the following reasons, among others:


•	Ashford Trust did not contribute all of the hotels and other assets it owns to us.


•	Our investment, financing and other strategies differ from those of Ashford Trust.

The operating performance of the hotels Ashford Trust contributed to us may decline and could adversely affect us. As described elsewhere in this Annual Report on Form 10-K, our future results are subject to many uncertainties and other factors that could cause our financial condition and results of operations to be materially different than that of Ashford Trust.

Our business strategy depends on acquiring additional hotels on attractive terms and the failure to do so or to otherwise manage our planned growth successfully may adversely affect our business and operating results.

We intend to acquire additional hotels in the future. We face significant competition for attractive investment opportunities from other well-capitalized investors, some of which have greater financial resources and greater access to debt and equity capital than we have. This competition increases as investments in real estate become increasingly attractive relative to other forms of investment. This competition could limit the number of suitable investment opportunities offered to us. It may also increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire new properties on attractive terms or on the terms contemplated in our business plan. As a result of such competition, we may be unable to acquire hotels that we deem attractive at prices that we consider appropriate or on terms that are satisfactory to us. If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the acquisition. In addition, we expect to finance future acquisitions through a combination of borrowings under our secured revolving credit facility, the use of retained cash flows, property-level debt, and offerings of equity and debt securities, which may result in additional leverage or dilution to our stockholders. Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially impede our growth.

In addition, we expect to compete to sell hotel properties. Availability of capital, the number of hotels available for sale and market conditions, all affect prices. We may not be able to sell hotel assets at our targeted price.

There is no guarantee that Ashford Trust will sell us any of the properties that are subject to the right of first offer agreement or the Crystal Gateway Marriott hotel option agreement.

We may not be able to acquire any of the properties that are subject to the right of first offer agreement, either because Ashford Trust does not elect to sell such properties or we are not in a position to acquire the properties when Ashford Trust elects to sell. Further, if we materially change our investment guidelines without the express consent of Ashford LLC, no hotels acquired by Ashford Trust after the date of such change will be subject to the right of first offer. Also, if we exercise our option to purchase the Crystal Gateway Marriott hotel, Ashford Trust can terminate the Crystal Gateway Marriott hotel option agreement if the value of the common units in our operating partnership payable in connection with such exercise (measured by the value of our common stock) decreases by more than 20% between the option exercise date and the closing date.

We may be unable to successfully integrate and operate acquired properties, which may have a material adverse effect on our business and operating results.

Even if we are able to make acquisitions on favorable terms, we may not be able to successfully integrate and operate them. We may be required to invest significant capital and resources after an acquisition to maintain or grow the properties that we acquire. In addition, we may need to adapt our management, administrative, accounting, and operational systems, or hire and retain sufficient operational staff, to integrate and manage successfully any future acquisitions of additional assets. These and other integration efforts may disrupt our operations, divert Ashford LLC’s attention away from day-to-day operations and cause us to incur unanticipated costs. The difficulties of integration may be increased by the necessity of coordinating operations in geographically dispersed locations. Our failure to integrate successfully any acquisitions into our portfolio could have a material adverse effect on our business and operating results. Further, acquired properties may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition. The failure to discover such issues prior to such acquisition could have a material adverse effect on our business and results of operations.

Because our board of directors and Ashford LLC have broad discretion to make future investments, we may make investments that result in returns that are substantially below expectations or in net operating losses. In addition, our investment policies may be revised from time to time at the discretion of our board of directors, without a vote of our stockholders. Such discretion could result in investments with yield returns inconsistent with stockholders’ expectations.

Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturers.

We own interests in two hotels through a joint venture and we do not have sole decision-making authority regarding these two properties. In addition, we may continue to co-invest with third parties through partnerships, joint ventures or other entities, acquiring controlling or non-controlling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity. We may not be in a position to exercise sole decision-making authority regarding any future properties that we may hold in a partnership or joint venture. Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt, suffer a deterioration in their financial condition or fail to fund their share of required capital contributions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, budgets, or financing, because neither we nor the partner or co-venturer have full control over the partnership or joint venture. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by, or disputes with, partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers.

Hotel franchise or license requirements or the loss of a franchise could adversely affect us.

We must comply with operating standards, terms, and conditions imposed by the franchisors of the hotel brands under which our hotels operate. Franchisors periodically inspect their licensed hotels to confirm adherence to their operating standards. The failure of a hotel to maintain these standards could result in the loss or cancellation of a franchise license. With respect to operational standards, we rely on our property managers to conform to such standards. Franchisors may also require us to make certain capital improvements to maintain the hotel in accordance with system standards, the cost of which can be substantial. A franchisor could condition the continuation of a franchise based on the completion of capital improvements that Ashford LLC or our board of directors determines is not economically feasible in light of general economic conditions, the operating results or prospects of the affected hotel or other circumstances. In that event, Ashford LLC or our board of directors may elect to allow the franchise to lapse or be terminated, which could result in a termination charge as well as a change in brand franchising or operation of the hotel as an independent hotel. In addition, when the term of a franchise expires, the franchisor has no obligation to issue a new franchise.

The loss of a franchise could have a material adverse effect on the operations and/or the underlying value of the affected hotel because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchisor. Any such material adverse effect on one or more of our hotels may, in turn, have a material adverse effect on our business and operating results.

Our reliance on third-party property managers, including Remington, to operate our hotels and for a substantial majority of our cash flow may adversely affect us.

Because federal income tax laws restrict REITs and their subsidiaries from operating or managing hotels, third parties must operate our hotels. A REIT may lease its hotels to taxable REIT subsidiaries in which the REIT can own up to a 100% interest. A taxable REIT subsidiary (“TRS”) pays corporate-level income tax and may retain any after-tax income. A REIT must satisfy certain conditions to use the TRS structure. One of those conditions is that the TRS must hire, to manage the hotels, an “eligible independent contractor” (“EIC”) that is actively engaged in the trade or business of managing hotels for parties other than the REIT. An EIC cannot (i) own more than 35% of the REIT, (ii) be owned more than 35% by persons owning more than 35% of the REIT, or (iii) provide any income to the REIT (i.e., the EIC cannot pay fees to the REIT, and the REIT cannot own any debt or equity securities of the EIC). Accordingly, while we may lease hotels to a TRS that we own, the TRS must engage a third-party operator to manage the hotels. Thus, our ability to direct and control how our hotels are operated is less than if we were able to manage our hotels directly.

We are parties to hotel management agreements under which unaffiliated third-party property managers manage our hotels. We have also entered into a mutual exclusivity agreement with Remington contemplating Remington’s management of hotels we acquire in the future, pursuant to which Remington currently manages the Pier House Resort. We do not supervise any of the property managers or their respective personnel on a day-to-day basis. Without such supervision, our property managers may not manage our properties in a manner that is consistent with their respective obligations under the applicable management agreement or our obligations under our hotel franchise agreements, be negligent in their performance, engage in criminal or fraudulent activity, or otherwise default on their respective management obligations to us. If any of these events occur, our relationships with any franchisors may be damaged, we may be in breach of our franchise agreement, and we could incur liabilities resulting from loss or injury to our property or to persons at our properties. In addition, from time to time, disputes may arise between us and our third-party managers regarding their performance or compliance with the terms of the hotel management agreements, which in turn could adversely affect us. If we are unable to resolve such disputes through discussions and negotiations, we may choose to terminate our management agreement, litigate the dispute or submit the matter to third-party dispute resolution, the expense of which may be material and the outcome of which may harm our business, operating results or prospects.

Our management agreements could adversely affect our ability to sell or finance our hotel properties.

Our management agreements do not allow us to replace hotel managers on relatively short notice or with limited cost and also contain other restrictive covenants. We may enter into additional such agreements or acquire properties subject to such agreements in the future. For example, the terms of a management agreement may restrict our ability to sell a property unless the purchaser is not a competitor of the manager, assumes the management agreement and meets other conditions. Also, the terms of a long-term management agreement encumbering our property may reduce the value of the property. When we enter into or acquire properties subject to any such management agreements, we may be precluded from taking actions that we believe to be in our best interest and could incur substantial expense as a result.

Eight of our hotels currently operate under Marriott or Hilton brands; therefore, we are subject to risks associated with concentrating our portfolio in just two brand families.

Eight of our ten hotels utilize brands owned by Marriott or Hilton. As a result, our success is dependent in part on the continued success of Marriott and Hilton and their respective brands. We believe that building brand value is critical to increase demand and build customer loyalty. Consequently, if market recognition or the positive perception of Marriott and/or Hilton is reduced or compromised, the goodwill associated with the Marriott- and Hilton--branded hotels in our portfolio may be adversely affected. Furthermore, if our relationship with Marriott or Hilton were to deteriorate as a result of disputes regarding the management of our hotels or for other reasons, Marriott and/or Hilton might terminate its current management agreements or franchise licenses with us or decline to manage or provide franchise licenses for hotels we may acquire in the future.

If we cannot obtain additional capital, our growth will be limited.

We are required to distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gains, each year to qualify and maintain our qualification as a REIT. As a result, our retained earnings available to fund acquisitions, development, or other capital expenditures are nominal. As such, we rely upon the availability of additional debt or equity capital to fund these activities. Our long-term ability to grow through acquisitions or development, which is an important strategy for us, will be limited if we cannot obtain additional financing or equity capital. Market conditions may make it difficult to obtain financing or equity capital, and we may not be able to obtain additional debt or equity financing or obtain it on favorable terms.

Two of our hotels are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a ground lease, our business could be materially and adversely affected.

Two of our hotels are on land subject to ground leases. Accordingly, we only own a long-term leasehold or similar interest in those two hotels. If we are found to be in breach of a ground lease, we could lose the right to use the hotel. In addition, unless we can purchase a fee interest in the underlying land and improvements or extend the terms of these leases before their expiration, we will lose our right to operate these properties and our interest in the improvements upon expiration of the leases. We may not be able to renew any ground lease upon its expiration. Our ability to exercise any extension options relating to our ground leases is subject to the condition that we are not in default under the terms of the ground lease at the time that we exercise such options. If we lose the right to use a hotel due to a breach or non-renewal of the ground lease, we would be unable to derive income from such hotel and would be required to purchase an interest in another hotel to attempt to replace that income, which could materially and adversely affect our business, operating results and prospects.

We will not recognize any increase in the value of the land or improvements subject to our ground leases and may only receive a portion of compensation paid in any eminent domain proceeding with respect to the hotel.

Unless we purchase a fee interest in the land and improvements subject to our ground leases, we will not have any economic interest in the land or improvements at the expiration of our ground leases. As a result, we will not share in any increase in value of the land or improvements beyond the term of a ground lease, notwithstanding our capital outlay to purchase our interest in the hotel or fund improvements thereon, and will lose our right to use the hotel. Furthermore, if the state or federal government seizes a hotel subject to a ground lease under its eminent domain power, we may only be entitled to a portion of any compensation awarded for the seizure.

The expansion of our business into new markets outside of the United States will expose us to risks relating to owning hotels in those international markets.

As part of our business strategy, we may acquire hotels that meet our investment criteria and are located in international gateway markets. We may have difficulty managing our expansion into new geographic markets where we have limited knowledge and understanding of the local economy, an absence of business relationships in the area, or unfamiliarity with local governmental and permitting procedures and regulations. There are risks inherent in conducting business outside of the United States, which include risks related to:


•	foreign employment laws and practices, which may increase the reimbursable costs incurred under our advisory agreement associated with international employees;


•	foreign tax laws, which may provide for income or other taxes or tax rates that exceed those of the U.S. and which may provide that foreign earnings that are repatriated, directly or indirectly, are subject to dividend withholding tax requirements or other restrictions;


•	compliance with and unexpected changes in regulatory requirements or monetary policy;


•	the willingness of domestic or international lenders to provide financing and changes in the availability, cost and terms of such financing;


•	adverse changes in local, political, economic and market conditions;


•	increased costs of insurance coverage related to terrorist events;


•	changes in interest rates and/or currency exchange rates;


•	regulations regarding the incurrence of debt; and


•	difficulties in complying with U.S. rules governing REITs while operating outside of the United States.

Any of these factors could affect adversely our ability to obtain all of the intended benefits of expanding internationally. If we do not effectively manage this expansion and successfully integrate the international hotels into our organization, our operating results and financial condition may be adversely affected.

Compliance with international laws and regulations may require us to incur substantial costs.

The operations of our international properties, if any, will be subject to a variety of U.S. and international laws and regulations, including the United States Foreign Corrupt Practices Act (“FCPA”). Before we invest in international markets, we will adopt policies and procedures designed to promote compliance with the FCPA and other anti-corruption laws, but we may not continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international properties might be subject and the manner in which existing laws might be administered or interpreted.

Exchange rate fluctuations could affect adversely our financial results.

If we acquire hotels or conduct operations in an international jurisdiction, currency exchange rate fluctuations could adversely affect our results of operations and financial position. If we have international operations, a portion of our revenue and expenses could be generated in foreign currencies such as the Euro, the Canadian dollar and the British pound sterling. Any steps we take to reduce our exposure to fluctuations in the value of foreign currencies, such as entering into foreign exchange agreements or currency exchange hedging arrangements will not eliminate such risk entirely. To the extent that we are unable to match revenue received in foreign currencies with expenses paid in the same currency, exchange rate fluctuations could have a negative impact on our results of operations and financial condition. Additionally, because our consolidated financial results are reported in U.S. dollars, if we generate revenues or earnings in other currencies, the conversion of such amounts into U.S. dollars can result in an increase or decrease in the amount of our revenues or earnings.

For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

Upon the completion of the spin-off, we became subject to reporting and other obligations under the Exchange Act. In April 2012, the Jump Start Our Business Startups Act (the “JOBS Act”) was enacted into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for “emerging growth companies,” including certain requirements relating to accounting standards and compensation disclosure. We are an “emerging growth company” as defined in the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to:


•	provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act;


•	comply with any new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies under Section 102(b)(1) of the JOBS Act;


•	comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;


•	comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise;


•	provide certain disclosure regarding executive compensation; or


•	hold stockholder advisory votes on executive compensation.

Because we are an "emerging growth company" under the JOBS Act, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting.

For as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b). We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with accounting standards that are newly issued or revised after April 5, 2012, our common stock may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. Without access to additional capital, we may not be able to expand our business or take other actions we determine to be in our best interests. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

We are increasingly dependent on information technology, and potential cyber attacks, security problems or other disruption and expanding social media vehicles present new risks.

Ashford LLC and our hotel managers rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, reservations, billing and operating data. Ashford LLC and our hotel managers may purchase some of our information technology from vendors, on whom our systems will depend, and Ashford LLC relies on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential operator and other customer information. We depend upon the secure transmission of this information over public networks. Ashford LLC’s and hotel managers’ networks and storage applications could be subject to unauthorized access by hackers or others through cyber attacks, which are rapidly evolving and becoming increasingly sophisticated, or by other means, or may be breached due to operator error, malfeasance or other system disruptions. In some cases, it will be difficult to anticipate or immediately detect such incidents and the damage they cause. Any significant breakdown, invasion, destruction, interruption or leakage of information from Ashford LLC’s or hotel managers’ systems could harm our reputation and business.

In addition, the use of social media could cause us to suffer brand damage or information leakage. Negative posts or comments about us, our hotel managers or our hotels on any social networking website could damage our or our hotels’ reputations. In addition, employees or others might disclose non-public sensitive information relating to our business through external media channels. The continuing evolution of social media will present us with new challenges and risks.

Changes in laws, regulations, or policies may adversely affect our business.

The laws and regulations governing our business or the regulatory or enforcement environment at the federal level or in any of the states in which we operate may change at any time and may have an adverse effect on our business. For example, the Patient Protection and Affordable Care Act of 2010, as it is phased in over time, will significantly affect the administration of health care services and could significantly impact our hotel managers’ cost of providing employees with health care insurance. We are unable to predict how this or any other future legislative or regulatory proposals or programs will be administered or implemented or in what form, or whether any additional or similar changes to statutes or regulations, including the interpretation or implementation thereof, will occur in the future. Any such action could affect us in substantial and unpredictable ways and could have an adverse effect on our results of operations and financial condition. Our inability to remain in compliance with regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market and on our reputation generally. Applicable laws or regulations may be amended or construed differently and new laws and regulations may be adopted, either of which could materially adversely affect our business, financial condition, or results of operations.

We may from time to time be subject to litigation, which could have a material adverse effect on our financial condition, results of operations, cash flow and trading price of our common stock.

We may from time to time be subject to litigation. Some of these claims may result in defense costs, settlements, fines or judgments against us, some of which may not be covered by insurance. Payment of any such costs, settlements, fines or judgments that are not insured could have a material adverse impact on our financial position and results of operations. Negative publicity regarding claims or judgments made against us or involving our hotels may damage our, or our hotels’, reputations. In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.

Tax indemnification obligations that will apply if we exercise our option to acquire the Crystal Gateway Marriott hotel and then dispose of such hotel or reduce the debt encumbering such hotel below a specified threshold could limit our operating flexibility.

If we exercise our option to acquire the Crystal Gateway Marriott hotel and then dispose of it in a taxable transaction or reduce the debt secured by that hotel below $43.3 million prior to July 13, 2016, Ashford Trust OP will be obligated to pay certain tax liabilities of the partners of the entity that originally contributed the hotel to Ashford Trust OP, under an existing tax reporting and protection agreement. Pursuant to the terms of the Crystal Gateway option agreement, if we acquire the Crystal Gateway Marriott we will be required to indemnify Ashford Trust OP for any such tax liabilities that it is required to pay because of our actions. Payment of this indemnity obligation could have a material adverse effect on our financial position.

The potential tax liability generally consists of the aggregate federal, state and local income tax liability incurred by the partners of the original contributor to Ashford Trust (using an assumed combined federal, state and local income tax rate at the then-highest applicable marginal rate for such contributor) with respect to the gain allocated to the contributor under Section 704(c) of the Internal Revenue Code. The terms of the original agreement, and accordingly the terms of our indemnification agreement with Ashford Trust OP, require the payment of a gross up of the tax indemnity payment for the amount of income taxes due as a result of the tax indemnity payment. While the tax indemnity obligations will not contractually limit our ability to conduct our business in the way we desire, if we elect to acquire the Crystal Gateway Marriott, we are less likely to dispose of it in a taxable transaction during the indemnity period. Instead, we would either hold the property for the remainder of the indemnity period or seek to transfer the property in a tax-deferred like-kind exchange. In addition, a condemnation of the property could trigger our tax indemnification obligations.

Risks Related to our Debt Financing

Increases in interest rates could increase our debt payments.

As of March 12, 2015, we had approximately $764.3 million of outstanding indebtedness, including approximately $347.2 million of variable interest rate debt, and we expect to incur additional indebtedness, including additional variable-rate debt. Increases in interest rates increase our interest costs on our variable-rate debt as well as any future fixed rate debt we may incur at higher interest rates, and interest we pay reduces our cash available for distributions, expansion, working capital and other uses. Moreover, periods of rising interest rates heighten the risks described immediately below under “We may be unable to make required payments on our debt, and our charter and bylaws do not limit the amount of debt we may incur.”

We may be unable to make required payments on our debt, and our charter and bylaws do not limit the amount of debt we may incur.

Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur, and we are subject to risks normally associated with debt financing, including the risk that we may not be able to meet our debt service obligations or refinance our debt as it becomes due. We may not be able to refinance any maturing indebtedness, and any such refinancing may not be on terms as favorable as the terms of the maturing indebtedness. In addition, we may not be able to obtain funds by selling assets or raising equity to repay maturing indebtedness. We may not achieve our targeted low-leverage capital structure and limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding preferred equity, less cash, cash equivalents and marketable securities, to not more than 5.0x EBITDA, for the 12-month period preceding the incurrence of such debt or the issuance of such preferred equity, for a substantial period of time.

If we do not meet our debt service obligations, we risk the loss of some or all of our assets to foreclosure. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on the foreclosure but would not receive any cash proceeds. As a result, we may be required to identify and utilize other sources of cash for distributions to our stockholders of that income.

Our future indebtedness may be cross-collateralized and, consequently, a default on any such indebtedness could cause us to lose part or all of our investment in multiple properties.

Under the advisory agreement, Ashford LLC is entitled to receive a quarterly base fee from us that is based on our total market capitalization, which is defined in the advisory agreement to include our indebtedness. This fee increases as the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt) increases. As a result, any increase in our consolidated indebtedness will also increase the fees we pay to Ashford LLC. The structure of this fee may incentivize Ashford LLC to increase our indebtedness when it is not in the best interest of our stockholders to do so.

In addition, changes in economic conditions, our financial condition or operating results or prospects could:


•	result in higher interest rates on our variable-rate debt,


•	reduce the availability of debt financing generally or debt financing at favorable rates,


•	reduce cash available for distribution to stockholders, or


•	increase the risk that we could be forced to liquidate assets to repay debt.

Covenants, “cash trap” provisions or other terms in our mortgage loans and our secured revolving credit facility, as well as any future credit facility, could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.

Some of our loan agreements and our secured revolving credit facility contain financial and other covenants. If we violate covenants in any debt agreements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may also prohibit us from borrowing unused amounts under our lines of credit, even if repayment of some or all the borrowings is not required. In addition, financial covenants under our current or future debt obligations could impair our planned business strategies by limiting our ability to borrow beyond certain amounts or for certain purposes.

Some of our loan agreements also contain cash trap provisions that are triggered if the performance of our hotels decline. When these provisions are triggered, substantially all of the profit generated by our hotels is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. Cash is not distributed to us at any time after the cash trap provisions have been triggered until we have cured performance issues. This could affect our liquidity and our ability to make distributions to our stockholders. If we are not able to make distributions to our stockholders, we may not qualify as a REIT.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on an investment in our company.

We use various derivative financial instruments to protect us against interest rate risks. The use of derivative financial instruments to hedge against such risk involves numerous uncertainties, such as the risk that the counterparties fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that a court could rule that such agreements are not legally enforceable. These instruments may also generate income that may not be treated as qualifying REIT income. In addition, the nature and timing of hedging transactions may influence the effectiveness of our hedging strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. Moreover, hedging strategies involve transaction and other costs. Our hedging strategy and the derivatives that we use may not adequately offset the risk of interest rate volatility and our hedging transactions could result in losses that may reduce the overall return on our stockholders’ investment in our company.

Risks Related to Conflicts of Interest

Our separation and distribution agreement, our advisory agreement, the mutual exclusivity agreement, the master management agreement and other agreements entered into in connection with the spin-off, as well as the investment management agreement, were not negotiated on an arms-length basis, and we may pursue less vigorous enforcement of their terms because of conflicts of interest with certain of our executive officers and directors and key employees of Ashford LLC.

Because our officers and two of our directors are also key employees of Ashford LLC or its affiliates and have ownership interests in Ashford Trust, our separation and distribution agreement, our advisory agreement, mutual exclusivity agreement and other agreements entered into in connection with the spin-off, as well as our investment management agreement, were not negotiated on an arms-length basis, and we did not have the benefit of arms-length negotiations of the type normally conducted with an unaffiliated third party. Due to the subsequent spin-off of Ashford Inc., the parent company of Ashford LLC in November 2014, these officers and directors also have ownership interests in the parent company of Ashford LLC and its subsidiaries, including Ashford Investment Management LLC (“AIM”). As a result of our affiliations with Ashford Trust, Ashford LLC and Remington, the terms, including fees and other amounts payable, of agreements between us and Ashford Trust, Ashford LLC, AIM or Remington may not be as favorable to us as the terms under an arms-length agreement. Furthermore, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Ashford Trust, Ashford LLC, AIM and Remington.

Ashford LLC may also manage other entities or assets in the future. Our officers and certain of our directors may also be key officers or directors of such future entities or their affiliates and may have ownership interests in such entities. Any such positions or interests could present additional conflicts of interest for our officers and certain of our directors.

Termination by us of our advisory agreement with Ashford LLC without cause would be difficult and costly.

The initial term of our advisory agreement with Ashford LLC ends on November 3, 2034, and will be extended automatically for five-year renewal terms unless previously terminated. Our board will review Ashford LLC’s performance and fees annually and, following the five-year initial term the advisory agreement may be terminated by us with 180 days’ prior notice upon the affirmative vote of at a majority of our independent directors based upon a good faith finding that either: (1) there has been unsatisfactory performance by Ashford LLC that is materially detrimental to us and our subsidiaries taken as a whole, or (2) the base fee and/or incentive fee is not fair (and Ashford LLC does not offer to negotiate a lower fee that a majority of our independent directors determine is fair).

If we terminate the advisory agreement, Ashford LLC will be paid all base and incentive fees owed through the date of termination. Additionally, if we terminate the advisory agreement based on unsatisfactory performance by Ashford LLC or unfair fees, as described above, or if a change of control transaction is conditioned upon the termination of the advisory agreement, we will have the right to terminate the advisory agreement upon the payment of a termination fee equal to either:


•	if Ashford LLC’s common stock is not publicly traded, 14 times the earnings of Ashford LLC attributable to our advisory agreement less costs and expenses (including taxes) of Ashford LLC attributable to the performance of duties under the advisory agreement (the “net earnings”) for the 12 months preceding termination of the advisory agreement; or

•

if at the time of the termination notice, Ashford LLC’s common stock is publicly traded separate from the common stock of Ashford Trust, 1.1 multiplied by the greater of (i) 12 times the net earnings of Ashford LLC for the 12 months preceding the termination of the advisory agreement or (ii) the earnings multiple (based on net earnings after taxes) for Ashford LLC’s common stock for the 12 months preceding the termination of the advisory agreement multiplied by the net earnings of Ashford LLC for the same 12 month period; or (iii) the simple average of the earnings multiples (based on net earnings after taxes) for Ashford LLC’s common stock for each of the three fiscal years preceding the termination of the advisory agreement, multiplied by the net earnings of Ashford LLC for the 12 months preceding the termination of the advisory agreement;

plus, in either case, a gross-up amount for assumed federal and state tax liability, based on an assumed tax rate of 40%. Any such termination fee will be payable on or before the termination date. The obligation to pay this termination fee increases the cost to us of terminating our advisory agreement, which adversely affects our ability to terminate Ashford LLC without cause.

Ashford LLC was a subsidiary of Ashford Trust until its spin-off and may be able to direct attractive investment opportunities to Ashford Trust and away from us.

Until its spin-off on November 12, 2014, Ashford LLC was a subsidiary of Ashford Trust, a publicly-traded hotel REIT, with investment objectives that are similar to ours. As of March 12, 2015, Ashford Trust holds 30.0% of the equity of Ashford Inc., Ashford LLC’s parent company, on a fully diluted basis. So long as Ashford LLC is our advisor, our governing documents require us to include two persons designated by Ashford LLC as candidates for election as director at any stockholder meeting at which directors are to be elected. Each of our executive officers and two of our directors also serve as key employees and as officers of Ashford LLC and Ashford Trust. Furthermore, Mr. Monty J. Bennett, our chief executive officer and chairman, is also the chief executive officer and chairman of Ashford Trust. Our advisory agreement requires Ashford LLC to present investments that satisfy our investment guidelines to us before presenting them to Ashford Trust or any future client of Ashford LLC. Our board may modify or supplement our investment guidelines from time to time so long as we do not change our investment guidelines in such a way as to be directly competitive with all or any portion of Ashford Trust’s investment guidelines as of the date of the advisory agreement. If we materially change our investment guidelines without the express consent of Ashford LLC, then Ashford LLC will not have an obligation to present investment opportunities to us and instead Ashford LLC will use its best judgment to allocate investment opportunities to us and other entities it advises, taking into account such factors as Ashford LLC deems relevant, in its discretion, subject to any then existing obligations of Ashford LLC to such other entities.

However, some portfolio investment opportunities may include hotels that satisfy our investment objectives as well as hotels that satisfy the investment objectives of Ashford Trust or other entities advised by Ashford LLC. If the portfolio cannot be equitably divided, Ashford LLC will necessarily have to make a determination as to which entity will be presented with the opportunity. In such a circumstance, our advisory agreement requires Ashford LLC to allocate portfolio investment opportunities between us and Ashford Trust or other entities advised by Ashford LLC in a fair and equitable manner, consistent with our, Ashford Trust’s and such other entities’ investment objectives. In making this determination, Ashford LLC, using substantial discretion, is required to consider the investment strategy and guidelines of each entity with respect to acquisition of properties, portfolio concentrations, tax consequences, regulatory restrictions, liquidity requirements, leverage and other factors deemed appropriate. In making the allocation determination, Ashford LLC has no obligation to make any such investment opportunity available to us. Ashford LLC and Ashford Trust have agreed that any new investment opportunities that satisfy our investment guidelines will be presented to our board of directors; however, our board will have only ten business days to make a determination with respect to such opportunity prior to it being available to Ashford Trust. The above mentioned dual responsibilities may create conflicts of interest for our officers that could result in decisions or allocations of investments that may benefit Ashford Trust more than they benefit our company, and Ashford Trust may compete with us with respect to certain investments that we may want to acquire.

Ashford LLC and its key employees, who are our executive officers, face competing demands relating to their time and this may adversely affect our operations.

We rely on Ashford LLC, its subsidiaries and its employees for the day-to-day operation of our business and management of our assets. Until its spin-off, Ashford LLC was wholly-owned by Ashford Trust. Ashford LLC continues to be an affiliate of Ashford Trust and is led by our current management team, which is also the current management team of Ashford Trust. Because Ashford LLC’s key employees have duties to Ashford Trust as well as to our company, we do not have their undivided attention and they face conflicts in allocating their time and resources between our company and Ashford Trust. If Ashford LLC advises and/or leads any additional entities, or manages additional assets, in the future, this could present additional conflicts with respect to the allocation of the time and resources of our management team. As a result of the spin-off of Ashford LLC, its employees have additional responsibilities relating to Ashford Inc.'s status as a public company. During turbulent market conditions or other times when we need focused support and assistance from Ashford LLC, other entities for which Ashford LLC also acts as an external advisor or Ashford Trust may likewise require greater focus and attention, placing competing high levels of demand on the limited time and resources of Ashford LLC’s key employees. We may not receive the necessary support and assistance we require or would otherwise receive if we were internally managed by persons working exclusively for us.

We must pay a minimum advisory fee to Ashford LLC regardless of our performance.

Ashford LLC is entitled to receive a quarterly base fee from us that is based on our total market capitalization (as defined in our advisory agreement), regardless of the performance of our portfolio. Ashford LLC’s entitlement to nonperformance-based compensation might reduce its incentive to devote its time and effort to seeking investments that provide attractive risk-adjusted returns for our portfolio.

Conflicts of interest with Remington could result in our hotel-level management acting other than in our stockholders’ best interest.

Remington currently manages the Pier House Resort, and we expect Remington will manage certain of the hotels we acquire in the future. Conflicts of interest in general and specifically relating to Remington may lead to management decisions that are not in our stockholders’ best interest. Our chief executive officer and chairman, Mr. Monty J. Bennett, serves as the chief executive officer of Remington. Mr. Monty J. Bennett and his father, Mr. Archie Bennett, Jr., beneficially own 100% of Remington.

We entered into a mutual exclusivity agreement and a master management agreement with Remington. To the extent we have the right or control the right to direct such matters, the exclusivity agreement requires us to engage Remington to provide certain project management and development services for our properties and to engage Remington to provide, under the master management agreement, property management, project management and development services for all future properties that we acquire, unless our independent directors either (i) unanimously vote not to hire Remington, or (ii) based on special circumstances or past performance, by a majority vote, elect not to engage Remington because they have determined, in their reasonable business judgment, that it would be in our best interest not to engage Remington or that another manager or developer could perform the duties materially better. As one of the two beneficial owners of Remington, which would receive any property management, project management, development and termination fees payable by us under the master management agreement, Mr. Monty J. Bennett may influence our decisions to sell, acquire, or develop hotels when it is not in the best interest of our stockholders to do so.

Mr. Monty J. Bennett’s ownership interests in and management obligations to Remington present him with conflicts of interest in making management decisions related to the commercial arrangements between us and Remington, and his management obligations to Remington reduce the time and effort he spends managing our company. Our board of directors has adopted a policy that requires all material approvals, actions or decisions which we have the right to make under the master management agreement with Remington be approved by a majority or, in certain circumstances, all, of our independent directors. However, given the authority and/or operational latitude provided to Remington under the master management agreement, Mr. Monty J. Bennett, as the chief executive officer of Remington, could take actions or make decisions that are not in our stockholders’ best interest or that are otherwise inconsistent with his obligations to us under the master management agreement or our obligations under the applicable franchise agreements.

Remington’s ability to exercise significant influence over the determination of the competitive set for any hotels managed by Remington could artificially enhance the perception of the performance of a hotel, making it more difficult to use managers other than Remington for future properties.

Under our master management agreement with Remington, we have the right to terminate Remington based on the performance of the applicable hotel, subject to the payment of a termination fee. The determination of performance is based on the applicable hotel’s gross operating profit margin and its RevPAR penetration index, which provides the relative revenue per room generated by a specified property as compared to its competitive set. For each hotel managed by Remington, its competitive set consists of a small group of hotels in the relevant market that we and Remington believe are comparable for purposes of benchmarking the performance of such hotel. Remington has significant influence over the determination of the competitive set for any of our hotels that it manages. Remington could artificially enhance the perception of the performance of a hotel by selecting a competitive set that is not performing well or is not comparable to the Remington-managed hotel, thereby making it more difficult for us to elect not to use Remington for future hotel management.

Remington may be able to pursue lodging investment opportunities that compete with us.

Pursuant to the terms of our mutual exclusivity agreement with Remington, if investment opportunities that satisfy our investment criteria are identified by Remington or its affiliates, Remington will give us a written notice and description of the investment opportunity. We will have 10 business days to either accept or reject the investment opportunity. If we reject the opportunity, Remington may then pursue such investment opportunity, subject to a right of first refusal in favor of Ashford Trust pursuant to an existing agreement between Ashford Trust and Remington, on materially the same terms and conditions as offered to us. If we reject such an investment opportunity, either Ashford Trust or Remington could pursue the opportunity and compete with us. In such a case, Mr. Monty J. Bennett, our chief executive officer and chairman, in his capacity as chairman and chief executive officer of Ashford Trust or as chief executive officer of Remington could be in a position of directly competing with us, and Remington may compete with us with respect to certain investments that we may want to acquire.

Our fiduciary duties as the general partner of our operating partnership could create conflicts of interest, which may impede business decisions that could benefit our stockholders.

As the general partner of our operating partnership, we have fiduciary duties to the other limited partners in our operating partnership, the discharge of which may conflict with the interests of our stockholders. The limited partners of our operating partnership have agreed that, in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our capacity as general partner of our operating partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners. In addition, persons holding common units have the right to vote on certain amendments to the operating partnership agreement (which require approval by a majority in interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we cannot modify the rights of limited partners to receive distributions as set forth in the operating partnership agreement in a manner that adversely affects their rights without their consent, even though such modification might be in the best interest of our stockholders.

In addition, conflicts may arise when the interests of our stockholders and the limited partners of our operating partnership diverge, particularly in circumstances in which there may be an adverse tax consequence to the limited partners. Tax consequences to holders of common units upon a sale or refinancing of our properties may cause the interests of Ashford Trust or the key employees of Ashford LLC (who are executive officers of Ashford Trust and have ownership interests in Ashford Trust) to differ from our stockholders. As a result of unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units, including Ashford Trust, may suffer different and more adverse tax consequences than holders of our common stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all. As a result, Ashford LLC, which is an affiliate of Ashford Trust, may cause us to sell, not sell or refinance certain properties, even if such actions or inactions might be financially advantageous to our stockholders, or to enter into tax deferred exchanges with the proceeds of such sales when such a reinvestment might not otherwise be in our best interest.

Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our activities.

We have adopted a conflicts of interest policy to address specifically some of the conflicts relating to our activities which requires the approval of a majority of our disinterested directors to approve any transaction, agreement or relationship in which any of our directors or officers, Ashford LLC or its employees or Ashford Trust has an interest. This policy may not be adequate to address all of the conflicts that may arise. In addition, it may not address such conflicts in a manner that is favorable to us.

The potential for conflicts of interest as a result of our management structure may provoke dissident stockholder activities that result in significant costs.

Other REITs, particularly following periods of volatility in the overall market or declines in the market price of the company’s securities, have been targets of stockholder litigation and stockholder director nominations and stockholder proposals by dissident stockholders that allege conflicts of interest in business dealings with affiliated and related persons and entities. Our relationships with Ashford LLC, Ashford Inc., Ashford Trust, Ashford Select, AIM, Remington, the other businesses and entities to which Ashford LLC, Ashford Inc., AIM and Remington provide management or other services, Mr. Monty J. Bennett, Mr. Archie Bennett, Jr. and with other related parties of Ashford Inc. and Ashford Trust may precipitate such activities. These activities, if instituted against us, could result in substantial costs and a diversion of our management’s attention even if the action is unfounded.

Risks Related to Hotel Investments

We are subject to general risks associated with operating hotels.

We own hotel properties, which have different economic characteristics than many other real estate assets and a hotel REIT is structured differently than many other types of REITs. A typical office property, for example, has long-term leases with third-party tenants, which provides a relatively stable long-term stream of revenue. Hotels, on the other hand, generate revenue from guests that typically stay at the hotel for only a few nights, which causes the room rate and occupancy levels at each of our hotels to change every day, and results in earnings that can be highly volatile.

In addition, our hotels are subject to various operating risks common to the hotel industry, many of which are beyond our control, including, among others, the following:


•	competition from other hotel properties in our markets;


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


•	dependence on business and commercial travelers and tourism;


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


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


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


•	increases in the cost of property insurance;


•	changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance;

•

unforeseen events beyond our control, such as terrorist attacks, travel related health concerns which could reduce travel, including pandemics and epidemics such as Ebola, H1N1 influenza (swine flu), bird flu and SARS, imposition of taxes or surcharges by regulatory authorities, travel-related accidents, travel infrastructure interruptions and unusual weather patterns, including natural disasters such as hurricanes, tsunamis or earthquakes;


•	adverse effects of international, 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;


•	adverse effects of a downturn in the lodging industry; and


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

These factors could adversely affect our hotel revenues and expenses, which in turn could adversely affect our financial condition, results of operations, the market price of our common stock and our ability to make distributions to our stockholders.

We may have to make significant capital expenditures to maintain our hotel properties, and any development activities we undertake may be more costly than we anticipate.

Our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures, and equipment. Managers or franchisors of our hotels also require that we make periodic capital improvements pursuant to our management agreements or as a condition of maintaining franchise licenses. Generally, we are responsible for the cost of these capital improvements. As part of our long-term growth strategy, we may also develop hotels. Hotel renovation and development involves substantial risks, including:


•	construction cost overruns and delays;


•	the disruption of operations and displacement of revenue at operating hotels, including revenue lost while rooms, restaurants or meeting space under renovation are out of service;


•	the cost of funding renovations or developments and inability to obtain financing on attractive terms;


•	the return on our investment in these capital improvements or developments failing to meet expectations;


•	inability to obtain all necessary zoning, land use, building, occupancy, and construction permits;


•	loss of substantial investment in a development project if a project is abandoned before completion;


•	environmental problems; and


•	disputes with franchisors or property managers regarding compliance with relevant franchise agreements or management agreements.

If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to borrow, sell assets or sell additional equity securities to fund future capital improvements.

The hotel business is seasonal, which affects our results of operations from quarter to quarter.

The hotel industry is seasonal in nature. This seasonality can cause quarterly fluctuations in our financial condition and operating results, including in the amount available for distributions on our common stock. 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 we operate. Our cash flows may not be sufficient to offset any shortfalls that occur as a result of these fluctuations. As a result, we may have to reduce distributions or enter into short-term borrowings in certain quarters in order to make distributions to our stockholders. Such borrowings may not be available on favorable terms, if at all.

The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a material adverse effect on our business and operating results.

The lodging industry historically has been highly cyclical in nature. Fluctuations in lodging demand and, therefore, hotel operating performance, are caused largely by general economic and local market conditions, which subsequently affect levels of business and leisure travel. In addition to general economic conditions, new hotel room supply is an important factor that can affect the lodging industry’s performance, and overbuilding has the potential to further exacerbate the negative impact of an economic recession. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. An adverse change in lodging fundamentals could result in returns that are substantially below our expectations or result in losses, which could have a material adverse effect on our business and operating results.

Many of our real estate-related costs are fixed, and will not decrease even if revenue from our hotels decreases.

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 acquired or 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 new hotels. If we are unable to offset real estate costs with sufficient revenues across our portfolio, our operating results and our ability to make distributions to our stockholders may be adversely affected.

The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability.

Some of our hotel rooms are booked through Internet travel intermediaries, including, but not limited to, Travelocity.com, Expedia.com and Priceline.com. As Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from our management companies. 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. These intermediaries hope that consumers will eventually develop brand loyalties to their reservations system rather than to the brands under which our properties are franchised. If the amount of sales made through Internet intermediaries increases significantly and results in a decrease in consumer loyalty to the brands under which our hotels are franchised, our rooms revenues may be lower than expected, and our profitability may be adversely affected.

Our revenues and profitability may be adversely affected by increased use of business-related technology, which may reduce the need for business-related travel.

The increased use of teleconference and video-conference technology by businesses could result in decreased business travel as companies increase the use of technologies that allow multiple parties from different locations to participate at meetings without traveling to a centralized meeting location. To the extent that such technologies play an increased role in day-to-day business and the necessity for business-related travel decreases, hotel room demand may decrease and our revenues, profitability and ability to make distributions to our stockholders may be adversely affected.

Future terrorist attacks or changes in terror alert levels could materially and adversely affect our business.

Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S. travel and hospitality industries since 2001, often disproportionately to the effect on the overall economy. The extent of the impact that actual or threatened terrorist attacks in the U.S. or elsewhere could have on domestic and international travel and our business in particular cannot be determined, but any such attacks or the threat of such attacks could have a material adverse effect on travel and hotel demand, our ability to finance our business and our ability to insure our hotels. Any of these events could materially and adversely affect our business, our operating results and our prospects.

We are subject to risks associated with the employment of hotel personnel, particularly with respect to hotels that employ unionized labor.

Our third-party managers are responsible for hiring and maintaining the labor force at each of our hotels. Although we do not directly employ or manage employees at our hotels, we still are subject to many of the costs and risks generally associated with the hotel labor force, particularly with respect to hotels with unionized labor. From time to time, hotel operations may be disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity. We also may incur increased legal costs and indirect labor costs as a result of contract disputes or other events. The resolution of labor disputes or re-negotiated labor contracts could lead to increased labor costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs. We do not have the ability to affect the outcome of these disputes.

Risks Related to the Real Estate Industry

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our hotel properties and harm our financial condition.

Because real estate investments are relatively illiquid, our ability to sell promptly one or more hotel properties for reasonable prices in response to changing economic, financial, and investment conditions is limited.

The real estate market is affected by many factors that are beyond our control, including:


•	adverse changes in international, national, regional and local economic and market conditions;


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


•	changes in governmental laws and regulations, fiscal policies, and zoning and other ordinances, and the related costs of compliance with laws and regulations, fiscal policies and zoning and other ordinances;


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


•	changes in operating expenses; and


•	civil unrest, acts of war or terrorism, and acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured and underinsured losses.

We may decide to sell hotel properties in the future. We cannot predict whether we will be able to sell any hotel property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a hotel property.

We may be required to expend funds to correct defects or to make improvements before a property can be sold. We may not have funds available to correct those defects or to make those improvements. In addition, when we acquire a hotel property, we may agree to lock-out provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These and other factors could impede our ability to respond to adverse changes in the performance of our hotel properties or a need for liquidity.

Increases in property taxes would increase our operating costs, reduce our income and adversely affect our ability to make distributions to our stockholders.

Each of our hotel properties is subject to real and personal property taxes. These taxes may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. If property taxes increase, our financial condition, results of operations and our ability to make distributions to our stockholders could be materially and adversely affected and the market price of our common stock could decline.

The costs of compliance with or liabilities under environmental laws may harm our operating results.

Operating expenses at our hotels could be higher than anticipated due to the cost of complying with existing or future environmental laws and regulations. In addition, our hotel properties may be subject to environmental liabilities. An owner or operator of real property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We may face liability regardless of:


•	our knowledge of the contamination;


•	the timing of the contamination;


•	the cause of the contamination; or


•	the party responsible for the contamination.

There may be environmental problems associated with our hotel properties of which we are unaware. Some of our hotel properties use, or may have used in the past, underground tanks for the storage of petroleum-based or waste products that could create a potential for release of hazardous substances. If environmental contamination exists on a hotel property, we could become subject to strict, joint and several liabilities for the contamination if we own the property.

The discovery of material environmental liabilities at our properties could subject us to unanticipated significant costs. The presence of hazardous substances on a property may adversely affect our ability to sell the property on favorable terms or at all, and we may incur substantial remediation costs.

Our environmental insurance policies may not provide sufficient coverage for any environmental liabilities at our properties. In addition, if environmental liabilities are discovered during the underwriting of the insurance policies for any property that we acquire in the future, we may be unable to obtain insurance coverage for the liabilities at commercially reasonable rates or at all. We may experience losses as a result of any of these events.

Numerous treaties, laws and regulations have been enacted to regulate or limit carbon emissions. Changes in the regulations and legislation relating to climate change, and complying with such laws and regulations, may require us to make significant investments in our hotels and could result in increased energy costs at our properties.

Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.

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. Some of the properties in our portfolio may contain microbial matter such as mold and mildew. As a result, the presence of significant mold at any of our properties could require us to undertake a costly remediation program to contain or remove the mold from the affected property. In addition, the presence of significant mold could expose us to liability from hotel guests, hotel employees, and others if property damage or health concerns arise.

Compliance with the Americans with Disabilities Act and fire, safety, and other regulations may require us to incur substantial costs.

All of our properties are required to comply with the Americans with Disabilities Act of 1990, as amended (the “ADA”). The ADA requires that “public accommodations,” such as hotels, be made accessible to people with disabilities. Compliance with the ADA’s requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes, and other land use regulations as they may be adopted by governmental agencies and bodies and become applicable to our properties. Any requirement to make substantial modifications to our hotel properties, whether to comply with the ADA or other changes in governmental rules and regulations, could be costly.

We may experience uninsured or underinsured losses.

We maintain property and casualty insurance with respect to our hotel properties and other insurance, in each case, with loss limits and coverage thresholds deemed reasonable by our management team (and to satisfy the requirements of lenders and franchisors). In doing so, we make decisions with respect to what deductibles, policy limits, and terms are reasonable based on management’s experience, our risk profile, the loss history of our property managers and our properties, the nature of our properties and our businesses, our loss prevention efforts, and the cost of insurance.

Various types of catastrophic losses may not be insurable or may not be economically insurable. In the event of a substantial loss, our insurance coverage may not cover the full current market value or replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations, and other factors might cause insurance proceeds to be insufficient to fully replace or renovate a hotel after it has been damaged or destroyed. Accordingly, it is possible that:


•	the insurance coverage thresholds that we have obtained may not fully protect us against insurable losses (i.e., losses may exceed coverage limits);


•	we may incur large deductibles that adversely affect our earnings;


•	we may incur losses from risks that are not insurable or that are not economically insurable; and


•	current coverage thresholds may not continue to be available at reasonable rates.

In the future, we may choose not to maintain terrorism insurance on any of our properties. As a result, one or more large uninsured or underinsured losses could have a material adverse effect on our business, operating results and financial condition.

Each of our current lenders requires us to maintain certain insurance coverage thresholds. If a lender does not believe we have complied with these requirements, the lender could obtain additional coverage thresholds and seek payment from us, or declare us in default under the loan documents. In the former case, we could spend more for insurance than we otherwise deem reasonable or necessary or, in the latter case, the hotels collateralizing one or more loans could be foreclosed upon. In addition, a material casualty to one or more hotels collateralizing loans may result in the insurance company applying to the outstanding loan balance insurance proceeds that otherwise would be available to repair the damage caused by the casualty, which would require us to fund the repairs through other sources, The lender may also foreclose on the hotels if there is a material loss that is not insured.

Risks Related to Our Organization and Structure

Our charter contains provisions that may delay or prevent a change of control transaction.

Our charter contains 9.8% ownership limits. For the purpose of preserving our REIT qualification, our charter prohibits direct or constructive ownership by any person of more than:


•	9.8% of the lesser of the total number or value of the outstanding shares of our common stock, or


•	9.8% of the lesser of the total number or value of the outstanding shares of any class or series of our preferred stock or any other stock of our company, unless our board of directors grants a waiver.

Our charter’s constructive ownership rules are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our common stock by an individual or entity could nevertheless cause that individual or entity to own constructively in excess of 9.8% of the outstanding common stock, and thus be subject to our charter’s ownership limit. Any attempt to own or transfer shares of our common stock in excess of the ownership limit without the consent of our board of directors will be void, and could result in the shares being automatically transferred to a charitable trust.

Our board of directors may create and issue a class or series of preferred stock without stockholder approval.

Our charter authorizes our board of directors to issue preferred stock in one or more classes and to establish the preferences and rights of any class of preferred stock issued. These actions can be taken without obtaining stockholder approval. Our preferred stock issuances could have the effect of delaying or preventing someone from taking control of us, even if our stockholders believe that a change in control was in their best interests.

Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited acquisitions of us.

Provisions in the partnership agreement of our operating partnership may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others:


•	redemption rights of qualifying parties;


•	transfer restrictions on our common units;


•	the ability of the general partner in some cases to amend the partnership agreement without the consent of the limited partners; and


•	the right of the limited partners to consent to transfers of the general partnership interest and mergers of the operating partnership under specified circumstances.

Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including:

•

“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose special stockholder voting requirements on these business combinations, unless certain fair price requirements set forth in the MGCL are satisfied; and

•

“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

Our charter opts out of each of these requirements, but we may later amend our charter, with stockholder approval, to modify or eliminate these opt-out provisions.

In addition, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval, to implement certain takeover defenses. Under this authority, our Board has elected into a provision that gives the Board the exclusive authority to fill vacancies on the Board that occur for any reason. This election and any other elections our Board may make in the future may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deterring or preventing a charge in control of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price.

Our charter provides that a director may be removed only for cause and only upon the affirmative vote of a majority of the votes entitled to be cast in the election of directors. Our charter defines cause to mean, with respect to any particular director, conviction of a felony or a final judgment of court of competent jurisdiction holding that such director caused demonstrable, material harm to us through bad faith or active deliberate dishonesty. However, because of the board’s exclusive power to fill vacant directorships, stockholders will be precluded from filling the vacancies created by their removal of any incumbent directors.

Our charter, bylaws, the partnership agreement for our operating partnership and Maryland law contain other provisions that may delay, deter or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Our board of directors can take many actions without stockholder approval.

Our board of directors has overall authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility. For example, our board of directors can do the following without stockholder approval:


•	terminate Ashford LLC under certain conditions pursuant to our advisory agreement;


•	amend or revise at any time and from time to time our investment, financing, borrowing and dividend policies and our policies with respect to all other activities, including growth, debt, capitalization and operations;


•	amend our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements;


•	subject to the terms of our charter, prevent the ownership, transfer and/or accumulation of shares in order to protect our status as a REIT or for any other reason deemed to be in the best interests of us and our stockholders;


•	issue additional shares without obtaining stockholder approval, which could dilute the ownership of our then-current stockholders;


•	amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series, without obtaining stockholder approval;


•	classify or reclassify any unissued shares of our common stock or preferred stock and set the preferences, rights and other terms of such classified or reclassified shares, including provisions that may have an anti-takeover effect, without obtaining stockholder approval;


•	employ and compensate affiliates;


•	direct our resources toward investments that do not ultimately appreciate over time; and


•	determine that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

Any of these actions could increase our operating expenses, impact our ability to make distributions or reduce the value of our assets without giving our stockholders the right to vote on whether we should take such actions.

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter eliminates our directors’ and officers’ liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or a judgment of active and deliberate dishonesty that was material to the cause of action. Our charter requires us to indemnify our directors and officers to the maximum extent permitted by Maryland law for liability actually incurred in connection with any proceeding to which they may be made, or threatened to be made, a party, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was either committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property or services, or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. In addition, we may advance the defense costs incurred by our directors and officers, prior to any determination regarding the availability of indemnification if actions are taken against them in their capacity as directors and officers.

Risks Related to Our Status as a REIT

Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.

We intend to operate in a manner intended to allow us to qualify as a REIT for U.S. federal income tax purposes. We believe that our organization and current and proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2013. However, we may not qualify or remain qualified as a REIT.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:


•	we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;


•	we could be subject to the federal alternative minimum tax and possibly increased state and local income taxes; and


•	unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common stock.

If Ashford Trust failed to qualify as a REIT in any of its 2009 through 2013 taxable years, we would be prevented from electing to qualify as a REIT under applicable Treasury Regulations until the fifth year after such failure.

Under applicable Treasury Regulations, if Ashford Trust failed to qualify as a REIT in any of its 2009 through 2013 taxable years, unless Ashford Trust’s failure to qualify as a REIT was subject to relief under U.S. federal income tax laws, we would be prevented from electing to qualify as a REIT prior to the fifth calendar year following the year in which Ashford Trust failed to qualify.

Even if we qualify and remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we qualify and remain qualified for taxation as a REIT, we may be subject to certain federal, state, and local taxes on our income and assets, as well as foreign taxes to the extent that we own assets or conduct operations in international jurisdictions. For example:


•	We will be required to pay tax on undistributed REIT taxable income.


•	We may be required to pay the “alternative minimum tax” on our items of tax preference.


•	If we have net income from the disposition of foreclosure property held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay tax on that income at the highest corporate rate.


•	If we sell a property in a “prohibited transaction,” our gain from the sale would be subject to a 100% penalty tax.


•	Each of our taxable REIT subsidiaries is a fully taxable corporation and will be subject to federal and state taxes on its income.

•

We may experience increases in our state and local income tax burden. Over the past several years, certain states have significantly changed their income tax regimes in order to raise revenues. The changes enacted include the taxation of modified gross receipts (as opposed to net taxable income), the suspension of and/or limitation on the use of net operating loss deductions, increases in tax rates and fees, the addition of surcharges, and the taxation of our partnership income at the entity level. Facing mounting budget deficits, more state and local taxing authorities have indicated that they are going to revise their income tax regimes in this fashion and/or eliminate certain federally allowed tax deductions such as the REIT dividends paid deduction.

Failure to make required distributions would subject us to U.S. federal corporate income tax.

We intend to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. In order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid and excluding any net capital gain, each year to our stockholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under the Internal Revenue Code.

Our TRS lessee structure increases our overall tax liability.

Our TRS lessees are subject to federal, state and local income tax on their taxable income, which consists of the revenues from the hotel properties leased by our TRS lessees, net of the operating expenses for such hotel properties and rent payments to us. Accordingly, although our ownership of our TRS lessees allows us to participate in the operating income from our hotel properties in addition to receiving rent, that operating income is fully subject to income tax. The after-tax net income of our TRS lessees is available for distribution to us.

If our leases with our TRS lessees are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT.

To qualify as a REIT, we are required to satisfy two gross income tests, pursuant to which specified percentages of our gross income must be passive income, such as rent. For the rent paid pursuant to the hotel leases with our TRS lessees, which constitutes substantially all of our gross income, to qualify for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and must not be treated as service contracts, joint ventures or some other type of arrangement. We have structured our leases, and intend to structure any future leases, so that the leases will be respected as true leases for federal income tax purposes, but the IRS may not agree with this characterization. If the leases were not respected as true leases for federal income tax purposes, we would not be able to satisfy either of the two gross income tests applicable to REITs and likely would fail to qualify as a REIT.

Our ownership of TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross operating income from hotels that are operated by eligible independent contractors pursuant to hotel management agreements. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

Our TRSs are subject to federal, foreign, state and local income tax on their taxable income, and their after-tax net income is available for distribution to us but is not required to be distributed to us. We believe that the aggregate value of the stock and securities of our TRSs is less than 25% of the value of our total assets (including our TRS stock and securities).

We monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS ownership limitations. In addition, we scrutinize all of our transactions with our TRSs to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax described above. For example, in determining the amounts payable by our TRSs under our leases, we engaged a third party to prepare transfer pricing studies to ascertain whether the lease terms we established are on an arm’s-length basis as required by applicable Treasury Regulations. However, the receipt of a transfer pricing study does not prevent the IRS from challenging the arm’s length nature of the lease terms between a REIT and its TRS lessees. Consequently, we may not be able to avoid application of the 100% excise tax discussed above. Moreover, the IRS may impose excise taxes and penalties based on transactions that occurred prior to the spin-off.

If our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.

Rent paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs. We lease all of our hotels to our TRS lessees. A TRS lessee will not be treated as a “related party tenant,” and will not be treated as directly operating a lodging facility, which is prohibited, to the extent the TRS lessee leases properties from us that are managed by an “eligible independent contractor.”

We believe that the rent paid by our TRS lessee is qualifying income for purposes of the REIT gross income tests and that our TRSs qualify to be treated as taxable REIT subsidiaries for federal income tax purposes, but the IRS could challenge this treatment and a court could sustain such a challenge. If the IRS were successful in challenging this treatment, it is possible that we would fail to meet the asset tests applicable to REITs and substantially all of our income would fail to qualify for the gross income tests. If we failed to meet either the asset or gross income tests, we would likely lose our REIT qualification for federal income tax purposes, unless certain relief provisions applied. If our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT. Each of the hotel management companies that enters into a management contract with our TRS lessees must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by our TRS lessees to be qualifying income for our REIT income test requirements. Among other requirements, in order to qualify as an eligible independent contractor a manager must not own more than 35% of our outstanding shares (by value) and no person or group of persons can own more than 35% of our outstanding shares and the ownership interests of the manager, taking into account only owners of more than 5% of our shares and, with respect to ownership interests in such managers that are publicly-traded, only holders of more than 5% of such ownership interests. Complex ownership attribution rules apply for purposes of these 35% thresholds. Although we intend to monitor ownership of our shares by our property managers and their owners, it is possible that these ownership levels could be exceeded.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our shares of beneficial interest. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may have a material adverse effect on our performance.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we must also ensure that at the end of each calendar quarter at least 75% of the value of our assets consists of cash, cash items, government securities, and qualified REIT real estate assets. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments.

Complying with REIT requirements may force us to borrow to make distributions to stockholders.

As a REIT, we must distribute at least 90% of our annual REIT taxable income, excluding net capital gains, (subject to certain adjustments) to our stockholders. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.

From time to time, we may generate taxable income greater than our net income for financial reporting purposes or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices, or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce the value of our equity. We may elect to pay dividends on our common stock in cash or a combination of cash and shares as permitted under federal income tax laws governing REIT distribution requirements.

We may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements. In addition, some of our distributions may include a return of capital. To the extent that we make distributions in excess of our current and accumulated earnings and profits (as determined for federal income tax purposes), such distributions would generally be considered a return of capital for U.S. federal income tax purposes to the extent of the holder's adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing the holder's adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder's shares, they will be treated as gain from the sale or exchange of such stock.

We may pay taxable dividends in our common stock and cash, in which case stockholders may sell our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.

We may distribute taxable dividends that are payable in cash and common stock at the election of each stockholder. The IRS has issued private letter rulings to other REITs treating certain distributions that are paid partly in cash and partly in stock as taxable dividends that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for U.S. federal income tax purposes. Those rulings may be relied upon only by taxpayers to whom they were issued. Accordingly, it is unclear whether and to what extent we will be able to make taxable dividends payable in cash and common stock.

If we made a taxable dividend payable in cash and common stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. As a result, stockholders may be required to pay income tax with respect to such dividends in excess of the cash dividends received. If a U.S. stockholder sells the common stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock. If we made a taxable dividend payable in cash and our common stock and a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common stock. We do not currently intend to pay taxable dividends of our common stock and cash, although we may choose to do so in the future.

The prohibited transactions tax may limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. We may not be able to comply with the safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction. Consequently, we may choose not to engage in certain sales of our properties or we may conduct such sales through our TRS, which would be subject to federal and state income taxation.

The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal and state and local income taxes on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on the total return received by our stockholders.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum federal income tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at individual rates is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. Individuals, trusts and estates whose income exceeds certain thresholds are also subject to a 3.8% Medicare tax on dividends received from us. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

We may be subject to adverse legislative or regulatory tax changes that could effectively reduce the market price of our common stock.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations or administrative interpretations.

If our operating partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences.

We believe that our operating partnership will be treated as a partnership for federal income tax purposes. As a partnership, our operating partnership is not subject to federal income tax on its income. Instead, each of its partners, including us, is allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income. The IRS could challenge the status of our operating partnership or any other subsidiary partnership in which we own an interest as a partnership for federal income tax purposes, and a court could sustain such a challenge. If the IRS were successful in treating our operating partnership or any such other subsidiary partnership as an entity taxable as a corporation for federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT. Also, the failure of our operating partnership or any subsidiary partnerships to qualify as a partnership could cause it to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code. An investment in our common stock has various federal, state, and local income tax risks that could affect the value of such investment.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which, in certain instances, only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. New legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT. We strongly urge our stockholders to consult their tax advisors concerning the effects of federal, state, and local income tax law on an investment in our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Offices

Our headquarters are located at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.

Hotel Properties

As of December 31, 2014 , we had ownership interests in ten hotel properties that were included in our consolidated operations, which included direct ownership in eight hotel properties and 75% ownership in two hotel properties through equity investments with our partner. Currently, all of our hotel properties are located in the United States. Each of the ten properties is encumbered by loans as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness.”

The following table presents certain information related to our hotel properties:



Hotel Property	Location	Service Type	Total Rooms	% Owned		Owned Rooms	Year Ended December 31, 2014
Hotel Property	Location	Service Type	Total Rooms	% Owned		Owned Rooms	Occupancy		ADR		RevPAR
Fee Simple Properties
Hilton	Washington DC	Full	547	75	%	410	84.76	%	$	219.56	$	186.11
Marriott	Seattle, WA	Full	358	100		358	79.67		240.56		191.66
Marriott	Plano, TX	Full	404	100		404	69.12		178.78		123.57
Courtyard by Marriott	Philadelphia, PA	Select	499	100		499	79.40		166.01		131.81
Courtyard by Marriott	Seattle, WA	Select	250	100		250	80.35		179.94		144.59
Courtyard by Marriott	San Francisco, CA	Select	405	100		405	89.89		255.75		229.90
Sofitel Chicago Water Tower	Chicago, IL	Full	415	100		415	84.21		234.93		197.84
Pier House Resort	Key West, FL	Full	142	100		142	85.18		374.92		319.37
Ground Lease Properties
Hilton ⁽¹⁾	La Jolla, CA	Full	394	75		296	84.50		178.35		150.71
Renaissance ⁽²⁾	Tampa, FL	Full	293	100		293	80.38		161.82		130.07
Total			3,707			3,472	81.62	%	$	209.96	$	171.37

________

(1) The ground lease expires in 2043.

(2) The ground lease expires in 2080.

Item 3. Legal Proceedings

We are engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations. However, the final results of legal proceedings cannot be predicted with certainty and if we fail to prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position or results of operations could be materially adversely affected in future periods.

Item 4. Mine Safety Disclosures

Not Applicable

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Price and Dividend Information

Our common stock has been listed and traded on the NYSE under the symbol “AHP” since November 20, 2013. Prior to that time, there was no public market for our common stock. On March 12, 2015, there were 118 holders of record. In order to comply with certain requirements related to our qualification as a REIT, our charter limits the number of shares of capital stock that may be owned by any single person or affiliated group without our permission to 9.8% of the outstanding shares of any class of our capital stock.

The following table sets forth the range of high and low sales prices of our common stock for the period beginning on November 20, 2013, the date our common stock commenced trading on the NYSE, through December 31, 2014 :



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2014
High	$	18.75	$	17.31	$	17.86	$	17.91
Low	14.62		14.89		14.95		14.17
Close	15.12		17.16		15.23		17.16
Cash dividends declared per share	0.05		0.05		0.05		0.05

2013
High	$	—	$	—	$	—	$	22.10
Low	—		—		—		17.20
Close	—		—		—		18.20
Cash dividends declared per share	—		—		—		0.05

Distributions and Our Distribution Policy

For the years ended December 31, 2014 , and 2013, we declared dividends of $0.20 per share and $0.05 per share, respectively. In December 2014 , the Board of Directors approved our dividend policy for 2015 and we expect to pay a quarterly dividend of $0.05 per share for 2015. The adoption of a dividend policy does not commit our Board of Directors to declare future dividends or the amount thereof. The board of directors will continue to review our dividend policy on a quarterly basis. For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof.

We intend to make quarterly distributions to our common stockholders. To qualify as a REIT, we must distribute to our stockholders an amount at least equal to:


(i)	90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital gain (which does not necessarily equal net income as calculated in accordance with GAAP); plus


(ii)	90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Internal Revenue Code; less


(iii)	any excess non-cash income (as determined under the Internal Revenue Code).

Distributions made by us are authorized and determined by our board of directors in its sole discretion out of funds legally available therefor and are dependent upon a number of factors, including restrictions under applicable law, actual and projected financial condition, liquidity, EBITDA, FFO and results of operations, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements and such other factors as our board of directors deems relevant. For more information regarding risk factors that could materially and adversely affect our ability to make distributions. See “Risk Factors-Risks Related to Our Status as a REIT.” We expect that, at least initially, our distributions may exceed our net income under GAAP because of non-cash expenses included in net income. To the extent that our cash available for distribution is less than 90% of our REIT taxable income, we may consider various means to cover any such shortfall, including borrowing under our secured revolving credit facility or other loans, selling certain of our assets or using a portion of the net proceeds we receive from future offerings of equity, equity-related or debt securities or declaring taxable stock dividends. In addition, our charter allows us to issue preferred stock that could have a preference on distributions, and, if we elect such issuance, the distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock. We cannot assure our stockholders that our distribution policy will not change in the future.

Characterization of Distributions

For income tax purposes, distributions paid consist entirely of ordinary income. Distributions paid per share were characterized as follows:



	2014					2013
	Amount			%		Amount			%
Common Stock (cash):
Ordinary income	$	0.25	⁽¹⁾	100.00	%	$	—	⁽¹⁾	—	%
Total	$	0.25		100.00	%	$	—		—	%

____________________


⁽¹⁾	The fourth quarter 2013 distributions paid January 15, 2014 to stockholders of record as of December 31, 2013 are treated as 2014 distributions for tax purposes.

The fourth quarter 2014 distributions paid January 15, 2015 to stockholders of record as of December 31, 2014 are treated as 2014 distributions for tax purposes.

Equity Compensation Plan Information

The following table sets forth certain information with respect to securities authorized and available for issuance under our equity compensation plans.



	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price Of Outstanding Options, Warrants, And Rights	Number of Securities Remaining Available for Future Issuance
Equity compensation plans approved by security holders:	None	N/A	2,015,000	⁽¹⁾
Equity compensation plans not approved by security holders	None	N/A	None
Total	None	N/A	2,015,000

____________________

⁽¹⁾ As of December 31, 2014 , 415,000 shares of our common stock, or securities convertible into 415,000 shares of our common stock, remained available for issuance under our 2013 Equity Incentive Plan and 1,600,000 shares of our common stock, or securities convertible into 1,600,000 shares of our common stock, remained available for issuance under our Advisor Equity Incentive Plan.

Purchases of Equity Securities by the Issuer

The following table provides the information with respect to purchases of our common stock during each of the months in the quarter ended December 31, 2014 :



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
October 1 to October 31 ⁽¹⁾	500	$	15.32	—	$	100,000,000
November 1 to November 30	660,121	17.35		660,121	88,547,121
December 1 to December 31 ⁽¹⁾	268,007	17.38		267,794	83,891,877
Total	928,628	$	17.36	927,915

__________________

(1) Includes shares that were repurchased from Ashford Trust when former Ashford Trust employees, who held restricted shares of Ashford Prime common stock received in the spin-off, forfeited the shares to Ashford Trust upon termination of employment.

Performance Graph

The following graph compares the percentage change in the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Stock Index and the FTSE NAREIT Lodging & Resorts Index for the period from November 20, 2013, the date our stock began trading on the NYSE through December 31, 2014 , assuming an initial investment of $100 in stock on November 20, 2013 with reinvestment of dividends. The NAREIT Lodging Resorts Index is not a published index; however, we believe the companies included in this index provide a representative example of enterprises in the lodging resort line of business in which we engage. Stockholders who wish to request a list of companies in the FTSE NAREIT Lodging & Resorts Index may send written requests to Ashford Hospitality Prime, Inc., Attention: Investor Relations, 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.

The stock price performance shown below on the graph is not necessarily indicative of future stock price performance.

COMPARISON OF CUMULATIVE TOTAL RETURNS

Among Ashford Hospitality Prime, Inc., the S&P Index and the FTSE NAREIT Lodging & Resorts Index

Use of Proceeds

On January 29, 2014, we closed an underwritten public offering of 8.0 million shares of common stock at $16.50 per share for gross proceeds of $132.0 million, pursuant to our Registration Statement on Form S-11 (File No. 333-192943), which the SEC declared effective on January 23, 2014. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC acted as joint book-running managers for the offering. We granted the underwriters a 30-day option to purchase up to an additional 1.2 million shares of common stock at a price of $16.50 per share less the underwriting discount, which was exercised in full on February 4, 2014. We paid an underwriting discount of approximately $6.8 million to the underwriters and we incurred approximately $1.1 million in expenses in connection with the sale of the shares in the offering. The net proceeds from the sale of the shares after underwriting discounts and offering expenses were approximately $143.9 million .

We used $95.7 million of the proceeds from the offering to fund our acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort. There has been no material change in the planned use of proceeds as described in our final prospectus filed with the SEC on January 24, 2014 pursuant to Rule 424(b)(1).

Item 6. Selected Financial Data

The following sets forth our selected consolidated and combined consolidated financial and operating information on a historical basis and should be read together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto, which are included in “Item 8. Financial Statements and Supplementary Data.”

For periods prior to the spin-off, the selected combined consolidated historical financial and operating information is a combination of the historical financial information for the eight initial properties that were contributed to us as part of the spin-off. These properties and certain related assets and liabilities are reflected in the selected combined consolidated historical financial statements as if they were owned in an entity separate from Ashford Trust during such periods; however, they were not owned in a separate legal entity during such periods.

The historical financial information of Ashford Hospitality Prime, Inc. prior to completion of the spin-off on November 19, 2013 is not presented because prior to the completion of the spin-off it had no activity other than the issuance to Ashford TRS of 100 shares of common stock in connection with the initial capitalization of our company and activity in connection with the separation and distribution. Therefore, we do not believe a discussion of the historical results would be meaningful.

The selected historical consolidated and combined consolidated financial information as of December 31, 2014 , 2013 and 2012 and for each of the three years in the period ended December 31, 2014 has been derived from the audited financial statements appearing elsewhere in this Annual Report on Form 10-K. The selected historical combined consolidated financial information as of December 31, 2011 and for the years ended December 31, 2011 and 2010 have been derived from the audited financial statements not included in this Annual Report on Form 10-K. The selected historical combined consolidated financial information as of December 31, 2010 was derived from unaudited financial statements not included in this Annual Report on Form 10-K. The selected historical information in this section is not intended to replace these audited and unaudited financial statements.

The selected financial information below and the financial statements included in this Annual Report on Form 10-K do not necessarily reflect what our results of operations, financial position and cash flows would have been if we had operated our initial eight properties as a stand-alone publicly traded company during all periods presented, and, accordingly, this historical information should not be relied upon as an indicator of our future performance.



	Year Ended December 31,
	2014		2013			2012			2011			2010
	(in thousands, except per share amounts)
Statements of Operations Data:
Total revenue	$	307,308	$	233,496		$	221,188		$	191,991		$	172,830
Total operating expenses	$	263,558	$	214,086		$	189,382		$	167,612		$	159,210
Operating income	$	43,750	$	19,410		$	31,806		$	24,379		$	13,620
Net Income (loss)	$	3,538	$	(17,928	)	$	(3,793	)	$	(363	)	$	(18,936	)
Net income (loss) attributable to the Company	$	1,939	$	(11,782	)	$	(4,545	)	$	626		$	(16,871	)
Diluted income (loss) per common share	$	0.07	$	(0.73	)	$	(0.28	)	$	0.03		$	(1.05	)
Weighted average diluted common shares	33,325		16,045			16,045			24,095			16,045



	December 31,
	2014		2013		2012		2011		2010
	(in thousands)
Balance Sheet Data:
Investments in hotel properties, net	$	990,303	$	765,326	$	771,936	$	789,170	$	808,322
Cash and cash equivalents	$	171,439	$	143,776	$	20,313	$	16,451	$	14,411
Restricted cash	$	29,646	$	5,951	$	16,891	$	10,808	$	12,952
Note receivable	$	8,098	$	8,098	$	8,098	$	8,098	$	—
Total assets	$	1,229,508	$	962,419	$	847,280	$	863,418	$	862,908
Indebtedness	$	765,230	$	621,882	$	570,809	$	577,996	$	582,713
Total stockholders’ equity of the Company	$	278,904	$	146,027	$	239,863	$	249,055	$	248,646



	Year Ended December 31,
	2014			2013			2012			2011			2010
	(in thousands, except per share amounts)
Other Data:
Cash provided by operating activities	$	54,854		$	34,085		$	27,852		$	15,395		$	21,624
Cash used in investing activities	$	(212,763	)	$	(28,354	)	$	(11,944	)	$	(10,281	)	$	(22,695	)
Cash provided by (used in) financing activities	$	185,572		$	117,732		$	(12,046	)	$	(3,074	)	$	(4,605	)
Cash dividends declared per common share	$	0.20		$	0.05		$	—		$	—		$	—
EBITDA (unaudited) ⁽¹⁾	$	78,187		$	42,332		$	56,353		$	60,017		$	41,647
Hotel EBITDA (unaudited) ⁽¹⁾	$	103,287		$	77,907		$	73,040		$	66,292		$	53,065
Funds From Operations (FFO) (unaudited) ⁽¹⁾	$	39,928		$	8,829		$	22,080		$	27,285		$	10,856

____________________

⁽¹⁾ A more detailed description and computation of EBITDA, Hotel EBITDA and FFO is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes thereto included in Item 8. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. See “Forward-Looking Statements.”

Overview

We operate in the direct hotel investment segment of the hotel lodging industry. As of March 12, 2015 , we own interests in ten hotels in six states and the District of Columbia with 3,707 total rooms, or 3,472 net rooms, excluding those attributable to our joint venture partner. The hotels in our current portfolio are predominantly located in U.S. gateway markets with favorable growth characteristics resulting from multiple demand generators. We own eight of our hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity.

Recent Developments

On January 29, 2014, we closed an underwritten public offering of 8.0 million shares of common stock at $16.50 per share for gross proceeds of $132.0 million. The net proceeds from the sale of the shares after underwriting discounts and estimated offering expenses were approximately $124.7 million. We granted the underwriters a 30-day option to purchase up to an additional 1.2 million shares of common stock. On February 4, 2014, the underwriters fully exercised their option and purchased an additional 1.2 million shares of our common stock at a price of $16.50 per share less the underwriting discount resulting in additional net proceeds of approximately $18.9 million.

On February 24, 2014, we completed the acquisition of the Sofitel Chicago Water Tower in Chicago, Illinois for an aggregate purchase price of $153.0 million in cash. The acquisition was funded with proceeds from an $80.0 million non-recourse mortgage loan and proceeds from the Company’s underwritten public offering discussed above.

On February 24, 2014, to fund a portion of our acquisition of the Sofitel Chicago Water Tower, we completed the financing for an $80.0 million mortgage loan. The mortgage loan bears interest at a rate of LIBOR plus 2.30%. The stated maturity date of the mortgage loan is March 9, 2016, which may be extended by us for up to three consecutive one-year terms. The mortgage loan is secured by the Sofitel Chicago Water Tower.

On February 27, 2014, Ashford Trust announced that its board of directors had approved a plan to spin-off Ashford Inc., the parent company of Ashford LLC, into a separate publicly traded company. The spin-off was completed on November 12, 2014, through a pro rata taxable distribution of Ashford Inc.’s common stock to Ashford Trust’s stockholders of record as of November 11, 2014. Ashford Trust stockholders received one share of Ashford Inc. common stock for every 87 shares of Ashford Trust common stock they owned as of the record date. Additionally, each holder of common units of Ashford Trust’s operating partnership received a common unit of the operating limited liability company subsidiary of Ashford Inc. Each holder of common units of the operating limited liability company of Ashford Inc. could exchange up to 99% of those units for shares of Ashford Inc. common stock at the rate of one share of Ashford Inc. common stock for every 55 common units. The spin-off did not affect us and Ashford LLC continues to act as our advisor.

On March 1, 2014, we closed our acquisition of the Pier House Resort from Ashford Trust for total consideration of $92.7 million. We assumed the $69.0 million mortgage on the property and paid the balance of the purchase price with cash from our underwritten public offering.

On May 13, 2014, the independent directors of the Company approved the Amended and Restated Advisory Agreement with Ashford LLC, effective as of January 1, 2014. The amendments, among other things, permit Ashford LLC to have other advisory clients, extend the term of the advisory agreement and modify certain terms of the annual incentive fee and the termination fee.

On November 3, 2014, the independent directors of the Company approved the Second Amended and Restated Advisory Agreement with Ashford LLC, effective as of November 3, 2014. The amendments, among other things, provide that the covenant restricting us from soliciting or hiring employees of Ashford LLC, in the event that the advisory agreement terminates does not apply if the agreement terminates due to an Advisor Change of Control (as defined in the advisory agreement).

On November 7, 2014, we refinanced our $197.8 million mortgage loan, with an outstanding balance of $195.7 million due February 2018 with a $198.0 million mortgage loan from the same lender with a five-year initial term and two one-year extension options, subject to the satisfaction of certain conditions. The new loan provides for a floating interest rate of LIBOR + 2.65%. The mortgage loan is secured by the Capital Hilton in Washington, DC and Hilton La Jolla Torrey Pines in La Jolla, CA. Ashford Prime has a 75% ownership interest in the properties, with Hilton holding the remaining 25%.

On November 10, 2014, AHP SMA entered into the Investment Management Agreement with AIM, pursuant to which AIM serves as the investment manager for certain designated assets of AHP SMA and is responsible for the investment and reinvestment of those assets in accordance with the investment guidelines set forth therein.

On March 9, 2015, we refinanced our $69.0 million mortgage loan with an outstanding balance of $69.0 million due September 2015, with a $70.0 million mortgage loan with Credit Agricole due March 2017, with three one-year extension options, subject to the satisfaction of certain conditions. The new loan is interest only and provides for a floating interest rate of LIBOR + 2.25%, with no LIBOR floor. The mortgage loan is secured by the Pier House Resort in Key West, Florida.

Discussion of Presentation

The discussion below relates to the financial condition and results of operation of Ashford Prime. For periods prior to the spin-off, the combined consolidated historical financial statements have been prepared on a “carve-out” basis from Ashford Trust’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to the eight initial properties we acquired from Ashford Trust in connection with the spin-off and include allocations of income, expenses, assets and liabilities from Ashford Trust. These allocations reflect significant assumptions, and the financial statements do not fully reflect what our financial positions, results of operations and cash flows would have been had we been a stand-alone publicly traded company owning the eight initial properties during all periods presented. As a result, historical financial information is not necessarily indicative of our future results of operations, financial positions and cash flows.

As an example of allocations relating to the “carve out” presentation, we note that corporate general and administrative expense and certain indirect costs have been allocated. Corporate general and administrative expense represents an allocation of certain Ashford Trust corporate general and administrative costs including salaries and benefits, stock based compensation, legal and professional fees, rent expense and office expenses. Any expenses that were determined to be directly related to any hotel property or specific transaction were allocated directly to the related hotel. However, any indirect costs were allocated pro rata across all hotels owned by Ashford Trust, including the eight initial properties contributed to us in the spin-off, based on the gross investment value for all such hotels. Indirect costs are primarily attributable to certain ownership costs related to specific hotel properties but paid by Ashford Trust. Indirect costs are included in “Other expenses” in the consolidated and combined consolidated financial statements. Additionally, interest income reflects earnings on amounts held as reserves by lenders and property managers.

Key Indicators of Operating Performance

We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:


•	Occupancy-Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period.

•

ADR-ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate.

•

RevPAR-RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues 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 (comparable hotels represent hotels we have owned for the entire period). 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.

RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.

Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue comprised approximately 74% of our total revenue for the year ended December 31, 2014 and is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.

We also use FFO, AFFO, EBITDA, Adjusted EBITDA and Hotel EBITDA as measures of the operating performance of our business. See “Non-GAAP Financial Measures.”

Principal Factors Affecting Our Results of Operations

The principal factors affecting our operating results include overall demand for hotel rooms compared to the supply of available hotel rooms, and the ability of our third-party management companies to increase or maintain revenues while controlling expenses.

Demand . The demand for lodging, including business travel, is directly correlated to the overall economy; as GDP increases, lodging demand increases. Historically, periods of declining demand are followed by extended periods of relatively strong demand, which typically occurs during the growth phase of the lodging cycle.

Following the recession that commenced in 2008, the lodging industry has experienced improvement in fundamentals, including demand, which has continued through 2014 . We believe improvements in the economy will continue to benefit the lodging industry and hotel operating results for several years to come.

Supply . The development of new hotels is driven largely by construction costs, the availability of financing and expected performance of existing hotels.

We expect that our ADR, occupancy and RevPAR performance will be impacted by macroeconomic factors such as national and local employment growth, personal income and corporate earnings, GDP, consumer confidence, office vacancy rates and business relocation decisions, airport and other business and leisure travel, new hotel construction, the pricing strategies of competitors and currency fluctuations. In addition, our ADR, occupancy and RevPAR performance are dependent on the continued success of the Marriott, Hilton and Sofitel brands.

Revenue . Substantially all of our revenue is derived from the operation of hotels. Specifically, our revenue is comprised of:


•	Rooms revenue-Occupancy and ADR are the major drivers of rooms revenue. Rooms revenue accounts for the substantial majority of our total revenue.


•	Food and beverage revenue-Occupancy and the type of customer staying at the hotel are the major drivers of food and beverage revenue (i.e., group business typically generates more food and beverage business through catering functions when compared to transient business, which may or may not utilize the hotel’s food and beverage outlets or meeting and banquet facilities).


•	Other hotel revenue-Occupancy and the nature of the property are the main drivers of other ancillary revenue, such as telecommunications, parking and leasing services.

Hotel Operating Expenses . The following presents the components of our hotel operating expenses:

•

Rooms expense-These costs include housekeeping wages and payroll taxes, reservation systems, room supplies, laundry services and front desk costs. Like rooms revenue, occupancy is the major driver of rooms expense and, therefore, rooms expense has a significant correlation to rooms revenue. These costs can increase based on increases in salaries and wages, as well as the level of service and amenities that are provided.


•	Food and beverage expense-These expenses primarily include food, beverage and labor costs. Occupancy and the type of customer staying at the hotel (i.e., catered functions generally are more profitable than restaurant, bar or other on-property food and beverage outlets) are the major drivers of food and beverage expense, which correlates closely with food and beverage revenue.


•	Management fees-Base management fees are computed as a percentage of gross revenue. Incentive management fees generally are paid when operating profits exceed certain threshold levels.


•	Other hotel expenses-These expenses include labor and other costs associated with the other operating department revenues, as well as labor and other costs associated with administrative departments, franchise fees, sales and marketing, repairs and maintenance and utility costs.

Most categories of variable operating expenses, including labor costs such as housekeeping, fluctuate with changes in occupancy. Increases in occupancy are accompanied by increases in most categories of variable operating expenses, while increases in ADR typically only result in increases in limited categories of operating costs and expenses, such as franchise fees, management fees and credit card processing fee expenses which are based on hotel revenues. Thus, changes in ADR have a more significant impact on operating margins than changes in occupancy.

RESULTS OF OPERATIONS

Marriott currently manages six of our properties. For these Marriott-managed hotels, the 2012 fiscal year reflects twelve weeks of operations in each of the first three quarters of the year and sixteen weeks for the fourth quarter of the year. Beginning in 2013, the fiscal quarters ended on March 31 ^st , June 30 ^th , September 30 ^th and December 31 ^st . For Marriott-managed hotels, the fourth quarters of 2014, 2013 and 2012 ended December 31, 2014, December 31, 2013 and December 28, 2012, respectively. 2012 results have not been adjusted.

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

The following table summarizes the changes in key line items from our consolidated and combined consolidated statements of operations for the years ended December 31, 2014 and 2013 (in thousands except percentages):



	Year Ended December 31,
	2014			2013			$ Change			% Change
Revenue
Rooms	$	226,495		$	171,670		$	54,825		31.9	%
Food and beverage	67,854			50,835			17,019			33.5	%
Other	12,844			10,969			1,875			17.1	%
Total hotel revenue	307,193			233,474			73,719			31.6	%
Other	115			22			93			422.73	%
Total revenue	307,308			233,496			73,812			31.6	%
Expenses
Hotel operating expenses:
Rooms	51,636			39,881			11,755			29.5	%
Food and beverage	44,297			33,694			10,603			31.5	%
Other expenses	80,593			61,779			18,814			30.5	%
Management fees	12,525			9,999			2,526			25.3	%
Total hotel expenses	189,051			145,353			43,698			30.1	%
Property taxes, insurance and other	16,174			11,753			4,421			37.6	%
Depreciation and amortization	40,686			30,862			9,824			31.8	%
Advisory services fee	12,534			1,047			11,487			1,097.1	%
Transaction costs	1,871			13,577			(11,706		)	(86.2	)%
Corporate general and administrative	3,242			11,494			(8,252		)	(71.8	)%
Total expenses	263,558			214,086			49,472			23.1	%
Operating income	43,750			19,410			24,340			125.4	%
Interest income	27			23			4			17.4	%
Interest expense and amortization of loan costs	(39,031		)	(33,011		)	6,020			18.2	%
Write-off of loan costs and exit fees	—			(1,971		)	(1,971		)	(100.0	)%
Unrealized loss on derivatives	(111		)	(36		)	75			208.3	%
Income (loss) before income taxes	4,635			(15,585		)	20,220			129.7	%
Income tax expense	(1,097		)	(2,343		)	(1,246		)	(53.2	)%
Net income (loss)	3,538			(17,928		)	21,466			119.7	%
Income from consolidated entities attributable to noncontrolling interests	(1,103		)	(934		)	169			18.1	%
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(496		)	7,080			7,576			107.0	%
Net income (loss) attributable to the Company	$	1,939		$	(11,782	)	$	13,721		116.5	%

Net income (loss) represents the operating results of ten hotel properties for the year ended December 31, 2014 and eight hotel properties for the year ended December 31, 2013 . The operating results of the Sofitel Chicago Water Tower are included since its acquisition on February 24, 2014 and the operating results of the Pier House Resort are included since its acquisition on March 1, 2014. The following table illustrates the key performance indicators of our hotels for the periods indicated:



	Year Ended December 31,
	2014			2013
Occupancy	81.62		%	78.40		%
ADR (average daily rate)	$	209.96		$	189.60
RevPAR (revenue per available room)	$	171.37		$	148.64

Rooms Revenue . Rooms revenue from our hotels in creased $54.8 million , or 31.9% , to $226.5 million during the year ended December 31, 2014 (“ 2014 ”) compared to the year ended December 31, 2013 (“ 2013 ”). During 2014 , we experienced a 322 basis point in crease in occupancy and a 10.7% in crease in room rates as the economy continued to improve. Rooms revenue increased $25.5 million and $13.9 million as a result of the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort, respectively, during 2014. Rooms revenue also increased (i) $4.1 million at the San Francisco Courtyard Downtown primarily as a result of 12.7% higher room rates at the hotel; (ii) $2.7 million at the Hilton La Jolla Torrey Pines as a result of a major renovation at the hotel in 2013; (iii) $2.6 million at the Seattle Marriott Waterfront as a result of 9.8% higher room rates and a 187 basis point increase in occupancy at the hotel; (iv) $2.0 million at the Seattle Courtyard Downtown as a result of 11.9% higher room rates and a 440 basis point increase in occupancy at the hotel; (v) $1.1 million at the Capital Hilton as a result of 1.5% higher room rates and a 111 basis point increase in occupancy at the hotel; (vi) $1.1 million at the Plano Marriott Legacy Town Center as a result of major renovations at the hotel in 2013; (vii) $1.0 million at the Tampa Renaissance as a result of 5.3% higher room rates and a 275 basis point increase in occupancy at the hotel; and (viii) $846,000 at the Philadelphia Courtyard as a result of a 285 basis point increase in occupancy and a 0.6% increase in room rates at the hotel.

Food and Beverage Revenue . Food and beverage revenues from our hotels in creased $17.0 million , or 33.5% , to $67.9 million in 2014 . This in crease was primarily attributable to an increase in total food and beverage revenue of $9.6 million and $2.7 million as a result of the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort, respectively, in 2014 and higher food and beverage revenue of $1.8 million at the Plano Marriott Legacy Town Center and $1.6 million at the Hilton La Jolla Torrey Pines as a result of major renovations at those hotels in 2013 and $445,000 at the Philadelphia Courtyard as a result of increased catering at this hotel. Additional increases resulted from aggregate higher food and beverage revenue of $1.1 million at the Seattle Marriott Waterfront, the Tampa Renaissance, the San Francisco Courtyard Downtown and the Seattle Courtyard Downtown as a result of increased occupancy at these hotels in 2014. These increases were partially offset by lower food and beverage revenue of $278,000 at the Capital Hilton, which was primarily attributable to the presidential inauguration in 2013 and a decrease in catering during the second quarter of 2014, partially offset by increased catering during the third quarter of 2014.

Other Hotel Revenue . Other hotel revenue, which consists mainly of telecommunications, parking and rentals, in creased $1.9 million , or 17.1% , to $12.8 million in 2014 . This in crease consisted of $1.5 million and $1.1 million attributable to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort, respectively, in 2014 and higher other revenue of $308,000 at the Hilton La Jolla Torrey Pines as a result of a major renovation at that hotel in 2013. These increases were partially offset by lower other revenue at the Capital Hilton of $707,000 due to lower cancellation fees in 2014 and business interruption claims in 2013 and the Seattle Marriott Waterfront of $532,000 due to lower miscellaneous revenues.

Other Non-Hotel Revenue . Other non-hotel revenue, in creased $93,000 , or 422.73% , to $115,000 , primarily attributable to increased Texas margin tax credits.

Rooms Expense . Rooms expense in creased $11.8 million , or 29.5% , to $51.6 million in 2014 primarily due to higher rooms revenue and the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort. Rooms margin in creased 40 basis points from 76.8% to 77.2% .

Food and Beverage Expense . Food and beverage expense in creased $10.6 million , or 31.5% , to $44.3 million during 2014 . The in crease is attributable to increased food and beverage revenue and the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort, partially offset by lower food and beverage expense at The Capital Hilton due to the presidential inauguration in 2013.

Other Operating Expenses . Other expense in creased $18.8 million , or 30.5% , to $80.6 million in 2014 . Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. Other direct expenses in creased $1.4 million due to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort and higher hotel revenue. Other direct expenses represented 1.8% of total hotel revenue for both 2014 and 2013 . Other indirect expenses and incentive management fees in creased $17.4 million in 2014 . The increase in indirect expenses is primarily attributable to higher general, administrative and marketing costs of $9.7 million, repair and maintenance costs of $3.0 million, incentive management fees of $2.5 million, energy costs of $1.7 million and lease expense of $499,000.

Management Fees . Base management fees in creased $2.5 million , or 25.3% , to $12.5 million in 2014 as a result of higher hotel revenue primarily attributable to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort in 2014 .

Property Taxes, Insurance and Other . Property taxes, insurance and other in creased $4.4 million , or 37.6% , to $16.2 million in 2014 . The in crease was primarily due to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort in 2014 and higher property taxes at two hotel properties as a result of higher assessed values in 2013.

Depreciation and Amortization . Depreciation and amortization in creased $9.8 million , or 31.8% , to $40.7 million in 2014 , primarily due to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort in 2014 and capital expenditures incurred since December 31, 2013.

Advisory Services Fee. Advisory services fee increased $11.5 million from $1.0 million in 2013 to $12.5 million in 2014. We are party to an advisory agreement with our advisor, Ashford LLC, which was a subsidiary of Ashford Trust until November 12, 2014, when the spin-off of Ashford Inc. was completed. For the period from January 1, 2014 to November 11, 2014 , we incurred an advisory services fee of $10.7 million to Ashford Trust which was comprised of a base advisory fee of $7.5 million , reimbursable overhead and internal audit, insurance claims advisory and asset management services of $1.4 million and equity-based compensation of $1.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Trust. Following the previously discussed spin-off of Ashford Inc., we incurred an advisory services fee of $1.8 million to Ashford Inc., the parent of Ashford LLC, from November 12, 2014 to December 31, 2014. This fee was comprised of a base advisory fee of $1.2 million , reimbursable overhead and internal audit, insurance claims advisory and asset management services of $253,000 and equity-based compensation of $340,000 associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. For the year ended December 31, 2013 , we only incurred an advisory services fee from November 19, 2013 through December 31, 2013 as a result of our spin-off from Ashford Trust. In 2013 we incurred advisory fees of $1.0 million to Ashford Trust which was comprised of a base advisory fee of $878,000 , reimbursable overhead and internal audit reimbursements of $169,000. No incentive management fees were incurred for 2014 or 2013.

Transaction Costs. We recorded transaction costs of $1.9 million and $13.6 million in 2014 and 2013 , respectively. Transaction costs in 2014 primarily related to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort, while costs in 2013 were related to our spin-off from Ashford Trust.

Corporate General and Administrative . Corporate general and administrative expenses de creased $8.3 million , or 71.8% , to $3.2 million in 2014 . Corporate general and administrative expenses primarily consist of public company costs and professional fees. Prior to the spin-off, corporate general and administrative expense represented an allocation of certain AHT corporate general and administrative costs including salaries and benefits, equity-based compensation, legal and professional fees, rent expense, insurance expense and office expenses. The costs were allocated based on the pro rata share of our undepreciated gross investments in hotel properties in relation to AHT’s undepreciated gross investments in hotel properties.

Interest Income . Interest income in creased by $4,000 , or 17.4% , to $27,000 in 2014 .

Interest Expense and Amortization of Loan Costs . Interest expense and amortization of loan costs in creased $6.0 million , or 18.2% , to $39.0 million in 2014 as a result of a higher debt balance and a higher weighted average interest rate as a result of the refinancing of our $141.7 million mortgage loan due August 2013, which had an outstanding balance of $141.0 million, with a $199.9 million mortgage loan due February 2018 and the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort in 2014. The average LIBOR rates for 2014 and 2013 were 0.15% and 0.19% , respectively.

Write-off of Loan Costs and Exit Fees . In 2014, we did not incur any write-offs of loan costs. We wrote off unamortized loan costs of $472,000 and incurred additional loan costs of $1.5 million in 2013 in connection with the refinancing of our $141.7 million mortgage loan due August 2013, which had an outstanding balance of $141.0 million. The mortgage loan was replaced, with a $199.9 million mortgage loan due February 2018.

Unrealized Loss on Derivatives . Unrealized loss on derivatives in creased $75,000 , or 208.3% , to $111,000 . Unrealized loss on derivatives represents unrealized losses on our interest rate caps. The fair value of the interest rate caps is primarily based on movements in the LIBOR forward curve and the passage of time.

Income Tax Expense . Income tax expense de creased $1.2 million , or 53.2% , to $1.1 million . The decrease in income tax expense in 2014 is primarily due to the utilization of a TRS net operating loss in 2014 that was generated after the spin-off during the period from November 19, 2013 through December 31, 2013.

Income from Consolidated Entity Attributable to Noncontrolling Interests . The noncontrolling interest partner in a consolidated entity was allocated income of $1.1 million and $934,000 for 2014 and 2013 , respectively. At December 31, 2014 and 2013 , noncontrolling interests in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net income of $496,000 in 2014 and net loss of $7.1 million in 2013 . Redeemable noncontrolling interests represented ownership interests of 25.88% and 35.26% in our operating partnership at December 31, 2014 and 2013 , respectively.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

The following table summarizes the changes in key line items from our combined consolidated statements of operations for the years ended December 31, 2013 and 2012 (in thousands except percentages):



	Year Ended December 31,
	2013			2012			$ Change			% Change
Revenue
Rooms	$	171,670		$	160,811		$	10,859		6.8	%
Food and beverage	50,835			50,784			51			0.1	%
Other	10,969			9,593			1,376			14.3	%
Total hotel revenue	233,474			221,188			12,286			5.6	%
Other	22			—			22
Total revenue	233,496			221,188			12,308			5.6	%
Expenses
Hotel operating expenses:
Rooms	39,881			37,001			2,880			7.8	%
Food and beverage	33,694			33,377			317			0.9	%
Other expenses	61,779			59,013			2,766			4.7	%
Management fees	9,999			9,360			639			6.8	%
Total hotel expenses	145,353			138,751			6,602			4.8	%
Property taxes, insurance and other	11,753			10,236			1,517			14.8	%
Depreciation and amortization	30,862			29,549			1,313			4.4	%
Advisory services fee	1,047			—			1,047
Transaction costs	13,577			—			13,577
Corporate general and administrative	11,494			10,846			648			6.0	%
Total expenses	214,086			189,382			24,704			13.0	%
Operating income	19,410			31,806			(12,396		)	(39.0	)%
Interest income	23			29			(6		)	(20.7	)%
Interest expense and amortization of loan costs	(33,011		)	(31,244		)	1,767			5.7	%
Write-off of loan costs and exit fees	(1,971		)	—			1,971
Unrealized loss on derivatives	(36		)	—			36
Income (loss) before income taxes	(15,585		)	591			16,176			2,737.1	%
Income tax expense	(2,343		)	(4,384		)	(2,041		)	(46.6	)%
Net loss	(17,928		)	(3,793		)	14,135			372.7	%
Income from consolidated entities attributable to noncontrolling interests	(934		)	(752		)	182			24.2	%
Net loss attributable to redeemable noncontrolling interests in operating partnership	7,080			—			7,080
Net loss attributable to the Company	$	(11,782	)	$	(4,545	)	$	7,237		159.2	%

Net loss represents the operating results of our eight hotel properties for the years ended December 31, 2013 and 2012. The following table illustrates the key performance indicators of our hotels for the periods indicated:



	Year Ended December 31,
	2013			2012
Occupancy	78.40		%	77.40		%
ADR (average daily rate)	$	189.60		$	181.13
RevPAR (revenue per available room)	$	148.64		$	140.20
Room revenue (in thousands)	$	171,670		$	160,811
Total hotel revenue (in thousands)	$	233,474		$	221,188

Rooms Revenue . Rooms revenue from our hotels increased $10.9 million, or 6.8%, to $171.7 million during the year ended December 31, 2013 (“2013”) compared to the year ended December 31, 2012 (“2012”). During 2013, we experienced a 100 basis point increase in occupancy and a 4.7% increase in room rates as the economy continued to improve. Rooms revenue at the San Francisco Courtyard Downtown increased $3.9 million as a result of a 303 basis point increase in occupancy and an 9.6% increase in room rates. Rooms revenue in our Seattle hotels was $3.7 million higher in 2013 when compared to 2012, due primarily to higher room rates and a 393 basis point increase in occupancy at the Seattle Courtyard Downtown. Rooms revenue at the Marriott Legacy Town Center increased $1.3 million primarily as a result of higher room rates of 7.0%. Rooms revenue at The Capital Hilton increased $885,000 which was primarily attributable to the presidential inauguration in 2013. Rooms revenue increased $752,000 at the Hilton La Jolla Torrey Pines, which was primarily attributable to the completion of a major renovation earlier in 2013.

Food and Beverage Revenue . Food and beverage revenues from our hotels increased $51,000, or 0.1%, to $50.8 million in 2013. This increase was primarily attributable to increases at the San Francisco Courtyard Downtown, the Seattle Marriott Waterfront and The Capital Hilton, offset by lower food and beverage revenue at the Plano Marriott Legacy Town Center and the Hilton La Jolla Torrey Pines, which were both negatively affected as a result of major renovations.

Other Revenue . Other hotel revenue, which consists mainly of telecommunications, parking and rentals, increased $1.4 million, or 14.3%, to $11.0 million in 2013. This increase was primarily attributable to higher rental income at The Capital Hilton, the Seattle Courtyard Downtown and the Philadelphia Courtyard Downtown as well as higher other revenue at the Hilton La Jolla Torrey Pines in 2013 as a result of its major renovation.

Other Revenue . Other non-hotel revenue was $22,000 in 2013. There was no other revenue in 2012.

Rooms Expense . Rooms expense increased $2.9 million, or 7.8%, to $39.9 million in 2013 primarily due to higher rooms revenue. Rooms margin was 76.8% for 2013 compared to 77.0% for 2012.

Food and Beverage Expense . Food and beverage expense increased $317,000, or 0.9%, to $33.7 million during 2013. The increase is attributable to increased food and beverage revenue offset by lower food and beverage expense at The Capital Hilton and the Hilton La Jolla Torrey Pines due to renovations during 2013.

Other Operating Expenses . Other expense increased $2.8 million, or 4.7%, to $61.8 million in 2013. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. Direct expenses increased $64,000. Direct expenses represented 1.8% of total hotel revenue for both 2013 and 2012. Indirect expenses and incentive management fees increased $2.7 million in 2013. The increase in indirect expenses is primarily attributable to higher incentive management fees, general, administrative and marketing costs and bad debt expense related to a modification of rent terms at The Capital Hilton.

Management Fees . Base management fees increased $639,000, or 6.8%, to $10.0 million in 2013 as a result of higher hotel revenue in 2013.

Property Taxes, Insurance and Other . Property taxes, insurance and other increased $1.5 million, or 14.8%, to $11.8 million in 2013. The increase was primarily due to higher property taxes at two hotel properties as a result of higher assessed values in 2013.

Depreciation and Amortization . Depreciation and amortization increased $1.3 million, or 4.4%, to 30.9 million in 2013, primarily due to a major renovation at the Hilton La Jolla Torrey Pines during 2012 and early 2013.

Advisory Services Fee. We recorded an advisory services fee of $1.0 million to Ashford Trust, which was then the parent of Ashford LLC, in 2013,which was comprised of a base advisory fee of $878,000, reimbursable overhead and internal audit reimbursements of $169,000. No incentive management fee was incurred for 2013 in connection with our advisory agreement with Ashford LLC.

Transaction Costs. We recorded transaction costs of $13.6 million related to our spin-off from Ashford Trust in 2013.

Corporate General and Administrative . Corporate general and administrative expenses increased to $11.5 million in 2013 compared to $10.8 million in 2012 primarily due to additional expense associated with accelerated vesting of LTIP units of Ashford Trust’s chairman emeritus as a result of his retirement.

Interest Income . Interest income decreased by $6,000, or 20.7%, to $23,000 in 2013.

Interest Expense and Amortization of Loan Costs . Interest expense and amortization of loan costs increased $1.8 million, or 5.7%, to $33.0 million in 2013 as a result of a higher debt balance and a higher weighted average interest rate as a result of the refinancing of our $141.7 million loan. The average LIBOR rates for 2013 and 2012 were 0.19% and 0.24%, respectively.

Write-off of Loan Costs and Exit Fees . We wrote off unamortized loan costs of $472,000 and incurred additional loan costs of $1.5 million in 2013 in connection with the refinancing of our $141.7 million mortgage loan due August 2013, which had an outstanding balance of $141.0 million. The mortgage loan was replaced, with a $199.9 million mortgage loan due February 2018. In 2012, we did not incur any write-offs of loan costs.

Unrealized Loss on Derivatives . We recorded an unrealized loss on derivatives of $36,000 in 2013, which represents an unrealized loss on an interest rate cap entered into in conjunction with our $199.9 million Aareal Capital Corporation mortgage loan. The fair value of the interest rate cap is primarily based on movements in the LIBOR forward curve and the passage of time. No unrealized gain or loss was recorded in 2012.

Income Tax Expense . Income tax expense decreased $2.0 million, or 46.6%, to $2.3 million in 2013 The decrease in tax expense in 2013 is primarily due to lower profitability in our taxable corporate subsidiaries resulting from an increase in certain indirect expenses.

Income from Consolidated Entity Attributable to Noncontrolling Interests . The noncontrolling interest partner in a consolidated entity was allocated income of $934,000 and $752,000 for 2013 and 2012, respectively. At December 31, 2013, noncontrolling interests in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated a net loss of $7.1 million in 2013, for its share of net loss from November 19, 2013 through December 31, 2013, the period subsequent to the spin-off. Redeemable noncontrolling interests represented ownership interests of 35.26% in our operating partnership at December 31, 2013.

Indebtedness

As of December 31, 2014 , we had approximately $765.2 million in outstanding indebtedness. The following table sets forth our indebtedness (in thousands):



Loan/Property(ies)	Number of Assets Encumbered	Outstanding Balance at December 31, 2014		Effective Annual Interest Rate at December 31, 2014		Amortization Period (Years)	Maturity Date
Aareal Capital Corporation ⁽¹⁾	2	$	197,605	2.82	%	30 ⁽⁵⁾	Nov-2019
The Capital Hilton, Washington, DC
Hilton La Jolla Torrey Pines, La Jolla, CA
Wells Fargo	1	33,860		5.91	%	30 ⁽⁶⁾	Apr-2017
Courtyard Philadelphia Downtown, Philadelphia, PA
Wells Fargo	2	124,111		5.95	%	30 ⁽⁶⁾	Apr-2017
Courtyard Seattle Downtown, Seattle, WA
Courtyard San Francisco Downtown, San Francisco, CA
Wells Fargo	3	252,556		5.95	%	30 ⁽⁶⁾	Apr-2017
Marriott Plano Legacy Town Center, Plano, TX
Seattle Marriott Waterfront, Seattle, WA
Renaissance Tampa International Plaza, Tampa, FL
JP Morgan Chase ⁽²⁾	1	69,000		5.07	%	Interest Only	Sep-2015
Pier House Resort, Key West, FL
GACC ⁽³⁾	1	80,000		2.47	%	Interest Only	Mar-2016
Sofitel Chicago Water Tower, Chicago, IL
TIF Loan ⁽⁴⁾	—	8,098		12.85	%	Interest Only ⁽⁷⁾	Jun-2018
Courtyard Philadelphia Downtown, Philadelphia, PA
Total/Weighted Average	10	$	765,230	4.99	%

__________________


(1)	Interest rate is variable at LIBOR plus 2.65%. In connection with the origination of this loan, we entered into an interest rate cap agreement with a counterparty, and the terms of that agreement provide for a LIBOR cap of 3.00% for 75% of the loan balance.


(2)	In connection with the origination of this loan, we entered into an interest rate cap agreement with a counterparty, and the terms of that agreement provide for a LIBOR cap of 1.80%.


(3)	In connection with the origination of this loan, we entered into an interest rate cap agreement with a counterparty, and the terms of that agreement provide for a LIBOR cap of 1.50%.


(4)	This loan relates to a tax increment financing district in the City of Philadelphia with respect to which we also hold a note receivable in the same principal amount and on the same terms.


(5)	Principal amortization based on a 6% interest rate.


(6)	Loan was interest only at origination in 2007 but began amortizing in May 2012.


(7)	Principal amortization to the extent of excess tax revenues.

On November 7, 2014, we refinanced our $197.8 million mortgage loan with Aareal Capital Corporation, with an outstanding balance of $195.7 million due February 2018 with a $198.0 million mortgage loan from the same lender with a five-year initial term and two one-year extension options, subject to the satisfaction of certain conditions. The new loan provides for a floating interest rate of LIBOR + 2.65%. The mortgage loan is secured by the Capital Hilton in Washington, DC and Hilton La Jolla Torrey Pines in La Jolla, CA. Ashford Prime has a 75% ownership interest in the properties, with Hilton holding the remaining 25%. Ashford Prime OP has guaranteed certain obligations of the borrowers under the loan agreement.

On March 9, 2015, we refinanced our $69.0 million mortgage loan with JP Morgan Chase, with an outstanding balance of $69.0 million due September 2015, with a $70.0 million mortgage loan with Credit Agricole due March 2017, with three one -year extension options, subject to the satisfaction of certain conditions. The new loan is interest only and provides for a floating interest rate of LIBOR + 2.25% , with no LIBOR floor. The mortgage loan is secured by the Pier House Resort in Key West, Florida. Ashford Prime OP has guaranteed certain obligations of the borrowers under the loan agreement.

The loans identified in the table above (other than the loans from Aareal Capital Corporation, JP Morgan Chase and GACC) were assumed in connection with the spin-off and include various financial cash trap triggers. The Wells Fargo loans each have a 1.10x debt service coverage ratio requirement, the Aareal Capital Corporation loan has a 1.25x debt service coverage ratio requirement, the GACC loan has a 7.05% debt yield requirement (which increases to 8.25% during the third extension period) and the JP Morgan Chase loan has a 6.90% debt yield requirement (which increases to 8.50% during the third extension period), and if we are unable to maintain these levels of debt service coverage or debt yield, as the case may be, substantially all of the net cash flow from the relevant hotels will be held as additional collateral in an account for the benefit of the respective lender.

As of December 31, 2014 , we were in compliance with the aforementioned financial covenants.

LIQUIDITY AND CAPITAL RESOURCES

Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotels, including:


•	advisory fees payable to Ashford LLC;


•	recurring maintenance necessary to maintain our hotels in accordance with brand standards;


•	interest expense and scheduled principal payments on outstanding indebtedness, including our secured revolving credit facility (see “Contractual Obligations and Commitments”);


•	distributions necessary to qualify for taxation as a REIT; and


•	capital expenditures to improve our hotels.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our secured revolving credit facility.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotels and scheduled debt payments. We expect to meet our long-term liquidity requirements through various sources of capital, including our secured revolving credit facility and future equity issuances, existing working capital, net cash provided by operations, long-term hotel mortgage indebtedness and other secured and unsecured borrowings. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources.

Our hotels will require periodic capital expenditures and renovation to remain competitive. In addition, acquisitions, redevelopments or expansions of hotels will require significant capital outlays. We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected.

Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotels decline. When these provisions are triggered, substantially all of the profit generated by our hotels is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. Cash is not distributed to us at any time after the cash trap provisions have been triggered until we have cured the performance issues. Currently, none of the cash trap provisions of our loans are triggered.

As noted above, on October 27, 2014, our Board of Directors approved a share repurchase program under which the Company may purchase up to $100 million of the Company’s common stock from time to time. The repurchase program does not have an expiration date. The specific timing, manner, price, amount and other terms of the repurchases is at management’s discretion and depends on market conditions, corporate and regulatory requirements and other factors. The Company is not required to repurchase shares under the repurchase program, and may modify, suspend or terminate the repurchase program at any time for any reason. Under the repurchase program, we repurchased 927,915 shares of our common stock, for approximately $16.1 million , in the year ended December 31, 2014. Subsequent to December 31, 2014, we repurchased 471,064 shares of our common stock, for approximately $8.1 million . As of March 12 , 2015, we had purchased a cumulative 1.4 million shares of our common stock, for approximately $24.2 million since the program’s inception on November 4, 2014.

Revolving Credit Facility

Concurrently with completion of the spin-off, on November 19, 2013, we entered into a three-year, $150 million secured revolving credit facility, which we believe will provide us with significant financial flexibility to fund future acquisitions and hotel redevelopments.

The credit facility is provided by a syndicate of financial institutions with Bank of America, N.A., serving as the administrative agent to Ashford Prime OP as the borrower. We and certain of our subsidiaries guarantee the credit facility. The facility is secured by a pledge of 100% of the equity interests we hold in Ashford Prime OP and 100% of the equity interest issued by any guarantor (other than Ashford Prime) or any other subsidiary of ours that is not restricted under its loan documents or organizational documents from having its equity pledged (subject to certain exclusions), all mortgage receivables held by the borrower or any guarantor, and certain deposit accounts and securities accounts held by the borrower and any guarantor. The proceeds of the credit facility may be used for working capital, capital expenditures, property acquisitions, and any other lawful purposes.

The credit facility also contains customary terms, covenants, negative covenants, events of default, limitations and other conditions for credit facilities of this type. Subject to certain exceptions, we are subject to restrictions on incurring additional indebtedness, mergers and fundamental changes, sales or other dispositions of property, changes in the nature of our business, investments, and capital expenditures.

We also are subject to certain financial covenants, as set forth below, which are tested on a consolidated basis (net of the amounts attributable to the non-controlling interest held by our partner in a majority owned consolidated entity) and include, but are not limited to, the following:

•

Consolidated indebtedness (less cash and cash equivalents and amounts represented by marketable securities) to EBITDA not to exceed 7.00x initially, with such ratio being reduced beginning December 1, 2014 to 6.5x and beginning December 1, 2015 to 5.75x; provided however, that a one-time allowance will be made if we are out of compliance with such covenant by an amount of 0.50x for the first three fiscal quarters following a significant acquisition occurring after November 30, 2014. Our ratio was 5.75x at December 31, 2014 .


•	Consolidated recourse indebtedness other than the credit facility not to exceed $50,000,000.


•	Consolidated fixed charge coverage ratios not less than 1.15x initially, with such ratio being increased beginning December 1, 2014 to 1.25x and beginning December 1, 2015 to 1.35x. Our ratio was 1.68x at December 31, 2014 .


•	Indebtedness of the consolidated parties that accrues interest at a variable rate (other than the credit facility) that is not subject to a “cap,” “collar,” or other similar arrangement not to exceed 25% of consolidated indebtedness.


•	Consolidated tangible net worth not less than 75% of the consolidated tangible net worth on the closing date of the credit facility plus 75% of the net proceeds of any future equity issuances.


•	Secured debt that is secured by real property (excluding the eight hotels we acquired in connection with the spin-off and, if we exercise our option to acquire it, the Crystal Gateway Marriott) not to exceed 70% of the as-is appraised value of such real property.

All financial covenants are tested and certified by the borrower on a quarterly basis. The amounts and effects of the Pier House Resort acquisition are excluded in the calculation of the financial covenants for the first four quarters following such acquisition. We were in compliance with all covenants at December 31, 2014 .

The credit facility includes customary events of default, and the occurrence of an event of default will permit the lenders to terminate commitments to lend under the facility and accelerate payment of all amounts outstanding thereunder. If a default occurs and is continuing, we will be precluded from making distributions on our shares of common stock (other than those required to allow us to qualify and maintain our status as a REIT, so long as such default does not arise from a payment default or event of insolvency).

Borrowings under the credit facility bear interest, at our option, at either LIBOR for a designated interest period plus an applicable margin, or the base rate (as defined in the credit agreement) plus an applicable margin. The applicable margin for borrowings under the credit facility for base rate loans range from 1.25% to 2.75% per annum and the applicable margin for borrowings under the credit facility for LIBOR loans range from 2.25% to 3.75% per annum, depending on the ratio of consolidated indebtedness to EBITDA described above, with the lowest rate applying if such ratio is less than 4x, and the highest rate applying if such ratio is greater than 6.5x.

The facility is a three-year interest-only facility with all outstanding principal being due at maturity, subject to two one-year extension options, subject to certain terms and conditions. The credit facility has an accordion feature whereby the aggregate commitments may be expanded up to $300 million, subject to certain terms and conditions and a 0.25% extension fee. No amounts were drawn under the facility as of December 31, 2014 .

We intend to repay indebtedness incurred under our secured revolving credit facility from time to time out of net cash provided by operations and from the net proceeds of issuances of additional equity and debt securities, as market conditions permit.

Sources and Uses of Cash

As of December 31, 2014 , we had $171.4 million of cash and cash equivalents compared to $143.8 million at December 31, 2013 . In 2014, we completed an underwritten public offering which generated net proceeds of approximately $143.9 million . We used $95.7 million of the proceeds from the offering for our acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort.

We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand, positive cash flow from operations and capital market activities. We anticipate using funds to pay for (i) capital expenditures for our ten hotels, estimated to be approximately $16.7 million through 2015 , (ii) debt interest and principal payments estimated to be approximately $48.6 million through 2015 and (iii) purchases of our common stock pursuant to our share repurchase program.

Net Cash Flows Provided by Operating Activities . Net cash flows provided by operating activities were $54.9 million and $34.1 million for the years ended December 31, 2014 and 2013 , respectively. Cash flows from operations are impacted by changes in hotel operations as well as changes in restricted cash due to the timing of cash deposits for certain loans and capital expenditures as well as the timing of collecting receivables from hotel guests, paying vendors, settling with related parties and settling with hotel managers.

During the year ended December 31, 2014 , we reimbursed Ashford Trust $13.6 million for transaction costs from the spin-off.

Net Cash Flows Used in Investing Activities . For the year ended December 31, 2014 , investing activities used net cash flows of $212.8 million . These cash outlays were primarily attributable to cash outflows of $172.1 million attributable to the acquisitions of the Sofitel Chicago Water Tower and the Pier House Resort, $21.0 million of capital improvements made to various hotel properties and $19.7 million of net deposits to restricted cash for capital expenditures. Previously, this cash was held in accounts in the name of a third-party hotel manager and included in “Due from third party hotel managers” as of December 31, 2013 on our consolidated balance sheet. As of December 31, 2014 , this cash is held in accounts in our name and is classified as “Restricted cash” on our consolidated balance sheet. For the year ended December 31, 2013 , investing activities used net cash flows of $28.4 million . These cash outlays were attributable to capital improvements made to various hotel properties, including a $4.0 million deposit for the Sofitel Chicago Water Tower.

Net Cash Flows Used in Financing Activities. For the year ended December 31, 2014 , net cash flows provided by financing activities were $185.6 million . Cash inflows primarily consisted of net proceeds of $143.9 million from our underwritten public offering and borrowings on indebtedness of $82.3 million . These inflows were partially offset by cash outlays of $15.4 million for the purchase of our common stock pursuant to our share repurchase program, $8.2 million for repayments of indebtedness, $6.4 million for payments of dividends, $1.1 million for payments of spin-off costs, payments of loan costs and exit fees of $4.4 million , $2.0 million for distributions to noncontrolling interests in our consolidated entity and redemption of operating partnership units of $3.1 million . For the year ended December 31, 2013 , net cash flows provided by financing activities were $117.7 million . Cash inflows primarily consisted of contributions from Ashford Trust of $177.7 million and borrowings on indebtedness of $199.9 million , partially offset by cash outlays of $148.6 million for repayments of indebtedness, $16.6 million for distributions to noncontrolling interests in our consolidated entity, $91.7 million of distributions to Ashford Trust and payments of loan costs and prepayment penalties of $2.8 million .

Inflation

We rely entirely on the performance of our properties and the ability of the properties’ managers to increase revenues to keep pace with inflation. Hotel operators can generally increase room rates rather quickly, but competitive pressures may limit their ability to raise rates faster than inflation. Our general and administrative costs, real estate and personal property taxes, property and casualty insurance, and utilities are subject to inflation as well.

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commitments

The table below summarizes future obligations for principal and estimated interest payments on our debt and future minimum lease payments on our operating leases, each as of December 31, 2014 (in thousands):



	Payments Due by Period
	< 1 Year		1-3 Years		3-5 Years		>5 Years		Total
Contractual obligations excluding extension options:
Long-term debt obligations	$	77,208	$	490,150	$	197,872	$	—	$	765,230
Operating lease obligations	2,287		4,422		4,381		67,391		78,481
Estimated interest obligations ⁽¹⁾	40,805		53,681		21,512		—		115,998
Total contractual obligations	$	120,300	$	548,253	$	223,765	$	67,391	$	959,709

____________________


(1)	For variable-rate indebtedness, interest obligations are estimated based on the LIBOR interest rate as of December 31, 2014 .

In addition to the amounts discussed above, we also have management agreements which require us to pay monthly management fees, incentive fees, group service fees and other general fees, if required. These management agreements expire from 2023 through 2041. See Note 11 of Notes to the Consolidated and Combined Consolidated Financial Statements as of December 31, 2014 included.

During the first quarter of 2014, we entered into an $80 million loan agreement in connection with our acquisition of the Sofitel Chicago Water Tower and assumed a loan agreement with respect to a $69 million mortgage loan in connection with our acquisition of the Pier House Resort. See “Recent Developments.”

Some of our loan agreements contain financial and other covenants. If we violate these covenants, we could be required to repay a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all.

Critical Accounting Policies

Our accounting policies are fully described in Note 2 of Notes to Consolidated and Combined 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.

Management Agreements . We have assumed certain management agreements that were first assumed by Ashford Trust when Ashford Trust acquired the eight initial hotel properties that we acquired in connection with the spin-off. Based on a review of these management agreements, Ashford Trust concluded that certain terms of these management agreements were more favorable to the respective managers than typical current market management agreements at the time of the acquisition. As a result, Ashford Trust recorded unfavorable contract liabilities related to these management agreements. At December 31, 2014 , $316,000 of unfavorable contract liabilities remained related to a hotel management agreement. Such unfavorable contract liabilities are being amortized as non-cash reductions to incentive management fees on a straight-line basis over the initial terms of the related agreement.

Income Taxes . At December 31, 2014 , we had a valuation allowance of approximately $3.9 million which substantially reserves our deferred tax assets. We evaluate the realizability of our deferred tax assets by assessing our valuation allowance and adjusting the amount of such allowance, if necessary. In evaluating our ability to realize our deferred tax assets, we consider all available positive and negative evidence, including historical results of operations, projected future taxable income, and scheduled reversals of deferred tax liabilities. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). At December 31, 2014 , we had net operating loss carry forwards for federal income tax purposes of $3.9 million , which are attributable to the subsidiaries conveyed to us in the separation, and which begin to expire in 2023. The loss carry forwards may be available to offset future taxable income, if any, through 2023; however, there could be substantial limitations on their use imposed by the Internal Revenue Code. Management determined that it is more likely than not that $3.9 million of our net deferred tax assets will not be realized. Accordingly, the deferred tax assets related to these loss carry forwards have been fully reserved against.

The “Income Taxes” Topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities. Tax years 2011 through 2014 remain subject to potential examination by certain federal and state taxing authorities.

Investments in Hotel Properties . Hotel properties are generally stated at cost. For hotel properties owned through our majority-owned entities, the carrying basis attributable to the partners’ minority ownership is recorded at historical cost, net of any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated purchase price of our ownership interests in the entities. All improvements and additions which extend the useful life of the hotel properties are capitalized.

Impairment of Investments in Hotel Properties. Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, less cost to sell. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. Fair value is determined through various valuation techniques, including internally developed undiscounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. If an asset is deemed to be impaired, we record an impairment charge for the amount that the property’s net book value exceeds its estimated fair value, or fair value less cost to sell. During the years ended December 31, 2014 , 2013 and 2012 , we have not recorded any impairment charges.

Depreciation and Amortization Expense . Depreciation expense is based on the estimated useful life of the assets, while amortization expense for leasehold improvements is based on the shorter of the lease term or the estimated useful life of the related assets. Presently, hotel properties are depreciated using the straight-line method over lives which range from 7.5 to 39 years for buildings and improvements and three to five years for furniture, fixtures, and equipment. While we believe our estimates are reasonable, a change in estimated lives could affect depreciation expense and net income (loss) as well as resulting gains or losses on potential hotel sales.

Equity-Based Compensation . We have two equity incentive plans that provide for the grant of restricted or unrestricted shares of our common stock, options to purchase our common stock and share awards (including restricted shares and restricted share units), share appreciation rights, performance shares, performance units and other equity-based awards, including LTIP units, or any combination of the foregoing. Equity-based compensation for non-employees is accounted for at fair value based on the market price of the shares at period end in accordance with applicable authoritative accounting guidance. Subsequently, expense is recognized equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Grants of restricted stock and LTIP units to independent directors are recorded at fair value based on the market price of our shares at grant date and this amount is fully expensed as the grants of stock and LTIP units are fully vested on the date of grant.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). ASU 2014-08 revises the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results, removing the lack of continuing involvement criteria and requiring discontinued operations reporting for the disposal of an equity method investment that meets the definition of discontinued operations. The update also requires expanded disclosures for discontinued operations, including disclosure of pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. ASU 2014-08 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014. Upon adoption of this standard in 2015, we will be required to evaluate whether a disposal meets the discontinued operations requirements under ASU 2014-08. We will make the additional disclosures upon adoption. Upon adoption, we anticipate that the operations of sold hotel properties through the date of their disposal will be included in continuing operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 is effective for fiscal periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management's responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We do not expect the adoption of this standard will have an impact on our financial position, results of operations or cash flows.

Non-GAAP Financial Measures

The following non-GAAP presentations of EBITDA, Adjusted EBITDA, Hotel EBITDA, FFO and AFFO are made to help our investors in evaluating our operating performance.

EBITDA is defined as net income (loss) attributable to the Company before interest expense and amortization of loan costs, interest income, income taxes, and depreciation and amortization, and redeemable noncontrolling interests in the operating partnership. We adjust EBITDA to exclude certain additional items such as transaction costs, write-off of loan costs and exit fees, other income and non-cash items such as amortization of unfavorable management contract liability, unrealized loss on derivatives, modification of rent terms and stock-based compensation. Unless otherwise indicated, EBITDA and Adjusted EBITDA exclude amounts attributable to the portion of a partnership owned by the third party. We also present Hotel EBITDA, which is Adjusted EBITDA for the hotel properties before corporate general and administrative expense, before corporate-level property taxes, insurance and other items and after other adjustments shown in the following table. We present EBITDA, Adjusted EBITDA and Hotel EBITDA because we believe they reflect more accurately the ongoing performance of our hotel assets and other investments and provide more useful information to investors as they are indicators of our ability to meet our future debt payment requirements, working capital requirements and they provide an overall evaluation of our financial condition. We also believe, with respect to Hotel EBITDA, that property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the management companies operating our business on a property-level basis. EBITDA, Adjusted EBITDA and Hotel EBITDA as calculated by us may not be comparable to EBITDA, Adjusted EBITDA and Hotel EBITDA reported by other companies that do not define EBITDA, Adjusted EBITDA and Hotel EBITDA exactly as we define the terms. EBITDA, Adjusted EBITDA and Hotel EBITDA do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity.

The following table reconciles net income (loss) to EBITDA and Adjusted EBITDA. The Sofitel Chicago Water Tower is included from February 24, 2014 through December 31, 2014 and the Pier House Resort is included from March 1, 2014 through December 31, 2014 (in thousands) (unaudited):



	Year Ended December 31,
	2014			2013			2012
Net income (loss)	$	3,538		$	(17,928	)	$	(3,793	)
Income from consolidated entities attributable to noncontrolling interests	(1,103		)	(934		)	(752		)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(496		)	7,080			—
Net income (loss) attributable to the Company	1,939			(11,782		)	(4,545		)
Interest income ⁽¹⁾	(26		)	(22		)	(28		)
Interest expense and amortization of loan costs ⁽¹⁾	37,188			31,182			29,917
Depreciation and amortization ⁽¹⁾	37,493			27,691			26,625
Income tax expense	1,097			2,343			4,384
Net income (loss) attributable to redeemable noncontrolling interests in operating partnership	496			(7,080		)	—
EBITDA	78,187			42,332			56,353
Amortization of unfavorable management contract liability	(158		)	(159		)	(158		)
Write-off of loan costs and exit fees	—			1,971			—
Transaction costs	1,871			13,750			—
Gain on insurance settlement	(23		)	—			—
Unrealized loss on derivatives	111			36			—
Modification of rent terms ⁽¹⁾	—			539			—
Compensation adjustment related to modified employment terms	573			—			—
Non-cash, non-employee stock/unit-based compensation	1,778			342			—
Adjusted EBITDA	$	82,339		$	58,811		$	56,195

__________________


⁽¹⁾	Net of adjustment for noncontrolling interests in consolidated entities. The following table presents the amounts of the adjustments for non-controlling interests for each line item:



	Year Ended December 31,
	2014			2013			2012
Interest expense and amortization of loan costs	$	(1,843	)	$	(1,829	)	$	(1,327	)
Depreciation and amortization	(3,193		)	(3,171		)	(2,924		)
Interest income	1			1			1
Modification of rent terms	—			(180		)	—

The following table further reconciles Adjusted EBITDA to Hotel EBITDA. The Sofitel Chicago Water Tower is included from February 24, 2014 through December 31, 2014 and the Pier House Resort is included from March 1, 2014 through December 31, 2014 (in thousands) (unaudited):



	Year Ended December 31,
	2014			2013			2012
Adjusted EBITDA	$	82,339		$	58,811		$	56,195
EBITDA adjustments attributable to JV partner	5,035			4,999			4,250
Income (loss) from consolidated entities attributable to non-controlling interest	1,103			934			752
Adjusted EBITDA (including amounts attributable to noncontrolling interest)	88,477			64,744			61,197
Corporate revenue	(115		)	(22		)	—
Allocated corporate general and administrative	890			11,494			10,846
Allocated corporate property taxes, insurance, and other	1,343			485			839
Advisory fee	12,534			1,047			—
Unfavorable contract liability	158			159			158
Hotel EBITDA (including amounts attributable to noncontrolling interest)	103,287			77,907			73,040
Less: Hotel EBITDA attributable to noncontrolling interest	(6,532		)	(6,149		)	(6,046		)
Hotel EBITDA	$	96,755		$	71,758		$	66,994

The following table reconciles net income (loss) attributable to the Company to Hotel EBITDA attributable to the Company on a property-by-property basis for each of our ten hotels and on a corporate basis for the year ended December 31, 2014 . The Sofitel Chicago Water Tower is included from February 24, 2014 through December 31, 2014 and the Pier House Resort is included from March 1, 2014 through December 31, 2014 (in thousands) (unaudited):



	Year Ended December 31, 2014
	The Capital Hilton			Hilton La Jolla Torrey Pines			Courtyard San Francisco Downtown			Courtyard Seattle Downtown			Marriott Plano Legacy Town Center			Seattle Marriott Waterfront			Renaissance Tampa International Plaza			Courtyard Philadelphia Downtown			Sofitel Chicago Water Tower		Pier House Resort		Corporate / Allocated(1)			Ashford Hospitality Prime, Inc.
Net income (loss) attributable to the Company	$	5,036		$	3,246		$	10,857		$	4,138		$	5,828		$	9,092		$	3,398		$	3,489		$	3,878	$	4,682	$	(51,705	)	$	1,939
Income (loss) from consolidated entities attributable to non-controlling interest	1,819			1,207			—			—			—			—			—			—			—		—		(1,427		)	1,599
Net income (loss)	6,855			4,453			10,857			4,138			5,828			9,092			3,398			3,489			3,878		4,682		(53,132		)	3,538
Non-property adjustments ⁽²⁾	(12		)	—			—			(11		)	—			—			—			—			—		—		17,890			17,867
Interest income	1			(2		)	(8		)	(1		)	(3		)	(6		)	(3		)	(1		)	—		—		(4		)	(27		)
Interest expense	—			—			—			—			—			—			—			2,041			1,696		—		33,466			37,203
Amortization of loan costs	—			—			—			—			—			—			—			32			564		—		1,232			1,828
Depreciation and amortization	7,592			5,976			2,196			1,957			3,934			3,895			2,249			5,706			5,182		1,999		—			40,686
Income tax expense	51			483			—			—			—			—			—			15			—		—		548			1,097
Non-Hotel EBITDA ownership expense	696			32			20			126			117			35			5			30			14		20		—			1,095
Hotel EBITDA (including amounts attributable to non-controlling interest)	$	15,183		$	10,942		$	13,065		$	6,209		$	9,876		$	13,016		$	5,649		$	11,312		$	11,334	$	6,701	$	—		$	103,287
Less: Hotel EBITDA attributable to noncontrolling interest	(3,796		)	(2,736		)	—			—			—			—			—			—			—		—		—			(6,532		)
Hotel EBITDA attributable to the Company	$	11,387		$	8,206		$	13,065		$	6,209		$	9,876		$	13,016		$	5,649		$	11,312		$	11,334	$	6,701	$	—		$	96,755

__________________


⁽¹⁾	Represents expenses not recorded at the individual hotel property level.


⁽²⁾	Includes allocated amounts which were not specific to hotel properties, such as corporate taxes, insurance and legal expenses.

The following table reconciles net income (loss) attributable to the Company to Hotel EBITDA attributable to the Company on a property-by-property basis for each of our eight initial hotels and on a corporate basis for the year ended December 31, 2013 (in thousands) (unaudited):



	Year Ended December 31, 2013
	The Capital Hilton			Hilton La Jolla Torrey Pines			Courtyard San Francisco Downtown			Courtyard Seattle Downtown		Marriott Plano Legacy Town Center			Seattle Marriott Waterfront			Renaissance Tampa International Plaza		Courtyard Philadelphia Downtown			Corporate / Allocated(1)			Ashford Hospitality Prime, Inc.
Net income (loss) attributable to the Company	$	5,405		$	2,074		$	9,674		$	3,480	$	4,913		$	8,105		$	2,828	$	4,519		$	(52,780	)	$	(11,782	)
Income (loss) from consolidated entities attributable to non-controlling interest	1,929			788			—			—		—			—			—		—			(8,863		)	(6,146		)
Net income (loss)	7,334			2,862			9,674			3,480		4,913			8,105			2,828		4,519			(61,643		)	(17,928		)
Non-property adjustments ⁽²⁾	—			—			—			—		—			—			—		—			33,691			33,691
Interest income	(1		)	(2		)	(2		)	—		(1		)	(1		)	—		(1		)	(14		)	(22		)
Interest expense	—			—			—			—		—			—			—		2,067			28,457			30,524
Amortization of loan costs	—			—			—			—		—			—			—		32			626			658
Depreciation and amortization	7,543			5,815			2,229			1,869		3,767			3,670			2,231		3,738			(3,171		)	27,691
Income tax expense	—			287			—			—		—			—			—		2			2,054			2,343
Non-Hotel EBITDA ownership expense	727			30			36			64		32			41			6		14			—			950
Hotel EBITDA (including amounts attributable to non-controlling interest)	$	15,603		$	8,992		$	11,937		$	5,413	$	8,711		$	11,815		$	5,065	$	10,371		$	—		$	77,907
Less: Hotel EBITDA attributable to noncontrolling interest	(3,901		)	(2,248		)	—			—		—			—			—		—			—			(6,149		)
Hotel EBITDA attributable to the Company	$	11,702		$	6,744		$	11,937		$	5,413	$	8,711		$	11,815		$	5,065	$	10,371		$	—		$	71,758

__________________


⁽¹⁾	Represents expenses not recorded at the individual hotel property level.


⁽²⁾	Includes allocated amounts which were not specific to hotel properties, such as corporate taxes, insurance and legal expenses.

The following table reconciles hotel-level net income (loss) attributable to the Company to Hotel EBITDA attributable to the Company on a property-by-property basis for each of our eight initial hotels and on a corporate basis for the year ended December 31, 2012 (in thousands) (unaudited):



	Year Ended December 31, 2012
	The Capital Hilton			Hilton La Jolla Torrey Pines			Courtyard San Francisco Downtown			Courtyard Seattle Downtown			Marriott Plano Legacy Town Center			Seattle Marriott Waterfront			Renaissance Tampa International Plaza		Courtyard Philadelphia Downtown			Corporate / Allocated(1)			Ashford Hospitality Prime, Inc.
Net income (loss) attributable to the Company	$	5,144		$	2,592		$	7,363		$	3,037		$	5,045		$	6,724		$	2,950	$	4,337		$	(41,737	)	$	(4,545	)
Income (loss) from consolidated entities attributable to non-controlling interest	1,824			966			—			—			—			—			—		—			(2,038		)	752
Net income (loss)	6,968			3,558			7,363			3,037			5,045			6,724			2,950		4,337			(43,775		)	(3,793		)
Non-property adjustments ⁽²⁾	—			—			—			—			—			—			—		—			15,583			15,583
Interest income	(1		)	(2		)	(3		)	(1		)	(1		)	(2		)	—		(2		)	(16		)	(28		)
Interest expense	—			—			—			—			—			—			—		2,096			27,788			29,884
Amortization of loan costs	—			—			—			—			—			—			—		33			—			33
Depreciation and amortization	7,474			4,855			2,773			1,778			3,338			3,783			2,193		3,356			(2,925		)	26,625
Income tax expense	572			484			—			—			—			—			—		(17		)	3,345			4,384
Non-Hotel EBITDA ownership expense	272			3			2			46			10			16			1		2			—			352
Hotel EBITDA (including amounts attributable to non-controlling interest)	$	15,285		$	8,898		$	10,135		$	4,860		$	8,392		$	10,521		$	5,144	$	9,805		$	—		$	73,040
Less Hotel EBITDA attributable to noncontrolling interest	(3,821		)	(2,225		)	—			—			—			—			—		—			—			(6,046		)
Hotel EBITDA attributable to the Company	$	11,464		$	6,673		$	10,135		$	4,860		$	8,392		$	10,521		$	5,144	$	9,805		$	—		$	66,994

__________________

⁽¹⁾ Represents expenses not recorded at the individual hotel property level.

⁽²⁾ Includes allocated amounts which were not specific to hotel properties, such as corporate taxes, insurance and legal expenses.

We calculate FFO and AFFO in the following table. FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to the Company, computed in accordance with GAAP, excluding gains or losses on sales of properties and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of AFFO excludes write-off of loan costs and exit fees, transaction costs, other income and non-cash items such as modification of rent terms and unrealized loss on derivatives. FFO and AFFO exclude amounts attributable to the portion of a partnership owned by the third party. We consider FFO and AFFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO and AFFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income or loss as an indication of our financial performance or GAAP cash flows from operating activities as a measure of our liquidity. FFO and AFFO are also not indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and AFFO should be considered along with our net income or loss and cash flows reported in the consolidated and combined consolidated financial statements.

The following table reconciles net income (loss) to FFO and Adjusted FFO. The Sofitel Chicago Water Tower is included from February 24, 2014 through December 31, 2014 and the Pier House Resort is included from March 1, 2014 through December 31, 2014 (in thousands) (unaudited):



	Year Ended December 31,
	2014			2013			2012
Net income (loss)	$	3,538		$	(17,928	)	$	(3,793	)
Income from consolidated entities attributable to noncontrolling interests	(1,103		)	(934		)	(752		)
(Income) loss attributable to redeemable noncontrolling interests in operating partnership	(496		)	7,080			—
Net income (loss) attributable to common stockholders	1,939			(11,782		)	(4,545		)
Depreciation and amortization on real estate ⁽¹⁾	37,493			27,691			26,625
Net loss attributable to redeemable noncontrolling interests in operating partnership	496			(7,080		)	—
FFO available to common stockholders	39,928			8,829			22,080
Write-off of loan costs and exit fees	—			1,971			—
Transaction costs	1,871			13,750			—
Gain on insurance settlement	(23		)	—			—
Compensation adjustment related to modified employment terms	573			—			—
Modification of rent terms ⁽¹⁾	—			539			—
Unrealized loss on derivatives	111			36			—
AFFO available to common stockholders	$	42,460		$	25,125		$	22,080

____________________


⁽¹⁾	Net of adjustment for noncontrolling interests in consolidated entities. The following table presents the amounts of the adjustments for non-controlling interests for each line item:



	Year Ended December 31,
	2014			2013			2012
Depreciation and amortization on real estate	$	(3,193	)	$	(3,171	)	$	(2,924	)
Modification of rent terms	$	—		$	(180	)	$	—

The following table reconciles net income (loss) to Hotel EBITDA for the Sofitel Chicago Water Tower for the year ended December 31, 2013, the period from January 1, 2012 through October 31, 2012, the period from November 1, 2012 through December 31, 2012, and the years ended December 31, 2012 and 2011 (in thousands) (unaudited):



	Year Ended December 31,		Period From January 1, 2012 through October 31,		Period From November 1, 2012 through December 31,			Year Ended December 31,
	2013		2012		2012			2012
Net income (loss)	$	2,070	$	690	$	(28	)	$	662
Non-property adjustments ⁽¹⁾	9		165		9			174
Interest expense and amortization of loan costs	3,887		4,885		596			5,481
Depreciation and amortization	3,915		2,594		637			3,231
Non-Hotel EBITDA ownership expense	—		32		—			32
Hotel EBITDA	$	9,881	$	8,366	$	1,214		$	9,580

____________________

⁽¹⁾ Includes allocated amounts which were not specific to hotel properties, such as corporate taxes, insurance and legal expenses.

The following table reconciles net income to Hotel EBITDA for the Pier House Resort for the years ended December 31, 2013 and 2012 (in thousands) (unaudited):



	Year Ended December 31,
	2013		2012
Net income	$	1,759	$	2,170
Non-property adjustments ⁽¹⁾	1,716		293
Interest income	—		(47		)
Interest expense and amortization of loan costs	2,008		1,626
Depreciation and amortization	1,884		1,489
Unrealized loss on derivatives	129		—
Income tax expense	56		—
Non-Hotel EBITDA ownership expense	15		—
Hotel EBITDA	$	7,567	$	5,531

____________________


⁽¹⁾	Includes allocated amounts which were not specific to hotel properties, such as corporate taxes, insurance and legal expenses.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments that bear interest at variable rates that fluctuate with market interest rates. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower the overall borrowing costs by closely monitoring our variable-rate debt and converting such debt to fixed rates when we deem such conversion advantageous. From time to time, we may enter into interest rate swap agreements or other interest rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates, they also expose us to the following risks: the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP guidance.

To the extent that we acquire assets or conduct operations in an international jurisdiction, we will also have currency exchange risk. We may enter into certain hedging arrangements in order to manage interest rate and currency fluctuations. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.

At December 31, 2014 , our total indebtedness of $765.2 million included $346.6 million of variable-rate debt. The impact on the results of operations of a 25-basis point change in interest rate on the outstanding balance of variable-rate debt at December 31, 2014 would be approximately $867,000 per year. Interest rate changes will have no impact on the remaining $418.6 million of fixed rate debt.

The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. The information presented above includes those exposures that existed at December 31, 2014 , but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated and Combined Consolidated Financial Statements



Report of Independent Registered Public Accounting Firm	98

Consolidated Balance Sheets — December 31, 2014 and 2013	99

Consolidated and Combined Consolidated Statements of Operations — Years Ended December 31, 2014, 2013 and 2012	100

Consolidated and Combined Consolidated Statements of Comprehensive Income (Loss) — Years Ended December 31, 2014, 2013 and 2012	101

Consolidated and Combined Consolidated Statements of Equity — Years Ended December 31, 2014, 2013 and 2012	102

Consolidated and Combined Consolidated Statements of Cash Flows — Years Ended December 31, 2014, 2013 and 2012	103

Notes to Consolidated and Combined Consolidated Financial Statements	105

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Ashford Hospitality Prime, Inc.

We have audited the accompanying consolidated balance sheets of Ashford Hospitality Prime, Inc. (the Company) as of December 31, 2014 and 2013, and the related consolidated and combined consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ashford Hospitality Prime, Inc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects, the information set forth therein.

/s/ Ernst & Young LLP

Dallas, Texas

March 16, 2015

ASHFORD HOSPITALITY PRIME, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)



	December 31, 2014			December 31, 2013
Assets
Investments in hotel properties, net	$	990,303		$	765,326
Cash and cash equivalents	171,439			143,776
Restricted cash	29,646			5,951
Accounts receivable, net of allowance of $47 and $34, respectively	12,382			7,029
Inventories	696			318
Note receivable	8,098			8,098
Deferred costs, net	4,707			4,064
Prepaid expenses	2,422			2,233
Derivative assets	35			—
Other assets	1,193			4,501
Intangible asset, net	2,542			2,631
Due from related party, net	541			12
Due from third-party hotel managers	5,504			18,480
Total assets	$	1,229,508		$	962,419
Liabilities and Equity
Liabilities:
Indebtedness	$	765,230		$	621,882
Accounts payable and accrued expenses	29,273			17,279
Dividends payable	1,425			1,245
Unfavorable management contract liabilities	316			474
Due to Ashford Trust OP, net	896			13,042
Due to Ashford Inc.	2,546			—
Due to third-party hotel managers	954			649
Intangible liability, net	3,739			3,795
Other liabilities	1,131			926
Total liabilities	805,510			659,292
Commitments and contingencies (Note 11)
Redeemable noncontrolling interests in operating partnership	149,555			159,726
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 25,393,433 and 16,129,112 shares issued and 24,464,163 and 16,129,112 shares outstanding at December 31, 2014 and 2013, respectively	254			161
Additional paid-in capital	391,184			246,928
Accumulated deficit	(96,404		)	(101,062		)
Treasury stock, at cost, 929,270 shares at December 31, 2014	(16,130		)	—
Total stockholders’ equity of the Company	278,904			146,027
Noncontrolling interest in consolidated entity	(4,461		)	(2,626		)
Total equity	274,443			143,401
Total liabilities and equity	$	1,229,508		$	962,419

See Notes to Consolidated and Combined Consolidated Financial Statements.

ASHFORD HOSPITALITY PRIME, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)



	Year Ended December 31,
	2014			2013			2012
Revenue
Rooms	$	226,495		$	171,670		$	160,811
Food and beverage	67,854			50,835			50,784
Other	12,844			10,969			9,593
Total hotel revenue	307,193			233,474			221,188
Other	115			22			—
Total revenue	307,308			233,496			221,188
Expenses
Hotel operating expenses:
Rooms	51,636			39,881			37,001
Food and beverage	44,297			33,694			33,377
Other expenses	80,593			61,779			59,013
Management fees	12,525			9,999			9,360
Total hotel expenses	189,051			145,353			138,751
Property taxes, insurance and other	16,174			11,753			10,236
Depreciation and amortization	40,686			30,862			29,549
Advisory services fee	12,534			1,047			—
Transaction costs	1,871			13,577			—
Corporate general and administrative	3,242			11,494			10,846
Total expenses	263,558			214,086			189,382
Operating income	43,750			19,410			31,806
Interest income	27			23			29
Interest expense and amortization of loan costs	(39,031		)	(33,011		)	(31,244		)
Write-off of loan costs and exit fees	—			(1,971		)	—
Unrealized loss on derivatives	(111		)	(36		)	—
Income (loss) before income taxes	4,635			(15,585		)	591
Income tax expense	(1,097		)	(2,343		)	(4,384		)
Net income (loss)	3,538			(17,928		)	(3,793		)
Income from consolidated entities attributable to noncontrolling interests	(1,103		)	(934		)	(752		)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(496		)	7,080			—
Net income (loss) attributable to the Company	$	1,939		$	(11,782	)	$	(4,545	)
Income (loss) per share – basic:
Net income (loss) attributable to common stockholders	$	0.08		$	(0.73	)	$	(0.28	)
Weighted average common shares outstanding – basic	24,473			16,045			16,045
Income (loss) per share – diluted:
Net income (loss) attributable to common stockholders	$	0.07		$	(0.73	)	$	(0.28	)
Weighted average common shares outstanding – diluted	33,325			16,045			16,045
Dividends declared per common share	$	0.20		$	0.05		$	—

See Notes to Consolidated and Combined Consolidated Financial Statements.

100

ASHFORD HOSPITALITY PRIME, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)



	Year Ended December 31,
	2014			2013			2012
Net income (loss)	$	3,538		$	(17,928	)	$	(3,793	)
Other comprehensive income (loss), net of tax:
Change in unrealized loss on derivatives	—			—			—
Reclassification to interest expense	—			—			—
Total other comprehensive income	—			—			—
Total comprehensive income (loss)	3,538			(17,928		)	(3,793		)
Comprehensive income attributable to noncontrolling interests in consolidated entities	(1,103		)	(934		)	(752		)
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	(496		)	7,080			—
Comprehensive income (loss) attributable to the Company	$	1,939		$	(11,782	)	$	(4,545	)

See Notes to Consolidated and Combined Consolidated Financial Statements.

101

ASHFORD HOSPITALITY PRIME, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)



	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Treasury Stock						Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interest in Operating Partnership
	Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Shares			Amount			Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interest in Operating Partnership
Balance at January 1, 2012	—	$	—	$	277,023		$	(27,968	)	—			$	—		$	13,987		$	263,042		$	—
Distributions to noncontrolling interests	—	—		—			—			—			—			(2,224		)	(2,224		)	—
Net income (loss)	—	—		—			(4,545		)	—			—			752			(3,793		)	—
Capital contributions	—	—		19,421			—			—			—			—			19,421			—
Capital distributions	—	—		(24,068		)	—			—			—			—			(24,068		)	—
Balance at December 31, 2012	—	$	—	$	272,376		$	(32,513	)	$	—		$	—		$	12,515		$	252,378		$	—
Equity-based compensation	—	—		342			—			—			—			—			342			—
Issuance of common stock	16,129	161		(161		)	—			—			—			—			—			—
Dividends declared – common stock	—	—		—			(806		)	—			—			—			(806		)	—
Reclass redeemable noncontrolling interests in operating partnership	—	—		(117,458		)	—			—			—			—			(117,458		)	117,458
Spin-off transaction costs	—	—		(1,320		)	—			—			—			—			(1,320		)	(125		)
Contributions from noncontrolling interests	—	—		—			—			—			—			282			282			—
Distributions to noncontrolling interests	—	—		—			—			—			—			(16,357		)	(16,357		)	(6,488		)
Net income (loss)	—	—		—			(11,782		)	—			—			934			(10,848		)	(7,080		)
Capital contributions	—	—		178,849			—			—			—			—			178,849			—
Capital distributions	—	—		(85,700		)	—			—			—			—			(85,700		)	—
Redemption value adjustments	—	—		—			(55,961		)	—			—			—			(55,961		)	55,961
Balance at December 31, 2013	16,129	161		246,928			(101,062		)	—			—			(2,626		)	143,401			159,726
Purchase of treasury shares	—	—		—			—			(928		)	(16,108		)	—			(16,108		)	—
Equity-based compensation	—	—		413			—			—			—			—			413			1,938
Issuance of common stock	9,200	92		143,843			—			—			—			—			143,935			—
Issuance of restricted shares/units	64	1		—			—			—			—			—			1			18
Forfeiture of restricted common shares	—	—		—			—			(1		)	(22		)	—			(22		)	—
Dividends declared – common stock	—	—		—			(5,031		)	—			—			—			(5,031		)	—
Distributions to noncontrolling interests	—	—		—			—			—			—			(2,938		)	(2,938		)	(1,799		)
Redemption of operating partnership units	—	—		—			—			—			—			—			—			(3,074		)
Net income	—	—		—			1,939			—			—			1,103			3,042			496
Redemption value adjustment	—	—		—			7,750			—			—			—			7,750			(7,750		)
Balance at December 31, 2014	25,393	$	254	$	391,184		$	(96,404	)	(929		)	$	(16,130	)	$	(4,461	)	$	274,443		$	149,555

See Notes to Consolidated and Combined Consolidated Financial Statements.

102

ASHFORD HOSPITALITY PRIME, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	Year Ended December 31,
	2014			2013			2012
Cash Flows from Operating Activities
Net income (loss)	$	3,538		$	(17,928	)	$	(3,793	)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization	40,686			30,862			29,549
Equity-based compensation	2,351			342			—
Bad debt expense	151			719			—
Amortization of loan costs	1,828			745			1,253
Write-off of loan costs and exit fees	—			1,971			—
Amortization of intangibles	(214		)	(216		)	(215		)
Unrealized loss on derivatives	111			36			—
Changes in operating assets and liabilities:
Restricted cash	(1,291		)	10,940			(6,083		)
Accounts receivable and inventories	(3,433		)	220			548
Prepaid expenses and other assets	19			751			1,380
Accounts payable and accrued expenses	4,360			(1,940		)	(1,621		)
Due to/from related party, net	(497		)	(12		)	—
Due to/from third-party hotel managers	13,281			(2,275		)	6,548
Due to/from Ashford Trust OP, net	(8,794		)	9,858			—
Due to/from Ashford Inc.	2,546			—			—
Other liabilities	212			12			286
Net cash provided by operating activities	54,854			34,085			27,852
Cash Flows from Investing Activities
Proceeds from property insurance	125			—			—
Acquisition of hotel properties, net of cash acquired	(172,112		)	—			—
Restricted cash related to improvements and additions to hotel properties	(19,742		)	—			—
Improvements and additions to hotel properties	(21,034		)	(28,354		)	(11,944		)
Net cash used in investing activities	(212,763		)	(28,354		)	(11,944		)
Cash Flows from Financing Activities
Borrowings on indebtedness	82,299			199,875			—
Repayments of indebtedness	(8,180		)	(148,594		)	(7,187		)
Payments of loan costs and exit fees	(4,357		)	(2,831		)	—
Payments for derivatives	(126		)	(36		)	—
Purchase of treasury shares	(15,448		)	—			—
Payments for spin-off costs	(1,091		)	(354		)	—
Payments for dividends	(6,402		)	—			—
Issuance of common stock	143,935			—			—
Issuance of restricted shares/units	19			—			—
Forfeiture of restricted shares/units	(22		)	—			—
Contributions from owners	—			177,740			19,421
Contributions from a noncontrolling interest in a consolidated entity	—			282			—
Distributions to owners	—			(85,700		)	(24,068		)
Redemption of operating partnership units	(3,074		)	—			—
Distributions to a noncontrolling interest in a consolidated entity	(1,981		)	(16,601		)	(212		)
Distribution to redeemable noncontrolling interests in operating partnership	—			(6,049		)	—
Net cash provided by (used in) financing activities	185,572			117,732			(12,046		)
Net change in cash and cash equivalents	27,663			123,463			3,862
Cash and cash equivalents at beginning of year	143,776			20,313			16,451
Cash and cash equivalents at end of year	$	171,439		$	143,776		$	20,313

103



	Year Ended December 31,
	2014			2013		2012
Supplemental Cash Flow Information
Interest paid	$	36,983		$	32,448	$	30,055
Income taxes paid	874			212		870
Supplemental Disclosure of Non Cash Investing and Financing Activities
Net other assets and liabilities acquired	$	(1,473	)	$	—	$	—
Assumption of debt	69,000			—		—
Dividends declared but not paid	1,674			1,245		—
Treasury stock purchase accrued but not paid	660			—		—
Capital expenditures accrued but not paid	140			779		753
Financed insurance premiums	—			1,284		1,047
Spin-off costs, accrued but not paid	—			1,091		—
Deferred loan costs incurred but not paid	—			1,886		—
Non cash contribution from owners	—			1,109		—
Distributions declared but not paid to a noncontrolling interest in a consolidated entity	2,938			1,981		2,224

See Notes to Consolidated and Combined Consolidated Financial Statements.

104

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Ashford Hospitality Prime, Inc., together with its subsidiaries (“Ashford Prime”), is a Maryland corporation that invests primarily in high revenue per available room (“RevPAR”), luxury, upper-upscale and upscale hotels. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Ashford Prime elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code beginning with the year ended December 31, 2013. Ashford Prime conducts its business and owns substantially all of its assets through its operating partnership, Ashford Hospitality Prime Limited Partnership (“Ashford Prime OP”). In this report, the terms “the Company,” “we,” “us” or “our” refers to Ashford Hospitality Prime, Inc. and, as the context may require, all entities included in its financial statements.

We were formed as a Maryland corporation in April 2013 and became a public company on November 19, 2013 when Ashford Hospitality Trust, Inc. (“AHT” or “Ashford Trust”), a NYSE-listed REIT, completed the spin-off of Ashford Prime through the distribution of its outstanding common stock to the Ashford Trust stockholders.

On June 17, 2013, AHT announced that its Board of Directors had approved a plan to spin-off an 80% ownership interest in an eight -hotel portfolio, totaling 3,146 rooms ( 2,912 net rooms excluding those attributable to AHT’s partner), to holders of its common stock in the form of a taxable special distribution. The distribution was comprised of common stock in Ashford Prime. Ashford Prime OP was formed as a Delaware limited partnership on April 5, 2013 to hold substantially all of Ashford Prime’s assets and conduct substantially all of its business. Ashford Prime OP General Partner LLC, a wholly-owned subsidiary of Ashford Prime (“Prime GP”), was created to serve as the sole general partner of Ashford Prime OP.

The distribution was made on November 19, 2013, on a pro rata basis to holders of AHT’s common stock as of November 8, 2013, with each of AHT’s stockholders receiving one share of Ashford Prime common stock for every five shares of AHT common stock held by such stockholder as of the close of business on November 8, 2013. Ashford Prime reimbursed AHT for transaction costs of $13.6 million incurred in connection with the spin-off. The transaction also included options for Ashford Prime to purchase the Crystal Gateway Marriott in Arlington, Virginia and the Pier House Resort in Key West, Florida. We acquired the Pier House Resort on March 1, 2014. The option to acquire the Crystal Gateway Marriott expires on May 19, 2015.

On February 27, 2014, Ashford Trust announced that its board of directors had approved a plan to spin-off Ashford Inc., the parent company of Ashford LLC, into a separate publicly traded company. The spin-off was completed on November 12, 2014, through a pro rata taxable distribution of Ashford Inc.’s common stock to our stockholders of record as of November 11, 2014. Ashford Trust stockholders received one share of Ashford Inc. common stock for every 87 shares of Ashford Trust common stock they owned as of the record date. Additionally, the holder of each common unit of Ashford Trust’s operating partnership received a common unit of the operating limited liability company subsidiary of Ashford Inc. Each holder of common units of the operating limited liability company of Ashford Inc. could exchange up to 99% of those units for shares of Ashford Inc. stock at the rate of one share of Ashford Inc. common stock for every 55 common units. The spin-off did not affect us and Ashford LLC continues to act as our advisor.

105

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The accompanying consolidated and combined consolidated financial statements include the accounts of certain wholly-owned and majority owned subsidiaries of Ashford Prime OP that own and operate ten hotels in six states and the District of Columbia. The portfolio includes eight wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Ashford Prime OP has a controlling interest. These hotels represent 3,707 total rooms, or 3,472 net rooms, excluding those attributable to our partner. As a REIT, Ashford Prime needs to comply with limitations imposed by the Internal Revenue Code related to operating hotels. As of December 31, 2014 , all of our ten hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Prime TRS”). Prime TRS then engages third-party or affiliated hotel management companies to operate the hotels under management contracts. As of December 31, 2014 , eight of the ten hotel properties were leased by Ashford Prime’s wholly-owned TRS and two hotel properties majority owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership. Each hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from Prime TRS is eliminated in consolidation. The hotels are operated under management contracts with subsidiaries of Marriott International, Inc. (“Marriott”), Hilton Worldwide (“Hilton”), Accor and Remington, which are eligible independent contractors under the Internal Revenue Code. We refer to the eight hotels we acquired from Ashford Trust in connection with the spin-off as our initial hotels.

With respect to six of our eight initial hotels, the accompanying carve-out combined consolidated financial statements for the period from January 1, 2013 through November 18, 2013 and the year ended December 31, 2012 include the accounts of the following subsidiaries:



1	Ashford Plano-M LP



2	Ashford Seattle Waterfront LP



3	Ashford Tampa International Hotel Partnership LP



4	Ashford Seattle Downtown LP



5	Ashford San Francisco II LP



6	Ashford Philadelphia Annex LP



7	Ashford TRS Philadelphia Annex LLC



8	Ashford TRS Sapphire III LLC



9	Ashford TRS Sapphire VII LLC

106

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

With respect to our other two initial hotels, the accompanying carve-out combined consolidated financial statements for the period from January 1, 2013 through November 18, 2013 and the year ended December 31, 2012 include the accounts of Ashford HHC Partners III, LP and its subsidiaries which include:



1	CHH Torrey Pines Hotel Partners, LP



2	CHH Capital Hotel Partners, LP



3	CHH III Tenant Parent Corp.



4	CHH Torrey Pines Tenant Corp.



5	CHH Capital Tenant Corp.



6	CHH Torrey Pines Hotel GP, LLC



7	CHH Capital Hotel GP, LLC

2. Significant Accounting Policies

Basis of Presentation and Principles of Combination and Consolidation —The accompanying consolidated and combined consolidated financial statements include the accounts of Ashford Hospitality Prime, Inc., its majority-owned subsidiaries and its majority-owned consolidated entity in which it has a controlling interest. All significant inter-company accounts and transactions between consolidated and combined consolidated entities have been eliminated in these consolidated and combined consolidated financial statements.

Ashford Prime OP, is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, (ii) an implicit financial responsibility to ensure that a VIE operates as designed, and (iii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Ashford Prime OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Ashford Prime OP General Partner LLC, its general partner. As such, we consolidate Ashford Prime OP.

For periods prior to the spin-off, the accompanying historical combined consolidated financial statements have been “carved out” of AHT’s consolidated financial statements and reflect significant assumptions and allocations. These hotels were under AHT’s common control. The combined consolidated financial statements were prepared using the financial position and results of operations of the entities set forth above after adjustments for certain ownership related activities that had been historically accounted for by AHT. These ownership activities included mortgage indebtedness associated with the eight initial hotels, debt related expenses and other owner related expenses. In addition, the combined consolidated statements of operations for the periods prior to the spin-off include allocations of corporate general and administrative expenses from AHT, which in the opinion of management, are reasonable. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position and cash flows subsequent to the spin-off.

Marriott manages six of our properties. For these Marriott-managed hotels, the 2012 fiscal year reflects twelve weeks of operations in each of the first three quarters of the year and sixteen weeks for the fourth quarter of the year. Beginning in 2013, the fiscal quarters end on March 31 ^st , June 30 ^th , September 30 ^th and December 31 ^st . For Marriott-managed hotels, the fourth quarters of 2014, 2013 and 2012 ended December 31, 2014, December 31, 2013, and December 28, 2012, respectively. 2012 results have not been adjusted.

Use of Estimates —The preparation of these consolidated and combined consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

107

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Cash and Cash Equivalents —Cash and cash equivalents include cash on hand or held in banks and short-term investments with an initial maturity of three months or less at the date of purchase.

Restricted Cash —Restricted cash includes reserves for debt service, real estate taxes, and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures, and equipment replacements of approximately 4% to 5% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions. For purposes of the statements of cash flows, changes in restricted cash caused by using such funds for debt service, real estate taxes, and insurance are shown as operating activities. Changes in restricted cash caused by using such funds for furniture, fixtures, and equipment replacements are included in cash flows from investing activities.

Accounts Receivable —Accounts receivable consists primarily of meeting and banquet room rental and hotel guest receivables. We generally do not require collateral. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of guests to make required payments for services. The allowance is maintained at a level believed adequate to absorb estimated receivable losses. The estimate is based on past receivable loss experience, known and inherent credit risks, current economic conditions, and other relevant factors, including specific reserves for certain accounts.

Inventories —Inventories, which primarily consist of food, beverages, and gift store merchandise, are stated at the lower of cost or market value. Cost is determined using the first-in, first-out method.

Investments in Hotel Properties —Hotel properties are generally stated at cost. For hotel properties owned through our majority-owned entities, the carrying basis attributable to the partners’ minority ownership is recorded at historical cost, net of any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated purchase price of our ownership interests in the entities. All improvements and additions which extend the useful life of the hotel properties are capitalized.

Impairment of Investments in Hotel Properties —Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. During 2014 , 2013 and 2012 , we have not recorded any impairment charges.

Assets Held for Sale and Discontinued Operations —We classify assets as held for sale when we have obtained a firm commitment from a buyer, and consummation of the sale is considered probable and expected within one year. The related operations of assets held for sale are reported as discontinued if a) such operations and cash flows can be clearly distinguished, both operationally and financially, from our ongoing operations, b) such operations and cash flows will be eliminated from ongoing operations once the disposal occurs, and c) we will not have any significant continuing involvement subsequent to the disposal.

Deferred Costs, net —Deferred loan costs are recorded at cost and amortized over the initial term of the related indebtedness using the effective interest method. Deferred franchise fees are recorded at cost and amortized on a straight-line basis over the initial term of the franchise agreement.

Intangible Asset, net and Intangible Liability, net —Intangible asset represents the market value related to a lease agreement obtained in connection with AHT’s acquisition of a hotel property that was below the market rate at the date of the acquisition and is amortized over the remaining term of the lease. Intangible liability represents the market value related to a lease agreement obtained in connection with AHT’s acquisition of a hotel property that was above the market rate at the date of the acquisition and is amortized over the remaining initial term of the lease. See Note 6.

Derivative Instruments and Hedging —Interest rate derivatives include interest rate caps that provide us with interest rate protection above the strike rate on the cap and result in us receiving interest payments when actual rates exceed the cap strike rate. These derivatives are subject to master netting settlement arrangements. As the derivatives are subject to master netting settlement arrangements, we report derivatives with the same counterparty net on the consolidated balance sheets.

108

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Derivatives are recorded at fair value in accordance with the applicable authoritative accounting guidance. For non-hedge designated interest rate derivatives, the changes in the fair value are recognized in earnings as “Unrealized loss on derivatives” in the consolidated and combined consolidated statements of operations.

Due to/from Related Party, net —Due to/from related party, net, represents current receivables related to advances for project management services and payables resulting from transactions related to hotel management, project management and market services with a related party. These receivables and payables are generally settled within a period not exceeding one year .

Due to/from Ashford Trust OP, net —Due to Ashford Trust OP represents payables related to the advisory services fee, including reimbursable expenses, for the periods when Ashford LLC was a subsidiary of Ashford Trust. Due to/from Ashford Trust OP also represented current receivable and payables resulting from costs associated with our spin-off from AHT. These receivables and payables are generally settled within a period not exceeding one year .

Due to Ashford Inc. —Due to Ashford Inc. represents payables related to the advisory services fee, including reimbursable expenses, for the periods following Ashford Inc.’s spin-off from Ashford Trust. These payables are generally settled within a period not exceeding one year .

Due to/from Third-Party Hotel Managers —Due from third-party hotel managers primarily consists of amounts due from Marriott related to cash reserves held at the Marriott corporate level related to operating, capital improvements, insurance, real estate taxes, and other items. Due to third-party hotel managers primarily consists of amounts due to Marriott, Hilton and Accor related to rebilled expenses.

Unfavorable Management Contract Liabilities —A management agreement assumed by AHT in an acquisition of a hotel in 2007 had terms that were more favorable to the respective manager than typical market management agreements at the acquisition date. As a result, AHT recorded an unfavorable management contract liability of $1.5 million based on the present value of expected cash outflows over the initial term of the related agreement. The unfavorable management contract liability, with an unamortized balance of $316,000 and $474,000 as of December 31, 2014 and 2013 , respectively, is amortized as a reduction to incentive management fees on a straight-line basis of $158,000 per year over the initial term of the related agreement which runs through December 31, 2016.

Noncontrolling Interests —The redeemable noncontrolling interests in the operating partnership represent the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common unit holdings throughout the period. The redeemable noncontrolling interests in our operating partnership is classified in the mezzanine section of the consolidated balance sheets as these redeemable operating units do not meet the requirements for equity classification prescribed by the authoritative accounting guidance because the redemption feature requires the delivery of cash or registered shares, at our election. The carrying value of the noncontrolling interests in the operating partnership is based on the greater of the accumulated historical cost or the redemption value.

The noncontrolling interest in a consolidated entity represents an ownership interest of 25% in two hotel properties at December 31, 2014 and 2013 , and is reported in equity in the consolidated balance sheets.

Net income/loss attributable to redeemable noncontrolling interests in operating partnership and income/loss from consolidated entities attributable to noncontrolling interests in our consolidated entities are reported as deductions/additions from/to net income/loss. Comprehensive income/loss attributable to these noncontrolling interests is reported as reductions/additions from/to comprehensive income/loss.

Revenue Recognition —Hotel revenues, including room, food, beverage, and ancillary revenues such as long-distance telephone service, laundry, parking and space rentals, are recognized when services have been rendered. Taxes collected from customers and submitted to taxing authorities are not recorded in revenue.

Other Expenses —Other expenses include telephone charges, guest laundry, valet parking, and hotel-level general and administrative expenses, sales and marketing expenses, repairs and maintenance, franchise fees and utility costs. They are expensed as incurred.

Advertising Costs —Advertising costs are charged to expense as incurred. For 2014 , 2013 and 2012 , we incurred advertising costs of $1.9 million , $645,000 and $652,000 , respectively. Advertising costs are included in “Other expenses” in the accompanying consolidated and combined consolidated statements of operations.

109

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Equity-Based Compensation —Stock/unit-based compensation for non-employees is accounted for at fair value based on the market price of our shares at period end in accordance with applicable authoritative accounting guidance. Subsequently, expense is recognized equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Grants of restricted stock and LTIP units to independent directors are recorded at fair value based on the market price of our shares at grant date and this amount is fully expensed as the grants of stock or LTIP units are fully vested on the date of grant.

Corporate General and Administrative Expense —Corporate general and administrative expenses are expensed as incurred. Prior to the spin-off, corporate general and administrative expense represented an allocation of certain AHT corporate general and administrative costs including salaries and benefits, stock-based compensation, legal and professional fees, rent expense, insurance expense and office expenses. The costs were allocated based on the pro rata share of our undepreciated gross investments in hotel properties in relation to AHT’s undepreciated gross investments in hotel properties for all indirect costs. All direct costs associated with the operations of the eight initial hotel properties are included in the consolidated and combined consolidated financial statements.

Depreciation and Amortization —Hotel properties are depreciated over the estimated useful life of the assets and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets. Presently, hotel properties are depreciated using the straight-line method over lives ranging from 7.5 to 39 years for buildings and improvements and 3 to 5 years for furniture, fixtures and equipment. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net income (loss) as well as resulting gains or losses on potential hotel sales.

Income Taxes —As a REIT, we generally are not subject to federal corporate income tax on the portion of our net income (loss) that does not relate to taxable REIT subsidiaries. However, Prime TRS is treated as a taxable REIT subsidiary for federal income tax purposes. In accordance with authoritative accounting guidance, we account for income taxes related to Prime TRS using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, the analysis utilized by us in determining our deferred tax asset valuation allowance involves considerable management judgment and assumptions.

The entities that own our ten hotels are considered partnerships for federal income tax purposes. Partnerships are not subject to U.S. federal income taxes. The partnerships’ revenues and expenses pass through to and are taxed on the owners. The states and cities where the partnerships operate follow the U.S. federal income tax treatment, with the exception of the District of Columbia, Texas, and the city of Philadelphia. Accordingly, we provide for income taxes in these jurisdictions for the partnerships. The consolidated entities that operate the ten hotels are considered taxable corporations for U.S. federal, state, and city income tax purposes and have elected to be taxable REIT subsidiaries of Ashford Prime and Ashford Trust (prior to the spin-off). The entities that operate the two hotels owned by a consolidated partnership elected to be treated as taxable REIT subsidiaries (“TRS”) of Ashford Trust in April 2007, when the partnership was acquired by AHT. Prior to the spin-off, income tax expense in the accompanying combined consolidated financial statements was calculated on a “carve-out” basis from AHT.

Reclassifications —Amounts within due to related parties, net, related to amounts owed to/from Ashford Trust as of December 31, 2013, have been reclassified to due to Ashford Trust OP, net, on the Combined Consolidated Balance Sheet to conform with the current year presentation. Additionally, amounts within the change in due to related parties, net, related to amounts owed to/from Ashford Trust as of December 31, 2013, have been reclassified to the change in due to Ashford Trust OP, net, on the Combined Consolidated Statement of Cash Flows. These reclassifications have no effect on our total cash flows, equity or net income (loss) previously reported.

110

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Income (Loss) Per Share —For periods prior to the spin-off, basic income (loss) per share was calculated by dividing net income (loss) attributable to the Company by the 16 million shares of common stock outstanding upon the completion of the distribution (based on a distribution ratio of one share of Ashford Prime common stock for every five shares of Ashford Trust common stock), including 16,000 shares for initial grants to the five independent members of our board of directors and excluding 84,000 unvested restricted shares. In 2013 and 2012, diluted loss per share was calculated using the 16.0 million shares of common stock outstanding upon the completion of the distribution. An additional 8.9 million shares that includes 84,000 unvested restricted shares and the assumed conversion of 8.8 million Ashford Prime OP units, which are comprised of 5.0 million units held by Ashford Trust representing Ashford Trust’s retained ownership interest in Ashford Prime OP and 3.8 million units of Ashford Prime OP received by Ashford Trust unit holders in the spin-off were excluded from the diluted loss per share calculation as the effect would have been anti-dilutive.

For periods after the spin-off, basic income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance. Diluted income (loss) per common share is calculated using the two-class method, or the treasury stock method, if more dilutive. Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share.

Recently Issued Accounting Standards — In April 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). ASU 2014-08 revises the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results, removing the lack of continuing involvement criteria and requiring discontinued operations reporting for the disposal of an equity method investment that meets the definition of discontinued operations. The update also requires expanded disclosures for discontinued operations, including disclosure of pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. ASU 2014-08 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014. Upon adoption of this standard in 2015, we will be required to evaluate whether a disposal meets the discontinued operations requirements under ASU 2014-08. We will make the additional disclosures upon adoption. Upon adoption, we anticipate that the operations of sold hotel properties through the date of their disposal will be included in continuing operations.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3. Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):



	December 31, 2014			December 31, 2013
Land	$	202,356		$	129,994
Buildings and improvements	918,809			746,083
Furniture, fixtures and equipment	56,623			44,847
Construction in progress	1,557			4,583
Total cost	1,179,345			925,507
Accumulated depreciation	(189,042		)	(160,181		)
Investments in hotel properties, net	$	990,303		$	765,326

The cost of land and depreciable property, net of accumulated depreciation, for federal income tax purposes was approximately $954.2 million and $716.8 million as of December 31, 2014 and 2013 , respectively.

For the years ended December 31, 2014 , 2013 and 2012 , depreciation expense was $40.5 million , $30.7 million and $29.4 million , respectively.

Acquisitions

On February 24, 2014, we acquired a 100% interest in the Sofitel Chicago Water Tower in Chicago, Illinois pursuant to the previously announced Agreement of Purchase and Sale, dated as of December 23, 2013, by and among the Company and Chestnut OwnerCo, LLC and Chestnut LeaseCo, LLC. We paid an aggregate purchase price of $153.0 million in cash. The acquisition was funded with proceeds from an $80.0 million non-recourse mortgage loan and proceeds from the Company’s underwritten public offering (see Note 13). We have allocated the assets acquired and liabilities assumed using estimated fair value information based on a third party appraisal that was received subsequent to March 31, 2014 and resulted in adjustments to land, buildings and improvements, furniture, fixtures and equipment. These adjustments resulted in $144,000 of additional depreciation expense for the three months ended June 30, 2014, which represents the additional depreciation from the date of the acquisition through March 31, 2014. Property level working capital balances amounted to a net asset of $349,000 . This valuation is considered a Level 3 valuation technique.

The following table summarizes the fair value of the assets acquired and liabilities assumed in the acquisition (in thousands):



	Preliminary Allocations as of March 31, 2014		Adjustments			Final Allocations as of June 30, 2014
Land	$	24,043	$	(11,412	)	$	12,631
Buildings and improvements	126,228		8,684			134,912
Furniture, fixtures, and equipment	2,729		2,728			5,457
	$	153,000	$	—		$	153,000

The results of operations of the hotel property have been included in our results of operations since February 24, 2014. For the year ended December 31, 2014 , we have included total revenue and net income of $36.6 million , and $3.9 million , respectively, in our consolidated statements of operations.

On February 24, 2014, to fund a portion of our acquisition of the Sofitel Chicago Water Tower, we completed the financing for an $80.0 million mortgage loan. The mortgage loan bears interest at a rate of LIBOR + 2.3% . The stated maturity date of the mortgage loan is March 9, 2016, which may be extended by us for up to three consecutive one -year terms. The mortgage loan is secured by the Sofitel Chicago Water Tower.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

On March 1, 2014, we acquired a 100% interest in the Pier House Resort from Ashford Trust for total consideration of $92.7 million . We assumed the $69.0 million mortgage on the property and paid the balance of the purchase price with cash from our underwritten public offering. We have allocated the assets acquired and liabilities assumed using estimated fair value information based on a third party appraisal that was received subsequent to March 31, 2014 and resulted in adjustments to land and buildings and improvements. These adjustments resulted in a $6,000 reduction of depreciation expense for the three months ended June 30, 2014, which represents lower depreciation from the date of the acquisition through March 31, 2014. Property level working capital balances amounted to a net liability of $1.8 million . This valuation is considered a Level 3 valuation technique.

The following table summarizes the fair value of the assets acquired and liabilities assumed in the acquisition (in thousands):



	Preliminary Allocations as of March 31, 2014			Adjustments			Final Allocations as of June 30, 2014
Land	$	56,900		$	2,831		$	59,731
Buildings and improvements	30,470			(2,831		)	27,639
Furniture, fixtures, and equipment	5,372			—			5,372
	$	92,742		$	—		$	92,742

Indebtedness	(69,000		)	—			(69,000		)

The results of operations of the hotel property have been included in our results of operations since March 1, 2014. For the year ended December 31, 2014 , we have included total revenue and net income of $17.7 million and $1.7 million , respectively, in our consolidated statements of operations.

The following table reflects the unaudited pro forma results of operations as if both acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2012, and the removal of $1.7 million of non-recurring transaction costs directly attributable to the acquisitions for the year ended December 31, 2014 (in thousands):



	Year Ended December 31,
	2014		2013			2012
Total revenue	$	314,698	$	294,301		$	279,134
Net income	4,554		(11,594		)	(1,166		)

4. Note Receivable

As of December 31, 2014 and 2013 , we owned a note receivable of $8.1 million issued by the city of Philadelphia, Pennsylvania. The note bears interest at a rate of 12.85% and matures in 2018. The interest income recorded on the note receivable is offset against the interest expense recorded on the TIF loan of the same amount. See Note 7.

5. Deferred Costs, net

Deferred costs, net consisted of the following (in thousands):



	December 31,
	2014			2013
Deferred loan costs	$	9,124		$	6,653
Accumulated amortization	(4,417		)	(2,589		)
Deferred costs, net	$	4,707		$	4,064

Amortization of loan costs was $1.8 million , $745,000 and $1.3 million for the years ended December 31, 2014 , 2013 and 2012 , respectively.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

6. Intangible Asset, net and Intangible Liability, net

Intangible asset, net and intangible liability, net consisted of the following (in thousands):



	Intangible Asset, net						Intangible Liability, net
	December 31,						December 31,
	2014			2013			2014			2013
Cost	$	3,233		$	3,233		$	4,179		$	4,179
Accumulated amortization	(691		)	(602		)	(440		)	(384		)
	$	2,542		$	2,631		$	3,739		$	3,795

Intangible asset represents a favorable market-rate lease which relates to the acquisition of the Hilton La Jolla Torrey Pines hotel in La Jolla, CA which is being amortized over the remaining initial lease term that expires in 2043. Intangible liability represents an unfavorable market-rate lease which relates to the acquisition of the Renaissance Tampa International Plaza in Tampa, FL which is being amortized over the remaining initial lease term that expires in 2080.

For the three years ended December 31, 2014 , 2013 and 2012 , amortization expense related to intangible asset was $89,000 , $90,000 and $89,000 , respectively. Estimated future amortization expense is approximately $89,000 for each of the next five years. For the years ended December 31, 2014 , 2013 and 2012 amortization related to the intangible liability was $56,000 , $57,000 and $57,000 , respectively. Estimated future amortization is approximately $57,000 for each of the next five years.

7. Indebtedness

Indebtedness and the carrying values of related collateral were as follows (in thousands):



				December 31, 2014				December 31, 2013
Indebtedness	Collateral	Maturity	Interest Rate	Debt Balance		Book Value of Collateral		Debt Balance		Book Value of Collateral
Mortgage loan ⁽³⁾	1 hotel	September 2015	LIBOR ⁽¹⁾ +4.90%	$	69,000	$	92,702	$	—	$	—
Mortgage loan ⁽⁴⁾	1 hotel	March 2016	LIBOR ⁽¹⁾ +2.30%	80,000		148,206		—		—
Secured revolving credit facility ⁽⁵⁾	Various	November 2016	Base Rate ⁽²⁾ + 1.25% to 2.75% or LIBOR ⁽¹⁾ +2.25% to 3.75%	—		—		—		—
Mortgage loan ⁽⁷⁾	1 hotel	April 2017	5.91%	33,860		98,613		34,310		96,728
Mortgage loan	2 hotels	April 2017	5.95%	124,111		139,584		125,748		142,100
Mortgage loan	3 hotels	April 2017	5.95%	252,556		264,817		255,886		270,816
Mortgage loan ⁽⁶⁾	2 hotels	February 2018	LIBOR ⁽¹⁾ +3.50%	—		—		197,840		255,682
Mortgage loan ⁽⁶⁾	2 hotels	November 2019	LIBOR ⁽¹⁾ +2.65%	197,605		246,381		—		—
TIF loan ^{(7) (8)}	1 hotel	June 2018	12.85%	8,098		—		8,098		—
Total				$	765,230	$	990,303	$	621,882	$	765,326

__________________


⁽¹⁾	LIBOR rates were 0.171% and 0.168% at December 31, 2014 and 2013 , respectively.


⁽²⁾	Base Rate, as defined in the secured revolving credit facility agreement is the greater of (i) Bank of America prime rate, or (ii) federal funds rate + 0.5% .


⁽³⁾	This mortgage loan has three one -year extension options beginning September 2015, subject to satisfaction of certain conditions.


⁽⁴⁾	This mortgage loan has three one -year extension options beginning March 2016, subject to satisfaction of certain conditions.

⁽⁵⁾

Our borrowing capacity under our secured revolving credit facility is $150.0 million We have an option, subject to lender approval, to further expand the facility to an aggregate size of $300.0 million . We may use up to $15.0 million for standby letters of credit. The credit facility has two one -year extension options subject to advance notice, satisfaction of certain conditions and a 0.25% extension fee.


⁽⁶⁾	On November 7, 2014, we refinanced our $197.8 million mortgage loan, with an outstanding balance of $195.7 million due February 2018 with a $198.0 million mortgage loan from the same lender with a five -year initial term and two one-year extension options, subject to the satisfaction of certain conditions.


⁽⁷⁾	These loans are collateralized by the same property.


⁽⁸⁾	The interest expense from the TIF loan is offset against interest income recorded on the note receivable of the same amount. See Note 4.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Maturities and scheduled amortization of indebtedness as of December 31, 2014 for each of the following five years and thereafter are as follows (in thousands):



2015	$	77,208
2016	88,646
2017	401,504
2018	11,037
2019	186,835
Thereafter	—
Total	$	765,230

On November 7, 2014, we refinanced our $197.8 million mortgage loan with an outstanding balance of $195.7 million due February 2018 with a $198.0 million mortgage loan from the same lender with a five -year initial term and two one -year extension options, subject to the satisfaction of certain conditions. The new loan provides for a floating interest rate of LIBOR + 2.65% . The mortgage loan remains secured by the Capital Hilton in Washington, DC and Hilton La Jolla Torrey Pines in La Jolla, CA. Ashford Prime has a 75% ownership interest in the properties, with Hilton holding the remaining 25% .

On March 1, 2014, in connection with the acquisition of the Pier House Resort, we assumed the $69.0 million mortgage on the property. The mortgage loan bears interest at a rate of LIBOR + 4.9% . The stated maturity date of the mortgage loan is September 9, 2015, which may be extended by us for up to three consecutive one -year terms. The mortgage loan is secured by the Pier House Resort. Subsequent to December 31, 2014, this mortgage loan was refinanced. See Note 21.

On February 24, 2014, to fund a portion of our acquisition of the Sofitel Chicago Water Tower, we completed the financing for an $80.0 million mortgage loan. The mortgage loan bears interest at a rate of LIBOR + 2.3% . The stated maturity date of the mortgage loan is March 9, 2016, which may be extended by us for up to three consecutive one -year terms. The mortgage loan is secured by the Sofitel Chicago Water Tower.

On November 19, 2013, we entered into a three -year, $150.0 million secured revolving credit facility. The facility is a three -year interest-only facility with all outstanding principal being due at maturity, subject to two one -year extension options, subject to certain terms and conditions. The credit facility has an accordion feature whereby the aggregate commitments may be expanded up to $300.0 million , subject to certain terms and conditions. No amounts were drawn under the facility as of December 31, 2014 .

On February 26, 2013, AHT refinanced our $141.7 million loan due August 2013, which had an outstanding balance of $141.0 million , with a $199.9 million loan due February 2018. The new loan provides for an interest rate of LIBOR + 3.50% , with no LIBOR floor. In connection with the refinancing, AHT entered into an interest rate cap with a counterparty, capping LIBOR at 3.00% . The new loan is secured by The Capital Hilton in Washington, D.C. and the Hilton La Jolla Torrey Pines in La Jolla, CA. We have a 75% ownership interest in the properties, with Hilton holding the remaining 25% . The excess loan proceeds above closing costs and reserves were distributed to the partners on a pro rata basis. AHT’s share of the excess loan proceeds was approximately $40.5 million .

We are required to maintain certain financial ratios under our secured revolving credit facility. If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in our inability to borrow unused amounts under our line of credit, even if repayment of some or all of our borrowings is not required. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. Presently, our existing financial covenants are non-recourse and primarily relate to maintaining minimum debt coverage ratios. As of December 31, 2014 , we were in compliance in all material respects with all covenants or other requirements set forth in our debt agreements as amended.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

8. Derivative Instruments and Hedging

Interest Rate Derivatives —We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage the risks, we primarily use interest rate derivatives to hedge our debt as a way to potentially improve cash flows. The interest rate derivatives include interest rate caps, which are subject to master netting settlement arrangements. All derivatives are recorded at fair value.

In 2013, AHT entered into an interest rate cap with a notional amount and strike rate of $199.9 million and 3.00% , respectively, which had an effective date of March 2013, a maturity date of March 2015 and total cost of $36,000 . In 2014, we entered into another interest rate cap with a notional amount and strike rate of $148.5 million and 4.00% , respectively, which had an effective date of November 2014, a maturity date of December 2016 and a total cost of $33,000 . Neither of these instruments were designated as cash flow hedges. These instruments cap the interest rate on our mortgage loan with a principal balance of $197.6 million and a maturity date of November 2019.

In 2014, we entered into an interest rate cap with a notional amount and strike rate of $80.0 million and 1.50% , respectively, which had an effective date of February 2014, a maturity date of March 2016 and total cost of $93,000 . The instrument was not designated as a cash flow hedge. This instrument caps the interest rate on our mortgage loan with a principal balance of $80.0 million and a maturity date of March 2016. In connection with the $69.0 million mortgage loan assumed in connection with the Pier House Resort acquisition, we acquired an interest rate cap with a notional amount and strike rate of $69.0 million and 1.80% , respectively, which had an effective date of September 2013 and a maturity date of September 2015 and a total cost of $19,000 . This instrument was not designated as a cash flow hedge.

The cost basis of interest rate derivatives for federal income tax purposes was approximately $138,000 and $21,000 as of December 31, 2014 and 2013 .

9. Fair Value Measurements

Fair Value Hierarchy —Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:


•	Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•

Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.


•	Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (the Level 2 inputs). We also incorporate credit valuation adjustments (the Level 3 inputs) to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements.

We have determined that when a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counter-parties, which we consider significant ( 10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which the measurements fall in the fair value hierarchy (in thousands):



	Significant Other Observable Inputs (Level 2)		Total
December 31, 2014
Assets
Derivative assets:
Interest rate derivatives	$	35	$	35	⁽¹⁾



	Significant Other Observable Inputs (Level 2)		Total
December 31, 2013
Assets
Derivative assets:
Interest rate derivatives	$	—	$	—	⁽¹⁾

__________________


⁽¹⁾	Reported as “Derivative assets” in the consolidated balance sheets.

Effect of Fair Value Measured Assets and Liabilities on Consolidated and Combined Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on the consolidated and combined consolidated statements of operations (in thousands):



	Loss Recognized in Income
	Year Ended December 31,
	2014				2013				2012
Assets
Derivative assets:
Interest rate derivatives	$	(111	)	⁽¹⁾	$	(36	)	⁽¹⁾	$	—	⁽¹⁾

__________________


⁽¹⁾	Reported as “Unrealized loss on derivatives” in the consolidated and combined consolidated statements of operations.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

10. Summary of Fair Value of Financial Instruments

Determining the estimated fair values of certain financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled. The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):



	December 31, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:
Derivative assets	$	35	$	35	$	—	$	—
Financial assets not measured at fair value:
Cash and cash equivalents	$	171,439	$	171,439	$	143,776	$	143,776
Restricted cash	29,646		29,646		5,951		5,951
Accounts receivable, net	12,382		12,382		7,029		7,029
Note receivable	8,098		10,295 to 11,378		8,098		10,954 to 12,108
Due from related party, net	541		541		12		12
Due from third-party hotel managers	5,504		5,504		18,480		18,480
Financial liabilities not measured at fair value:
Indebtedness	$	765,230	$747,659 to $826,359		$	621,882	$615,880 to $680,710
Accounts payable and accrued expenses	29,273		29,273		17,279		17,279
Dividends payable	1,425		1,425		1,245		1,245
Due to Ashford Trust OP, net	896		896		13,042		13,042
Due to Ashford Inc.	2,546		2,546		—		—
Due to third-party hotel managers	954		954		649		649

Cash, cash equivalents and restricted cash . These financial assets bear interest at market rates and have maturities of less than 90 days . The carrying values approximate fair value due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Accounts receivable, net, due from related party, net, accounts payable and accrued expenses, dividends payable, due to Ashford Trust OP, net, due to Ashford Inc. and due to/from third-party hotel managers . The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Note receivable . Fair value of the note receivable was determined by using similar loans with similar collateral. Since there is very little to no trading activity, we had to rely on our internal analysis of what we believe a willing buyer would pay for this note at December 31, 2014 and 2013 . We estimated the fair value of the note receivable to be approximately 27.1% to 40.5% higher than the carrying value of $8.1 million at December 31, 2014 , and approximately 35.3% to 49.5% higher than the carrying value of $8.1 million at December 31, 2013 . This is considered a Level 2 valuation technique.

Derivative assets . Fair value of the interest rate derivatives are determined using the net present value of the expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of the Company and the counterparties. See Notes 2, 8 and 9 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness . Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of our total indebtedness to be approximately 97.7% to 108.0% of the carrying value of $765.2 million at December 31, 2014 , and approximately 99.0% to 109.5% of the carrying value of $621.9 million at December 31, 2013 . This is considered a Level 2 valuation technique.

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NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

11. Commitments and Contingencies

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at December 31, 2014 , escrow payments are required for insurance, real estate taxes, and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4% to 5% of gross revenues for capital improvements.

Management Fees —Under management agreements for our hotel properties existing at December 31, 2014 , we pay a) monthly property management fees equal to the greater of $10,000 (CPI adjusted since 2003) or 3% of gross revenues, or in some cases 3% to 7% of gross revenues, as well as annual incentive management fees, if applicable, b) market service fees on approved capital improvements, including project management fees of up to 4% of project costs, for certain hotels, and c) other general fees at current market rates as approved by our independent directors, if required. These management agreements expire from December 31, 2023 through December 31, 2041, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.

Leases —We lease land under two non-cancelable operating ground leases, which expire in 2043 and 2080, related to our hotel properties in La Jolla, CA, and Tampa, FL, respectively. These leases are subject to base rent plus contingent rent based on the related property’s financial results and escalation clauses. For the years ended December 31, 2014 , 2013 , and 2012 , we recognized rent expense of $3.5 million , $3.0 million and $2.9 million , respectively, which included contingent rent of $1.1 million , $729,000 and $660,000 , respectively. Rent expense is included in “Other expenses” in the consolidated and combined consolidated statements of operations. Future minimum rentals due under non-cancelable leases are as follows for each of the years ending December 31, (in thousands):



2015	$	2,287
2016	2,223
2017	2,199
2018	2,181
2019	2,200
Thereafter	67,391
Total	$	78,481

Capital Commitments —At December 31, 2014 , we had capital commitments of $5.1 million relating to general capital improvements that are expected to be paid in the next twelve months .

Litigation —We are engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations. However, the final results of legal proceedings cannot be predicted with certainty and if we fail to prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position or results of operations could be materially adversely affected in future periods.

Income Taxes —We and our subsidiaries file income tax returns in the federal jurisdiction and various states and cities. Tax years 2011 through 2014 remain subject to potential examination by certain federal and state taxing authorities.

As part of our formation transactions in connection with the spin-off, AHT contributed its indirect interest in CHH III Tenant Parent Corp. (“CHH”), the parent of the TRS lessees for two of our eight initial properties, which we elected to treat as a TRS. AHT also elected to treat CHH III Tenant Parent Corp. as a TRS.

119

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

In September 2010, the Internal Revenue Service (“IRS”) completed an audit of CHH for the tax year ended December 31, 2007. The IRS issued a notice of proposed adjustment based on Section 482 of the Internal Revenue Code that reduced the amount of rent AHT charged CHH. AHT owned a 75% interest in the hotel properties and CHH. In connection with the CHH audit, the IRS selected AHT for audit for the same tax year. In October 2011, the IRS issued an income tax adjustment to AHT as an alternative to the CHH proposed adjustment. The AHT adjustment was based on the REIT 100% federal excise tax on its share of the amount by which the rent was held to be greater than the arm’s length rate. AHT strongly disagreed with the IRS’ position and appealed its cases to the IRS Appeals Office. In determining amounts payable by CHH under its leases, AHT engaged a third party to prepare a transfer pricing study which concluded that the lease terms were consistent with arms’ length terms as required by applicable Treasury regulations. AHT believed the IRS transfer pricing methodologies applied in the audits contained flaws and that the IRS adjustments to the rent charged were inconsistent with the U.S. federal tax laws related to REITs and true leases. The IRS Appeals Office reviewed the AHT and CHH cases in 2012. In July 2013, the IRS Appeals Office issued “no-change letters” for CHH and AHT indicating that the 2007 tax returns were accepted as filed and the examinations resulted in no deficiencies. The statute of limitations for IRS assessments relating to the 2007 tax returns expired on March 31, 2014.

In June 2012, the IRS completed audits of CHH and AHT for the tax years ended December 31, 2008 and 2009. With respect to the 2009 tax year, the IRS has not proposed any adjustments to CHH or AHT. For the 2008 tax year, the IRS issued notices of proposed adjustments for both AHT and CHH. The AHT adjustment was for $3.3 million of U.S. federal excise taxes and represented the amount by which the IRS asserted that the rent charged to CHH was greater than the arms’ length rate pursuant to IRC Section 482. The CHH adjustment was for $1.6 million of additional income, which would have resulted in approximately $467,000 of additional U.S. federal income taxes and potential state income taxes of $83,000 , net of federal benefit. The CHH adjustment represented the IRS’ imputation of compensation to CHH under IRC Section 482 for agreeing to be a party to the lessor entity’s bank loan agreement. Until the spin-off, AHT owned a 75% interest in the lessor entity. AHT strongly disagreed with both of the IRS adjustments for the reasons noted under the 2007 audits, and in addition, AHT believed the IRS misinterpreted certain terms of the lease, third-party hotel management agreements, and bank loan agreements. AHT appealed the cases to the IRS Appeals Office, and the IRS assigned the same Appeals team that oversaw the 2007 cases to the 2008 cases. AHT’s representatives attended the Appeals conferences for the 2008 cases in August 2013 and in February, April and May of 2014. In August 2014, AHT reached a final settlement with the IRS Appeals Office resolving all issues that arose in the 2008 audits of CHH and AHT. In connection with the settlement, AHT agreed to an adjustment to reduce the TRS rent expense and thereby increase CHH’s taxable income by $660,000 . However, due to net operating losses available for utilization by CHH in the 2008 tax year and the expiration of the statute of limitations for the 2009 CHH tax year, the IRS Appeals Office issued “no-change letters” for CHH and AHT indicating that the examinations resulted in no deficiencies. The statute of limitations for IRS assessments relating to the 2008 tax returns expired on December 31, 2014.

12. Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity in earnings/losses of Ashford Prime OP, which is an allocation of net income/loss attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common units to total units outstanding. Beginning one year after issuance, each common unit of limited partnership interest may be redeemed, by the holder, for either cash or, at our sole discretion, one share of our common stock.

In connection with the spin-off, Ashford Trust had an initial interest in Ashford Prime OP equal to 20% of the outstanding units of Ashford Prime OP as of the completion of the spin-off. Additionally, Ashford Trust’s unit holders received one common unit in Ashford Prime OP for every five units held in Ashford Trust OP. This represented a 15.26% interest in Ashford Prime OP. The aggregate 35.26% ownership in Ashford Prime OP of $117.5 million was reclassified from additional paid-in capital to redeemable noncontrolling interests in operating partnership as it represents the portion of Ashford Prime OP’s equity distributed to non-controlling interest holders in Ashford Prime OP.

120

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

LTIP units, which are issued to certain officers and employees of Ashford LLC as compensation, have vesting periods of three years . Additionally, certain independent members of the Board of Directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common partnership unit of our operating partnership which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.

As of December 31, 2014 , we have issued a total of 355,000 LTIP units, all of which have reached full economic parity with the common units. During 2014 , 37,000 LTIP units vested. There were no forfeitures in 2014 . Expense of $1.9 million was recognized for the year ended December 31, 2014 , of which approximately $1.9 million associated with LTIP units issued to Ashford LLC’s employees is included in “Advisory services fee” and $49,000 associated with LTIP units issued to our independent directors is included in “Corporate general and administrative” expense in our consolidated statements of operations for the year ended December 31, 2014 . No expense was recognized during the year ended December 31, 2013 . As the LTIP units are issued to non-employees, the compensation expense was determined based on the share price as of the end of the period. The fair value of the unamortized LTIP units, which was $5.4 million at December 31, 2014 , will be amortized over a period of 2.3 years .

In 2014 , approximately 176,000 operating partnership units with a fair value of $3.1 million were redeemed for cash at an average price of $17.43 . For 2013 , no operating partnership units were presented for redemption or converted to shares of our common stock.

Redeemable noncontrolling interests in our operating partnership as of December 31, 2014 and 2013 was $149.6 million and $159.7 million , respectively, which represented ownership of 25.88% and 35.26% , respectively. The carrying value of redeemable noncontrolling interests as of December 31, 2014 and 2013 included adjustments of $47.3 million and $56.0 million , respectively, to reflect the excess of redemption value over the accumulated historical cost. For 2014 and 2013 , we allocated net income of $496,000 and net loss of $7.1 million , respectively, to the redeemable noncontrolling interests. No net income/loss was allocated to redeemable noncontrolling interests for the year ended December 31, 2012. We declared cash distributions to operating partnership units of $1.8 million and $439,000 for the years ended December 31, 2014 and 2013 , respectively. A summary of the activity of the operating partnership units is as follows (in thousands):



	Year Ended December 31,
	2014		2013
Units outstanding at beginning of year	8,776		—
Units issued in connection with spin-off	—		8,776
Units issued	355		—
Units redeemed for cash of $3,074 in 2014	(176	)	—
Units outstanding at end of year	8,955		8,776
Units convertible/redeemable at end of year	8,259		—

13. Equity

Equity Offering —On January 21, 2014, we commenced an underwritten public offering of 8.0 million shares of common stock at $16.50 per share for gross proceeds of $132.0 million . The offering closed on January 29, 2014. We granted the underwriters a 30 -day option to purchase up to an additional 1.2 million shares of common stock. On February 4, 2014, the underwriters fully exercised their option and purchased an additional 1.2 million shares of our common stock at a price of $16.50 per share. The net proceeds from the sale of the shares after underwriting discounts and offering expenses were approximately $143.9 million .

Dividends —Common stock dividends declared for the years ended December 31, 2014 and 2013 were $5.0 million and $806,000 , respectively. There were no dividends declared for the year ended December 31, 2012.

121

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Stock Repurchases —On October 27, 2014, our Board of Directors approved a share repurchase program under which the Company may purchase up to $100 million of the Company’s common stock from time to time. The repurchase program does not have an expiration date. The specific timing, manner, price, amount and other terms of the repurchases is at management’s discretion and depends on market conditions, corporate and regulatory requirements and other factors. The Company is not required to repurchase shares under the repurchase program, and may modify, suspend or terminate the repurchase program at any time for any reason. Under the repurchase program, we repurchased 927,915 shares of our common stock, for approximately $16.1 million , in the year ended December 31, 2014.

Noncontrolling Interests in Consolidated Entities —A partner had noncontrolling ownership interests of 25% in two hotel properties with a total carrying value of $(4.5) million and $(2.6) million , respectively, at December 31, 2014 and 2013 . Income from consolidated entities attributable to these noncontrolling interests was $1.1 million , $934,000 and $752,000 for the years ended December 31, 2014 , 2013 and 2012 , respectively.

14. Stock-Based Compensation

Under the 2013 Equity Incentive Plan, we are authorized to grant 850,000 restricted shares of our common stock as incentive stock awards and under the Advisor Equity Incentive Plan we are authorized to grant 1.6 million shares of our common stock as incentive stock awards. At December 31, 2014 , 415,000 shares were available for future issuance under the 2013 Equity incentive Plan and 1.6 million shares were available under the Advisor Equity Incentive Plan.

A summary of our restricted stock activity is as follows (shares in thousands):



	Year Ended December 31,
	2014				2013				2012
	Restricted Shares		Weighted Average Price at Grant		Restricted Shares		Weighted Average Price at Grant		Restricted Shares	Weighted Average Price at Grant
Outstanding at beginning of year	84		$	21.35	—		$	—	—	$	—
Restricted shares granted	64		15.45		16		21.35		—	—
Restricted shares issued in connection with spin-off	—		—		84		21.35		—	—
Restricted shares vested	(53	)	19.91		(16	)	21.35		—	—
Restricted shares forfeited	(1	)	21.35		—		—		—	—
Outstanding at end of year	94		$	18.11	84		$	21.35	—	$	—

At December 31, 2014 , the outstanding restricted stock had vesting dates starting in January 2015 and ending in April 2017. Stock-based compensation expense of $216,000 was recognized for the year ended December 31, 2014 in connection with equity awards granted in April 2014 to employees of Ashford LLC and is included in “Advisory services fee” on our consolidated statements of operations. Additionally, $197,000 of stock-based compensation expense was recognized for the year ended December 31, 2014 in connection with common stock issued to our independent directors, which vested immediately, and is included in “Corporate general and administrative” expense on our consolidated statements of operations. Stock-based compensation expense of $342,000 was recognized for the year ended December 31, 2013 in connection with the stock grants of 16,000 restricted shares to our independent directors, which vested immediately. There was no stock-based compensation expense in the year ended December 31, 2012. The restricted stock which vested during 2014 and 2013 had a fair value of $841,000 and $353,000 , respectively, at the date of vesting. At December 31, 2014 and 2013 , the outstanding restricted shares had a fair value of $1.6 million and $1.5 million , respectively. At December 31, 2014 , the unamortized cost of the unvested shares of restricted stock was $668,000 which will be amortized over a period of 2.3 years .

122

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

15. Income Taxes

For federal income tax purposes, we elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, we must meet certain organizational and operational stipulations, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gains, to our stockholders. We currently intend to adhere to these requirements and maintain our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes as well as to federal income and excise taxes on our undistributed taxable income.

At December 31, 2014 , our ten hotel properties were leased by Prime TRS. Prime TRS recognized net book income before income taxes of $6.6 million , $5.5 million and $11.0 million for the years ended December 31, 2014 , 2013 and 2012 , respectively.

For periods prior to the spin-off, income tax expense was calculated on a “carve-out” basis from AHT. Income tax expense for the TRS that operates eight hotels was calculated on a separate stand-alone basis. For the period from January 1, 2013 through November 18, 2013 and the year ended December 31, 2012, the results of operations of our initial six wholly-owned hotels were included in the consolidated tax returns in various jurisdictions of a TRS subsidiary of AHT. For the period from November 19, 2013 through December 31, 2013, the results of operations of our initial six wholly-owned hotels were included in the tax returns in various jurisdictions by Ashford Prime’s wholly-owned TRS. Income tax expense for the TRSs that lease the two hotels owned by the other consolidated partnership and the District of Columbia tax on the partnership has been included in the accompanying combined consolidated financial statements at the same amounts included in AHT’s consolidated financial statements for the period from January 1, 2013 through November 18, 2013 and the year ended December 31, 2012.

The following table reconciles the income tax expense at statutory rates to the actual income tax expense recorded (in thousands):



	Year Ended December 31,
	2014			2013			2012
Income tax expense at federal statutory income tax rate of 35%	$	(2,299	)	$	(1,838	)	$	(3,729	)
State income tax expense, net of federal income tax benefit	(279		)	(164		)	(366		)
State and local income tax expense on pass-through entity subsidiaries	(56		)	(161		)	(139		)
Gross receipts and margin taxes	(193		)	(177		)	(177		)
Other	(2		)	(65		)	(36		)
Valuation allowance	1,732			62			63
Total income tax expense	$	(1,097	)	$	(2,343	)	$	(4,384	)

The components of income tax expense are as follows (in thousands):



	Year Ended December 31,
	2014			2013			2012
Current:
Federal	$	(824	)	$	(2,043	)	$	(3,693	)
State	(315		)	(504		)	(711		)
Total current	(1,139		)	(2,547		)	(4,404		)
Deferred:
Federal	76			178			18
State	(34		)	26			2
Total deferred	42			204			20
Total income tax expense	$	(1,097	)	$	(2,343	)	$	(4,384	)

For the years ended December 31, 2014 , 2013 and 2012 , income tax expense included interest and penalties paid to taxing authorities of $3,000 , $0 and $2,000 , respectively. At December 31, 2014 and 2013 , we determined that there were no amounts to accrue for interest and penalties due to taxing authorities.

123

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

At December 31, 2014 and 2013 , our net deferred tax liability, included in “Accounts payable and accrued expenses” on the consolidated balance sheets, consisted of the following (in thousands):



	December 31,
	2014			2013
Deferred tax assets:
Allowance for doubtful accounts	$	19		$	15
Unearned income	134			69
Unfavorable management contract liability	126			189
Federal and state net operating losses	1,978			2,101
Amortization	17			—
Accrued expenses	743			585
Tax property basis greater (less) than book basis	1,575			1,547
Other	—			4
	4,592			4,510
Valuation allowance	(3,939		)	(3,920		)
Net deferred tax asset	653			590
Deferred tax liability:
Prepaid expenses	(1,156		)	(1,183		)
Net deferred tax liability	$	(503	)	$	(593	)

At December 31, 2014 and 2013 , we recorded a valuation allowance of $3.9 million and $3.9 million , respectively, to substantially reserve our deferred tax assets. As a result of cumulative consolidated losses in 2014 , 2013 and 2012 , and the limitation imposed by the Internal Revenue Code on the utilization of net operating losses of acquired subsidiaries, we believe that it is more likely than not that $3.9 million of our deferred tax assets will not be realized, and therefore, have provided a valuation allowance to reserve against the balances. The cumulative combined consolidated losses for the period from January 1, 2013 through November 18, 2013 and the year ended December 31, 2012 were determined on a “carve out” basis from AHT. The cumulative combined consolidated losses through December 31, 2013 also included the consolidated loss for Ashford Prime for the period from November 19, 2013 through December 31, 2013. For tax purposes, the Company’s activities related to our initial six hotels were included in the federal, state and local income tax return filings for AHT and its subsidiaries through November 18, 2013. Net operating losses for AHT and its subsidiaries during 2012 and 2013 were not able to be carried back. Accordingly, the tax accounts for the Company have been determined, assuming that net operating losses and other tax attributes cannot be carried back. At December 31, 2014 , the TRSs had net operating loss carryforwards for federal income tax purposes of $3.9 million that are available to offset future taxable income, if any, through 2023. The $3.9 million of net operating loss carryforwards is attributable to acquired subsidiaries and is subject to substantial limitation on its use.

The following table summarizes the changes in the valuation allowance (in thousands):



	Year Ended December 31,
	2014			2013			2012
Balance at beginning of year	$	3,920		$	2,202		$	2,033
Additions charged to other deferred tax assets	1,945			1,867			232
Deductions	(1,926		)	(149		)	(63		)
Balance at end of year	$	3,939		$	3,920		$	2,202

124

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

16. Income (Loss) Per Share

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):



	Year Ended December 31,
	2014			2013			2012
Net income (loss) attributable to common stockholders—Basic and diluted:
Net income (loss) attributable to the Company	$	1,939		$	(11,782	)	$	(4,545	)
Less: Dividends on common stock	(5,013		)	(802		)	—
Less: Dividends on unvested restricted shares	(18		)	(4		)	—
Undistributed net loss allocated to common stockholders	(3,092		)	(12,588		)	(4,545		)
Add back: Dividends on common stock	5,013			802			—
Distributed and undistributed net income (loss)—basic	$	1,921		$	(11,786	)	$	(4,545	)
Net income attributable to redeemable noncontrolling interests in operating partnership	496			—			—
Distributed and undistributed net income (loss)—diluted	$	2,417		$	(11,786	)	$	(4,545	)

Weighted average common shares outstanding:
Weighted average common shares outstanding — basic	24,473			16,045			16,045
Effect of assumed conversion of operating partnership units	8,852			—			—
Weighted average common shares outstanding — diluted	33,325			16,045			16,045

Income (loss) per share—basic:
Net income (loss) allocated to common stockholders per share	$	0.08		$	(0.73	)	$	(0.28	)
Income (loss) per share—diluted:
Net income (loss) allocated to common stockholders per share	$	0.07		$	(0.73	)	$	(0.28	)

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):



	Year Ended December 31,
	2014		2013			2012
Net loss allocated to common stockholders is not adjusted for:
Income allocated to unvested restricted shares	$	18	$	4		$	—
Loss attributable to redeemable noncontrolling interests in operating partnership	—		(7,080		)	—
Total	$	18	$	(7,076	)	$	—
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	57		84			84
Effect of assumed conversion of operating partnership units	—		8,776			8,776
Total	57		8,860			8,860

17. Segment Reporting

We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refer to owning hotels through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance. As of December 31, 2014 and 2013 , all of our hotel properties were domestically located.

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

18. Related Party Transactions

We have management agreements with Remington, a related party, which is owned by our Chairman and Chief Executive Officer and AHT’s Chairman Emeritus. Under the agreements, we pay the related party a) monthly property management fees equal to the greater of $10,000 (CPI adjusted since 2003) or 3% of gross revenues as well as annual incentive management fees, if certain operational criteria are met, b) project management fees of up to 4% of project costs, c) market service fees including purchasing, design and construction management not to exceed 16.5% of project budget cumulatively, including project management fees, and d) other general and administrative expense reimbursements, approved by our independent directors, including rent, payroll, office supplies, travel, and accounting. This related party allocates such charges to us based on various methodologies, including headcount and actual amounts incurred.

At December 31, 2014 , Remington managed one of our ten hotels and we incurred the following fees related to the management agreements with the related party (in thousands):



	Year Ended December 31,
	2014		2013		2012
Property management fees, including incentive property management fees	$	747	$	—	$	—
Market service and project management fees	1,126		2,118		940
Corporate general and administrative expenses	50		—		—
Total	$	1,923	$	2,118	$	940

Management agreements with Remington include exclusivity clauses that require us to engage Remington, unless our independent directors either (i) unanimously vote to hire a different manager or developer or (ii) by a majority vote elect not to engage Remington because either special circumstances exist such that it would be in our best interest not to engage Remington, or, based on Remington’s prior performance, it is believed that another manager or developer could perform the management, development or other duties materially better.

In connection with our spin-off, we entered into an advisory agreement with Ashford LLC, which was a subsidiary of Ashford Trust until November 12, 2014, when it spun off and became a subsidiary of Ashford Inc. Ashford LLC acts as our advisor, and as a result, we pay advisory fees to Ashford LLC. We are required to pay Ashford LLC a quarterly base fee equal to 0.70% per annum of our total market capitalization (which is defined to include the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt)), subject to a minimum quarterly base fee, as payment for managing our day-to-day operations in accordance with our investment guidelines. We are also required to pay Ashford LLC an incentive fee that is based on our total return performance as compared to our peer group as well as to reimburse Ashford LLC for certain reimbursable overhead and internal audit, insurance claims advisory and asset management services, as specified in the advisory agreement. We also record equity-based compensation expense for equity grants of common stock and LTIP units awarded to our officers and employees of Ashford LLC in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period.

For the period from January 1, 2014 to November 11, 2014 , we incurred advisory services fees of $10.7 million to Ashford Trust which was comprised of a base advisory fee of $7.5 million , fees for reimbursable overhead and internal audit, insurance claims advisory and asset management services of $1.4 million and equity-based compensation of $1.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Trust. For the year ended December 31, 2013 , we paid advisory fees of $1.0 million to Ashford Trust which was comprised of a base advisory fee of $878,000 and fees for reimbursable overhead of $53,000 and internal audit reimbursements of $116,000 . No incentive management fee was incurred for the years ended December 31, 2014 or 2013. At December 31, 2014 , we had a payable of $896,000 included in due to Ashford Trust OP, net, associated with the advisory services fee discussed above. At December 31, 2013 , we had a payable of $15.5 million , included in due to Ashford Trust OP, net, associated with reimbursable expenses in connection with the spin-off and the fees discussed above offset by a receivable of $2.4 million associated with certain property expenses paid by us on behalf of AHT, which related to the period prior to the spin-off.

126

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

We incurred advisory services fees of $1.8 million to Ashford Inc. from November 12, 2014 to December 31, 2014. These fees were comprised of a base advisory fee of $1.2 million , fees for reimbursable overhead and internal audit, insurance claims advisory and asset management services of $253,000 and equity-based compensation of $340,000 associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. No incentive management fee was incurred for the year ended December 31, 2014. At December 31, 2014 , we had a payable of $2.5 million included in due to Ashford Inc. associated with advisory services fee.

19. Concentration of Risk

Our investments are all concentrated within the hotel industry. Our investment strategy is to acquire primarily full-service and select-service hotels in the luxury, upper-upscale and upscale segments located predominantly in domestic and international gateway markets with RevPAR twice the national average. All of our hotels are located domestically with two located in Seattle, WA, comprising 15% of total hotel revenue. During 2014 , five of our hotels generated revenues in excess of 10% of total hotel revenue amounting to 64% of total hotel revenue.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions and amounts due or payable under our derivative contracts. Our counterparties to our derivative contracts are investment grade financial institutions.

20. Selected Financial Quarterly Data (Unaudited)

The following is a summary of the quarterly results of operations for the years ended December 31, 2014 and 2013 (in thousands, except per share data):



	First Quarter			Second Quarter		Third Quarter		Fourth Quarter			Full Year
2014
Total revenue	$	61,806		$	83,967	$	84,784	$	76,751		$	307,308
Total operating expenses	57,031			69,153		70,086		67,288			263,558
Operating income	4,775			14,814		14,698		9,463			43,750
Net income (loss)	(4,451		)	4,525		4,389		(925		)	3,538
Net income (loss) attributable to the Company	(2,878		)	3,497		3,372		(2,052		)	1,939
Diluted income (loss) attributable to common stockholders per share	$	(0.13	)	$	0.14	$	0.13	$	(0.08	)	$	0.07
Weighted average diluted common shares	22,308			34,396		34,429		24,954			33,325
2013
Total revenue	$	54,086		$	63,342	$	60,960	$	55,108		$	233,496
Total operating expenses	48,909			50,043		51,595		63,539			214,086
Operating income (loss)	5,177			13,299		9,365		(8,431		)	19,410
Net income (loss)	(5,326		)	4,329		29		(16,960		)	(17,928		)
Net income (loss) attributable to the Company	(4,622		)	3,829		400		(11,389		)	(11,782		)
Diluted income (loss) attributable to common stockholders per share	$	(0.29	)	$	0.15	$	0.02	$	(0.71	)	$	(0.73	)
Weighted average diluted common shares	16,045			24,905		24,905		16,045			16,045

127

ASHFORD HOSPITALITY PRIME, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

21. Subsequent Events (unaudited)

Subsequent to December 31, 2014, in connection with our stock repurchase program, we repurchased 471,064 shares of our common stock for approximately $8.1 million . As of March 12 , 2015, we had purchased a cumulative 1.4 million shares of our common stock, for approximately $24.2 million since the program’s inception on November 4, 2014.

On March 9, 2015, we refinanced our $69.0 million mortgage loan due September 2015, which had an outstanding balance of $69.0 million , with a $70.0 million mortgage loan due March 2017, with three one -year extension options, subject to the satisfaction of certain conditions. The new loan is interest only and provides for a floating interest rate of LIBOR + 2.25% , with no LIBOR floor. The mortgage loan is secured by the Pier House Resort in Key West, Florida.

128

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2014. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2014, our disclosure controls and procedures are effective to ensure that (i) information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of our internal control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and our expenditures are being made only in accordance with authorizations of management and our directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making the assessment of the effectiveness of our internal control over financial reporting, management has utilized the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, (2013 framework) (“COSO”).

Based on management’s assessment of these criteria, we concluded that, as of December 31, 2014, our internal control over financial reporting is effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officer, and Corporate Governance

The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 11. Executive Compensation

The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

129

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 14. Principal Accountant Fees and Services

The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

130

PART IV

Item 15. Financial Statement Schedules and Exhibits

(a) Financial Statements and Schedules

See “Item 8. Financial Statements and Supplementary Data,” on pages 97 through 128 hereof, for a list of our consolidated financial statements and report of independent registered public accounting firm.

The following financial statement schedule is included herein on page 137.

Schedule III – Real Estate and Accumulated Depreciation

All other financial statement schedules have been omitted because such schedules are not required under the related instructions, such schedules are not significant, or the required information has been disclosed elsewhere in the consolidated financial statements and related notes thereto.

(b) Exhibits

Exhibits required by Item 601 of Regulation S-K: The exhibits filed in response to this item are listed in the Exhibit Index.

131

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 16, 2015 .



	ASHFORD HOSPITALITY PRIME, INC.

	By:	/s/ MONTY J. BENNETT
		Monty J. Bennett
		Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below on behalf of the Registrant in the capacities and on the dates indicated.



Signature	Title	Date

/s/ MONTY J. BENNETT	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)	March 16, 2015
Monty J. Bennett

/s/ DOUGLAS A. KESSLER	President and Director	March 16, 2015
Douglas A. Kessler

/s/ DERIC S. EUBANKS	Chief Financial Officer (Principal Financial Officer)	March 16, 2015
Deric S. Eubanks

/s/ MARK L. NUNNELEY	Chief Accounting Officer (Principal Accounting Officer)	March 16, 2015
Mark L. Nunneley

/s/ STEFANI D. CARTER	Director	March 16, 2015
Stefani D. Carter

/s/ CURTIS B. MCWILLIAMS	Director	March 16, 2015
Curtis B. McWilliams

/s/ W. MICHAEL MURPHY	Director	March 16, 2015
W. Michael Murphy

/s/ MATTHEW D. RINALDI	Director	March 16, 2015
Matthew D. Rinaldi

/s/ ANDREW L. STRONG	Director	March 16, 2015
Andrew L. Strong

132

EXHIBIT INDEX



Exhibit Number		Exhibit Description
2.1		Separation and Distribution Agreement between Ashford Hospitality Prime, Inc., Ashford Hospitality Trust, Inc. and the other parties thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 12, 2013)
2.2		Separation and Distribution Agreement Correction between Ashford Hospitality Prime, Inc., Ashford Hospitality Trust, Inc. and the other parties thereto (incorporated by reference to Exhibit 2.2 of the Registration Statement on Form S-11 filed on December 19, 2013)
3.1		Articles of Amendment and Restatement of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on November 12, 2013)
3.2		Amended and Restated Bylaws of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on November 12, 2013)
4.1		Specimen Common Stock Certificate of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 4 to the Registration Statement on Form 10 filed on October 23, 2013)
10.1		Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Prime Limited Partnership, dated November 19, 2013 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 25, 2013)
10.2		Second Amended and Restated Advisory Agreement by and between Ashford Hospitality Prime, Inc., Ashford Hospitality Prime Limited Partnership, and Ashford Hospitality Advisors LLC, dated November 3, 2014 (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on November 7, 2014)
10.3		Right of First Offer Agreement between Ashford Hospitality Trust, Inc. and Ashford Hospitality Prime, Inc., dated November 19, 2013 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on November 25, 2013)
10.4		Ashford Hospitality Prime, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 12, 2013)
10.5		Ashford Hospitality Prime, Inc. Advisor Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of the Registration Statement on Form S-11 filed on December 19, 2013)
10.6		Option Agreement Pier House Resort & Spa by and between Ashford Hospitality Prime Limited Partnership and Ashford Hospitality Limited Partnership with respect to the Properties Entities, and Ashford TRS Corporation and Ashford Prime TRS Corporation with respect to the TRS Entity, dated November 19, 2013 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on November 25, 2013)
10.7		Option Agreement Crystal Gateway Marriott by and between Ashford Hospitality Prime Limited Partnership and Ashford Hospitality Limited Partnership with respect to the Properties Entities, and Ashford TRS Corporation and Ashford Prime TRS Corporation with respect to the TRS Entity, dated November 19, 2013 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on November 25, 2013)
10.8		Mutual Exclusivity Agreement by and among Ashford Hospitality Prime Limited Partnership, Ashford Hospitality Prime, Inc. and Remington Lodging & Hospitality, LLC, as consented and agreed to by Monty J. Bennett, dated November 19, 2013 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on November 25, 2013)
10.9		Ashford Prime Hotel Master Management Agreement by and between Ashford Prime TRS Corporation and Remington Lodging & Hospitality, LLC, dated November 19, 2013 (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on November 25, 2013)
10.10		Form of Indemnification Agreement between Ashford Hospitality Prime, Inc. and each of its executive officers and directors (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on November 25, 2013)
10.11		Registration Rights Agreement by and between Ashford Hospitality Prime, Inc., Ashford Hospitality Limited Partnership and Ashford Hospitality Advisors LLC, dated November 19, 2013 (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on November 25, 2013)
10.12		Registration Rights Agreement between Ashford Hospitality Prime, Inc., for the benefit of the holders of common partnership units in Ashford Hospitality Prime Limited Partnership named therein, dated November 19, 2013 (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on November 25, 2013)
10.13		Open-End Mortgage, Security Agreement, Financing Statement and Assignment of Rents, dated as of April 9, 2007 and effective as of April 11, 2007, by Ashford Philadelphia Annex LP (f/k/a Ashford Philadelphia Annex, LLC) for the benefit of U.S. Bank National Association, as Trustee, successor-in-interest to Bank of America, N.A., as Trustee, successor-in-interest to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C32, as successor-in-interest to Wachovia Bank, National Association (incorporated by reference to Exhibit 10.13 to Amendment No. 3 to the Registration Statement on Form 10 filed on September 24, 2013)

133



Exhibit Number		Exhibit Description
10.13a		Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K (incorporated by reference to Exhibit 10.13a to Amendment No. 3 to the Registration Statement on Form 10 filed on September 24, 2013)
10.14		First Amendment to Open-End Mortgage, Security Agreement, Financing Statement and Assignment of Rents and to Assignment of Leases and Rents and Security Deposits, by Ashford Philadelphia Annex LP (f/k/a Ashford Philadelphia Annex, LLC) for the benefit of U.S. Bank National Association, as Trustee, successor-in-interest to Bank of America, N.A., as Trustee, successor-in-interest to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C32, as successor-in-interest to Wachovia Bank, National Association, effective as of November 19, 2013 (incorporated by reference to Exhibit 10.15 to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.15		Amendment to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, by and between Ashford Plano-M LP and U.S. Bank National Association, as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass Through Certificates, Series 2007-C33, dated as of November 19, 2013 (incorporated by reference to Exhibit 10.14a to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.16		Amendment to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, by and between Ashford San Francisco II LP and U.S. Bank National Association, as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass Through Certificates, Series 2007-C31, dated as of November 19, 2013 (incorporated by reference to Exhibit 10.14b to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.17		Amendment to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, by and between Ashford Seattle Downtown LP and U.S. Bank National Association, as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass Through Certificates, Series 2007-C31, dated as of November 19, 2013 (incorporated by reference to Exhibit 10.14c to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.18		Amendment to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, by and between Ashford Seattle Waterfront LP and U.S. Bank National Association, as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass Through Certificates, Series 2007-C33, dated as of November 19, 2013 (incorporated by reference to Exhibit 10.14d to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.19		Amendment to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, by and between Ashford Tampa International Hotel Partnership, LP and U.S. Bank National Association, as Trustee for the Registered Holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass Through Certificates, Series 2007-C33, dated as of November 19, 2013 (incorporated by reference to Exhibit 10.14d to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.20		Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Rents, dated as of February 26, 2013, by CHH Torrey Pines Hotel Partners, LP for the benefit of Aareal Capital Corporation (incorporated by reference to Exhibit 10.16 to Amendment No. 3 to the Registration Statement on Form 10 filed on September 24, 2013)
10.21		Amended and Restated Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Rents, dated as of February 26, 2013, by CHH Capital Hotel Partners, LP for the benefit of Aareal Capital Corporation (incorporated by reference to Exhibit 10.17 to Amendment No. 3 to the Registration Statement on Form 10 filed on September 24, 2013)
10.22		Licensing Agreement between Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. and Ashford Hospitality Prime Limited Partnership, dated November 19, 2013 (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on November 25, 2013)
10.23		Credit Agreement between Ashford Hospitality Prime Limited Partnership, Ashford Hospitality Prime, Inc., Bank of America, N.A. and the other lenders party thereto, dated November 19, 2013 (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on November 25, 2013)
10.24		Agreement of Purchase and Sale by and among Chestnut OwnerCo, LLC, Chestnut LeaseCo, LLC and Ashford Hospitality Prime Limited Partnership, dated as of December 23, 2013 (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the Registration Statement on Form S-11 filed on January 21, 2014)
10.25		Loan Document by and among Ashford Chicago LP, Ashford TRS Chicago II LLC and German American Capital Corporation, dated February 24, 2014 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 26, 2014)
10.26		Guaranty of Recourse Obligations by Ashford Hospitality Prime Limited Partnership, dated February 24, 2014 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 26, 2014)

134



Exhibit Number		Exhibit Description
10.27		Loan Document by and between Ashford Pier House LP and JPMorgan Chase Bank, National Association, dated September 10, 2013 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 6, 2014)
10.28		Senior Mezzanine Loan Document by and between Ashford Pier House Mezz A LLC and JPMorgan Chase Bank, National Association, dated September 10, 2013 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on March 6, 2014)
10.29		Junior Mezzanine Loan Document by and between Ashford Pier House Mezz B LLC and JPMorgan Chase Bank, National Association, dated September 10, 2013 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on March 6, 2014)
10.30*		Second Amended and Restated Loan Agreement, dated as of November 7, 2014, by CHH Torrey Pines Hotel Partners, LP, CHH Capital Hotel Partners, LP, CHH Torrey Pines Tenant Corp., CHH Capital Tenant Corp., Aareal Bank AG, Aareal Capital Corporation, Westdeutsche Immobilienbank AG, and Aareal Capital Corporation
10.31*		Second Amended and Restated Recourse Liability Agreement, dated as of November 7, 2014, made by CHH Torrey Pines Hotel Partners, LP, CHH Capital Hotel Partners, LP, CHH Torrey Pines Tenant Corp., CHH Capital Tenant Corp., and Ashford Hospitality Prime Limited Partnership for the benefit of Aareal Capital Corporation
10.32*		Second Amended Environmental Indemnity, dated as of November 7, 2014, made by CHH Torrey Pines Hotel Partners, LP, CHH Capital Hotel Partners, LP, CHH Torrey Pines Tenant Corp., CHH Capital Tenant Corp., and Ashford Hospitality Prime Limited Partnership for the benefit of Aareal Capital Corporation*
10.33*		Loan Agreement, dated as of March 9, 2015, among Ashford Pier House LP, Ashford TRS Pier House LLC, and Credit Agricole Corporate and Investment Bank
10.34*		Recourse Liability Agreement, dated as of March 9, 2015, made by Ashford Pier House LP, Ashford TRS Pier House LLC, and Ashford Hospitality Prime Limited Partnership for the benefit of Credit Agricole Corporate and Investment Bank
10.35*		Environmental Indemnity, dated as of March 9, 2015, made by Ashford Pier House LP, Ashford TRS Pier House LLC, and Ashford Hospitality Prime Limited Partnership for the benefit of Credit Agricole Corporate and Investment Bank
10.36		Investment Management Agreement, dated as of November 10, 2014, by and between AHP SMA, LP and Ashford Investment Management LLC (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed on December 17, 2014)
12.0*		Statement Regarding Computation of Ratios of Earnings to Combined Fixed Charges
21.1*		List of Subsidiaries of Ashford Hospitality Prime, Inc.
21.2*		List of Special Purpose Entities of Ashford Hospitality Prime, Inc.
23.1*		Consent of Ernst & Young LLP
31.1*		Certification of the Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2*		Certification of the Chief Financial Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1*		Certification of the Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)
32.2*		Certification of the Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)

_________________________

* Filed herewith.



101.INS *		XBRL Instance Document
101.SCH *		XBRL Taxonomy Extension Schema Document.
101.CAL *		XBRL Taxonomy Calculation Linkbase Document.
101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *		XBRL Taxonomy Label Linkbase Document.
101.PRE *		XBRL Taxonomy Presentation Linkbase Document.

135

136

SCHEDULE III

ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2014

(in thousands)



Column A		Column B		Column C				Column D				Column E						Column F		Column G	Column H	Column I
				Initial Cost				Costs Capitalized Since Acquisition				Gross Carrying Amount At Close of Period
Hotel Property	Location	Encumbrances		Land		FF&E, Buildings and improvements		Land		FF&E, Buildings and improvements		Land		FF&E, Buildings and improvements		Total		Accumulated Depreciation		Construction Date	Acquisition Date	Income Statement
Hilton	Washington, D.C.	$	128,518	$	45,720	$	106,245	$	—	$	30,281	$	45,720	$	136,526	$	182,246	$	36,984	—	04/2007	(1),(2),(3)
Hilton	La Jolla, CA	69,087		—		114,614		—		18,362		—		132,976		132,976		31,858		—	04/2007	(1),(2),(3)
Marriott	Seattle, WA	131,329		31,888		112,176		—		5,995		31,888		118,171		150,059		25,283		—	04/2007	(1),(2),(3)
Marriott	Plano, TX	77,006		2,725		93,044		—		9,159		2,725		102,203		104,928		21,967		—	04/2007	(1),(2),(3)
Courtyard by Marriott	Philadelphia, PA	41,958		9,814		94,029		—		19,233		9,814		113,262		123,076		24,463		—	04/2007	(1),(2),(3)
Courtyard by Marriott	Seattle, WA	57,784		17,194		46,711		—		4,497		17,194		51,208		68,402		11,213		—	04/2007	(1),(2),(3)
Courtyard by Marriott	San Francisco, CA	66,328		22,653		72,731		—		2,282		22,653		75,013		97,666		15,270		—	04/2007	(1),(2),(3)
Pier House Resort	Key West, FL	69,000		59,731		33,011		—		1,844		59,731		34,855		94,586		1,884		—	05/2013	(1),(2),(3)
Sofitel Chicago Water Tower	Chicago, IL	80,000		12,631		140,369		—		388		12,631		140,757		153,388		5,182		—	02/2014	(1),(2),(3)
Renaissance	Tampa, FL	44,220		—		69,179		—		2,839		—		72,018		72,018		14,938		—	04/2007	(1),(2),(3)
Total		$	765,230	$	202,356	$	882,109	$	—	$	94,880	$	202,356	$	976,989	$	1,179,345	$	189,042

__________________


⁽¹⁾	Estimated useful life for buildings is 39 years .


⁽²⁾	Estimated useful life for building improvements is 7.5 years .


⁽³⁾	Estimated useful life for furniture and fixtures is 3 to 5 years .



	Year Ended December 31,
	2014			2013			2012
Investment in Real Estate:
Beginning balance	$	925,507		$	920,968		$	924,318
Additions	265,484			24,119			12,183
Write-offs	(11,646		)	(19,580		)	(15,533		)
Ending balance	1,179,345			925,507			920,968
Accumulated Depreciation:
Beginning balance	160,181			149,032			135,148
Depreciation expense	40,507			30,729			29,417
Write-offs	(11,646		)	(19,580		)	(15,533		)
Ending balance	189,042			160,181			149,032
Investment in Real Estate, net	$	990,303		$	765,326		$	771,936

137

EXHIBIT 10.30

_________________________________________________________________________

SECOND AMENDED AND RESTATED LOAN AGREEMENT

Dated as of November 7, 2014

among

BORROWERS

(as defined herein)

and

OPERATING LESSEES

(as defined herein)

and

AAREAL CAPITAL CORPORATION ,

AAREAL BANK AG

and

WESTDEUTSCHE IMMOBILIENBANK AG

together with their respective successors and assigns,

as Lenders,

and

AAREAL CAPITAL CORPORATION ,

as Agent for Lenders

_________________________________________________________________________

62383226

TABLE OF CONTENTS

Page

ARTICLE IDEFINITIONS 2

Section 1.1 Definitions 2

Section 1.2 Other Definitional Provisions. 32

ARTICLE IITHE LOAN 33

Section 2.1 The Loan 33

Section 2.2 Interest Rate 33

Section 2.3 Payments on Account of Principal and Interest. 34

Section 2.4 Manner and Application of Payments. 35

Section 2.5 Interest on Overdue Amounts; Late Penalty. 37

Section 2.6 LIBOR Rate Breakage 37

Section 2.7 Changes in Circumstance or Law. 37

Section 2.8 No Withholdings 39

Section 2.9 Increased Costs and Capital Adequacy. 39

Section 2.10 Fees 42

Section 2.11 Cash Management and Reserves. 42

Section 2.12 Accounts of Borrower Parties 48

Section 2.13 Letters of Credit. 48

Section 2.14 Release of Properties 49

Section 2.15 Extension Period. 50

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ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF BORROWERS 52

Section 3.1 Due Organization 52

Section 3.2 Due Execution 52

Section 3.3 Enforceability 52

Section 3.4 No Violation 52

Section 3.5 No Litigation 53

Section 3.6 No Default 53

Section 3.7 Consents 53

Section 3.8 Financial Statements and Other Information 53

Section 3.9 Availability of Utilities and Access 53

Section 3.10 No Liens 54

Section 3.11 Title to the Properties 54

Section 3.12 Loan Documents 54

Section 3.13 Taking; Casualty 54

Section 3.14 Brokerage 54

Section 3.15 Representations, Warranties and Certifications of Others 54

Section 3.16 Indebtedness 54

Section 3.17 Compliance with Building Codes, Zoning Laws, Etc. 54

Section 3.18 Taxes 55

Section 3.19 Labor Relations 55

Section 3.20 Management and Operating Agreements 55

Section 3.21 Property Documents and Permitted Encumbrances 55

62383226

Section 3.22 Space Leases 56

Section 3.23 Encroachments 56

Section 3.24 No Trademarks, etc. 56

Section 3.25 Debts; Net Worth 56

Section 3.26 Accounts 57

Section 3.27 Margin Stock 57

Section 3.28 Foreign Person 57

Section 3.29 Name; Principal Place of Business 57

Section 3.30 Special Purpose Entity 57

Section 3.31 ERISA. 57

Section 3.32 Insurance Policies 57

Section 3.33 Usury 58

Section 3.34 Adverse Change 58

Section 3.35 Flood Zone 58

Section 3.36 Fiscal Year of Borrower Parties 58

Section 3.37 Organizational and Operational Restrictions 58

Section 3.38 Ground Lease. 58

Section 3.39 Patriot Act. 59

ARTICLE IVAFFIRMATIVE COVENANTS OF BORROWER PARTIES 59

Section 4.1 Financial Statements, Reports and Documents. 60

Section 4.2 Loan Proceeds 63

Section 4.3 Interest Rate Protection Arrangement. 63

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Section 4.4 Leases. 67

Section 4.5 Management and Operation of Property. 68

Section 4.6 Maintenance, Repairs and Alterations. 69

Section 4.7 Inspection of Books and Records 71

Section 4.8 Compliance with Legal Requirements, Etc. 71

Section 4.9 Appraisals 71

Section 4.10 Insurance. 72

Section 4.11 Payment of Taxes 74

Section 4.12 Damage or Destruction. 74

Section 4.13 Taking of the Mortgaged Property. 78

Section 4.14 Costs and Expenses. 80

Section 4.15 Indemnity by Borrowers 81

Section 4.16 Further Assurances 81

Section 4.17 Ownership of Properties 81

Section 4.18 Maintenance of Liens 81

Section 4.19 Defense of Title 82

Section 4.20 Property Document Covenants 82

Section 4.21 Ground Lease. 82

Section 4.22 Operating Leases. 84

Section 4.23 Compliance with Anti-Money Laundering and OFAC Laws 84

ARTICLE VNEGATIVE COVENANTS 85

62383226

Section 5.1 Name, Fiscal Year and Accounting Method 85

Section 5.2 Consolidation or Merger 85

Section 5.3 Transactions with Affiliates 85

Section 5.4 Lines of Business 86

Section 5.5 Easements and Restrictions 86

Section 5.6 Changes in Zoning; Changes in Use. 86

Section 5.7 Waste 86

Section 5.8 Limitation on Indebtedness 86

Section 5.9 Distributions, Dividends or Repayments 86

Section 5.10 Organizational Documents 86

Section 5.11 ERISA Plans, Collective Bargaining Agreement. 87

Section 5.12 Organizational and Operational Restrictions 88

Section 5.13 Maintenance of Existence 88

Section 5.14 Loans to Affiliates and Employees 88

Section 5.15 Adverse Contracts 88

Section 5.16 Liens 89

Section 5.17 Transfers. 89

ARTICLE VICONDITIONS OF LENDING 91

ARTICLE VIIEVENTS OF DEFAULT 93

ARTICLE VIIIRIGHTS AND REMEDIES OF LENDERS 95

Section 8.1 Rights and Remedies Generally 95

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Section 8.2 Rights of Agent with Respect to the Properties 96

Section 8.3 Acceleration 97

Section 8.4 Funds of Agent or Lenders 97

Section 8.5 Accounts 97

Section 8.6 Management Agreements 98

Section 8.7 No Waiver or Exhaustion 98

Section 8.8 Right of Offset 98

Section 8.9 Protective Advances 98

Section 8.10 Interest Rate Protection Agreement 98

Section 8.11 No Liability of Agent 99

ARTICLE IXSYNDICATION 99

Section 9.1 Assignment and Participations. 99

Section 9.2 Availability of Records 100

Section 9.3 Borrower Parties’ Facilitation of Transfer. 100

Section 9.4 Notice; Registration Requirement 101

Section 9.5 Registry 101

Section 9.6 Lender Interest Rate Protection Agreements 102

Section 9.7 Disclosure by Agent or Lender 102

ARTICLE XMISCELLANEOUS 102

Section 10.1 Notices 102

Section 10.2 Modifications 104

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Section 10.3 No Other Party Beneficiary 104

Section 10.4 Gender 105

Section 10.5 Captions 105

Section 10.6 Survival of Agreement 105

Section 10.7 Binding Effect 105

Section 10.8 Governing Law; Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by Jury 105

Section 10.9 Time of the Essence 105

Section 10.10 Waivers, Consents and Approvals 106

Section 10.11 Severability 106

Section 10.12 When Effective 106

Section 10.13 Payments on Business Days 106

Section 10.14 Limitation of Liability 106

Section 10.15 Further Assurances; Filing of Financing Statements 107

Section 10.16 Third Party Payments 107

Section 10.17 Controlling Document 108

Section 10.18 No Acknowledgement or Representation by Agent or any Lender 108

Section 10.19 Entire Agreement 108

Section 10.20 Counterparts 108

Section 10.21 Cross Default; Cross Collateralization 108

Section 10.22 Joint and Several Liability 108

Section 10.23 Contribution Among Borrowers 108

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Section 10.24 Employer Identification Number Etc 108

ARTICLE XIAGENT AND LENDERS 109

Section 11.1 Scope of Article XI 109

Section 11.2 Agent. 109

Section 11.3 Distributions 110

Section 11.4 Authority, No Reliance; Binding Effect 110

Section 11.5 Loan. 111

Section 11.6 Equitable Adjustments; Offset 112

Section 11.7 Other Transactions 112

Section 11.8 Obligations Absolute 112

Section 11.9 Indemnification. 113

Section 11.10 Taxes 113

Section 11.11 Return of Payments 114

Section 11.12 No Partnership 114

Section 11.13 Resignation and Removal of Agent; Successor Agent. 114

Section 11.14 Defaults by any Lender. 115

Section 11.15 Enforcement Action Plan. 116

EXHIBITS

EXHIBIT A-1    Legal Description of Capital Property
EXHIBIT A-2    Legal Description of Torrey Pines Property
EXHIBIT B    Account Agreement
EXHIBIT C    Allocated Loan Amounts
EXHIBIT D    Disclosed Litigation
EXHIBIT E    Insurance Policies
EXHIBIT F    Accounts

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EXHIBIT G    Material Operating Agreements
EXHIBIT H    Interest Rate Protection Agreement Acknowledgment
EXHIBIT I    Definition of Special Bankruptcy Remote Entity
EXHIBIT J    Agent’s Wiring Instructions
EXHIBIT K    Form of Quarterly Compliance Statement
EXHIBIT L    Form of Assignment and Acceptance
EXHIBIT M    Monthly Operating Statement
EXHIBIT N    Schedule of Amortization Payments
EXHIBIT O    Collective Bargaining Agreements

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SECOND AMENDED AND RESTATED LOAN AGREEMENT

This SECOND AMENDED AND RESTATED LOAN AGREEMENT (this “ Loan Agreement ”) dated as of November 7, 2014, between CHH TORREY PINES HOTEL PARTNERS, LP ((“ Torrey Pines Borrower ”), CHH CAPITAL HOTEL PARTNERS, LP (“ Capital Borrower ”), each a Delaware limited partnership, as borrowers (each of Capital Borrower and Torrey Pines Borrower, together with its successors and assigns, is a “ Borrower ” and collectively, “ Borrowers ”), CHH TORREY PINES TENANT CORP. (“ Torrey Pines Operating Lessee ”) , CHH CAPITAL TENANT CORP. (“ Capital Operating Lessee ”), each a Delaware corporation (each of Capital Operating Lessee and Torrey Pines Operating Lessee, together with its successors and assigns, is an “ Operating Lessee ” and collectively, “ Operating Lessees ” and each Borrower and each Operating Lessee is sometimes referred to as a “ Borrower Party ” and collectively as “ Borrower Parties ”) and AAREAL BANK AG , a German banking corporation (“ Aareal Bank ”), as a lender, AAREAL CAPITAL CORPORATION , a Delaware corporation (“ ACC ”), as a lender and WESTDEUTSCHE IMMOBILIENBANK AG , a German banking corporation (“ WIB ”), as a lender (each of WIB, Aareal Bank and ACC, in its capacity as a lender, together with their respective successors and assigns, a “ Lender ”, and, collectively with any Assignees (as defined below), “ Lenders ”), and AAREAL CAPITAL CORPORATION , as agent for Lenders (in such capacity, together with its successors and assigns, “ Agent ”).

W I T N E S S E T H :

WHEREAS , Capital Borrower is the owner of a fee interest in those certain parcels of land located in Washington, D.C., as more particularly described in Exhibit A-1 attached hereto, together with the improvements thereon, (collectively, the “ Capital Property ”);

WHEREAS, Capital Borrower, as lessor, and Capital Operating Lessee, as lessee, are parties to that certain Amended and Restated Lease Agreement dated as of April 11, 2007, as amended by that certain First Amendment to Lease Agreement dated as of April 1, 2009, and that certain Second Amendment to Lease Agreement dated as of January 1, 2013 (the “ Capital Operating Lease ”);

WHEREAS , Torrey Pines Borrower is the owner of a leasehold estate interest in those certain parcels of land located in La Jolla, California, as more particularly described in Exhibit A-2 attached hereto, together with the improvements thereon, as hereinafter defined (collectively, the “ Torrey Pines Property ;” the Torrey Pines Property and the Capital Property are sometimes each referred to individually as a “ Property ” and collectively, as the “ Properties ”);

WHEREAS, Torrey Pines Borrower, as lessor, and Torrey Pines Operating Lessee, as lessee, are parties to that certain Amended and Restated Lease Agreement dated as of April 11, 2007, as amended by that certain First Amendment to Lease Agreement dated as of April 1, 2009, and certain Second Amendment to Lease Agreement dated as of January 1, 2013 (the “ Torrey Pines Operating Lease ;” the Torrey Pines Operating Lease and the Capital Operating Lease are sometimes each individually referred to as an “ Operating Lease ” and collectively, as the “ Operating Leases ”);

61046467.DOC

WHEREAS , Lenders are the holders of that certain loan in the original principal amount of $199,875,000 (the “ Existing Loan ”) made to Borrowers pursuant to that certain Loan Agreement dated as of August 8, 2008 among Borrower Parties and certain predecessors-in-interest to Lenders (as amended, the “ Original Loan Agreement ”), which Original Loan Agreement was amended by that certain Amended and Restated Loan Agreement, dated as of February 26, 2013, by and among Borrower Parties and Lenders (other than Aareal Bank), and as amended by that certain First Amendment to Loan Agreement dated as of November 19, 2013 (as heretofore so amended, restated, replaced, supplemented or otherwise modified, the “ Existing Loan Agreement ”);

WHEREAS , as of the date hereof the outstanding amount of the Existing Loan is $195,700,646.72.

WHEREAS , Borrowers have requested that ACC advance $2,299,353.28 of additional loan proceeds to Borrowers, such that, after giving effect thereto, the principal amount of the Loan will be $198,000,000 (the “ Loan Amount ”); and

WHEREAS , in connection with the foregoing, Borrower Parties, Agent and Lenders desire to amend and restate the Existing Loan Agreement in its entirety by the execution of this Loan Agreement .

NOW, THEREFORE , in consideration of the premises and of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the Existing Agreement is hereby amended and restated, and the parties hereto hereby agree as follows:

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ARTICLE I

DEFINITIONS

Section 1.1 Definitions . For purposes of this Loan Agreement, the following terms shall have the respective meanings set forth in this Article I :

“ Account Agreements ” mean collectively, with respect to each of the Accounts, those certain agreements which govern such Accounts attached hereto as Exhibit B (or which shall be in such other form acceptable to Agent and substantially in the form as attached hereto as Exhibit B from time to time) among Borrower Parties, Agent and the bank or financial institution at which any of such Accounts are held.

“ Accounts ” means, collectively, all accounts of each Borrower Party and all accounts of any other Person, including Manager (except the Excluded Accounts), held on behalf of or for the benefit of any Borrower Party, including the Capital/FF&E Reserve Account, the Impositions and Insurance Reserve Account, the Operating Account, the Security Deposit Account, the Cash Collateral Account, the Ground Rent Reserve Account and, if established, the account referred to in Section 4.12(g) hereof.

“ Additional Interest ” means the following:

(a) in the event that any Lender Interest Rate Protection Agreement is entered into and is then in effect, all sums payable by Borrowers to Agent or to any Lender pursuant thereto, including any sums payable by Borrowers to Agent or to any Lender in connection with any termination of such Lender Interest Rate Protection Agreement; and

(b) all sums payable pursuant to Sections 2.6 through 2.9 hereof.

“ Administration Fee ” has the meaning set forth in the Loan Fee Letter.

“ Affected Lender ” has the meaning set forth in Section 2.9(d) hereof.

“ Affiliate ”, as determined with respect to any Person, means any other Person:

(a) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such Person; or

(b) which, directly or indirectly, beneficially owns or holds ten percent (10%) or more of any class of stock or any other ownership interest in such Person; or

For purposes of this definition, Guarantors, each Borrower Party Partner, any other Persons who, in conformance with this Loan Agreement and the other Loan Documents become

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Borrower Party Partners after the Closing Date, and any of Affiliates of the foregoing shall be deemed to be “Affiliates” of Borrower Parties.

“ AHT OP ” means Ashford Hospitality Limited Partnership, a Delaware limited partnership.

“ AHT REIT ” means Ashford Hospitality Trust, Inc., a Maryland business corporation.

“ Agent ” has the meaning set forth in the first paragraph of this Loan Agreement.

“ Allocated Loan Amount ” means, with respect to each Property, the amount set forth with respect to such Property on Exhibit C , such Allocated Loan Amounts to be reduced proportionately by each permitted payment of principal made by Borrowers pursuant to this Loan Agreement, including, without limitation, regular payments of principal pursuant to Section 2.3(b)(i) hereof.

“ Amortization Amount ” means, with respect to each Payment Date commencing with the first Payment Date through and including the last Payment Date occurring prior to the Maturity Date, the amortization payment in the amount set forth on Exhibit N attached hereto and required to be made pursuant to Section 2.3(b) hereof; which Amortization Amount is based on a thirty (30) year amortization schedule and an assumed interest rate of six percent (6.0%) per annum. Subsequent to a Release in accordance with Section 2.14 hereof, the Amortization Amount shall be adjusted by Agent to reflect the then applicable outstanding principal balance of the Loan after giving effect to such Release.

“ Anti-Money Laundering Laws ” means any laws or regulations relating to money laundering or terrorist financing, including, without limitation, the Bank Secrecy Act, 31 U.S.C. sections 5301 et seq .; the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a the USA Patriot Act); Laundering of Monetary Instruments, 18 U.S.C. section 1956; Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957; the Financial Recordkeeping and Reporting of Currency and Foreign Transaction Regulations, 31 C.F.R. Part 103; and any similar laws or regulations currently in force or hereafter enacted.

“ Applicable Accounting Standards ” means the Uniform System of Accounts for the Lodging Industry, Tenth Revised Edition (unless otherwise set forth in the Management Agreements), consistently applied.

“ Applicable Interest Rate ” has the meaning set forth in Section 2.2(a) hereof.

“ Appraisal ” means, with respect to any Property, a written appraisal report of such Property, as the term “appraisal” is defined in the Code of Professional Ethics of the American Institute of Appraisers, meeting the requirements of the Federal Institutions Reform, Recovery and Enforcement Act of 1989, as amended, prepared by a professional appraiser retained by Agent at Borrowers’ expense, who is a member of the American Institute of Appraisers, addressed to Agent,

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setting forth such appraiser’s determination of the fair market value of the Property on the date of the Appraisal and which shall otherwise be in form, scope and substance be satisfactory to Agent. In the event Agent agrees to accept an Appraisal Update in lieu of an appraisal of the nature described in the immediately preceding sentence, such Appraisal Update shall be deemed to be an Appraisal.

“ Appraisal Update ” means any supplement or “update” to an Appraisal, addressed to Agent, prepared by an appraiser who is a member of the American Institute of Appraisers and setting forth such appraiser’s determination of the fair market value of the applicable Property as of the date of the Appraisal Update and which shall in form, scope and substance be satisfactory to Agent.

“ Appraised Value ” means, with respect to any Property, the fair market value of such Property which would be obtained in an arm’s length transaction between an informed and willing buyer and an informed and willing seller, under no compulsion, respectively, to buy or sell, as set forth in the Appraisal.

“ Approved Bank ” means Agent and any other bank or other financial institution, the long term unsecured debt obligations of which are rated at least “A-” by S&P and “A3” by Moody’s or equivalent rating by Fitch Inc., or are otherwise approved in writing by Agent in its reasonable discretion.

“ Approved Capital/FF&E Expenditures Budget ” means, for any Fiscal Year of Borrower Parties, the Capital/FF&E Expenditures Budget approved (or deemed approved) by Agent pursuant to Section 4.1(a)(v) hereof, and any amendments or modifications thereto approved (or deemed approved) by Agent pursuant to Section 4.1(a)(v) hereof.

“ Ashford Prime OP ” means Ashford Hospitality Prime Limited Partnership, a Delaware limited partnership.

“ Ashford Prime REIT ” means Ashford Hospitality Prime, Inc. a Maryland business corporation.

“ Assignee ” has the meaning set forth in Section 9.1 hereof.

“ Assignment and Acceptance ” has the meaning set forth in Section 9.4 hereof.

“ Assignment of Agreements ” means that certain Second Amended and Restated Assignment of Agreements dated as of the Closing Date made by Borrower Parties to Agent.

“ Assignments of Leases ” means each Second Amended and Restated Assignment of Leases and Rents dated as of the Closing Date made by one or more Borrower Parties to Agent.

“ Assumed Debt Service ” means as of any Testing Determination Date, the greater of:

(i) the scheduled interest and principal payments due under the Loan Documents for the twelve (12)-month period ending on such Testing Determination Date (or, during the first

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twelve (12) months of the term of the Loan, the annualized scheduled interest and principal payments) (assuming, for purposes of this definition, that the Applicable Interest Rate throughout such twelve (12) month period shall be equal to the Applicable Interest Rate as of the Testing Determination Date),

(ii) the aggregate amount of interest and principal amortization payments that would be payable for the twelve (12) month period ending on such Testing Determination Date on a hypothetical 30-year fully-amortizing loan in an original principal amount equal to the outstanding principal amount of the Loan as of such Testing Determination Date with an interest rate equal to the sum of the Treasury Rate plus two and one-half percent (2.50%) per annum and which requires monthly constant payments of principal and interest on the first date of each month throughout the term of such loan; and

(iii) the product of (A) the outstanding principal as of the Testing Determination Date multiplied by (B) seven percent (7.00%).

“ Assumed Debt Service Coverage Ratio ” means as of any Testing Determination Date, the ratio of (i) the Cash Available for Debt Service for the twelve (12) month period ending with the most recently completed calendar month to (ii) the Assumed Debt Service as of such Testing Determination Date.

“ Base Management Fee ” equals the greater of (a) the “Base Management Fee” payable to Manager under the Management Agreements, (b) three percent (3%) of Gross Revenues and (c) the then current market standard “base management fee” as reasonably determined by Lender as of the date of determination; provided, however, that for so long as Hilton Management LLC (or any Affiliate thereof) is Manager, “Base Management Fee” shall mean the “Fixed Management Fee” payable to Manager under the Management Agreements as of the date hereof.

“ Base Rate ” means, as of any date of determination, a rate per annum equal to one and one-half percent (1.5%) plus the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Rate plus one-half percent (0.50%). Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Rate, respectively.

“ Basel III ” has the meaning set forth in Section 2.9(b) hereof.

“ Borrower ” and “ Borrowers ” each has the meaning set forth in the first paragraph of this Loan Agreement.

“ Borrower Certificate ” means that certain certificate dated as of the Closing Date made by Borrowers in favor of Agent.

“ Borrower Party ” and “ Borrower Parties ” each has the meaning set forth in the first paragraph of this Loan Agreement.

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“ Borrower Party Partner ” means any current or future general partner or managing member of a Borrower Party.

“ Borrowing Margin ” means two and sixty-five hundredths percent (2.65%) per annum.

“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York City, London, England or Frankfurt, Germany are authorized or required by law to close.

“ Calendar Quarter ” means each of the periods of January 1 through the immediately succeeding March 31, April 1 through the immediately succeeding June 30, July 1 through the immediately succeeding September 30, and October 1 through the immediately succeeding December 31.

“ Capital/FF&E Expenditures ” means expenditures for (a) capital alterations or improvements to the Properties which are required or permitted under Applicable Accounting Standards to be capitalized or (b) the repair, replacement or acquisition (as appropriate) of FF&E.

“ Capital/FF&E Expenditures Budget ” means, for any Fiscal Year of Borrower Parties, a budget for Capital/FF&E Expenditures delivered to Agent pursuant to Section 4.1(a)(v) hereof.

“ Capital/FF&E Reserve Account ” has the meaning set forth in Section 2.11(b) hereof.

“ Capital/FF&E Reserve Amount ” means, for any calendar month, an amount equal to five percent (5%) of Gross Revenues for the month prior to the immediately preceding calendar month (i.e., the Capital/FF&E Reserve Amount due and payable on August 1 ^st will be five percent (5%) of Gross Revenues for June.)

“ Capital Property ” has the meaning set forth in the recitals hereof.

“ Capital Operating Lessee ” has the meaning set forth in the recitals hereof.

“ Cash Available for Debt Service ” means, with respect to any period in which a determination is being made, the excess of (a) Gross Revenues for such period over (b) Operating Expenses for such period.

“ Cash Collateral Account ” has the meaning set forth in Section 2.11(f) hereof.

“ Cash Collateral Payment Amount ” means, as to any calendar month with respect to which Borrowers are required to make a deposit into the Cash Collateral Account pursuant to Section 2.11(f) hereof on account of the existence of a Cash Sweep Condition, the excess of (a) Owners’ Remittance for such calendar month over (b) the sum of (without duplication of any sums deducted by Manager prior to the determination of Owners’ Remittance in accordance with Section 7.02 of the Management Agreements) (i) all Operating Expenses for such calendar month

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(excluding any amounts paid in contravention of the Loan Documents), (ii) payments on account of Debt Service for such calendar month, (iii) deposits into the Capital/FF&E Reserve Account, the Impositions and Insurance Reserve Account, and/or the Ground Rent Reserve Account required during such calendar month and (iv) non-recurring and other extraordinary expenses which are not expected to be incurred on an annual basis, but which have been incurred for such calendar month and are reasonable and necessary in accordance with Comparable Standards.

“ Cash Sweep Condition ” shall exist:

(a) during the continuance of an Event of Default and/or

(b) with respect to each Testing Determination Date (i) from the next Payment Date occurring after the delivery of the Quarterly Compliance Statement required to be delivered to Agent pursuant to Section 4.1(a)(ii) hereof for the Calendar Quarter ending on such Testing Determination Date which provides that the Assumed Debt Service Coverage Ratio is less than 1.25 to 1.00 (the “ Minimum Cash Sweep DSCR ”) or (ii) as of such Testing Determination Date, the Quarterly Compliance Statement required to be delivered to Agent pursuant to Section 4.1(a)(ii) hereof for the Calendar Quarter ending on such Testing Determination Date is not delivered to Agent by the date required under Section 4.1(a)(ii) hereof, unless , in the case of clause (i) (but not clause (ii)), Borrowers shall have either (y) made a partial prepayment of the outstanding principal amount of the Loan (without payment of the Spread Maintenance Premium, but, for the avoidance of doubt, subject to the payment of all other sums, if any, required under Section 2.3(i) hereof) in an amount such that, after giving effect thereto as though such prepayment was made on the first day of the twelve (12) month period ending on such Testing Determination Date, the Assumed Debt Service Coverage Ratio would be greater than or equal to the Minimum Cash Sweep DSCR or (z) delivered to Agent a Cash Sweep Letter of Credit, and in each of clause (i) and (ii) shall continue to exist thereafter until the earliest of (A) the occurrence of two (2) consecutive Testing Determination Dates on which the Assumed Debt Service Coverage Ratio for the Calendar Quarter ending on such Testing Determination Date shall be equal to or greater than the Minimum Cash Sweep DSCR, (B) the date upon which the amount then on deposit in the Cash Collateral Account shall, if applied to the outstanding principal amount of the Loan, would cause the Assumed Debt Service Coverage Ratio to be equal to or greater than the Minimum Cash Sweep DSCR and Borrower instructs Agent to apply such amount to the partial prepayment of the outstanding principal amount of the Loan (without payment of the Spread Maintenance Premium, but, for the avoidance of doubt, subject to the payment of all other sums, if any, required under Section 2.3(i) hereof) and (C) the date upon which Borrower shall have delivered to Agent a Cash Sweep Letter of Credit. Notwithstanding the foregoing, any Cash Sweep Condition which commenced solely with respect to the matter described in clause (b)(ii) above shall end upon the delivery of the Quarterly Compliance Statement then required to be delivered to Agent pursuant to Section 4.1(a)(ii) , if such Quarterly Compliance Statement provides that the Assumed Debt Service Coverage Ratio was equal to or greater than the Minimum Cash Sweep DSCR as of the last Testing Determination Date, but only to the extent that such Quarterly Compliance Statement is delivered to Agent within thirty (30) days of the date due, it being agreed that this provision shall not be applicable with respect to any Quarterly Compliance Statement which is delivered more than thirty (30) days after the date due.

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“ Cash Sweep Letter of Credit ” means a Letter of Credit in a stated amount which if deducted from the outstanding principal amount of the Loan on the first day of the twelve (12) month period used in the calculation of the Assumed Debt Service on the applicable Testing Determination Date would cause the Assumed Debt Service Coverage Ratio to be greater than or equal to the Minimum Cash Sweep DSCR.

“ Casualty ” shall mean a fire or any other physical loss or physical damage to any Property.

“ Casualty Threshold ” means $1,500,000.

“ Central Bank Pledge ” has the meaning set forth in Section 9.1 hereof.

“ Closing Date ” means the date of this Loan Agreement.

“ Collateral ” means the Mortgaged Property (including any leasehold improvements), the Accounts and any other real or personal property, tangible or intangible heretofore, now or hereafter pledged, assigned or delivered pursuant to the Loan Documents or otherwise by any Borrower Party or any other Person to Agent as security for the payment or performance of the Obligations.

“ Commitment ” means, (i) as to any Lender, the commitment of such Lender to make its Pro Rata Share of the Loan as set forth in its signature page hereto or in an Assignment and Acceptance, as such commitments may be adjusted by the making of assignments to Assignees, and (ii) as to all Lenders, the aggregate commitment of all Lenders to make the Loan, which aggregate commitment equals the Loan Amount.

“ Comparable Standards ” means, with respect to any Property the standards of management, operation and maintenance of first-class hotels in the county and state in which such Property is located which are comparable to such Property in location, size, facilities, amenities, quality and nature; provided , however , that for so long as Hilton Management LLC (or any Affiliate thereof) is Manager, “Comparable Standards” shall mean the operation, management, and maintenance of the Properties in accordance with and as required under Section 4.01 of the Management Agreements.

“ Condemnation Threshold ” means $500,000.

“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of equity interests, by contract or otherwise, “ Controls ”, “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Covered Bond Pool Pledge ” has the meaning set forth in Section 9.1(a) hereof.

“ Debt Service ” means, as to any period with respect to which Debt Service is being determined, the sum of (a) the amount of regularly scheduled amortization payments due for each

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such period pursuant to Section 2.3(b)(i) hereof and (b) the amount of Interest due for each such period.

“ Debt Service Coverage Ratio ” means, as of any Testing Determination Date, the ratio of (a) Cash Available for Debt Service for the twelve (12) month period ending on such Testing Determination Date to (b) scheduled interest and principal payments due under the Loan Documents for the twelve (12) month period immediately following such Testing Determination Date (assuming, for the purposes of this definition, that the Applicable Interest Rate throughout such twelve (12) month period shall be equal to the Applicable Interest Rate as of such Testing Determination Date, after giving effect to the Interest Rate Protection Agreement). For purposes of Section 8.1(r) hereof only, the Debt Service Coverage Ratio shall be calculated using the scheduled interest payments which would be due under the Loan Documents for the twelve (12) month period immediately following such Testing Determination Date assuming that the outstanding principal amount of the Loan was reduced by the balance, if any, of the Cash Collateral Account as of such Testing Determination Date.

“ Debt Yield ” means, as of any date, the ratio (expressed as a percentage) of (i) the Cash Available for Debt Service for the twelve (12) month period ending on the most recent Testing Determination Date to (ii) the unpaid principal amount of the Loan.

“ Default ” means any event, condition or state of facts which would, if uncured following the giving of notice or passage of any applicable cure period, or both, constitute an Event of Default.

“ Default Rate ” means, a per annum interest rate which shall from day‑to‑day be equal to four percent (4%) per annum in excess of the Applicable Interest Rate.

“ Defaulting Lender ” has the meaning set forth in Section 11.14 hereof.

“ Disclosed Litigation ” means the matters listed on Exhibit D attached hereto.

“ Disqualified Person ” means any Person if, at any time as of which a determination is required under the terms of this Loan Agreement, such Person is a Person to which a proposed Transfer would cause Agent or any Lender (or the parent or holding company of Agent or any Lender) to be prohibited from maintaining the Loan or subject to any fine or penalty, or the cost of maintaining the Loan would increase as a result of such Transfer; provided a Person shall not constitute a Disqualified Person unless after giving effect to the Proposed Transfer, such Person would Control Borrower Parties or own a direct or indirect interest in Borrower Parties which is equal to or greater than 20% of the ownership interests in Borrower Parties.

“ Documentation ” has the meaning set forth in Section 10.24 hereof.

“ Dollar ” and the sign “ $ ” means lawful currency of the United States of America.

“ Dodd-Frank ” has the meaning set forth in Section 2.9(b) hereof.

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“ Eligibility Requirements ” means, with respect to any Person in connection with a Covered Bond Pool Pledge, that such Person (i) has total assets (in name or under management) in excess of $600,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity of $250,000,000 and (ii) is regularly engaged in the business of making or owning commercial real estate loans or operating commercial mortgage properties.

“ Eligible Assignee ” means (a) Agent or any Affiliate of Agent, (b) a Lender or any Affiliate of a Lender, (c) a commercial bank having total assets in excess of $1,000,000,000, or (d) a finance company or other financial institution which is regularly engaged in the ordinary course of its business in making, purchasing or investing in loans similar in nature to the Loan, which has total assets in excess of $250,000,000, has a net worth of at least $100,000,000 and which is otherwise acceptable to Agent; provided , however , no Borrower, no Guarantor, Manager or any Borrower Partner or any Affiliate of a Borrower, a Guarantor, Manager or any Borrower Partner or any Prohibited Assignee shall be an Eligible Assignee.

“ Endorsement ” has the meaning set forth in Section 5.17(c) hereof.

“ Engineer’s Audit ” means collectively, (i) the Property Condition Report for the Torrey Pines Property dated October 22, 2014 and prepared by IVI Assessment Services, Inc. and (ii) the Property Condition Report for the Capital Property dated October 22, 2014 and prepared by IVI Assessment Services, Inc.

“ Environmental Audit ” means collectively, (i) the Phase I Environmental Site Assessment for the Torrey Pines Property dated October 21, 2014 and prepared by IVI Assessment Services, Inc. and (ii) the Phase I Environmental Site Assessment for the Capital Property dated October 22, 2014 and prepared by IVI Assessment Services, Inc.

“ Environmental Indemnity ” means that certain Second Amended and Restated Environmental Indemnity dated as of the Closing Date made by Borrowers and Guarantors for the benefit of Agent.

“ Equipment Leases ” shall mean any leases executed in connection with the financing and leasing of equipment used in the ordinary course of operation of any Property.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder by any Governmental Authority, as from time to time in effect.

“ ERISA Affiliate ” means any organization, trade or business, or other arrangement (whether or not incorporated) which is a member of a group of which any Borrower Party is also a member and which is treated as a single employer within the meaning of IRC Section 414(b), (c), (m) or (o) or Section 4001 of ERISA.

“ Event(s) of Default ” has the meaning set forth in Article VII hereof.

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“ Excluded Accounts ” means (i) the Payment Accounts and (ii) any accounts established by Manager for purposes of performing centralized accounting functions, “in-house” banks or accounts, petty cash funds, or any general ledger accounts, in accordance with Section 7.01 of the Management Agreements.

“ Excluded Sums ” has the meaning set forth in Section 11.3 hereof.

“ Excluded Taxes ” means (a) income, franchise, branch profits or similar Taxes imposed on (or measured by) Agent’s or any Lender’s net income or net profits by any jurisdiction and (b) Taxes imposed by reason of the failure of the Agent or any Lender to comply with its obligations under Section 2.8 and/or Section 11.10 hereof.

“ Extension Term ” has the meaning set forth in Section 2.15(a) .

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum (based on a 360-day year) equal, for each day of such period, to the rate of interest quoted at 11:00 a.m. New York time charged on overnight federal funds transactions with member banks of the Federal Reserve System.

“ FF&E ” has the meaning set forth in the Mortgages.

“ Financial Statements ” means, (a) with respect to any Person, a balance sheet, statement of operations (income and expenses), statement of cash flow, statement of changes in partners’ or members’ capital or shareholders’ equity, as the case may be, and any other financial information with respect to such Person as shall be required by Agent, in each case, prepared in accordance with Applicable Accounting Standards and in a form acceptable to Agent. All Financial Statements to the extent reflecting income, expenses, or other operational aspects shall contain all relevant financial information of such Person for (i) the period for which such Financial Statements had been prepared, (ii) the Fiscal Year to date of such Person, and (iii) the twelve (12)-calendar month period ending on the last day of the period for which such Financial Statements had been prepared, and shall contain figures for the corresponding date and periods in the preceding Fiscal Year.

“ Financing Statements ” means financing statements in accordance with the applicable uniform commercial code to be filed with the appropriate state and/or county offices for the perfection of a security interest in the Collateral.

“ First Extended Maturity Date ” has the meaning set forth in Section 2.15(a) .

“ First Extension Term ” has the meaning set forth in Section 2.15(a) .

“ Fiscal Year ” means for any Person, the annual period such Person employs for accounting purposes, which shall be the calendar year, or such other period as such Person may designate.

“ Force Majeure Event ” means any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, acts of war or terrorism, sabotage, accidents, inability to obtain

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services, labor, or materials or reasonable substitutes therefor, governmental actions, riots, civil commotions, fire, casualty or condemnation, extreme weather conditions, explosions, in each case if due to a cause beyond the reasonable control of the party obligated to perform.

“ Fourth IRPA ” has the meaning set forth in Section 4.3(a)(iv) hereof.

“ Full Recourse Event ” means, collectively, any or all of the following:

(a) the appointment at a Borrower Party’s or its Affiliate’s initiation or with a Borrower Party’s or its Affiliate’s consent or approval, express or implied, of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings with respect to a Borrower Party or a Borrower Party Partner or with respect to all, or substantially all, of any Borrower Party’s or a Borrower Party Partner’s property, or for the winding-up or liquidation of any Borrower Party’s or Borrower Party Partner’s affairs (in each case, other than at the direction or request of Agent);

(b) the filing by a Borrower Party or a Borrower Party Partner of a petition, or the institution by a Borrower Party or its Affiliate or consent or approval by a Borrower Party or its Affiliate, express or implied, to the institution against a Borrower Party or Borrower Party Partner of, proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors; and/or

(c) the voluntary termination, cancellation or reduction of the term of the Ground Lease by a Borrower Party or its Affiliates (or consented to by a Borrower Party or its Affiliates) without the prior written consent of Agent.

“ GAAP ” means those generally accepted accounting principles and practices which are recognized as such by the American Institute of Certified Public Accountants or by the Financial Accounting Standards Board or through appropriate boards or committees thereof after the Closing Date, and which are consistently applied for all periods, so as to properly reflect the financial position of a Person, except that any accounting principle or practice required or permitted to be changed by the Financial Accounting Standards Board (or other appropriate board or committee of that Board) in order to continue as a generally accepted accounting principle or practice may be so changed, so long as such required or permitted change shall not have the effect of permitting Borrower Parties’ compliance with any financial covenants or performance tests contained in this Loan Agreement when without such change, Borrower Parties would not so comply.

“ Governmental Authority ” means any federal, state, county, municipal, parish, provincial or other government, or any department, commission, board, court, agency, committee, whether of the United States of America or any other country, or any instrumentality of any of them, or any other political subdivision thereof.

“ Government List ” means (a) the OFAC SDN List, (b) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Agent notified Borrowers in writing is now included in “Government Lists” or (c) any similar lists maintained by the United States Department of State, the United States

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Department of Commerce or any other government authority or pursuant to any Executive Order of the President of the United States of America that Agent notified Borrowers in writing is now included in “Government Lists.”

“ Gross Revenues ” means, for any period, collectively but without duplication, all revenues, receipts, fees and proceeds of any kind, including Rents, actually received by or on behalf of any Borrower Party in connection with the ownership, use, occupancy, management and operation of the Properties for such period, determined in accordance with the cash basis of accounting ; provided , that ,

(a) the following items shall be excluded from the computation of “Gross Revenues” for all purposes: (i) proceeds of the Loan, (ii) any loan, equity investment or capital contribution made by a Borrower Party Partner or any other Person to a Borrower Party, (iii) insurance proceeds (except for business interruption or rent loss insurance proceeds), (iv) condemnation awards, (v) security deposits under Leases, (vi) sales, use and occupancy taxes, and (vii) revenues of tenants (other than Operating Lessees) or concessionaires;

(b) non-recurring and other extraordinary income shall be excluded from the computation of “Gross Revenues” for purposes of calculating “Cash Available for Debt Service” only (as opposed to calculating any “Cash Sweep Payment Amount”); and

(c) rent received by Borrowers from Operating Lessees under the Operating Leases shall be excluded from the computation of “Gross Revenues” for purposes of calculating “Cash Available for Debt Service” and “Cash Sweep Payment Amount”.

“ Ground Lease ” means, with respect to the Torrey Pines Property, that certain Percentage Lease dated August 10, 1987, The City of San Diego, as ground lessor, Torrey Pines Hotel Associates, as ground lessee, a memorandum of which was recorded on January 10, 1989 as Instrument No. 89-013605 in the Official Records of San Diego County, California, as (i) assigned to Hilton Hotels Corporation (a/k/a Hilton Worldwide, Inc.) pursuant to that certain Assignment and Assumption of Percentage Lease and Deed to Improvements dated December 29, 1998 and recorded on December 29, 1998 as Instrument No. 1998-0853813 in the Official Records of San Diego County, California and further assigned by Hilton Hotels Corporation to (ii) Torrey Pines Borrower pursuant to that certain Assignment and Assumption of Percentage Lease and Deed to Improvements dated December 17, 2003 and recorded on December 18, 2003 as Instrument No. 2003-1487568 in the Official Records of San Diego County, California.

“ Ground Lesso r” means, the ground lessor under the Ground Lease.

“ Ground Rent ” means any and all rent payable by Torrey Pines Borrower under the Ground Lease.

“ Ground Rent Reserve Account ” has the meaning set forth in Section 2.11(e)(i) hereof.

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“ Guarantor ” means Ashford Prime OP and any replacement guarantor in connection with a Permitted Transfer or as otherwise consented to by Agent (collectively, “ Guarantors ”).

“ Impositions ” means and includes all taxes, assessments for public improvements or benefits and any payments in lieu thereof, whether or not commenced or completed prior to the date hereof or while the Loan is outstanding, water rates and sewer rents, charges, license fees, permit fees, inspection fees and other governmental levies or payments, of every kind and nature whatsoever, general and special, foreseen or unforeseen, ordinary and extraordinary, which now or at any time hereafter may be assessed, levied, confirmed, imposed or which may become a lien upon the Mortgaged Property, or any portion thereof, or which are payable with respect thereto, or upon the Rent thereof, or on the occupancy, operation, use, possession or activities thereof, whether any or all of the same be levied directly or indirectly or as excise or income or franchise taxes in lieu of taxes which are otherwise imposed upon property of the same type(s) as the Mortgaged Property together with any penalties or other charges with respect to the late payment or non-payment thereof.

“ Impositions and Insurance Reserve Account ” has the meaning set forth in Section 2.11(d) hereof.

“ Indebtedness ” means, with respect to any Person, (a) all indebtedness for borrowed money, including all loans made to such Person, or for the deferred purchase price of property or services (including all obligations, contingent or otherwise in connection with letter of credit facilities, acceptance facilities or other similar facilities), (b) all obligations evidenced by bonds, notes, debentures or other similar instruments, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (d) all capital lease obligations, (e) all uninsured obligations, contingent or otherwise in connection with indemnities, hold harmless agreements and similar arrangements and in connection with interest rate exchange agreements and similar instruments, and (f) all Indebtedness of the nature referred to in clauses (a) through (e) above of another Person guaranteed directly or indirectly or secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contract rights) owned by the Person with respect to whom Indebtedness is being determined, even though such Person has not assumed or become liable for the payment of such Indebtedness.

“ Indemnitee ” has the meaning set forth in Section 4.15 hereof.

“ Insurance Policies ” means, in addition to any insurance required to be maintained by Borrower Parties pursuant to the Ground Lease, a Management Agreement, any Lease and any other Loan Document, the insurance policies and coverage set forth on Exhibit E hereto.

“ Insurance Review ” means a review by a consultant selected by Agent of the Insurance Policies.

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“ Interest ” means interest payable on the outstanding principal balance of the Loan at the Applicable Interest Rate or Default Rate, as applicable.

“ Interest Rate Protection Agreement ” means an interest rate protection arrangement which satisfies the requirements set forth in Section 4.3 hereof.

“ Interest Rate Protection Agreement Acknowledgment ” means an acknowledgment of the assignment of each Borrower’s interest in such Interest Rate Protection Agreement pursuant to an acknowledgment in the form annexed hereto as Exhibit H or an agreement similar in effect which is acceptable to Agent.

“ Interest Period ” means the period commencing on each Payment Date and ending on the day immediately preceding the next succeeding Payment Date, provided that the first Interest Period shall commence on the Closing Date.

“ Initial IRPA ” has the meaning set forth in Section 4.3(a)(i) hereof.

“ Initial Maturity Date ” means November 7, 2019, or any earlier date on which the Loan shall become due, whether by acceleration or otherwise.

“ Initial Term ” means the period commencing on the Closing Date and ending on the Initial Maturity Date.

“ IRC ” means the Internal Revenue Code of 1986, as amended.

“ Lease Guaranties ” has the meaning set forth in the Mortgages.

“ Lease Security ” has the meaning set forth in Section 4.4(j) hereof.

“ Leases ” has the meaning set forth in the Mortgages but shall exclude the Ground Lease, the Equipment Leases and the Operating Leases.

“ Legal Requirements ” means collectively, all laws, ordinances, rules, regulations, codes, orders and directives of any Governmental Authority applicable to Borrower Parties, Guarantors, Manager (to the extent the same relates to Manager’s obligations with respect to a Management Agreement), Agent, Lenders or the Properties or any portion thereof, including all applicable licenses, building codes, rent stabilization laws, zoning and subdivision ordinances, flood disaster, health and environmental laws and regulations, and the Americans with Disabilities Act of 1990, Pub. L. No. 89-670, 104 Stat. 327 (1990), as amended, and all regulations promulgated pursuant thereto.

“ Lender Interest Rate Protection Agreement ” means an Interest Rate Protection Agreement to which Borrowers and Agent, one or more Lenders, or an Affiliate thereof are parties in the event that Borrowers and Agent, one or more Lenders, or an Affiliate thereof elect to enter into an Interest Rate Protection Agreement or in the event Agent elects to enter into an Interest Rate Protection Agreement with Agent, one or more Lenders, or an Affiliate thereof pursuant to Section 4.3 hereof.

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“ Lenders ” has the meaning given such term in the first paragraph of this Loan Agreement.

“ Lessee ” has the meaning set forth in the Mortgages.

“ Letter of Credit ” means an irrevocable, unconditional, transferable, clean sight draft letter of credit acceptable to Agent in its good faith reasonable discretion (either an evergreen letter of credit or one which does not expire until at least one hundred (100) days after the scheduled Maturity Date) in favor of Agent and entitling Agent to draw thereon in New York, New York (or in accordance with the procedures of the issuing bank, provided that such issuing bank allows for draws by facsimile), issued by a domestic Approved Bank or the U.S. agency or branch of a foreign Approved Bank, at the request of an applicant/obligor that is not a Borrower Party.

“ LIBOR ” means a rate per annum (expressed as a percentage and rounded upward, as necessary, to the next nearest 1/1000 of 1%), equal to (i) the LIBOR Screen Rate for a period comparable to such LIBOR Rate Period, or (ii) if no LIBOR Screen Rate is available for a period comparable to such LIBOR Rate Period, the rate per annum as supplied to Agent at its request, at or about 11:00 a.m. London time on the day that is two (2) LIBOR Banking Days prior to the first day of the applicable LIBOR Rate Period, by any major bank or financial institution in the London interbank market selected by Agent in its discretion as such bank's offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in Dollars for a period comparable to such LIBOR Rate Period, and, if any such applicable LIBOR Screen Rate or the rate supplied to Agent is below zero, LIBOR will be deemed to be zero.

“ LIBOR Banking Day ” means any Business Day on which dealings in deposits in Dollars are transacted in the London interbank market and banks are also open for business in London, England.

“ LIBOR Rate ” means, for any accrual period, the sum of (a) LIBOR for such period and (b) the Borrowing Margin.

“ LIBOR Rate Period ” means each successive period for the computation of Interest at a LIBOR Rate as set forth below. The first LIBOR Rate Period shall commence on the Closing Date and end on the first Payment Date. Each LIBOR Rate Period after the first LIBOR Rate Period shall have a duration of one (1) month commencing on a Payment Date and ending on the date immediately preceding the immediately following Payment Date. Notwithstanding the foregoing, in the case of a LIBOR Rate Period which would otherwise end after the Maturity Date, such LIBOR Rate Period shall have a duration equal to the period commencing on the effective date of such LIBOR Rate Period and ending on and including the Maturity Date. If any LIBOR Rate Period would otherwise end on a day which is not a LIBOR Banking Day, such LIBOR Rate Period shall be extended to the next succeeding LIBOR Banking Day.

“ LIBOR Screen Rate ” means the London interbank offered rate administered by the ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for deposits in U.S. Dollars for the relevant period displayed on page LIBOR01 of the

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Reuters screen (or any replacement Reuters page which displays that rate) at or about 11:00 a.m. London time on the Interest Rate Determination Date, or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If the agreed page is replaced or service ceases to be available, Agent may specify another page or service displaying the appropriate rate.

“ Lien ” means any lien (including any mechanic’s, judgment or tax lien), mortgage, deed of trust, security interest, assignment, pledge or encumbrance, or conditional sale or title retention agreement or lease in the nature thereof, or any other interest in property designed to secure the repayment of indebtedness or the performance of an obligation, whether arising by agreement or under any statute or law, or otherwise.

“ Loan ” means the loan made by Lenders to Borrowers pursuant to this Loan Agreement.

“ Loan Agreement ” has the meaning set forth in the first paragraph of this Loan Agreement.

“ Loan Amount ” has the meaning set forth in the recitals of this Loan Agreement.

“ Loan Documents ” means, collectively, this Loan Agreement, the Note, the Mortgages, the Financing Statements, any Lender Interest Rate Protection Agreement, the Assignments of Leases, the Assignment of Agreements, the Environmental Indemnity, the Recourse Liability Agreement, the Manager SNDAs, the Subordination and Security Agreements, the Borrower Certificate and such other documents, agreements and instruments evidencing, securing or pertaining to the Obligations, or any part thereof executed on or about the Closing Date by a Borrower Party, a Borrower Party Partner, a Guarantor, Manager or any other Person or, as shall, from time to time thereafter be executed and delivered by a Borrower Party, a Borrower Party Partner, a Guarantor, Manager or any other Person, in each case pursuant to or in connection with the Loan or any other Loan Document.

“ Loan Fee Letter ” means that certain “Loan Fee Letter” dated as of the Closing Date between Agent and Borrowers.

“ Loan-to-Value Ratio ” means the ratio of (i) the aggregate outstanding principal amounts of the Loan as of the date of determination to (ii) the Appraised Value of the Properties and based on the then‑most current Appraisal or Appraisal Update, with such adjustments thereto as reasonably determined by Agent.

“ Management Agreement ” means, (i) with respect to the Torrey Pines Property, that Management Agreement between Torrey Pines Operating Lessee and Manager (as successor-in-interest to Hilton Worldwide, Inc., a/k/a Hilton Hotels Corporation) dated as of December 17, 2003, as amended by that certain Amendment to Management Agreements dated as of April 11, 2007, as supplemented by that certain Owner Agreement dated as of February 26, 2013, as amended by that certain letter agreement dated as of October 31, 2014 with respect to the Torrey Pines Property (as the same may be amended from time to time in accordance with this Agreement), and (ii) with

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respect to the Capital Property, that Management Agreement between Capital Operating Lessee and Manager (as successor-in-interest to Hilton Worldwide, Inc., a/k/a Hilton Hotels Corporation) dated as of December 17, 2003, as amended by that certain Amendment to Management Agreements dated as of April 11, 2007, as supplemented by that certain Owner Agreement dated as of February 26, 2013, as amended by that certain letter agreement dated as of October 31, 2014 with respect to the Capital Property (as the same may be amended from time to time in accordance with this Agreement), and with respect to each Property, any other management agreement given in substitution thereof approved in writing by Agent prior to its effectiveness, which approval may be withheld by Agent in its sole and absolute discretion, together with any material amendments or material modifications approved in writing by Agent prior to the effectiveness thereof, which approval shall not be unreasonably withheld, conditioned or delayed (provided that any amendment or modification which increases any amounts payable to Manager shall be deemed to be material).

“ Management Fees ” means all fees and reimbursements, including incentive fees, management fees (including Base Management Fees), marketing fees and accounting fees, payable to Manager pursuant to the Management Agreement.

“ Manager ” means Hilton Management LLC, or any replacement manager designated for any Property by a Borrower Party which owns or leases such Property, as the case may be, and approved by Agent prior to the retention thereof (provided that no such approval shall be required to the extent Manager is permitted to assign the Management Agreement pursuant to Section 9.02.2 of the applicable Management Agreement).

“ Manager SNDA ” means, (i) with respect to the Torrey Pines Property, that certain Second Amended and Restated Agreement Regarding Hotel Management dated as of the Closing Date and entered into between Agent, Manager, Torrey Pines Borrower and Torrey Pines Operating Lessee and (ii) with respect to the Capital Property, that certain Second Amended and Restated Agreement Regarding Hotel Management dated as of the Closing Date and entered into between Agent, Manager, Capital Borrower and Capital Operating Lessee, with respect to each Property, as modified from time to time in accordance with the terms hereof, or any substitute Manager SNDA between Agent and Torrey Pines Borrower and Torrey Pines Operating Lessee or Capital Borrower and Capital Operating Lessee, as the case may be.

“ Material Adverse Effect ” shall have the meaning as set forth in Section 3.5 hereof.

“ Material Lease ” means all Leases which individually or in the aggregate with respect to the same tenant and its Affiliates have a gross annual rent of more $100,000 per annum.

“ Material Operating Agreements ” means (a) the Operating Agreements set forth on Exhibit G attached hereto together with any contracts or agreements entered into in replacement thereof or substitution therefor, which have a noncancellable term which exceeds one (1) year in length and require in excess of an aggregate of $50,000 per annum in payments by any Borrower Party or Manager, and (b) any other Operating Agreement entered into after the Closing Date that has a noncancellable term which exceeds one (1) year in length and requires in excess of an aggregate of $50,000 per annum in payments by any Borrower Party or Manager.

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“ Material Taking ” means, with respect to any Property, a Taking where the Net Restoration Award equals or exceeds twenty five percent (25%) of the Allocated Loan Amount of such Property.

“ Maturity Date ” means the Initial Maturity Date, as the same may be extended pursuant to Section 2.15 , or such earlier date as the entire principal amount of the Loan shall become due and payable by acceleration or otherwise pursuant to the terms of the Loan Documents.

“ Minimum Cash Sweep DSCR ” has the meaning set forth in the definition of “Cash Sweep Condition.”

“ Monthly Operating Statement ” has the meaning set forth in Section 4.1(a)(i) hereof.

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Mortgaged Properties ” means, collectively, each Mortgaged Property.

“ Mortgaged Property ” has the meaning set forth in the Mortgages.

“ Mortgages ” means collectively (i) that certain Second Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Rents dated as of the Closing Date encumbering the leasehold estate of Torrey Pines Borrower in the Torrey Pines Property and executed by Torrey Pines Borrower in favor of or for the benefit of Agent (“ Torrey Pines Mortgage ”) and (ii) that certain Second Amended and Restated Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Rents dated as of the Closing Date encumbering the Capital Property and executed by Capital Borrower in favor of or for the benefit of Agent.

“ Multiemployer Plan ” means, at any time a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) subject to Title IV of ERISA, (i) to which any Borrower Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or (ii) with respect to which any Borrower Party or any ERISA Affiliate could be subjected to any liability under Title IV of ERISA.

“ Net Proceeds ” means the amount of all insurance proceeds paid pursuant to any Insurance Policy as the result of a Casualty, after deduction of the costs and expenses (including fees of any insurance consultant or adjuster and reasonable attorneys’ fees and disbursements), if any, incurred in collecting the same.

“ Net Restoration Award ” means the amount of all awards and payments received on account of a Taking, after deduction of the costs and expenses (including reasonable attorneys’ fees and disbursements), if any, incurred in collecting the same.

“ Non-Availability Notice ” has the meaning set forth in Section 2.7(a) .

“ Note ” means collectively (a) that certain Second Amended and Restated Promissory Note A in the original principal amount of $82,265,215.47 made in favor of ACC, (b) that certain

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Second Amended and Restated Promissory Note B in the original principal amount of $63,964,069.38 made in favor of Aareal Bank and (c) that certain Second Amended and Restated Promissory Note C in the original principal amount of $51,770,715.15 made in favor of WIB, each dated as of the Closing Date and jointly and severally made by Borrowers.

“ Obligations ” means, collectively, all present and future indebtedness, obligations, duties and liabilities of Borrowers or Guarantors to Agent or Lenders arising pursuant to this Loan Agreement, the Note, any Lender Interest Rate Protection Agreement or the other Loan Documents, and all interest accruing thereon, and attorneys’ fees and disbursements incurred in the drafting, negotiation, enforcement or collection thereof, regardless of whether such indebtedness, obligations, duties or liabilities are direct, indirect, fixed, contingent, joint, several or joint and several.

“ OFAC ” means the Office of Foreign Assets Control of the United States.

“ OFAC Laws ” means any laws, regulations, and Executive Orders relating to the economic sanctions programs administered by OFAC, including without limitation, the International Emergency Economic Powers Act, 50 U.S.C. sections 1701 et seq .; the Trading with the Enemy Act, 50 App. U.S.C. sections 1 et seq .; and the Office of Foreign Assets Control, Department of the Treasury Regulations, 31 C.F.R. Parts 500 et seq . (implementing the economic sanctions programs administered by OFAC).

“ OFAC SDN List ” means the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC

“ OFAC Violation ” has the meaning assigned to such term in Section 4.23 hereof.

“ Operating Account ” means, (i) with respect to the Capital Property, that certain Bank of America account number 12355-57746, Tax Id. No. 20-0454830, (ii) with respect to the Torrey Pines Property, that certain Wells Fargo Bank account number 4040004681, Tax Id. No. 20-0454862, and (iii) with respect to any Property, any other bank account(s) in which the receipts from the operation and management of any Property are deposited by a Borrower Party or Manager and from which funds are transferred into the Payment Accounts to the extent required for the payment of Operating Expenses. The Account Agreements for the accounts in (i) and (ii) above are attached hereto as Exhibits B-1 and B-2, respectively.

“ Operating Agreements ” means, collectively, all agreements entered into by or on behalf of a Borrower Party (other than the Ground Lease, the Management Agreements, the Operating Leases, the Leases and the Property Documents) which relate to the ownership, operation or maintenance of any Property or which relate to or govern Borrower Parties’ or Manager’s use of and rights in Personal Property, or any portion thereof.

“ Operating Budget ” means the annual operating budget for the Properties.

“ Operating Expenses ” means, for any period, collectively but without duplication, the actual operating costs and expenses incurred by or on behalf of a Borrower Party or reserved by or on behalf of a Borrower (including as “reserved” funds, Capital/FF&E Reserve Amounts

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deposited into the Capital/FF&E Reserve Account in accordance with the terms hereof, amounts deposited into the Imposition and Insurance Reserve Account in accordance with the terms hereof and amounts deposited into the Ground Rent Reserve Account in accordance with the terms hereof), to the extent such reserves are established and maintained in the ordinary course of business and in a manner consistent with good business practices, during such period in connection with the ownership, use, occupancy, management, leasing and operation of the Properties, determined on an accrual basis of accounting in accordance with Applicable Accounting Standards;

excluding , without duplication, the following:

(i) any amount paid from any reserve (including any amounts paid from the Capital/FF&E Reserve Account, the Imposition and Reserve Account or the Ground Rent Reserve Account) maintained by or on behalf of Borrowers if Borrowers’ payment to such reserve previously or currently constituted an “Operating Expense”;

(ii) Debt Service;

(iii) any sums payable by Borrowers in connection with an Interest Rate Protection Agreement;

(iv) federal and state income taxes, franchise taxes or other taxes based on income due and owing from a Borrower Party;

(v) depreciation and amortization or any non-cash deductions of Borrower Parties and any other non‑cash items; and

(vi) amounts funded from insurance or condemnation proceeds which are applied to the repair or restoration of any Property.

Nothing contained in this definition shall be deemed to impose any limit or restriction on Borrower Parties’ ability to operate, manage or lease the Properties or otherwise limit or restrict the payment of operating expenses, tenant improvement costs, leasing commissions or other costs and expenses of the Properties; provided , however , the foregoing does not limit any restrictions, limitations or other requirements specifically provided elsewhere in this Loan Agreement or in the other Loan Documents.

“ Operating Lease ” and “ Operating Leases ” each has the meaning set forth in the recitals hereto.

“ Operating Lessee ” and “ Operating Lessees ” each has the meaning set forth in the recitals hereto.

“ Organizational Documents ” means, (a) for any corporation, the articles of incorporation and by-laws of such corporation and all amendments thereto, (b) for any partnership or trust, the general or limited partnership or trust agreement, as the case may be, with all amendments thereto, together with, if appropriate, a filed certificate of limited partnership and all amendments

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thereto, and (c) for any limited liability company, the operating agreement and any other agreements governing the organization of the limited liability company and the management of its business and affairs, and all amendments thereto.

“ Owners’ Remittance ” means, with respect to any month, the amount to be distributed to “Owner” pursuant to Section 7.02 of the Management Agreements for such month.

“ Par Prepayment Date ” means May 7, 2016.

“ Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended from time to time, and corresponding provisions of future laws.

“ Patriot Act Offense ” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (i) the criminal laws against terrorism or (ii) the Anti-Money Laundering Laws. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense.

“ Participant ” has the meaning set forth in Section 9.1(b) hereof.

“ Payment Account ” means, with respect to each Property, the account into which funds are transferred from the Operating Account in order to pay Operating Expenses actually incurred with respect to such Property (such account, in the case of the Capital Property, is Wells Fargo Bank, N.A. account number 2000014830992, Tax Id. No. 20-0454830 as of the date hereof and, in the case of the Torrey Pines Property, is that certain Wells Fargo Bank, N.A. account number 2000014831001, Tax Id. No. 20-0454862 as of the date hereof).

“ Payment Date ” means December 1, 2014 and the first Business Day of each calendar month thereafter up through and including the Maturity Date. “Payment Date” shall also include such earlier date, if any, on which the unpaid principal amount of the Loan is paid in full.

“ PBGC ” means the Pension Benefit Guaranty Corporation or any Person succeeding to any or all of its functions under ERISA.

“ Permits ” means, collectively, all certificates, including certificates of occupancy and certificates of compliance, authorizations, franchises, consents and approvals given by and licenses (including liquor licenses) and permits issued by Governmental Authorities that are required in connection with the any Property or the Loan Documents.

“ Permitted Encumbrances ” means, collectively (i) those matters set forth in Schedule B of the Title Policy and any other Liens as may be consented to by Agent, (ii) Liens, if any, for Impositions or any mechanics’ or materialmens’ claim for amounts not yet due and payable or delinquent or that are being contested pursuant to the procedures set forth in Section 4.8(b) of this Loan Agreement, (iii) Liens relating to Permitted Equipment Financing, (iv) the Management

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Agreements (and any replacements thereof entered into in accordance with the terms hereof) and (iv) Leases as permitted in the Loan Documents.

“ Permitted Equipment Financing ” means equipment financing (including Equipment Leases) that is (i) entered into in the ordinary course of a Borrower Party’s business, (ii) for equipment related to the ownership and operation of the Property owned or leased by such Borrower Party, as the case may be, whose removal would not materially damage or impair the value of such Property, and (iii) which is secured only by the equipment financed.

“ Permitted Indebtedness ” means any Indebtedness of a Borrower Party under (a) the Loan, (b) Operating Agreements, Leases, Property Documents, Management Agreements, Operating Leases, the Ground Lease and any other agreements, in each case entered into in accordance with this Loan Agreement, (c) unsecured trade payables incurred in the ordinary course of business relating to the ownership and operation of the Property owned or leased by such Borrower Party, as the case may be, and (d) Permitted Equipment Financing, which in the case of clauses (b), (c) and/or (d) above, such indebtedness (1) is not evidenced by a note, (2) does not exceed (exclusive of the Indebtedness of the nature described in clause (e) of the definition of “Indebtedness”), at any time, a maximum aggregate amount of two percent (2%) of the original Allocated Loan Amount of the Property owned or leased by such Borrower Party, as the case may be, (or, when taken together with the unsecured trade payables of all Borrowers Parties, three percent (3%) of the original amount of the Principal) and (3) is paid prior to delinquency.

“ Permitted Transfer ” means any or all of the following:

(a) with respect to any Property, all transfers of worn out or obsolete furnishings, fixtures or equipment that are reasonably promptly replaced with property of equivalent value and functionality in the ordinary course of operation of such Property;

(b) a Transfer (including a pledge) of any direct or indirect interest in Hilton Worldwide, Inc.;

(c) a pledge (but not the foreclosure thereon), except with respect to the foreclosure of the direct or indirect ownership interests in a Borrower Party owned by Hilton Worldwide, Inc. or its Affiliates or AHT OP, in which event the foreclosure shall be permitted, of indirect ownership interests in a Borrower Party or a Borrower Party Partner to an institutional lender providing a corporate line of credit or other financing to a Sponsor or AHT OP; provided that (A) such operating line of credit or other financing is secured directly or indirectly by all or substantially all of the portfolio of such Sponsor or AHT OP and (B) the value of the equity in the Properties which is indirectly pledged as collateral under such corporate line of credit or other financing constitutes no more than twenty percent (20%) of the total value of all assets directly or indirectly securing such line of credit or other financing at the time of such pledge;

(d) any direct or indirect Transfer of legal or beneficial interests in a Borrower Party (other than a direct Transfer of the interest of a Borrower Party Partner in a Borrower Party) to a Person which is not a Disqualified Person so long as, after giving effect to each such Transfer, all of the following conditions are satisfied:

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(i) Each Borrower Party and each Borrower Party Partner shall continue to be Controlled by a Sponsor;

(ii) One or both Sponsors shall own an aggregate of at least fifty one percent (51%) of the legal and beneficial ownership interest in each Borrower Party and Borrower Party Partner (either directly or indirectly);

(iii) Borrowers shall not have knowledge that a Default or Event of Default shall have occurred and be continuing at the time of such Transfer;

(iv) if such Transfer would cause the transferee (other than a Sponsor or an Affiliate thereof which is Controlled by such Sponsor and in which such Sponsor owns a direct or indirect interest of at least fifty one percent (51%)) to increase its direct or indirect interest in any Borrower Party or in any Borrower Party Partner to an amount which equals or exceeds five percent (5%), Agent shall have approved in its reasonable discretion such proposed transferee, which approval shall be based upon Agent’s satisfactory determination as to the reputable character and creditworthiness of such proposed transferee, as evidenced by credit and background checks performed by Agent and such other financial statements and other information reasonably requested by Agent;

(v) if such Transfer is of greater than a twenty percent (20%) direct or indirect interest in any Borrower Party, or the consummation of the Transfer would result in a single Person (together with, in the case of an individual, the members of such individual’s family members or trusts as described in clause (c) of the definition of “Affiliate”) (who did not previously own the percentage interest or Controlling interest described below) owning, directly or indirectly, (w) greater than a twenty percent (20%), (x) a fifty percent (50%), (y) greater than a fifty percent (50%) interest in such Borrower Party or (z) Controlling such Borrower Party, in each case Borrower Parties shall have given Agent at least ten (10) Business Days’ prior notice of the proposed Transfer (it being acknowledged that Borrower Parties shall be required to give the notice under clause (y) above even if it previously gave a notice under clause (x) above, and shall be required to give a notice under clause (z) above even if it previously gave a notice under clauses (x) or (y) above), which notice shall identify the proposed transferee(s) and the proposed percentage interest to be transferred;

(vi) resolutions or other transaction authorization of the proposed transferee(s), shall be delivered to Agent at least twenty (20) days prior to the proposed Transfer, except with respect to a Transfer to a Sponsor or an Affiliate thereof which is Controlled by such Sponsor and in which such Sponsor owns a direct or indirect interest of at least fifty one (51%), in which case such resolutions or authorizations shall not be required to be delivered to Agent);

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(vii) Agent shall have been reimbursed for any and all expenses incurred by Agent, if any, in connection with such proposed Transfer, including reasonable attorneys’ fees and disbursements;

(viii) each Borrower Party and Borrower Party Partner shall continue to be a Special Purpose Bankruptcy Remote Entity;

(ix) the proposed Transfer shall not result in any Borrower Party, the transferor or the transferee being in default under any Loan Document or under any other agreement, instrument, document or understanding of which any of the foregoing Persons is a party, either upon such Transfer or but for the passage of time or the giving of notice or both; and

(x) all taxes (other than income taxes), including stamp taxes, mortgage recording taxes, transfer taxes, and other taxes, charges and fees incurred in connection with such Transfer shall have been paid by Borrowers, the transferor or the proposed transferee at the time of such proposed Transfer;

(e) the (i) issuance, Transfer, conversion or redemption of any securities, options, warrants or other interests in Ashford Prime REIT, Ashford Prime OP, AHT REIT or AHT OP, (ii) the merger or consolidation of the Ashford Prime REIT or AHT REIT, or (iii) the merger or consolidation of the Ashford Prime OP or AHT OP; provided that in the case of each of (ii) and (iii) above, the surviving entity shall be the Ashford Prime REIT or AHT REIT and/or Ashford Prime OP or AHT OP, as applicable, after giving effect to such merger or consolidation; or

(f) the Transfer of any or all of the direct and indirect interests of any Sponsor in a Borrower Party or Borrower Party Partner (other than the direct interest of a Borrower Party Partner in a Borrower Party) to the other Sponsor so long the transferee Sponsor shall not be a Disqualified Person and the conditions set forth in clauses (i), (ii), (v), (vi), (vii), (viii), (ix) and (x) of paragraph (d) above have been satisfied;

(g) a Transfer and Assumption in accordance with Section 5.17(b) hereof; and

(h) intentionally omitted:

(i) a Transfer and/or issuance of any publicly traded shares of any Person (including for the avoidance of doubt initial public offering);

(j) a Transfer by Hilton Worldwide, Inc., or by an entity Controlled by Hilton Worldwide, Inc., of all or a portion of its direct or indirect ownership interest in a Borrower Party to an Affiliate of Hilton Worldwide, Inc. that is Controlled by Hilton Worldwide, Inc., or by Hilton Worldwide, Holdings, Inc.; provided that the condition set forth in clause (v) of paragraph (d) above have been satisfied; and

(k) a Permitted Encumbrance which constitutes a Transfer.

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Notwithstanding anything to the contrary contained in the foregoing definition, if, as a result of such Permitted Transfer no direct or indirect interest in Borrower Parties shall continue to be owned by a Guarantor or any such Guarantor no longer Controls Borrower Parties, it shall also be a condition hereunder that, one or more creditworthy Persons reasonably satisfactory to Agent that Controls Borrower Parties or owns a direct or indirect interest in Borrower Parties, shall execute and deliver a recourse liability agreement and environmental indemnity (in the same form as the Recourse Liability Agreement and Environmental Indemnity delivered to Agent by Guarantors on the date hereof) pursuant to which, the replacement guarantor/indemnitor agrees to be liable under such recourse liability agreement and environmental indemnity (whereupon the previous guarantor shall be released from any further liability) and from and after the date of such Permitted Transfer, such replacement guarantor/indemnitor shall be the “Guarantor” for all purposes set forth in this Loan Agreement).

“ Person ” means any individual, corporation, limited liability company, general partnership, limited partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other form of entity.

“ Personal Property ” has the meaning set forth in the Mortgages.

“ Plan ” means an employee benefit or other plan, other than a Multiemployer Plan, that is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code and (i) which is maintained for employees of any Borrower Party or any ERISA Affiliate or in which any such employees participate or to which contributions are made by any Borrower Party or any ERISA Affiliate, or (ii) with respect to which any Borrower Party or any ERISA Affiliate could be subjected to any liability under Title IV of ERISA.

“ Prime Rate ” means either (i) the rate per annum listed in the “Money Rates” section of The Wall Street Journal (or any successor publication) as the “Prime Rate”, or (ii) if The Wall Street Journal ceases publication of such rate, then the so-called “prime rate” or “base rate” as announced by Citibank N.A., or its successor from time to time, or (iii) if the rate in clause (ii) is not published or available, then the so-called “prime rate” or “base rate” announced by J.P. Morgan Chase & Co. or its bank subsidiary, or (iv) if the rate in clause (iii) is unavailable, then, a rate selected by Agent in its reasonable judgment as most nearly approximating the foregoing rates.

“ Prohibited Assignee ” means any Person which is (i) named on any Government List or (ii) a Specially Designated National.

“ Property ” and “ Properties ” each has the meaning set forth in the recitals hereto.

“ Property Documents ” has the meaning set forth in the Mortgages.

“ Property Document Requirements ” means the requirements applicable to the matter in question under the Property Documents.

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“ Pro Rata Share ” means with respect to all matters relating to any Lender, the percentage obtained by dividing (i) the Commitment of such Lender by (ii) the aggregate Commitments of all Lenders, in each case as of the date of determination.

“ Purchase Date ” has the meaning set forth in Section 11.14(c) hereof.

“ Purchaser ” has the meaning set forth in Section 9.1(d) hereof.

“ Qualified Counterparty ” means a financial institution whose senior long term debt is rated “A-” or better by S&P, or “A3” by Moody’s and which is otherwise approved by Agent as being acceptable to Agent.

“ Quarterly Compliance Statement ” has the meaning set forth in Section 4.1(a)(ii) hereof.

“ Rating Agency ” means any of S&P, Moody’s and Fitch, Inc.

“ Recourse Liability Agreement ” means that certain Second Amended and Restated Recourse Liability Agreement dated as of the Closing Date made by Borrowers and Guarantors for the benefit of Agent.

“ Recourse Liability Events ” means, collectively, any or all of the following:

(a) fraud or intentional misrepresentation on the part of a Borrower Party, a Guarantor, any Borrower Party Partner or any Affiliate of any thereof in connection with the execution, delivery and/or performance of the Loan Documents or any certificate, report, financial statement or other instrument or document furnished to Agent or any Lender at the time of the closing of the Loan or during the term of the Loan;

(b) gross negligence or willful misconduct on the part of a Borrower Party, a Guarantor, any Borrower Party Partner or any Affiliate of any thereof;

(c) any application or appropriation, in contravention of any provision of this Loan Agreement or any other Loan Document, of Rents, Lease Security, insurance proceeds, condemnation awards, sums payable pursuant to any Interest Rate Protection Agreement, proceeds of all or any portion of the Collateral or any sum held in any Account;

(d) any distribution or payments in violation of Section 5.9 hereof;

(e) the withdrawal or other removal of any sums held in any Account in violation of this Loan Agreement or any other Loan Document;

(f) any transfer or encumbrance of the Collateral or any interest therein or any interest in a Borrower Party in violation of this Loan Agreement or any other Loan Document (excluding (i) any transfer by foreclosure, deed-in-lieu, or otherwise in connection with Lenders’ exercise of remedies), (ii) a transfer to a Governmental Authority as a result of a Taking, and (iii) the foreclosure of any pledge to the extent that such foreclosure is otherwise a Permitted Transfer);

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(g) the incurrence of Indebtedness, other than Permitted Indebtedness, by a Borrower Party or a Borrower Party Partner (provided that, any existence of Indebtedness which was Permitted Indebtedness when incurred but became non Permitted Indebtedness due to the inability of Borrower to repay such Indebtedness as it became due caused by the failure of the Premises to generate sufficient net operating income shall not constitute a Recourse Liability Event);

(h) the incurrence of any liability by a Borrower Party or Borrower Party Partner pursuant to ERISA caused by any act or omission of a Borrower Party or its Affiliates;

(i) the attachment of any Lien to the Collateral, other than Permitted Encumbrances;

(j) the occurrence of any material physical waste of or to the Properties or any portion thereof by a Borrower Party, a Guarantor, Manager or an Affiliate of any of the foregoing or any Person acting on behalf of a Borrower Party, a Guarantor, Manager or such Affiliate (provided that the occurrence of waste shall not constitute a Recourse Liability Event to the extent such waste occurs due to (i) insufficient revenues at the Property), (ii) the occurrence of a Casualty or Taking and/or the failure to complete the Restoration of the Property thereafter, or (iii) the failure of any owner of a Borrower Party to make additional capital contributions or other advances to Borrower Parties;

(k) all third party costs and expenses of any nature (including attorneys’ fees and disbursements and expenses of third-party professionals or receivers) paid or incurred by Agent or Lenders in connection with or arising out of the enforcement of the Loan or any of the Loan Documents to the extent such enforcement results from, is based upon or relates to the occurrence of any Recourse Liability Event; and

(l) the imposition of all transfer taxes and/or fees by a Governmental Authority as a result of the Transfer of any Property or any portion thereof, including pursuant to a foreclosure, deed in lieu of a foreclosure or otherwise which results from, is based upon or relates to (i) the occurrence of any Recourse Liability Event, or (ii) any bankruptcy or insolvency proceeding filed by or against a Borrower Party, any constituent partner or member of a Borrower Party, or a Guarantor.

“ Register ” has the meaning set forth in Section 9.4 hereof.

“ Release ” has the meaning set forth in Section 2.14(a) hereof.

“ Release Condition ” and “ Release Conditions ” shall each have the meaning set forth in Section 4.12 hereof.

“ Release Date ” has the meaning set forth in Section 2.14(a) hereof.

“ Release Payment ” means, with respect to any Property released pursuant to Section 2.14(a) hereof, the greater of (i) with respect to the Capital Property, 100% of the Allocated Loan Amount for such Property or with respect to the Torrey Pines Property, 110% of the Allocated Loan

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Amount for such Property and (ii) the amount necessary to reduce the outstanding principal balance of the Loan such that after giving effect to such release, the Assumed Debt Service Coverage Ratio for the Property then remaining subject to the Lien of a Mortgage as of the most recent Testing Determination Date (assuming that such payment was made on the first day of the twelve (12) month period ending on such Testing Determination Date) shall be equal to 1.40:1.

“ Rent Roll ” has the meaning set forth in Section 3.22 hereof.

“ Rents ” has the meaning set forth in the Mortgages.

“ Replacement Lender ” has the meaning set forth in Section 2.9(e) hereof

“ Requisite Lenders ” means (i) Lenders (other than Lenders who are then Defaulting Lenders) whose Commitments equal, in the aggregate, at least sixty-six and two-thirds percent (66-2/3%) of the aggregate Commitments of all Lenders (other than Lenders who are then Defaulting Lenders) or (ii) at any time that Agent and any Affiliate of Agent shall have Commitments equal to or greater than sixty-six and two-thirds percent (66-2/3%) of the aggregate Commitments of all Lenders, Lenders (other than Lenders who are then Defaulting Lenders) whose Commitments equal, in the aggregate, at least sixty-six and two-thirds percent (66-2/3%) of the aggregate Commitments of all Lenders (other than Lenders who are then Defaulting Lenders) plus, so long as there is at least one (1) additional Lender which is not a Defaulting Lender, one (1) additional Lender.

“ Restoration ” means in case of a Casualty or a Taking, the restoration, replacement or rebuilding of the portion of any Property affected by the Casualty or Taking such that when such restoration, replacement or rebuilding is completed, the affected Property shall have been restored, in the case of any Casualty, substantially to the same character and condition as prior to such Casualty, and in the case of any Taking, to an integral unit as substantially similar as possible, taking into account the extent of the Taking, to the character and condition of the affected Property prior to such Taking, in each case in accordance with this Loan Agreement, all Legal Requirements, the Permitted Encumbrances. In any case, Restoration shall (i) provide substantially the same (but in no case less than what is required by Legal Requirements and the Permitted Encumbrances) amount and type of, and rights with respect to, utilities and parking spaces applicable to the affected Property as existed prior to such Casualty or Taking and (ii) provide sufficient (in Agent’s reasonable determination) access across and over the Properties to the public roads and highways taking into account the use and nature of the Property.

“ S&P ” means Standard and Poor’s Rating Service, a division of the McGraw-Hill Companies.

“ Section 2.9 Replacement Notice ” has the meaning set forth in Section 2.9(a) hereof.

“ Second Extended Maturity Date ” has the meaning set forth in Section 2.15(a) .

“ Second Extension Term ” has the meaning set forth in Section 2.15(a) .

“ Second IRPA ” has the meaning set forth in Section 4.3(a)(ii) hereof.

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“ Security Deposit Account ” has the meaning set forth in Section 2.11(c) hereof.

“ Securities ” has the meaning set forth in Section 9.1(c) hereof.

“ Significant Improvement ” means any improvement, alteration, replacement or addition constructed or made by a Borrower Party at any Property which (a) costs or is estimated to cost in excess of $2,000,000, or (b) when aggregated with all other improvements, alterations and additions constructed or made by any Borrower Party at such Property during such Fiscal Year, costs or is estimated by Agent or Borrower Parties to cost in excess of $4,000,000.

“ Specially Designated National ” means any Person (a) that is, or is owned or controlled by, or acting on behalf of the government of any country subject to comprehensive U.S. sanctions in force and which currently include the government of Cuba, Iran, North Korea, Sudan, and Syria (each, a “ Sanctioned Country ”) or (b) that is located in, organized under the laws of or ordinarily resident in any Sanctioned Country.

“ Special Purpose Bankruptcy Remote Entity ” has the meaning set forth on Exhibit I attached hereto.

“ Sponsor ” means each of Ashford Prime REIT, Ashford Prime OP, and with respect to the defined term “Permitted Transfer” only, Hilton Worldwide, Inc., and “ Sponsors ” shall mean, collectively, each of the foregoing (except, as to Hilton Worldwide, Inc., only for purposes of the defined term “Permitted Transfer”).

“ Spread Maintenance Premium ” means, with respect to any payment or prepayment of the outstanding principal amount of the Loan (including an acceleration of the Loan but excluding any prepayment as to which no such Spread Maintenance Premium is due pursuant to the applicable provisions of this Loan Agreement, including, without limitation, subsections (d), (e) and (h) of Section 2.3 , Section 2.7(b)(ii) , Section 2.9(f) and Section 2.11(f)(i) ) prior to the Par Prepayment Date, an amount equal to the product of the following: (A) the amount of such prepayment (or the amount of principal so accelerated), multiplied by (B) the Borrowing Margin, multiplied by (C) a fraction (expressed as a percentage) having a numerator equal to the number of days between the Par Prepayment Date and the date such prepayment occurs and a denominator equal to three hundred sixty (360), with the resulting amount to be discounted at an interest rate per annum equal to the Treasury Rate published during the second full week preceding the date on which such Spread Maintenance Payment is payable for instruments having a maturity coterminous with the period from the date of such prepayment to the Par Prepayment Date.

“ Subordination and Security Agreements ” means collectively (i) that certain Second Amended and Restated Subordination, Attornment and Security Agreement dated as of the Closing Date between Torrey Pines Borrower, Torrey Pines Operating Lessee and Agent and (ii) that certain Second Amended and Restated Subordination, Attornment and Security Agreement dated as of the Closing Date between Capital Borrower, Capital Operating Lessee and Agent.

“ Survey ” means collectively, (i) that certain survey of the Torrey Pines Property prepared by Psomas and Associates delivered to Agent in connection with the closing of the Existing

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Loan and (ii) that certain survey of the Capital Property prepared by Wiles Mensch Corporation delivered to Agent in connection with the closing of the Existing Loan

“ Taking ” (and its correlative meanings) means, with respect to any Property, any temporary or permanent taking by any Governmental Authority of such Property or any portion thereof through eminent domain, condemnation or other proceedings or by any settlement or compromise of such proceedings, or any voluntary conveyance of such property or any portion thereof during the pendency of any such proceedings.

“ Taxes ” has the meaning set forth in Section 2.8 hereof.

“ Term Sheet ” means that certain term sheet of Agent pertaining to the Loan dated as of October 7, 2014.

“ Testing Determination Date ” means the date which is the last day of the Calendar Quarter with respect to which a Quarterly Compliance Statement was then most recently required to have been delivered to Agent pursuant to Section 4.1(a)(ii) hereof.

“ Third IRPA ” has the meaning set forth in Section 4.3(a)(iii) hereof.

“ Title Company ” means Chicago Title Insurance Company.

“ Title Insurance Policy ” means, collectively, the title policies issued by Title Company insuring the Mortgages.

“ Torrey Pines Property ” has the meaning set forth in the recitals hereof.

“ Torrey Pines Operating Lessee ” has the meaning set forth in the recitals hereof.

“ Transfer ” means any sale, conveyance, transfer, Lease or assignment, or the entry into any agreement to sell, convey, transfer, lease or assign, whether by law or otherwise, of, on, in or affecting (i) all or part of any Property (including any legal or beneficial direct or indirect interest therein), (ii) any direct or indirect interest in a Borrower Party (including any profit interest), or (iii) any direct or indirect interest in a Borrower Party Partner.

“ Transfer and Assumption ” has the meaning set forth in Section 5.17 hereof.

“ Transferee Borrower ” has the meaning set forth in Section 5.17 hereof.

“ Treasury Rate ” means, as of any Testing Determination Date, the annualized yield on securities issued by the United States Treasury having a remaining maturity of one hundred twenty (120) months, as quoted in Federal Reserve Statistical Release H. 15(519) under the heading “U.S. Government Securities - Treasury Constant Maturities” for the Treasury Rate Determination Date, converted to a monthly equivalent yield. If yields for such securities of such applicable maturity are not shown in such publication, then the Treasury Rate shall be determined by Agent by linear interpolation between the yields of securities of the next longer and next shorter maturities. If said Federal Reserve Statistical Release or any other information necessary for determination of

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the Treasury Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Treasury Rate shall be reasonably determined by Agent based on comparable data.

“ Treasury Rate Determination Date ” means the date which is five (5) Business Days prior to the applicable Testing Determination Date.

“ UCC ” means the Uniform Commercial Code as in effect in the State of New York.

“ Uniform System of Accounts ” means the accounting standards printed in the then most recently revised edition of the Uniform System of Accounts for the Lodging Industry.

“ Upfront Fee ” has the meaning set forth in the Loan Fee Letter.

Section 1.2 Other Definitional Provisions .

(a) All terms defined in this Loan Agreement shall have the above-defined meanings when used in the Note or any of the other Loan Documents, or in any other certificate, report or other document made or delivered pursuant to this Loan Agreement, unless the context therein shall otherwise require.

(b) Defined terms used in the singular shall import the plural and vice versa .

(c) The words “hereof”, “herein”, “hereunder” and similar terms when used in this Loan Agreement shall refer to this Loan Agreement as a whole and not to any particular provision of this Loan Agreement. The words “hereof”, “herein”, “hereunder” and similar terms when used in any other Loan Document shall refer to such Loan Document as a whole and not to any particular provision of such Loan Document.

(d) The words “include” and “including” wherever used in this Loan Agreement or any other Loan Document shall be deemed to be followed by the words “without limitation”.

(e) Any reference to any Loan Document in this Loan Agreement shall be deemed to mean such Loan Document as it may from time to time be amended, restated, extended, renewed, increased, consolidated, spread, severed, supplemented or otherwise modified in accordance with the terms thereof.

(f) Any reference to a statute or law in this Loan Agreement shall be deemed to include any amendment, modification or supplement to, or replacement of, such statute or law.

(g) The words “not unreasonably withheld” and similar terms when used in this Loan Agreement or in any other Loan Document shall be deemed to be followed by the words “or conditioned or delayed”.

ARTICLE II

THE LOAN

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Section 2.1 The Loan . Subject to the conditions and upon the terms provided herein, Lenders agree to lend to Borrowers and Borrowers agrees to borrow from Lenders on the Closing Date the Loan Amount. The Loan and all Interest, Additional Interest, Spread Maintenance Premiums and all other sums which become due and payable hereunder and under the other Loan Documents shall be evidenced by the Note and secured by the Mortgages and the other Loan Documents. Interest and Additional Interest, if any, shall be payable in accordance with the Note and this Loan Agreement. The Loan shall be repaid with Interest, Additional Interest, if any, Spread Maintenance Premiums, if any, costs and charges as more particularly set forth in this Loan Agreement, the Note, the Mortgages and the other Loan Documents. The Loan is not a “revolving” loan and any portion of principal repaid or prepaid may not be reborrowed. The Loan shall be disbursed by wire transfer in immediately available funds to, or for the account of, Borrowers in accordance with Borrowers’ written instructions and the terms hereof.

Section 2.2 Interest Rate . Subject to Sections 2.5 and 2.7 hereof, the outstanding principal balance of the Loan shall bear interest at an interest rate (the “ Applicable Interest Rate ”) equal to the LIBOR Rate and each subsequent LIBOR Rate Period shall commence on the day following the last day of the preceding LIBOR Rate Period. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed.

(b) The Note, this Loan Agreement, the Mortgages, and the other Loan Documents are subject to the express condition that at no time shall Borrowers be obligated or required to pay interest on the Obligations at a rate which could subject any Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrowers are permitted by law to contract for or to agree to pay. If by the terms of the Note, this Loan Agreement, the Mortgages or any other Loan Document, Borrowers are at any time required or obligated to pay interest at a rate in excess of such maximum rate, the rate of interest shall be deemed to be immediately reduced to such maximum rate and the interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of principal.

Section 2.3 Payments on Account of Principal and Interest .

(a) Interest Payments . Borrowers shall pay Interest as provided in this Loan Agreement on each Payment Date in arrears, commencing on the first Payment Date occurring after the Closing Date and as otherwise provided in this Loan Agreement, the Note or the other Loan Documents.

(b) Scheduled Principal Payments .

(i) Monthly Amortization . On each Payment Date, Borrowers shall make a repayment of principal of the Loan in an amount equal to the applicable Amortization Amount. Any such repayments shall be made together with the payment of all Additional Interest, fees and any other amounts due and payable hereunder and under the Note, the Mortgages and the other Loan Documents. The Amortization Amount shall not be reduced or otherwise modified notwithstanding any prepayments of principal pursuant to this Section 2.3 or any other provision of the Loan Documents (other than after a Release Payment pursuant to Section 2.14 hereof).

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(ii) Principal Payment at Maturity . Borrowers shall pay the unpaid principal balance of the Loan in a single installment on the Maturity Date.

(c) Optional Prepayment . Borrowers may, upon ten (10) days’ prior written notice to Agent (which notice shall be confirmed by Borrowers in writing not less than three (3) days prior to the scheduled prepayment date), prepay the Loan, in whole or in part, in accordance with this Section 2.3(c) . Any such prepayment notice shall specify the date and amount of the prepayment; provided, however, neither Borrowers’ failure to make such prepayment, nor Borrowers’ making of such prepayment on a date which is different than the date specified in such prepayment notice, shall be a Default or Event of Default; provided that Borrowers shall pay within three (3) Business Days of written demand by Agent (i) any overdraft or other costs or amounts charged to Agent by Agent’s domestic depository bank and any other out-of-pocket expenses incurred by Agent by reason of Borrowers’ failure to make such prepayment on the date specified in such prepayment notice and (ii) Additional Interest which, in each case, results from Agent not having received such payment prior to 11:00 A.M. (New York time) on the date specified in such prepayment notice. All partial prepayments under this Section 2.3(c) shall be in increments of $1,000,000. Concurrently with any such prepayment, Borrowers shall pay to Agent all sums required to be paid pursuant to Section 2.3(i) hereof.

(d) Mandatory Prepayment . Borrowers shall be required to prepay the Note at any time and from time to time upon the occurrence of any of the circumstances requiring prepayment described in Section 4.12 or 4.13 hereof by paying the principal amount so required to be prepaid. Concurrently with any such prepayment, Borrowers shall pay to Agent all sums required to be paid pursuant to Section 2.3(i) hereof other than the Spread Maintenance Premium, it being agreed that no Spread Maintenance Premium shall be payable in connection with a prepayment in accordance with this Section 2.3(d) .

(e) Cash Sweep Condition Prepayment . Agent may apply funds on deposit in the Cash Collateral Account to the prepayment of principal in accordance with and subject to the terms and conditions of Section 2.11(f) hereof. In addition, Borrower may make a partial prepayment of principal (including pursuant to clause (B) of the definition of Cash Sweep Condition) in order to avoid the commencement of a Cash Sweep Condition or to end a Cash Sweep Condition which has previously commenced (for the avoidance of doubt, it is agreed that such prepayment may be made prior to the Par Prepayment Date). Concurrently with any such prepayment, Borrower shall pay to Agent all sums required to be paid pursuant to Section 2.3(i) other than the Spread Maintenance Premium; it being agreed that no Spread Maintenance Premium shall be payable in connection with a prepayment in accordance with this Section 2.3(e) .

(f) Prepayment on Account of Releases . Concurrently with and as a condition to a Release pursuant to Section 2.14 hereof, Borrowers shall make a prepayment of the Loan in the amount of the Release Payment. Concurrently with any such prepayment, Borrowers shall pay to Agent all sums required to be paid pursuant to Section 2.3(i) hereof.

(g) Intentionally Omitted .

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(h) Illegality Mandatory Prepayment . Borrowers shall be required to fully or partially prepay the Note at any time and from time to time upon the occurrence of any of the circumstances requiring prepayment described in Section 2.7(b)(ii) hereof. Concurrently with any such full or partial prepayment, as the case may be, Borrowers shall pay to Agent all sums required to be paid pursuant to Section 2.3(i) hereof other than the Spread Maintenance Premium; it being agreed that no Spread Maintenance Premium shall payable in connection with a prepayment in accordance with this Section 2.3(h) .

(i) Payment of Costs, Spread Maintenance Premium . Concurrently with any prepayment of principal under this Section 2.3 , Borrowers shall pay to Agent all accrued and unpaid Interest to and including the date of such prepayment on the amount being prepaid, all Additional Interest, fees and any other amounts due and payable hereunder and under the other Loan Documents and all fees and expenses incurred by Agent, including reasonable attorneys fees in connection with the Loan and/or with the such prepayment. In addition, concurrently with any prepayment of principal pursuant to Section 2.3(c) and Section 2.3(f) hereof, made prior to the Par Prepayment Date, Borrowers shall, in addition to the other sums described in this Section 2.4(i) , pay the Spread Maintenance Premium applicable thereto. For the avoidance of doubt, no Spread Maintenance Premium shall be payable in connection with any prepayment made on or after the Par Prepayment Date.

(j) Acceleration of the Loan . If, the Maturity Date is accelerated prior to the Par Prepayment Date, then, in addition to all other sums then due under the Loan Documents, Borrower shall pay to Agent the Spread Maintenance Premium.

(k) Other Sums . Any sum owed to Agent or any Lender pursuant to the Loan Documents for which no due date is specified shall be payable on demand by Agent.

Section 2.4 Manner and Application of Payments .

(a) Payment Office; Manner of Payment to Agent . All amounts payable by Borrowers under this Loan Agreement or the other Loan Documents to or for the account of Agent or Lenders shall be made by Borrowers to Agent before 11:00 A.M. (New York time) in immediately available funds in accordance with the instructions set forth on Exhibit J attached hereto or to such other account or address as Agent may provide to Borrowers from time to time. Except as otherwise set forth herein with respect to any LIBOR Rate, in the event any payment required hereunder or under any of the Loan Documents becomes due and payable on a day other than a Business Day, such payment shall become due and payable on the next succeeding Business Day. Funds received after 11:00 A.M. (New York time) shall be treated for all purposes as having been received by Agent on the first (1st) Business Day next following receipt of such funds. With respect to payments on account of any Obligations other than regularly scheduled payments of Interest due on each Payment Date and the payment of all Obligations due on the Maturity Date, in the event that Agent shall not receive any such payment, including any prepayments pursuant to Section 2.3(c) hereof, prior to 11:00 A.M. (New York time) on the date on which such payment is required to be made under any Loan Document or if Borrowers have otherwise advised Agent that any such payment will be made on a specific date, Borrowers shall pay within three (3) Business Days of written demand any (i) overdraft or other costs or amounts charged to Agent by Agent’s domestic depository bank and

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(ii) Additional Interest which, in each case, results from Agent not having received such payment prior to 2:00 P.M. (New York time) on such date. All payments, including prepayments, of principal made hereunder shall be made, together with Interest accrued through the date of such payment, on the principal amount paid and all Additional Interest, Spread Maintenance Premiums, fees and any other amount due and payable hereunder and under the Note, the Mortgages and the other Loan Documents and any payment due with respect to any Interest Rate Protection Agreement then in effect.

(b) No Set-Offs, Deductions, Etc . Notwithstanding anything to the contrary contained herein or in any other Loan Document, all sums payable by Borrowers under this Loan Agreement, the Note and the other Loan Documents shall be paid without any set-off, deduction or counterclaim against Agent or Lenders.

(c) Application of Payments . All payments, including prepayments, received by Agent shall be applied in the order and manner set forth in the Note; provided , however , in the event that an Event of Default shall have occurred and shall then be continuing, all such payments, including sums received in connection with the exercise of any remedies pursuant to the Loan Documents, shall be applied in such order and manner as Agent shall elect; provided , further , that, Agent may apply payments first to satisfy the portion of the Obligations, if any, for which Borrowers, Guarantors or any other Person have no personal, partnership, company or corporate liability, and then to the remaining Obligations.

(d) Distribution of Funds to Lenders . All sums received by Agent pursuant to the Loan Documents on account of principal, Interest, Additional Interest and other sums, after application of such sums on account of any Excluded Sums then outstanding, which are received by 11:00 a.m. (New York time) shall be paid to Lenders on the date of receipt; such sums received by Agent after 11:00 a.m. (New York time) shall be paid to Lenders on or before the next succeeding Business Day. All such sums shall be paid to Lenders by wire transfer of immediately available funds to the account of which a Lender shall give notice to Agent in accordance with Section 10.1 hereof.

Section 2.5 Interest on Overdue Amounts; Late Penalty . Default Rate Interest. Notwithstanding anything to the contrary contained herein or in any other Loan Document, including in Section 2.2 hereof, (i) if an Event of Default shall have occurred and be continuing, interest on the then outstanding principal balance of the Loan and on any other sums due and payable under this Loan Agreement, the Note and/or any other Loan Document, shall accrue from the date of the occurrence of such Event of Default at a fluctuating rate of interest equal to the Default Rate and (ii) Interest, Additional Interest, Spread Maintenance Premiums, fees or other sums due under this Loan Agreement, the Note and the other Loan Documents that are not paid when the same is due (after giving effect to any applicable grace period, if any) shall bear interest from the respective due dates thereof (without regard to any notice of non-payment or any grace period) until paid at the Default Rate, in each case, which interest at the Default Rate shall be payable to Agent upon demand.

(a) Late Payment Fee . In the event any payment of principal, Interest, Additional Interest, Spread Maintenance Premiums, fees or other sums due under this Loan Agreement, the

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Note and the other Loan Documents is not paid within five (5) days after the date due, with respect to all payments other than the payment of interest and principal due on the Maturity Date, Borrowers shall pay to Agent a late payment fee equal to five percent (5%) of the amount of such overdue payment, which late payment fee is Agent’s estimate of the additional administrative costs and expenses Lenders will incur in servicing such late payment.

Section 2.6 LIBOR Rate Breakage . Borrowers shall indemnify Agent and Lenders against any loss, cost or expense which Agent or any Lender may sustain or incur as a consequence of any payment or prepayment (whether voluntary or involuntary) of the Loan or any portion thereof whether or not required by any provision of this Loan Agreement or any other Loan Document or otherwise made and applied on account of principal on a date other than the last day of a LIBOR Rate Period, including any loss or expense sustained or incurred by any Lender(s) or determined by Agent would be sustained or incurred by any Lender(s) in obtaining, liquidating or redeploying deposits or other funds acquired by such Lender(s) to maintain or fund the Loan or any portion thereof. The amount of any loss or expense for which Borrowers shall indemnify Lenders under this Section 2.6 shall be an amount equal to the excess, if any, as determined by Agent or the applicable Lender(s) of (i) Lenders’ cost of obtaining the funds for the Loan or any portion thereof being paid or prepaid for the period from the date of such payment or prepayment to the last day of the LIBOR Rate Period, over (ii) the amount of interest (as determined by Agent) that would be realized by such Lender(s) in redeploying the funds so paid or prepaid, as the case may be. Agent’s determination of any amount or amounts which Agent and/or any Lender is entitled to receive pursuant to this Section 2.6 shall be conclusive, absent manifest error.

Section 2.7 Changes in Circumstance or Law .

(a) Unavailability of LIBOR . In the event that Agent reasonably and in good faith determines (which determination shall be conclusive and binding upon Borrowers) that (i) Dollar deposits in an amount approximately equal to the Loan are not generally available at such time in the London interbank Eurodollar market for deposits in Eurodollars, (ii) adequate and fair means do not exist for ascertaining a LIBOR Rate, (iii) such a LIBOR Rate would be in excess of the maximum interest rate which Borrowers may by law pay or (iv) that the LIBOR Rate does not adequately reflect such Lender’s costs of funds, Agent shall, within ten (10) Business Days after receipt of notice thereof from a Lender, give notice (the “ Non-Availability Notice ”) of such fact to Borrowers. Effective upon the giving of the Non-Availability Notice, the Loan shall bear interest at the Base Rate (or, when applicable, at the Default Rate), from and including the date of the giving of the Non-Availability Notice until the Maturity Date or until any earlier date on which the LIBOR Rate shall become effective for the Loan pursuant to Section 2.2 hereof following the giving of notice by Agent to Borrowers that the conditions referred to in this Section 2.7(a) no longer exist.

(b) Illegality .

(i) In the event that any Lender shall reasonably and in good faith determine such (which determination shall be conclusive and binding on Borrowers absent manifest error) that it shall become illegal for such Lender to maintain the Loan on the basis of a LIBOR Rate having a LIBOR Rate Period which is permitted hereunder, Agent shall within ten (10) Business Days after receipt of notice thereof from such Lender give notice

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of such fact to Borrowers. Effective upon the giving of such a notice to Borrowers, the Loan shall bear interest at a LIBOR Rate having a LIBOR Rate Period permitted hereunder which may be legally maintained by such Lender or, if no LIBOR Rate having a LIBOR Rate Period permitted hereunder may be legally maintained by such Lender, the Loan shall bear interest at the Base Rate until the Maturity Date or until such time as such condition shall no longer exist following the giving of notice by Agent to Borrowers that the conditions referred to in this Section 2.7(b) no longer persist.

(ii) In the event that any Lender shall reasonably and in good faith determine that, as the result of any Permitted Transfer (other than a Permitted Transfer from one Sponsor to another Sponsor, directly or indirectly) or any change in law, treaty, regulation (including the administration or interpretation thereof) with respect to the maximum credit exposure that such Lender may maintain with the holder of any direct or indirect interest in a Borrower Party, that it shall become illegal for such Lender to maintain the Loan, then Borrowers shall, upon 180 days prior written notice from Agent (which written notice shall set forth the law or regulation in question), prepay the Loan in full or in such lesser amount which would result in the Loan no longer being illegal for any such Lender to maintain. No Spread Maintenance Premium shall be payable in connection with any prepayment made pursuant to this Section 2.7(b)(ii) . Within fifteen (15) Business Days of Borrower Parties’ request therefor, which request shall be accompanied by an updated organizational chart and such other information reasonably requested by Agent, Agent shall confirm to Borrower Parties whether such proposed Permitted Transfer would require a full or partial prepayment pursuant to this Section 2.7(b)(ii) based upon then current Legal Requirements (which confirmation shall set forth the law or regulation in question).

(c) Obligation to Mitigate . Each Lender agrees that, within a reasonable period of time after the officer of such Lender having primary responsibility for administering its portion of the Loan becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments or exercise rights under this Section 2.7 , such Lender will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (i) make, issue, fund or maintain its portion of the Loan through another office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause the additional amounts which would otherwise be required to be paid to such Lender, or invoke the rights of such Lender, pursuant to this Section 2.7 to be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of its portion of the Loan through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Loan portion or the interests of such Lender; provided , such Lender will not be obligated to utilize such other office pursuant to this Section 2.7(c) unless Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described above.

Section 2.8 No Withholdings . All sums payable by Borrowers under this Loan Agreement, the Note and the other Loan Documents, shall be paid in full and without set-off or counterclaims and free of any deductions or withholdings for any and all present and future taxes,

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levies, imposts, deductions, duties, filing and other fees or charges (collectively, “ Taxes ”). In the event that Borrowers are prohibited by any law from making any such payment free of such deductions or withholdings with respect to Taxes as a result of any change in any applicable law, regulation or treaty, or in the interpretation or administration thereof by any domestic or foreign governmental authority charged with the interpretation or administration thereof (whether or not having the force of law), or by any domestic or foreign court, then Borrowers shall pay such additional amount to Agent as may be necessary in order that the actual amount received by Agent after such deduction or withholding (and after payment of any additional Taxes due as a consequence of the payment of such additional amount) shall equal the amount that would have been received if such deduction or withholding were not required; provided , however , that Borrowers shall not be obligated to pay such additional amounts attributable to Excluded Taxes.

(a) Without limitation on the generality of the proviso in the last sentence of Section 2.8(a) , Borrowers shall not be obligated to pay any additional amounts on account of a specific Lender or the Agent if such Lender or Agent fails to deliver to Borrowers: (i) in the case of a Lender or Agent (or, if such Lender or Agent is a disregarded entity for United States federal income tax purposes, the Person treated, for United States federal income tax purposes, as the owner of the assets of such Lender or such Agent) that is not organized under the laws of the United States or a state thereof, a duly executed copy of United States Internal Revenue Service Form W‑8 BEN, W‑8 ECI or W‑8 IMY and/or any successor form or any required renewal thereof, as the case may be, certifying in each case that such Lender or Agent is entitled to receive payments hereunder or under the other Loan Documents without deduction or withholding of any United States federal income taxes, (ii) a duly executed United States Internal Revenue Service Form W‑8 BEN or W‑9 or any successor form or any required renewal thereof establishing a full exemption from United States backup withholding tax, and/or (iii) other required form or documentation establishing that a full exemption exists from United States backup withholding tax.

Section 2.9 Increased Costs and Capital Adequacy .

(a) Increased Costs . Borrowers agree to pay Agent additional amounts as Agent or any Lender shall reasonably and in good faith determine (which determination shall be conclusive and binding upon Borrowers absent manifest error) will compensate Lenders for costs incurred in maintaining the Loan or any portion thereof outstanding or for the reduction of any amounts received or receivable as a result of any change after the date hereof in any law, regulation or treaty, or in the interpretation or administration thereof, by any domestic or foreign governmental authority charged with the interpretation or administration thereof (whether or not having the force of law), or by any domestic or foreign court, (i) changing the basis of taxation of payments to any Lender (other than taxes imposed on all or any portion of the overall net income of any Lender by the United States or by any political subdivision or taxing authority of the United States), (ii) imposing, modifying or applying any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, credit extended by, or any other acquisition of funds for loans by any Lender or (iii) imposing on any Lender any other condition affecting this Loan Agreement, the Note or the Loan Document or the Loan. No Lender shall require Borrowers to pay any amounts under this Section 2.9(a) unless such Lender takes similar action with respect to other similarly situated borrowers with respect to loans where such Lender has a contractual right to do so.

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(b) Capital Adequacy . If any Lender shall reasonably and in good faith determine that (i) any change after the date hereof in the general application of any law, rule, regulation or guideline adopted or arising out of (x) the June 2006 report of the Basel Committee on Banking Regulations and Supervisory Practices entitled “Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework - Comprehensive Version,” (y) the reports and supporting documentation of the Basel Committee on Banking Supervision commonly referred to as the Basel III accord (“ Basel III ”) or (z) the rules and regulations promulgated pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“ Dodd-Frank ”), in each case together with any amendments thereto, or any change in the interpretation or administration thereof by any domestic or foreign governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, (ii) any generally applicable change after the date hereof in or adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy or (iii) compliance by any Lender, or any lending office of any Lender, or the holding company of any Lender, with any generally applicable request or directive regarding capital adequacy (having the force of law) of any such authority, central bank or comparable agency based on any such change or adoption, has the effect of reducing the rate of return on any Lender’s capital to a level below that which such Lender would have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender with respect to capital adequacy), then upon notice from time to time Borrower shall, without duplication of any other amounts paid by Borrower hereunder, pay to Agent such additional amounts as will compensate such Lenders for such actual reduction with respect to any portion of the Loan, if any, outstanding. Notwithstanding anything to the contrary contained in this Section 2.9(b) , any change based upon Basel III or Dodd-Frank shall be deemed not to have occurred on or prior to the Closing Date. No Lender shall require Borrowers to pay any amounts under this Section 2.9(b) unless such Lender takes similar action with respect to other similarly situated borrowers with respect to loans where such Lender has a contractual right to do so.

(c) Payment . Any amount payable by Borrowers pursuant to Section 2.9(a) or (b) shall be paid to Agent within ten (10) days of receipt by Borrowers of a notice of Agent setting forth the amount due and Agent’s or a Lender’s reasonable and good faith determination of such amount in reasonable detail, which statement shall be conclusive and binding upon Borrowers absent manifest error. Failure on the part of Agent to demand payment from Borrowers for any such amount attributable to any particular period shall not constitute a waiver of Agent’s right to demand payment of such amount for any subsequent or prior period.

(d) If any Lender (an “ Affected Lender ”) gives notice to Borrowers of the occurrence of the circumstances described in Section 2.7(b) , Section 2.9(a) , or Section 2.9(b) , Borrowers may, within ninety (90) days of receipt of such notice, give written notice to Agent and to each Lender of Borrowers’ intention to (y) replace the Affected Lender with an Eligible Assignee designated in such notice and otherwise reasonably acceptable to Agent (any such notice, a “ Section 2.9 Replacement Notice ”), or (z) prepay the entire outstanding principal balance of the Loan, together with any Additional Interest in connection therewith, but, provided that no Event of Default shall have occurred and be continuing and provided further that Borrower shall have used commercially reasonable efforts for a period not less than ninety (90) days to replace the Affected Lender with a

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Replacement Lender, without any Spread Maintenance Premium or any other prepayment premium or fee.

(e) If Borrower delivers a Section 2.9 Replacement Notice, then unless the Affected Lender agrees, within ten (10) days of receipt of such Section 2.9 Replacement Notice, to waive the application of Section 2.7(b) , Section 2.9(a) , or Section 2.9(b) hereof, as applicable, the Affected Lender shall thereafter assign all of its rights and obligations under this Loan Agreement to a financial institution which is an Eligible Assignee (the “ Replacement Lender ”) and the Replacement Lender shall assume all of the Affected Lender’s rights and obligations under this Loan Agreement, in each case pursuant to an agreement, substantially in the form of an Assignment and Acceptance, executed by the Affected Lender and the Replacement Lender. In connection therewith, the Replacement Lender shall pay to the Affected Lender an amount equal to the Affected Lender’s Pro Rata Share of the outstanding principal amount of the Loan plus all interest accrued thereon, plus all other then accrued and unpaid amounts, if any, allocable to the Affected Lender. Upon the effective date of such Assignment and Acceptance, the Replacement Lender shall become a party to this Loan Agreement and shall have all the rights and obligations of a Lender hereunder and the Affected Lender shall be released from its obligations hereunder, and no further consent or action by any party shall be required. Borrower, Agent and the Lenders shall execute such modifications to the Loan Documents as shall be reasonably required in connection with and to effectuate the foregoing. Any Affected Lender which is replaced as a Lender under this Section 2.9(e) shall remain entitled to the benefits of this Loan Agreement, including, without limitation, this Section 2.9 , in respect of the period prior to its replacement.

(f) If Borrower delivers a Section 2.9 Prepayment Notice, then unless the Affected Lender agrees, within ten (10) days of receipt of such Section 2.9 Prepayment Notice, to waive the application of Section 2.7(b) , Section 2.9(a) , or Section 2.9(b) , as applicable, Borrower shall have the right, exercisable within ninety (90) days after the end of such ten (10) day period, to prepay the entire outstanding principal balance of the Loan, together with any Additional Interest, but, provided that no Event of Default shall have occurred and be continuing and provided further that Borrower shall have used commercially reasonable efforts for a period not less than ninety (90) days to replace the Affected Lender with a Replacement Lender, without a Spread Maintenance Premium, it being agreed, however, that Borrower shall have no right to make a prepayment under this Section 2.9(f) whatsoever until the occurrence of the Par Prepayment Date. By way of example and not limitation, if Borrower delivers a Section 2.9 Prepayment Notice on June 1, 2016, the Affected Lender would have until June 10, 2016 to decide whether or not to waive the application of Section 2.7(b) , Section 2.9(a) , or Section 2.9(b) , as applicable, and Borrower would then have until September 1, 2016 to make such a prepayment of the Loan.

(g) Obligation to Mitigate . Each Lender agrees that, within a reasonable period of time after the officer of such Lender having primary responsibility for administering its portion of the Loan becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments or exercise rights under this Section 2.9 , such Lender will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (i) make, issue, fund or maintain its portion of the Loan through another office of such Lender, or (ii) take such other measures as such Lender may

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deem reasonable, if as a result thereof the circumstances which would cause the additional amounts which would otherwise be required to be paid to such Lender, or invoke the rights of such Lender, pursuant to this Section 2.9 to be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of its portion of the Loan through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Loan portion or the interests of such Lender; provided , such Lender will not be obligated to utilize such other office pursuant to this Section 2.9(g) unless Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described above.

Section 2.10 Fees . Borrowers shall pay to Agent the Upfront Fee and the Administration Fee and in accordance with the terms of the Loan Fee Letter.

Section 2.11 Cash Management and Reserves .

(a) Cash Management Arrangements .

(i) Borrowers Parties shall cause all Gross Revenue to be deposited into the applicable Operating Account promptly after Borrower Parties’ or Manager’s receipt thereof in accordance with the Management Agreements.

(ii) Borrower Parties hereby grant to Agent a security interest in all rights of Borrower Parties in and to each Operating Account and all sums on deposit therein as additional security for the Obligations and at any time during the continuance of an Event of Default, Agent shall have all the rights specified in this Loan Agreement or in the other Loan Documents with respect to the Operating Accounts, subject to the terms and conditions of the Manager SNDA.

(iii) Subject to the Manager SNDA, Manager may make deposits into and receive withdrawals from the Operating Accounts in accordance with Section 7.02 of the Management Agreements (whether or not, so long as the Management Agreement is in full force and effect, an Event of Default shall be continuing). During the continuance of a Cash Sweep Condition, an amount equal to the Cash Collateral Payment Amount shall be deposited by Borrower (or Manager) into the Cash Collateral Account for application in accordance with Section 2.11(f) hereof.

(b) Capital/FF&E Reserve Account .

(i) Funding the Capital/FF&E Reserve Account . In order to further secure the payment and performance of the Obligations, in addition to all other amounts payable under the Loan Documents, on each Payment Date Borrowers shall, or shall cause Manager or Operating Lessees to deposit the Capital/FF&E Reserve Amount for the month prior to the immediately preceding calendar month (i.e., the Capital/FF&E Reserve Amount due and payable on August 1 ^st will be five percent (5%) of Gross Revenues for June) in an interest-bearing account (the “ Capital/FF&E Reserve Account ”) at a bank or other financial institution acceptable to Agent. All amounts deposited into the Capital/FF&E Reserve

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Account by or on account of Borrowers shall be held and applied in accordance with the terms of this Loan Agreement. Subject to the restrictions on disbursements from the Capital/FF&E Reserve Account contained in this Section 2.11(b) , any interest on amounts held in the Capital/FF&E Reserve Account shall accrue for the benefit of Borrowers and may be used by Borrower Parties for the payment of Capital/FF&E Expenditures pursuant to Section 2.11(b)(ii) hereof.

(ii) Disbursements Prior to Default . Borrower Parties shall not be permitted to make any withdrawals from the Capital/FF&E Reserve Account without the prior consent of Agent. From time to time, but no more frequently than once per month, Borrower Parties may submit to Agent a request for disbursement from the Capital/FF&E Reserve Account. Agent shall allow Borrower Parties to withdraw from the Capital/FF&E Reserve Account amounts to pay for Capital/FF&E Expenditures subject to satisfaction of the following conditions:

(A) at the time of making of the request and at the time a withdrawal is to be made, no Event of Default shall have occurred and be continuing;

(B) the Capital/FF&E Expenditures that are the subject of the disbursement request were identified in an Approved Capital/FF&E Expenditures Budget or are otherwise approved in writing by Agent;

(C) the Capital/FF&E Expenditures that are the subject of such request shall not be duplicative of any cost that is, has been or may be the subject of a previous or contemporaneous request for disbursement from any Account; and

(D) Borrower Parties shall have delivered to Agent a written request for the disbursement at least ten (10) Business Days prior to the date requested for the disbursement, which shall include a (x) certificate of a duly authorized officer of Borrowers certifying as to the matters set forth in the preceding clauses (A) through (C) above, (y) invoices or bills for the payment of the Capital/FF&E Expenditures which are the subject of such Capital/FF&E Expenditure Disbursement Request, and (z) the total amount of the requested disbursement.

(iii) Effect of Management Agreement . Notwithstanding anything to the contrary in Section 2.11(b)(i) and Section 2.11(b)(ii) hereof, with respect to either Property, provided that the Management Agreement applicable to such Property (or a replacement management agreement with Hilton Management LLC or any Affiliate thereof) is then in full force and effect, the deposit by Manager of five percent (5%) of the “Gross Revenues” (as defined in the Management Agreements) to the “Capital Renewals Reserve” (as defined in the Management Agreements) in accordance with Section 4.02.5 of the applicable Management Agreement for the payment of additions to and substitutions, replacements and renewals of fixtures, furniture and equipment and capital expenditures

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shall constitute compliance with Section 2.11(b)(i) hereof. Notwithstanding anything to the contrary in Section 2.11(b)(i) and Section 2.11(b)(ii) hereof and subject to the terms of the Manager SNDA, Manager shall have the right to make withdrawals from the “Capital Renewals Reserve” in accordance with the applicable Management Agreement whether or not an Event of Default shall be continuing. Notwithstanding Section 7.01 of the applicable Management Agreement, Borrower acknowledges and represents that the “Capital Renewals Reserve” for the Capital Property is held in Bank of America account number 12330-59099, Tax Id. No. 20-0454830 and the “Capital Renewals Reserve” for the Torrey Pines Property is held in Wells Fargo Bank account number 4121557219, Tax Id. No. 20-0454862. The Account Agreements for the Capital Renewals Reserves are attached hereto as Exhibits B-1 and B-2 , respectively.

(c) Security Deposit Account . Borrower Parties shall deposit or cause Manager to deposit all security deposits actually received from Lessees under Material Leases into an interest bearing account (the “ Security Deposit Account ”) at a bank or other financial institution acceptable to Agent. All security deposits shall be held in accordance with the applicable Material Lease and all Legal Requirements. Borrower Parties shall be permitted to make withdrawals from the Security Deposit Account in the ordinary course of business following a default by the applicable Lessee or upon a termination or expiration of the applicable Material Lease so long as (a) such withdrawal is permitted under the applicable Material Lease and Legal Requirements and (b) no Default or Event of Default shall have occurred and be continuing and any letter of credit or other instrument that Borrowers receive in lieu of a cash security deposit under any Material Lease shall be (i) maintained in full force and effect in the full amount which was in effect at the time of the Closing Date (less any amounts drawn in accordance with the terms of the applicable Material Lease and Legal Requirements) unless replaced by a cash deposit and (ii) fully transferable or assignable to Agent to the extent permissible under applicable Legal Requirements.

(d) Impositions and Insurance Reserve Account .

(i) Funding of the Impositions and Insurance Reserve Account . In order to further secure the payment and performance of the Obligations, in addition to all other amounts payable under the Loan Documents, on each Payment Date Borrowers shall deposit or cause Manager or Operating Lessees to deposit one-twelfth of an amount which would be sufficient to pay the Impositions and premiums for the Insurance Policies payable or estimated by Agent to be payable or accrued, during the ensuing twelve (12) months into an account at a bank or other financial institution acceptable to Agent (the “ Impositions and Insurance Reserve Account ”). If the amounts on deposit in the Impositions and Insurance Reserve Account for any of the aforementioned obligations shall be insufficient for the payment of any such obligations in full on the due date thereof, after taking into account the monthly payments which would be due prior to such due date, Borrowers, within ten (10) days after notice from Agent, shall deposit in the Impositions and Insurance Reserve Account an amount which Agent reasonably estimates as the amount of such deficiency

(ii) Disbursements from the Impositions and Insurance Reserve Account . Borrower Parties shall not be permitted to make any withdrawals from the Impositions and

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Insurance Reserve Account without the prior consent of Agent. From time to time, but no more frequently than once per month, Borrower Parties may submit to Agent a request for disbursement from the Impositions and Insurance Reserve Account. Agent shall allow Borrower Parties to withdraw from the Impositions and Insurance Reserve Account an amount equal to the due and owing Impositions and Insurance Policy premiums which were requested subject to satisfaction of the following conditions:

(A) the funds requested by Borrower Parties shall be used solely for the purpose of paying or reimbursing Borrower Parties for the due and owing Impositions and Insurance Policy premiums set forth in such request;

(B) the Impositions and Insurance Policy premiums that are the subject of such request shall not be duplicative of any cost that is, has been or may be the subject of a previous or contemporaneous request for disbursement from any Account; and

(C) Borrower Parties shall have delivered to Agent a written request for the disbursement at least ten (10) Business Days prior to the date requested for the disbursement, which shall include a (x) certificate of a duly authorized officer of Borrowers certifying as to the matters set forth in the preceding clauses (A) and (B) above, (y) reasonably detailed description of the Impositions and Insurance Policy premiums for which the funds are requested, accompanied by bills or other statements, and (z) the total amount of the requested disbursement.

(iii) Effect of Management Agreement . Notwithstanding anything to the contrary in Section 2.11(d)(i) or Section 2.11(d)(ii) , with respect to either Property, provided that the Management Agreement applicable to such Property (or a replacement management agreement with Hilton Management LLC or any Affiliate thereof) is then in full force and effect, the deposit by Manager of one-twelfth of an amount which would be sufficient to pay the Impositions and premiums for the Insurance Policies payable or estimated by Agent to be payable or accrued, during the ensuing twelve (12) months into a subaccount of the Operating Account or separate tax and insurance Hotel Account (as defined in the Management Agreement) shall constitute compliance with Section 2.11(d)(i) . Notwithstanding anything to the contrary in Section 2.11(d)(i) or Section 2.11(d)(ii) , subject to the terms of the Manager SNDA, Manager shall have the right to withdraw funds from such subaccount or separate “Hotel Account” to make payments for Impositions (as defined in the Management Agreement) and premiums for any insurance at the Hotels in accordance with the applicable Management Agreement whether or not an Event of Default shall be continuing. The “Tax and Insurance Hotel Account” for the Capital Property is held in Bank of America account number 12331-64019, Tax Id. No. 20-0454830 and the “Tax and Insurance Hotel Account” for the Torrey Pines Property is held in Wells Fargo Bank account number 4121756126, Tax Id. No. 20-0454862. The Account Agreements for such subaccounts are attached hereto as Exhibits B-1 and B-2 , respectively.

(e) Ground Rent Reserve Account .

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(i) Funding of the Ground Rent Reserve Account . In order to further secure the payment and performance of the Obligations, in addition to all other amounts payable under the Loan Documents, on each Payment Date Borrowers shall, deposit or cause Manager or Operating Lessees to deposit one-twelfth of an amount which would be sufficient to pay the Ground Rent payable or estimated by Agent to be payable or accrued, during the ensuing twelve (12) months into an account at a bank or other financial institution acceptable to Agent (the “ Ground Rent Reserve Account ”). If the amounts on deposit in the Ground Rent Reserve Account for any of the aforementioned obligations shall be insufficient for the payment of any such obligations in full on the due date thereof, after taking into account the monthly payments which would be due prior to such due date, Borrowers, within ten (10) days after notice from Agent, shall deposit in the Ground Rent Reserve Account an amount which Agent reasonably estimates as the amount of such deficiency.

(ii) Disbursements from the Ground Rent Reserve Account . Borrower Parties shall not be permitted to make any withdrawals from the Ground Rent Reserve Account without the prior consent of Agent. From time to time, but no more frequently than once per month, Borrower Parties may submit to Agent a request for disbursement from the Ground Rent Reserve Account. Agent shall allow Borrower Parties to withdraw from the Ground Rent Reserve Account an amount equal to the due and owing Ground Rent which was requested subject to satisfaction of the following conditions:

(A) the funds requested by Borrower Parties shall be used solely for the purpose of paying or reimbursing Borrower Parties for the due and owing Ground Rent set forth in such request;

(B) the Ground Rent that is the subject of such request shall not be duplicative of any cost that is, has been or may be the subject of a previous or contemporaneous request for disbursement from any Account; and

(C) Borrower Parties shall have delivered to Agent a written request for the disbursement at least ten (10) Business Days prior to the date requested for the disbursement, which shall include a (x) certificate of a duly authorized officer of Borrowers certifying as to the matters set forth in the preceding clauses (A) and (B) above, (y) reasonably detailed description of the Ground Rent for which the funds are requested, accompanied by bills or other statements and a calculation of the percentage rent then due, if any, under the Ground Lease, and (z) the total amount of the requested disbursement.

(iii) Effect of Management Agreement . Notwithstanding anything to the contrary in Section 2.11(e)(i) or Section 2.11(e)(ii) , with respect to either Property, provided that the Management Agreement applicable to such Property (or a replacement management agreement with Hilton Management LLC or any Affiliate thereof) is then in full force and effect, the deposit by Manager of one-twelfth of an amount which would be sufficient to pay the Ground Rent payable or estimated by Agent to be payable or accrued, during the ensuing twelve (12) months into a subaccount of the Operating Account or a

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separate Hotel Account (as defined in the Management Agreement) shall constitute compliance with Section 2.11(e)(i) . Notwithstanding anything to the contrary in Section 2.11(e)(i) or Section 2.11(e)(ii) , and subject to the terms of the Manager SNDA, Manager shall have the right to withdraw funds from such subaccount or separate “Hotel Account” to make payments for Ground Rent in accordance with the applicable Management Agreement whether or not an Event of Default shall be continuing. The “Ground Rent Hotel Account” for the Torrey Pines Property is held in Wells Fargo Bank account number 4121756720, Tax Id. No. 20-0454862. The Account Agreements for the subaccounts are attached hereto as Exhibits B-1 and B-2 , respectively.

(f) Cash Collateral Account; Cash Sweep Letter of Credit .

(i) If a Cash Sweep Condition shall exist, then on the immediately succeeding Payment Date and on each Payment Date thereafter during the continuance of such Cash Sweep Condition, Borrower Parties shall deposit an amount equal to the Cash Collateral Payment Amount into an Account (the “ Cash Collateral Account ”) as cash collateral for the Obligations. In addition during a Cash Sweep Condition caused by an Event of Default, Borrower Parties shall cause Manager to deposit the Owners’ Remittance into the Cash Collateral Account (in lieu of paying such amount to Borrower Parties). Any funds in the Cash Collateral Account and not previously disbursed or applied shall be disbursed to Borrowers upon the termination of such Cash Sweep Condition; provided that (x) if such Cash Sweep Condition shall exist for more than twelve (12) consecutive months and/or (y) at any time during the continuance of an Event of Default, until such time that the Cash Sweep Condition and/or the Event of Default (if any) has been cured and no longer exists Agent shall have the right, but not the obligation, in its sole and absolute discretion to apply all sums then on deposit in the Cash Collateral Account to the Obligations (or, to the extent that a Cash Sweep Letter of Credit has been delivered to Agent, draw on such Cash Sweep Letter of Credit and apply the proceeds thereof to the Obligations, in either case in such order as Agent may elect), in such order and in such manner as Agent shall elect in its sole and absolute discretion, including to make a prepayment of principal (which application to principal, if any, shall not be subject to payment of the Spread Maintenance Premium).

(ii) If Borrowers shall have delivered a Cash Sweep Letter of Credit to Agent so as to prevent the occurrence of a Cash Sweep Condition (in accordance with the definition of Cash Sweep Condition in Section 1.1 ), then, provided that no Default or Event of Default shall then be continuing, Agent shall return such Cash Sweep Letter of Credit, within ten (10) Business Days after the earlier to occur of (i) the date on which the Cash Sweep Condition which would have (in Agent’s reasonable determination) commenced in the absence of the delivery of such Cash Sweep Letter of Credit would have (in Agent’s reasonable determination) ended or (ii) the repayment of the Obligations.

(iii) In addition, Agent shall have the rights with respect to any Cash Sweep Letter of Credit set forth in Section 2.13 hereof.

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Section 2.12 Accounts of Borrower Parties . Borrower Parties hereby grant to Agent and Lenders a security interest in all rights of Borrower Parties in and to the Accounts and all sums on deposit therein. Borrowers shall cause all banks or financial institutions which are holding any Account to execute and deliver to Agent an Account Agreement with respect to such Account. The Account Agreements for the existing Accounts are attached hereto as Exhibits B-1 and B-2 , respectively. Subject to the rights of Borrowers expressly set forth herein to make withdrawals from the Accounts and subject to the terms of the Manager SNDA, Borrower Parties hereby acknowledges and agrees that Agent shall have sole dominion and control of the Accounts. Borrower Parties shall not close any Account without obtaining the prior written consent of Agent. Borrower Parties shall not open any Account other than the Accounts open as of the Closing Date (whether in substitution of another Account or otherwise) (a) without delivering to Agent at least ten (10) Business Days prior notice of Borrower Parties’ intention to open a new Account and (b) unless (i) the bank or other financial institution at which such Account is to be opened is acceptable to Agent and (ii) prior to the opening of such Account, Borrower Parties shall have delivered to Agent an Account Agreement with respect to such Account substantially in the form as attached hereto as Exhibit B . Borrower Parties shall maintain the Accounts and shall pay all fees and charges due with respect thereto when due, and shall keep in full force and effect the Account Agreement with respect thereto. No funds in any Account may be commingled with any other funds of Borrower Parties, Manager, any Affiliate of Borrower Parties or Manager or with any other Person or with any funds contained in any other Account. All sums held in the Accounts shall constitute additional security for the Obligations. At any time following the occurrence and during the continuance of an Event of Default, Agent may apply any funds on deposit in the Accounts as set forth in Section 8.5 hereof, subject to Manager’s rights with respect to such funds pursuant to the terms of the Manager SNDA.

Section 2.13 Letters of Credit .

(a) Each Letter of Credit delivered to Agent in accordance with this Loan Agreement shall be held by Agent subject to the terms and conditions of this Loan Agreement, including this Section 2.13 .

(b) Neither Borrower Parties nor the applicant/obligor under any Letter of Credit shall be entitled to draw upon any such Letter of Credit. If a Borrower Party shall, at any time, receive notice that the issuer of such Letter of Credit has ceased to be an Approved Bank, such Borrower Party shall within twenty (20) Business Days after receipt of such notice replace such Letter of Credit with another Letter of Credit in the same amount as the replaced Letter of Credit, which new Letter of Credit shall be issued by an Approved Bank. Agent shall reasonably cooperate with Borrower Parties to cause any such Letter of Credit to be cancelled or returned timely so that any collateral securing such Letter of Credit may be used to issue the replacement Letter of Credit.

(c) Each Letter of Credit delivered by or on behalf of a Borrower Party under this Loan Agreement shall be additional security for the payment of the Obligations so long as such Letter of Credit continues to be held by Agent in accordance with this Loan Agreement. Upon the occurrence and during the continuance of an Event of Default, Agent shall have the right, at its option, to draw on any such Letter of Credit and to apply the proceeds thereof to payment of the

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Obligations in such order, proportion or priority as Agent may determine (subject to the Spread Maintenance Premium if such Spread Maintenance Premium would otherwise be payable under the terms of this Loan Agreement). Each Letter of Credit not previously returned to a Borrower Party in accordance with the terms of this Loan Agreement shall be returned to such Borrower Party promptly after repayment of the Obligations.

(d) In addition to any other right Agent may have to draw upon a Letter of Credit pursuant to the terms and conditions of this Loan Agreement, Agent shall have the additional rights to draw in full any Letter of Credit (unless such Letter of Credit is required to be re-delivered to a Borrower Party under the other terms of this Loan Agreement): (i) with respect to any evergreen Letter of Credit, if Agent has received a notice from the issuer that such Letter of Credit will not be renewed and a substitute Letter of Credit is not provided at least ten (10) Business Days prior to the date on which such Letter of Credit is scheduled to expire; (ii) with respect to any Letter of Credit with a stated expiration date, if Agent has not received a notice from the issuer that it has renewed such Letter of Credit at least ten (10) Business Days prior to the date on which such Letter of Credit is scheduled to expire and a substitute Letter of Credit is not provided at least ten (10) days prior to the date on which such outstanding Letter of Credit is scheduled to expire; (iii) upon receipt of notice from the issuing bank that any Letter of Credit will be terminated and has not been replaced within ten (10) days of such notice; (iv) if Agent has received notice that the bank issuing such Letter of Credit shall cease to be an Approved Bank and Borrower Parties shall not have replaced such Letter of Credit with a Letter of Credit issued by an Approved Bank within twenty (20) Business Days after notice thereof; or (v) if either Borrower Party shall become a debtor in a Bankruptcy Proceeding within ninety (90) days after the prepayment of all or any portion of the Loan. Notwithstanding anything to the contrary contained in the above, Agent is not obligated to draw any Letter of Credit upon the happening of an event specified in (i) , (ii) , (iii) , (iv) or (v) above and shall not be liable for any losses sustained by Borrower Parties due to the insolvency of the bank issuing any Letter of Credit if Agent has not drawn such Letter of Credit.

Section 2.14 Release of Properties .

(a) Borrowers may obtain a release (a “ Release ”) of the Lien of a Mortgage (and the concurrent release of the Lien of the applicable Subordination and Security Agreement) and Agent’s and Lenders’ other Liens with respect to any Property upon at least twenty (20) days’ prior written notice to Agent (which notice shall specify the Property or Properties being released and the amount of the Release Payment being prepaid and, subject to Borrowers’ payment of any Additional Interest and Agent’s reasonable out-of-pocket costs arising as a result of the revocation of such notice, such be revoked or extended at any time up on or prior to the date specified in such notice) subject to all of the following conditions:

(iv) Borrower shall not have knowledge that a Default or Event of Default shall have occurred and be continuing as of the date of a Release (the “ Release Date ”) or shall arise as a result of such Release unless, after giving effect to such Release, no Default or Event of Default shall exist;

(v) Borrowers shall make a prepayment of the Loan pursuant to Section 2.3(f) hereof in an amount equal to the Release Payment;

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(vi) Borrowers shall have delivered to Agent such documents amending the Loan Documents to reflect such Release and such other documents, agreements and instruments to reflect such release as Agent or counsel to Agent shall reasonably request, in each case in form and substance reasonably satisfactory to Agent;

(vii) With respect to any Release occurring prior to the Par Prepayment Date, Borrowers shall pay the Spread Maintenance Premium applicable thereto; and

(viii) Borrowers shall have delivered to Agent a certificate signed by Borrowers certifying that the conditions set forth in this Section 2.14 with respect to such Release shall have been satisfied.

(b) Payment in Full . Agent shall, upon the written request and at the expense of Borrower Parties, upon payment in full of the Obligations in accordance with the terms hereof, release or, if requested by Borrower Parties, assign to Borrower Parties’ designee (without any representation or warranty by and without any recourse against Lender whatsoever), the Liens of the Loan Documents if not theretofore released. Upon such payment in full, Borrower Parties shall be released from all obligations under the Loan Documents other than those which expressly survive the repayment in full of the Loan.

Section 2.15 Extension Period .

(a) Subject to the conditions set forth in this Section 2.15 , Borrowers shall have two (2) options to extend the then current Maturity Date. The first option shall be exercisable as provided in Section 2.15(b) hereof and shall extend the Initial Maturity Date to November 7, 2020 (the “ First Extended Maturity Date ” and the period from the Initial Maturity Date to the First Extended Maturity Date, the “ First Extension Term ”). The second option shall be exercisable as provided in Section 2.15(b) hereof and shall extend the then current Maturity Date to November 7, 2021 (the “ Second Extended Maturity Date ” and the period from the First Extended Maturity Date to the Second Extended Maturity Date, the “ Second Extension Term ”, and together with the First Extension Term, the “ Extension Terms ”).

(b) Conditions to Extension Terms . Borrowers’ option to extend the term of the Loan for th e First Extension Term or the Second Extension Term, as applicable, shall be subject to the following conditions being satisfied by Borrowers at their sole cost and expense to the reasonable satisfaction of Agent, except to the extent that Agent may elect (which election may be made without written or express notice of such waiver) to waive any of the following conditions, on or prior to the then current Maturity Date (or such other date as may be expressly provided):

(iv) Borrowers shall have delivered to Agent a written notice of Borrowers’ election to so extend the Term no later than thirty (30) days prior to the then current Maturity Date;

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(v) With respect to the First Extension Term, the Loan-to-Value Ratio, based on Appraisals or Appraisal Updates, in each case, dated no more than sixty (60) days prior to the Initial Maturity Date, shall be no greater than sixty percent (60%);

(vi) Borrowers shall have taken and completed all action required to be taken to cause the Interest Rate Protection Agreement to be in full force and effect which shall satisfy all of the conditions set forth in Section 4.3 hereof through and including the expiration of the First Extension Term or the Second Extension Term, as applicable, without regard to any time period set forth in Section 4.3 hereof by which such Interest Rate Protection Agreement is required to be in effect or any other action must be completed;

(vii) No Default or Event of Default shall have occurred and then be continuing as of the then current Maturity Date;

(viii) The representations and warranties made by Borrower Parties and Guarantors in Section 3.34 hereof shall be true and correct in all material respects on and as of the then current Maturity Date with the same force and effect as if made on and as of such date, and shall be remade as of such date; all other representations and warranties made by Borrower Parties and Guarantors in the Loan Documents (and any certificate, document or financial or any other statement furnished pursuant to or in connection therewith) shall be true and correct in all material respects, except as a result of changes of facts resulting from any actions or omissions of any Borrower Party or Guarantor that are permitted under the Loan Documents, on and as of the then current Maturity Date with the same force and effect as if made on and as of such date, and shall be remade as of such date;

(ix) Borrowers shall have paid to Agent, on or prior to the then current Maturity Date, (A) an extension fee, for the account of the Lenders in accordance with their respective Pro Rata Shares, equal to the product of (y) fifteen one-hundredths percent (0.15%) and (z) the then outstanding principal amount of the Loan as of the then current Maturity Date, and (B) all reasonable out-of-pocket costs and expenses, including reasonable attorneys’ fees and disbursements, incurred by Agent in connection with such extension;

(x) Borrowers shall have delivered to Agent on or prior to the then current Maturity Date (A) a certificate of a duly authorized officer of Borrowers, satisfactory to Agent, certifying as to the matters set forth in clauses (ii) through (vi) above, (B) a certificate from Operating Lessees certifying as to their representations and warranties as provided in clause (v) above and (C) any other documents reasonably required by Agent to evidence satisfaction of the conditions in this Section 2.15(b) ; and

(xi) The Debt Yield shall be not less than (i) in the case of the First Extension Term, as of the most recent Testing Determination Date prior to the Initial Maturity Date, 11.5%, and (ii) in the case of the Second Extension Term, as of the most recent Testing Determination Date prior to the First Extended Maturity Date, 12%.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BORROWERS

To induce Lenders to make the Loan and to induce Lenders and Agent to enter into this Loan Agreement and to perform Lenders’ and Agent’s obligations hereunder, each Borrower Party hereby represents and warrants as of the Closing Date to Agent and Lenders as follows, which representations, warranties and covenants shall survive (but shall not be re-made or deemed to be made or re-made after the date hereof) the execution and delivery of this Loan Agreement and the other Loan Documents, regardless of any investigation made by Agent or Lenders or on its or their behalf.

Section 3.1 Due Organization . Each Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Borrower Party Partner is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Operating Lessee is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Borrower Party has all necessary power and authority to own its properties, to conduct its business as presently conducted or proposed to be conducted and to enter into and perform its obligations under this Loan Agreement and the other Loan Documents to which such Borrower Party is a party, and all other agreements and instruments to be executed by such Borrower Party in connection herewith and therewith.

Section 3.2 Due Execution . This Loan Agreement and the other Loan Documents to which any Borrower Party is a party have been duly executed and delivered by such Borrower Party.

Section 3.3 Enforceability . This Loan Agreement and the other Loan Documents to which any Borrower Party is a party constitute legal, valid and binding obligations of such Borrower Party, enforceable against such Borrower Party in accordance with their respective terms.

Section 3.4 No Violation . The consummation of the transactions herein contemplated and the execution, delivery and performance by each Borrower Party of its obligations under this Loan Agreement, the other Loan Documents to which such Borrower Party is a party and all other agreements and instruments to be executed by such Borrower Party in connection herewith do not and will not (a) violate any Legal Requirement or Property Document Requirement, (b) result in a breach of any of the terms, conditions or provisions of, or constitute a default under any Organizational Document, the Management Agreements, the Property Documents, the Leases currently in effect, any Permitted Encumbrances or any mortgage, deed of trust, indenture, agreement, permit, franchise, license, note or instrument to which a Borrower Party or any Affiliate of a Borrower Party is a party or by which it or any of its properties is bound, or (c) result in the creation or imposition of any mortgage, Lien, charge or encumbrance of any nature whatsoever upon any of the assets of a Borrower Party or any Affiliate thereof (except as contemplated by this Loan Agreement and by the other Loan Documents) which is likely to result in a Material Adverse Effect. No Borrower Party has received written notice of any default with respect to any Legal Requirement, Property Document Requirement or any such mortgage, deed of trust, indenture,

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agreement, permit, franchise, license, note or instrument, which is likely to result in a Material Adverse Effect.

Section 3.5 No Litigation . Except for the Disclosed Litigations, there are no actions, suits or proceedings at law or in equity or before or instituted by any Governmental Authority pending or, to Borrowers’ knowledge, threatened (a) against or affecting a Borrower Party, a Guarantor or any Property or any part thereof (including any condemnation or eminent domain proceeding against any Property, or any part thereof), or (b) which affect or might affect the validity or enforceability of any Loan Document (or the priority of the Lien thereof). If each of the Disclosed Litigations are determined against a Borrower Party or a Guarantor, such determinations, taken as a whole, would not (i) materially adversely affect the condition (financial or otherwise) or business of Borrower Parties or Guarantors, (ii) materially adversely affect the condition, use, value or ownership of any Property, (iii) affect the validity or enforceability of any Loan Document (or the priority of the Lien thereof), (iv) materially adversely affect the ability of Borrowers to pay any amounts under the Loan Documents as they become due, (v) prevent Borrower Parties from performing Borrower Parties’ material obligations under this Loan Agreement or any of the other Loan Documents or (vi) prevent or materially impede or limit Agent’s ability to exercise those rights and remedies which Agent must reasonably be able to exercise in order to realize the principal benefits and/or security intended to be provided by the Loan Documents (one or more of Subparagraphs (i) through (vi) herein called a “ Material Adverse Effect ”).

Section 3.6 No Default . To Borrower’s knowledge, no Default or Event of Default has occurred and is continuing under this Loan Agreement or the other Loan Documents.

Section 3.7 Consents . All consents, approvals, orders or authorizations of, or material registrations, declarations or filings with, or other actions with respect to or by, any Governmental Authorities or under any Legal Requirement, or Property Document Requirement that are required in connection with the valid execution, delivery and performance by Borrower Parties of this Loan Agreement, the other Loan Documents, the Management Agreements, the Leases and all other agreements and instruments to be executed by a Borrower Party in connection herewith or therewith have been obtained and are in full force and effect.

Section 3.8 Financial Statements and Other Information . All statements of financial condition and related schedules and all certificates, statements, documents or other information of Borrower Parties and Guarantors heretofore delivered to Agent, its attorneys or consultants or to any other Person at the request of Agent (a) are (or with respect to any such documents or other information prepared by third parties which are not Affiliates of Borrower Parties, are, to Borrower’s knowledge) true, correct and complete in all material respects as of the date hereof, (b) fairly present the financial conditions of the subjects thereof as of the respective dates thereof, (c) do not contain any materially misleading information or any untrue statements of a material fact, or (d) omit to state a material fact. No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof.

Section 3.9 Availability of Utilities and Access . All utility services and facilities necessary for the operation, use and occupancy of the Improvements for their intended purposes

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are available at the boundaries of each Property at ordinary costs, including water supply, storm and sanitary sewer facilities, gas and electric and telephone facilities and means of access between the each Property and public highways, except as otherwise shown in the surveys delivered to Agent on behalf of Lenders prior to the date hereof.

Section 3.10 No Liens . Except for the Loan Documents, the Equipment Leases and the Leases currently in effect, no Borrower Party has made, assumed or been assigned any contract or arrangement of any kind, the performance of which by the other party thereto would give rise to a Lien against all or any portion of the Collateral which would have priority over the Liens of the Loan Documents, other than with respect to Permitted Encumbrances.

Section 3.11 Title to the Properties . Capital Borrower is the sole legal and beneficial owner of a fee simple interest in the real property comprising the Capital Property and Torrey Pines Borrower has a good, marketable and indefeasible leasehold estate in the real property comprising the Torrey Pines Property , in each case subject to no Liens or encumbrances other than the Permitted Encumbrances. Each Borrower Party owns its Personal Property, Leases, Rents and all other personal property encumbered by the Mortgages and the Subordination and Security Agreements free and clear of all Liens and encumbrances other than Permitted Encumbrances. No Borrower Party owns directly or indirectly, any legal or beneficial interest in any material asset which is not subject of the Lien of the Mortgages and the Subordination and Security Agreements.

Section 3.12 Loan Documents . The provisions of this Loan Agreement, the Mortgages, the Assignments of Leases, the Assignment of Agreements, the Subordination and Security Agreements and the Financing Statements are effective to create in favor of Agent and Lenders a legal, valid and enforceable Lien on all of the collateral described therein, and when the appropriate recordings and filings have been effected in public offices, this Loan Agreement, the Mortgages, the Assignments of Leases, the Assignment of Agreements, the Subordination and Security Agreements and the Financing Statements will constitute a perfected Lien on all right, title, estate and interest in the collateral described therein, prior and superior to all other Liens.

Section 3.13 Taking; Casualty . No (a) Taking of any portion of any Property, (b) Taking or relocation of any roadways abutting any Property, or (c) denial of access to the any Property from any point of access (public or private) has commenced or, to Borrowers’ knowledge, is contemplated or has been threatened by any Governmental Authority or any other Person. No material damage has occurred with respect to any portion of any Property which has not been fully restored.

Section 3.14 Brokerage . No Borrower Party has dealt with any brokers or “finders” in connection with the Loan and no brokerage or “finder’s” fees or commissions are payable by or to any Person in connection with the Loan. Borrowers hereby agree to indemnify and defend Agent and Lenders and hold Agent and Lenders harmless from and against any and all claims for any brokerage or “finder’s” fees or commissions payable to brokers or finders with whom any Borrower Party has dealt.

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Section 3.15 Representations, Warranties and Certifications of Others . The representations, warranties and certifications of Borrower Parties, Guarantors and any other Person set forth in the Loan Documents are true, correct and complete in all material respects.

Section 3.16 Indebtedness . No Borrower has incurred, created, contracted for, waived, assumed, guaranteed any Indebtedness that remains unpaid or unsatisfied and is not otherwise liable in respect of any Indebtedness other than the Loan and the Permitted Indebtedness and has not held out its credit as being available to satisfy the obligations of any other Person.

Section 3.17 Compliance with Building Codes, Zoning Laws, Etc. The use and occupancy of the Properties as contemplated by this Loan Agreement, the Permitted Encumbrances, the Property Documents and the Leases is a permitted use under all Legal Requirements, including zoning ordinances and regulations. To Borrower’s knowledge, except as otherwise set forth in the surveys and zoning reports delivered to Agent on behalf of Lenders on or prior to the date hereof, Borrower Parties, the Properties and the operation thereof currently comply in all material respects with all Legal Requirements and Property Document Requirements, and all Permits required for the operation of the Properties in accordance with the terms of the Loan Agreement are currently in full force and effect in all material respects. No Borrower Party has received any written notice alleging or asserting that any Borrower Party, Manager, any Property and the operation thereof currently violate any Legal Requirement, Property Document Requirement. There are no pending, or to Borrower’s knowledge, threatened actions, suits or proceedings to revoke, attach, invalidate, rescind or modify the ordinances and regulations currently in effect and to which the Properties are subject or any of the Permits. No Borrower Party has received written notice that any, and to Borrowers’ knowledge, there are no other Permits, including certificates of occupancy, which are required or necessary for the operation of the Properties in the manner required by the Loan Agreement, the other Loan Documents, the Leases or the Property Documents, or by any Legal Requirement other than those Permits that have been obtained.

Section 3.18 Taxes . Each Property is taxed and assessed separately from and without regard to any other property and for all purposes each Property may be mortgaged, conveyed and otherwise dealt with as an independent parcel or parcels. Borrower Parties have paid all taxes and assessments affecting the Properties or otherwise payable by Borrower Parties which are due on or before the Closing Date. To Borrowers’ knowledge, there is no proposed tax assessment against any Property or any basis for any such assessment. All tax returns required to be filed by any Borrower Party in any jurisdiction if required to be filed have been filed or will be timely filed and all taxes, assessments, fees, and other governmental charges upon any Borrower Party or upon any of its properties, income or franchises have been paid that are required to be paid prior to the time that the non-payment of such taxes could give rise to a Lien on any asset of such Borrower Party, unless such tax, assessment, fee or charge is being contested in good faith by such Borrower Party in accordance with Section 4.8(b) hereof.

Section 3.19 Labor Relations . As of the date hereof, there are no material grievances, disputes or controversies with any union or any other organization of employees at the Properties, including employees of Manager, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization.

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Section 3.20 Management and Operating Agreements . The Management Agreements and the Material Operating Agreements are in full force and effect and are valid and enforceable in all material respects. Neither the Management Agreements nor any Material Operating Agreement has been amended, modified, terminated, assigned or otherwise changed, or the provisions thereof waived, except as permitted hereunder. No Borrower Party, or to Borrower’s knowledge, any other Person who is a party to such agreements, has breached any of its respective obligations thereunder. There are no Operating Agreements which have a noncancellable term which exceeds one (1) year in length and require in excess of an aggregate of $50,000 per annum in payments by a Borrower Party or Manager except for those set forth in Exhibit G attached hereto. No Person has any right, title or interest in any Borrower Party's interest in the Operating Agreements except Agent. The Material Operating Agreements are in full force and effect .

Section 3.21 Property Documents and Permitted Encumbrances . To Borrower’s knowledge and without limiting any of the representations and warranties set forth herein or in the other Loan Documents, the Property Documents are in full force and effect, and there are no monetary defaults or material non-monetary defaults by any Borrower Party under any of the Property Documents or the Permitted Encumbrances. No Borrower Party has received or sent any written notice of default with respect to any of the Property Documents or Permitted Encumbrances.

Section 3.22 Space Leases . A true, correct, complete and most current rent roll for each property is attached to Borrower’s Certificate (the “ Rent Roll ”). There are no Leases with respect to the Properties other than the Leases set forth on the Rent Roll. Except as set forth on the Rent Roll: (a) each Lease is in full force and effect; (b) the Lessees have commenced the payment of Rent under the Leases to the extent set forth on the Rent Roll, and, there are no offsets, claims or defenses to the enforcement thereof presently outstanding; (c) all Rents due and payable under the Lease have been paid and no portion of any Rent has been paid for any period more than thirty (30) days in advance; (d) the rent payable under each Lease is the amount of rent set forth in the Rent Roll, and there is no claim or basis for a claim by the Lessee thereunder for an adjustment to the rent thereunder; (e) no Lessee has made any claim in writing against any Borrower Party or Manager which remains outstanding that any Borrower Party or Manager is in default under its applicable Lease; (f) no default by any Borrower Party or, to Borrowers’ knowledge, any Lessee exists under any Lease beyond the expiration of applicable notice and cure periods; (g) each Lease is the valid, binding and enforceable obligation of such Borrower Party which is party thereto and the applicable Lessee thereunder; (h) each Lease is subordinate to the Loan Documents; (i) no letter of credit has been delivered to a Borrower Party or Manager as a security deposit, or in lieu of a cash security deposit, under any Lease; (j) there is no tenant improvement work remaining to be done under any Lease; (k) there are no sums remaining which are required to be paid by a Borrower Party to any Lessee with respect to any Lease, whether on account of any tenant improvement work or otherwise; (l) there are no remaining rent concessions, tenant allowances or abatements with respect to any Lease; and (m) all real estate brokerage commissions relating to the Leases have been paid in full. No Lease contains any option to purchase or right of first refusal to purchase the applicable Property or any part thereof. All security deposits under the Leases are as set forth on the Rent Roll and are held pursuant to Section 2.11(c) hereof. Borrower Parties and Manager are in compliance with all Legal Requirements with respect to all security deposits. The Rent Roll sets forth the scheduled expiration date of each Lease and any arrearages in the payment of rent

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thereunder. No use restriction contained in any Lease is violated by any use permitted under any other Lease individually or when aggregated with any other Lease(s).

Section 3.23 Encroachments . Except as shown on the Survey, no Property encroaches upon or otherwise violates any building line, setback line, side yard line or any recorded or visible easement or restrictive covenant, or other easement or restrictive covenant of which Borrower Parties are aware or has reason to believe may exist.

Section 3.24 No Trademarks, etc. There exists no claim by any Person that contests or questions Borrower Party’s right to use all applicable patents, trademarks, copyrights, technology, know-how and processes necessary for the conduct of the business and the operation of the Properties substantially in the manner as contemplated to be conducted and operated. There are no claims, and to the best of Borrower’s actual knowledge, there is no infringement of the rights of any Person, arising from the use of such patents, trademarks, copyrights, technology, know-how and processes by Borrower Parties. Borrowers have no knowledge of any infringement by any third party on any rights of a Borrower Party in any of its intellectual property. No name or logo used in connection with any Property or any part thereof or business therein is a registered tradename or trademark, other than in accordance with the Management Agreements.

Section 3.25 Debts; Net Worth . Each Borrower Party and each Guarantor are able to pay their debts and other obligations when due. Each Borrower Party and each Guarantor have a positive net worth.

Section 3.26 Accounts . All Accounts of Borrower Parties or of any other Person, including Manager, held on behalf of or for the benefit of Borrower Parties, including the account number of each Account and the name and address of the financial institution at which each Account is held, are as set forth on Exhibit F attached hereto. There are no other Accounts except as set forth on said exhibit. Borrower Parties have delivered to Agent an Account Agreement with respect to each such Account.

Section 3.27 Margin Stock . None of the proceeds of the Loan will be used for the purpose of purchasing or carrying “margin stock” within the meaning of Regulation T, U or X issued by the Board of Governors of the Federal Reserve System, as at any time amended, and Borrowers agree to execute all instruments necessary to comply with all the requirements of Regulation U of the Federal Reserve System, as at any time amended.

Section 3.28 Foreign Person . No Borrower is a “foreign person” within the meaning of Section 1445 or 7701 of the Internal Revenue Code.

Section 3.29 Name; Principal Place of Business . No Borrower Party uses or will use any trade name other than Borrower Party’s actual name set forth herein. No Borrower Party has or will do business under any name, other than such Borrower Party’s actual name set forth herein. The principal place of business and chief executive office of each Borrower Party are at such Borrower Party’s principal address for notices set forth in Section 10.1 hereof and will remain at such location unless Borrowers otherwise notify Agent of a change of address in accordance with this Loan Agreement.

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Section 3.30 Special Purpose Entity . Each Borrower Party and each Borrower Party Partner is a Special Purpose Bankruptcy Remote Entity.

Section 3.31 ERISA .

(a) No Borrower Party, Borrower Party Partner or Guarantor contributes to or is obligated to contribute to any Plan, except to the extent applicable, the Multiemployer Plans identified on Exhibit G . No Borrower Party, Borrower Party Partner or Guarantor (or any ERISA Affiliate) has incurred any material liability that is outstanding, and to Borrower Parties’ knowledge no action or event has occurred that could cause any one of them to incur any material liability, (i) with respect to any Plan, including, without limitation, any liability under Section 412 or Title IV of ERISA, or (ii) under Section 4201 of ERISA with respect to any Multiemployer Plan on account of a “complete withdrawal" (within the meaning of Section 4203 of ERISA) or a "partial withdrawal" (within the meaning of Section 4205 of ERISA) or (iii) for unpaid contributions to any Multiemployer Plan. No Borrower Party has engaged in any transaction in connection with which it could be subject to either a material civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a material tax imposed under the provisions of Section 4975 of the Code.

(b) None of the assets of Borrower Parties constitute “plan assets” (i) within the meaning of 29 C.F.R. Section 2510.3-101, or (ii) of a governmental plan for the purposes of any state statute.

Section 3.32 Insurance Policies . The Insurance Policies required to be maintained as of the Closing Date pursuant to the Loan Documents are in full force and effect.

Section 3.33 Usury . The amounts to be received by Agent under the Note and the other Loan Documents as Interest or Additional Interest do not violate any laws of the States where the Properties are located or the State of New York regulating the maximum rate of interest that may be charged or received.

Section 3.34 Adverse Change . There has been no material adverse change (including bankruptcy, insolvency, reorganization or receivership) in the business, condition (financial or otherwise), operations, properties, prospects or performance of Borrower Parties, Guarantors or the Properties since (a) September 30, 2014, with respect to Borrower Parties and the Properties or (b) June 30, 2014, with respect to Guarantors, which would materially and adversely affect the ability of Borrowers or Guarantors to fulfill their respective obligations under the Loan Documents.

Section 3.35 Flood Zone . Except as shown on the Survey, no Property nor any portion thereof is located within an area that has been designated or identified as an area having special flood hazards by the Secretary of Housing and Urban Development or by such other official as shall from time to time be authorized by federal or state law to make such designation pursuant to the National Flood Insurance Act of 1968, as such Act may from time to time be amended, or pursuant to any other national, state, county or city program of flood control.

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Section 3.36 Fiscal Year of Borrower Parties . The Fiscal Year of Borrower Parties is the calendar year.

Section 3.37 Organizational and Operational Restrictions . Each Borrower Party (a) maintains its accounts, books and records separate from any other Person; (b) does not commingle its funds or assets with those of any other Person; (c) holds its assets in its own name; (d) maintains its financial statements, accounting records and other entity documents separate from any other Person (except to the extent required by applicable Legal Requirements to maintain consolidated financial statements); (e) pays its own liabilities, including the salaries of its own employees, out of its own funds and assets; (f) observes all corporate, partnership or limited liability company formalities, as the case may be; (g) has not acquired obligations or securities of any of its constituent shareholders, partners or members, as the case may be; (h) allocates fairly and reasonably shared expenses, including shared office space, and uses separate stationery, invoices and checks; (i) maintains its assets separate from those of any other Person; (j) does not identify itself as a division or part of any of its constituent shareholders, partners or members, as the case may be, or any Affiliate of any of them; and (k) has no assets other than such assets which are subject to the Liens of the Mortgages and/or the other Loan Documents.

Section 3.38 Ground Lease .

(a) Recording; Modification . All documents evidencing the entirety of the Ground Lease have been duly recorded (or shall be recorded at closing prior to the recordation of the Torrey Pines Mortgage). The Ground Lease permits the interest of Torrey Pines Borrower to be encumbered by a mortgage.

(b) No Liens . Except for the Permitted Encumbrances, Torrey Pines Borrower’s interest in the Ground Lease is not subject to any Liens or encumbrances superior to, of equal priority with, or subordinate to the Torrey Pines Mortgage.

(c) Ground Lease Assignable . Torrey Pines Borrower’s interest in the Ground Lease is assignable to Agent or its designee in accordance with the Ground Lease. The Ground Lease is further assignable by Agent, its successors and assigns in accordance with the Ground Lease.

(d) Default . As of the date hereof, the Ground Lease is in full force and effect and no default on the part of Borrowers and, to the best of Borrowers’ knowledge, (i) no default on the part of Ground Lessor exists and (ii) there is no existing condition which, but for the passage of time or the giving of notice, could result in a default under the terms of the Ground Lease. Neither Torrey Pines Borrower nor Ground Lessor has commenced any action or given or received any notice for the purpose of terminating the Ground Lease.

(e) Notice . The Ground Lease provides that the Ground Lessor may not amend, rescind or terminate the Ground Lease without the prior written consent of Agent.

(f) Cure . Agent is permitted the opportunity to cure any default under the Ground Lease, which is curable after the receipt of notice of any of the default before Ground Lessor may terminate the Ground Lease.

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(g) Term . The Ground Lease has a term that extends not less than twenty five years beyond the Maturity Date, as the same may be extended in accordance with the terms of this Loan Agreement.

(h) New Lease . The Ground Lease requires the Ground Lessor to enter into a new lease with Lender upon the termination of the Ground Lease for any reason (other than a termination consented to by Agent or resulting from a total taking in the event of a Condemnation), including rejection of the Ground Lease in a bankruptcy proceeding, provided that Agent cures any defaults that are susceptible to being cured by Agent.

Section 3.39 Patriot Act. No Borrower Party nor, to Borrower Parties’ knowledge, any Persons holding any legal or beneficial interest whatsoever in a Borrower Party, whether directly or indirectly: (a) appear on any Government List; (b) are included in, owned by, Controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the Persons referred to or described in any Government List; (c) to Borrower Parties’ knowledge, have conducted business with or engaged in any transaction with any Person named on any Government List or any Person included in, owned by, Controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the Persons referred to or described in any Government List; (d) are Persons who have been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other Presidential Executive Orders in respect thereof; (e) have been previously indicted for or convicted of any felony involving a crime or crimes or moral turpitude or for Patriot Act Offense; or (f) are currently under investigation by any governmental authority for alleged criminal activity. Borrower is the ultimate beneficiary of the Loan.

ARTICLE IV

AFFIRMATIVE COVENANTS OF BORROWER PARTIES

Until payment in full of all Obligations, Borrower Parties agree that:

Section 4.1 Financial Statements, Reports and Documents .

(a) Financial Reporting . Borrower Parties shall, at their own cost and expense, provide Agent with the following:

(i) As soon as practical, but in any event no later than forty-five (45) days after the end of each calendar month, (x) a monthly operating statement of each Property a “ Monthly Operating Statement ”) in a form substantially similar to Exhibit M , which statement shall (1) reflect the cash flow and operations of such Property for such calendar month and on a year-to-date and trailing twelve (12) calendar month basis and (2) set forth the Gross Revenues, Operating Expenses, required deposits into the Capital/FF&E Reserve Account and Impositions and Insurance Account and Cash Collateral Payment Amount, if any, for such calendar month, (y) a certificate specifying all Capital/FF&E Expenditures

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incurred or paid during such calendar month or paid from the Capital/FF&E Reserve Account during such calendar month, together with, in reasonable detail, Borrower’s calculation of the Capital/FF&E Reserve Amount and (z) a monthly bank statement with respect to each Account from the bank or financial institution at which such Account is held, which statement shall specify the balance of each such Account as of the last day of such calendar month; and

(ii) As soon as practicable, but in any event no later than sixty (60) days after the end of each Calendar Quarter, (w) a current rent roll and receivables aging report of each Property setting forth all outstanding arrears, which items shall be in a form substantially the same as the Rent Roll and otherwise satisfactory to Agent, provided that Borrower Parties shall not be required to deliver a Rent Roll at the end of any Calendar Quarter (other than the last Calendar Quarter of any year, for which a Rent Roll shall be required in all cases) to the extent that such Rent Roll is unchanged from the last Rent Roll delivered, in which event the Quarterly Compliance Certificate delivered by Borrowers on such date shall include a certification that the Rent Roll is unchanged from the last delivered Rent Roll, (x) Financial Statements of Borrower Parties as of the end of and for such Calendar Quarter, (y) the most recent Smith Travel Research STAR reports for each Property and (z) a compliance statement executed by Borrowers in a form attached hereto as Exhibit K (each, a “ Quarterly Compliance Statement ”), which statement shall (A) set forth the Assumed Debt Service Coverage Ratio and the Debt Service Coverage Ratio, each as of the Testing Determination Date occurring as of the end of such Calendar Quarter, (B) certify that to the knowledge of Borrowers, no Default or Event of Default shall exist as of the date of such statement, and, if so, stating the facts with respect thereto, and (C) contain such other statements pertaining to the operations of each Property as Agent may request;

(iii) As soon as practicable, but in any event no later than one hundred twenty (120) days after the close of each Fiscal Year of Borrower Parties, Financial Statements of each Borrower Party as of the end of and for such Fiscal Year;

(iv) As soon as practicable, but in any event no later than one-hundred twenty (120) days after the close of each Fiscal Year of Guarantors, audited Financial Statements of Guarantors (provided that, neither the REIT OP nor any replacement guarantor which is the operating partnership of a “real estate investment trust” shall be required to deliver audited financial statements, it being agreed that the delivery of the audited financial statements of the REIT shall satisfy the requirements of this clause (iv) with respect to Guarantor) as of the end of and for such Fiscal Year prepared by an independent certified public accounting firm acceptable to Agent;

(v) As soon as available, but in no event later than the end of each Fiscal Year of Borrowers, a preliminary draft and within ninety (90) days after the end of such Fiscal Year, a final of, (x) a copy of the Capital/FF&E Expenditures Budget and (y) a copy of the Operating Budget approved by Borrower Parties and Manager, each for the next Fiscal Year. Borrower Parties shall not approve the Capital/FF&E Expenditures Budget submitted by Manager pursuant to the Management Agreement without Agent’s approval,

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which approval shall not be unreasonably withheld, conditioned or delayed. Agent’s failure to approve or disapprove any Capital/FF&E Expenditures Budget or revision thereto within fifteen (15) days after Agent’s receipt thereof shall be deemed to constitute Agent’s approval thereof. Within five (5) Business Days after Agent’s final approval (or deemed approval thereof) of a Capital/FF&E Expenditures Budget, Borrowers shall deliver a copy of such budget certified by Borrowers as the Approved Capital/FF&E Expenditures Budget for the applicable Fiscal Year. No Approved Capital/FF&E Expenditures Budget shall be amended or modified without the prior consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed. No Operating Budget shall be amended or modified without delivering a copy of such amendment or modification to Agent at least ten (10) days prior to the effectiveness thereof. Notwithstanding the foregoing (1) so long as Hilton Management LLC (or any Affiliate thereof) is Manager, Agent shall not disapprove any the Capital/FF&E Expenditures Budget or any amendments thereto or modifications thereof to the extent that such disapproval will prevent the maintenance and operation of the any Property in accordance with the standards set forth in the “Operating Manual” (as defined in the Management Agreements) and (2) so long as the applicable Management Agreement is in effect (y) any Capital/FF&E Expenditures Budget in effect by operation of the dispute resolution provisions of Section 12.04 of such Management Agreement and (z) any variance from any Approved Capital/FF&E Expenditures Budget permitted under Section 4.02.6 of the Management Agreement shall be deemed approved by Agent; and

(vi) Within thirty (30) days after the Closing Date, segregated Financial Statements of each Borrower Party for the Calendar Quarter which ended September 30, 2014.

All of the foregoing statements and information shall be prepared in accordance with Applicable Accounting Standards and shall be certified as true, correct and complete by the chief financial or accounting officer of Borrower Parties, or, in the case of Financial Statements of Guarantors, by Guarantors. If Agent notifies Borrowers that Agent has determined that any of the information delivered Agent under this Section 4.1(a) is incorrect, Borrower Parties shall revise such information accordingly within five (5) Business Days after Borrowers’ receipt of such notice.

(b) Notices by Governmental Authorities . Within ten (10) days after receipt of the same by any Borrower Party, true and complete copies of any official written notice, claim or complaint by any Governmental Authority pertaining to any Property or any portion thereof.

(c) Notification by Borrowers . Without limiting any other provision of this Loan Agreement or the other Loan Documents, the following notifications:

(i) within five (5) days of Borrowers’ obtaining knowledge thereof, of any material determination in any material litigation and any material proceedings before any Governmental Authority affecting any Borrower Party or any portion of any Property, or of any judgment or determination by a court of competent jurisdiction, an arbitral or mediation board or such Governmental Authority of liability of a Borrower Party in excess of $100,000 or when aggregated with any other such judgment or determinations made in the immediately preceding twelve (12) calendar months, in excess of $250,000;

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(ii) within five (5) days after receipt by a Borrower of notice of the occurrence thereof, of any acceleration of any Permitted Indebtedness of a Borrower Party in excess of $100,000;

(iii) within ten (10) days after the occurrence thereof, of any name change, change in the Fiscal Year of a Borrower Party or change in address of any principal or executive office of a Borrower Party;

(iv) within ten (10) days after the occurrence thereof, a copy of any amendment to any other Organizational Documents of a Borrower Party, a Borrower Party Partner or a Guarantor;

(v) within five (5) days of Borrower’s obtaining knowledge thereof, of any event or occurrence which constitutes a Default or an Event of Default;

(vi) within five (5) days after the occurrence thereof, any damage, destruction or other casualty or any notice of taking or eminent domain action or proceeding affecting any Property or any portion thereof, the cost of restoration of which is in excess of $100,000; or

(vii) other than statements and reports which are expressly referred to in this Section 4.1 , contemporaneously with a Borrower Party’s receipt or giving of same, a copy of all statements and reports provided to or by a Borrower Party pursuant to the Management Agreements and any material notice or other material written communication given under, pursuant to or in connection with the Management Agreements.

(d) Notice Regarding Leases . Within five (5) days of a Borrower Party’s receipt or giving of same, a copy of any written notice under, pursuant to or in connection with any Lease, (i) alleging a default by any Borrower Party or Lessee thereunder (provided that, with respect to a Lease which is not a Material Lease, such notice under this clause (i) shall not be required unless and until such default has continued beyond applicable notice and cure periods) or (ii) exercising a renewal, extension, expansion or termination option thereunder.

(e) Property Rights and Claims . Within five (5) days of receipt of same by any Borrower Party, a copy of any written notice or other written instrument which might materially adversely affect any Property, the Liens securing the Obligations or Agent’s or any Lender’s rights and remedies under or with respect to any Loan Document, including any written notice from a Governmental Authority concerning any tax or special assessment, or any written notice of any alleged violation of any zoning ordinance, Permitted Encumbrance, fire ordinance, building code provision, or other Legal Requirement, Property Document Requirement.

(f) Other Information . Such other information concerning the business, properties, or financial condition of Borrower Parties or Guarantors as Agent shall request in its discretion.

Section 4.2 Loan Proceeds . Borrower shall use the proceeds of the Loan (a) to repay the existing mortgage indebtedness with respect to the Properties, (b) to pay the costs of

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closing the transaction that is the subject of this Loan Agreement, and (c) as working capital. Any excess proceeds may be used for any lawful purpose.

Section 4.3 Interest Rate Protection Arrangement .

(a) Interest Rate Protection Agreements .

(viii) Borrowers shall, on or before the Closing Date, enter into and satisfy the following conditions precedent to the effectiveness of an interest rate cap arrangement acceptable to Agent, the effect of which is to protect Borrowers against upward fluctuations of LIBOR (as distinguished from the LIBOR Rate) applicable to a LIBOR Rate Period of one (1) month in excess of, at most, four percent (4%) per annum with respect to a notional amount equal to at least seventy-five percent (75%) of the outstanding principal amount of the Loan for a term from the Closing Date through, the second (2nd) anniversary of the Closing Date (the “ Initial IRPA ”);

(ix) Prior to the expiration of the Initial IRPA, Borrower shall enter into an interest rate cap arrangement acceptable to Agent, the effect of which is to protect Borrowers against upward fluctuations of LIBOR (as distinguished from the LIBOR Rate) applicable to a LIBOR Rate Period of one (1) month in excess of, at most, the greater of (x) four percent (4%) per annum with respect to a notional amount equal to at least seventy-five percent (75%) of the then outstanding principal amount of the Loan and (y) the rate which, which when added to the Borrowing Margin, would result in a Debt Service Coverage Ratio of 1.25:1.00 as of the immediately preceding Testing Determination Date, with respect to a notional amount equal to at least seventy-five percent (75%) of the then outstanding principal amount of the Loan, for a term expiring not earlier than the third (3rd) anniversary of the Closing Date (the “ Second IRPA ”);

(x) Prior to the expiration of the Second IRPA, Borrower shall enter into an interest rate cap arrangement acceptable to Agent, the effect of which is to protect Borrowers against upward fluctuations of LIBOR (as distinguished from the LIBOR Rate) applicable to a LIBOR Rate Period of one (1) month in excess of, at most, the greater of (x) four percent (4%) per annum with respect to a notional amount equal to at least seventy-five percent (75%) of the then outstanding principal amount of the Loan and (y) the rate which, which when added to the Borrowing Margin, would result in a Debt Service Coverage Ratio of 1.25:1.00 as of the immediately preceding Testing Determination Date, with respect to a notional amount equal to at least seventy-five percent (75%) of the then outstanding principal amount of the Loan, for a term expiring not earlier than the fourth (4th) anniversary of the Closing Date (the “ Third IRPA ”);

(xi) Prior to the expiration of the Third IRPA, Borrower shall enter into an interest rate cap arrangement acceptable to Agent, the effect of which is to protect Borrowers against upward fluctuations of LIBOR (as distinguished from the LIBOR Rate) applicable to a LIBOR Rate Period of one (1) month in excess of, at most, the greater of (x) four percent (4%) per annum with respect to a notional amount equal to at least seventy-five percent (75%) of the then outstanding principal amount of the Loan and (y) the rate which, which when added to the Borrowing Margin, would result in a Debt Service Coverage Ratio of 1.25:1.00 as of the immediately preceding Testing Determination Date, with respect to a notional amount equal to at least seventy-five percent

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(75%) of the then outstanding principal amount of the Loan, for a term expiring not earlier than the fifth (5th) anniversary of the Closing Date (the “ Fourth IRPA ”);

(xii) If Borrowers have exercised the option to extend the Maturity Date in accordance with Section 2.15 , prior to the expiration of the any Interest Rate Protection Agreement then in effect, Borrower shall enter into an interest rate cap arrangement acceptable to Agent, the effect of which is to protect Borrowers against upward fluctuations of LIBOR (as distinguished from the LIBOR Rate) applicable to a LIBOR Rate Period of one (1) month in excess of, at most, the greater of (x) four percent (4%) per annum with respect to a notional amount equal to at least seventy-five percent (75%) of the outstanding principal amount of the Loan on the then current Maturity Date and (y) the rate which, which when added to the Borrowing Margin, would result in a Debt Service Coverage Ratio of 1.25:1.00 as of the Testing Determination Date immediately preceding the then current Maturity Date, with respect to a notional amount equal to at least seventy-five percent (75%) of the then outstanding principal amount of the Loan, for a term expiring not earlier than the Maturity Date, as so extended;

(xiii) All sums payable by Borrowers on account of the purchase price thereof during the term thereof shall have been paid in full on or prior to the effective date of such Interest Rate Protection Agreement;

(xiv) Each Interest Rate Protection Agreement shall be entered into between Borrowers and Agent or an Affiliate thereof (if Agent or its Affiliate elect to enter into the Interest Rate Protection Agreement) or a Qualified Counterparty, provided , that , an Interest Rate Protection Agreement other than a Lender Interest Rate Protection Agreement shall not be secured by all or any portion of the Collateral;

(xv) Each Interest Rate Protection Agreement shall provide that all sums payable to Borrowers thereunder shall be paid to Agent and shall otherwise be in form and content satisfactory to Agent;

(xvi) Borrowers’ interest in each Interest Rate Protection Agreement shall have been collaterally assigned to Agent pursuant to the Mortgages and the other Loan Documents and Borrower shall have executed such confirmatory documentation in this regard as Agent may request; and

(xvii) The counterparty to each Interest Rate Protection Agreement shall have executed and delivered to Agent an Interest Rate Protection Agreement Acknowledgment.

(b) Delivery of Interest Rate Protection Agreement . Borrowers shall promptly after (A) the Closing Date, (B) the second anniversary of the Closing Date, (C) the third anniversary of the Closing Date, (D) the fourth anniversary of the Closing Date, (E) if Borrowers have exercised the option to extend the Maturity Date to the First Extended Maturity Date in accordance with Section 2.15 , the Initial Maturity Date, and (F) if Borrowers have exercised the option to extend the Maturity Date to the Second Extended Maturity Date in accordance with Section 2.15 , the First Extended Maturity Date, as applicable, (i) cause a fully executed counterpart of the Interest Rate Protection Agreement required by Section 4.3(a) hereof, together with such other documents,

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instruments and opinions of counsel as shall have been requested by Agent to effectuate the purposes of this Section 4.3 , to be received by Agent and (ii) deliver to Agent a trade confirmation from a Qualified Counterparty which evidences to Agent that Borrowers have entered into and satisfied all requirements to the effectiveness of the applicable Interest Rate Protection Agreement (other than the payment of the rate lock premium with respect to the Initial IRPA, which shall be paid from the proceeds of the Loan) that shall satisfy all of the requirements set forth herein.

(c) Termination, etc. of Interest Rate Protection Agreement . Borrowers shall maintain each Interest Rate Protection Agreement required by Section 4.3(a) hereof in full force and effect at all times through the time periods set forth in Section 4.3(a). Borrowers shall not terminate, modify, cancel or surrender, or permit the termination, modification, cancellation or surrender of, any Interest Rate Protection Agreement without the prior consent of Agent. Within five (5) days after Borrowers obtain knowledge of or receipt of notice (which may be given by Lender or Agent) of a default by the financial institution that is a party to any Interest Rate Protection Agreement, Borrowers shall (i) enter into a substitute Interest Rate Protection Agreement with a Qualified Counterparty (which shall in no event be the Person that defaulted under the defaulted Interest Rate Protection Agreement) such that after giving effect to such substitute Interest Rate Protection Agreement, Borrowers shall be in compliance with the requirement set forth in this Section 4.3 , (ii) pay all sums payable by Borrowers on account of the purchase price for such substitute Interest Rate Protection Agreement, (iii) deliver to Agent copies of such substitute Interest Rate Protection Agreement, certified by Borrowers to be true, complete and correct; (iv) execute and deliver to Agent such confirmatory documentation with regard to the collateral assignment by Borrowers to Agent of such substitute Interest Rate Protection Agreement as Agent may request; and (v) deliver an original Interest Rate Protection Agreement Acknowledgment to Agent with respect to such substitute Interest Rate Protection Agreement, executed by the financial institution which is party thereto. Borrowers shall compensate Lenders for any Additional Interest in connection with any termination of any Interest Rate Protection Agreement as set forth therein. Agent’s determination of the amount of such Additional Interest shall be conclusive evidence of the amount thereof, absent manifest error.

(d) Payments Pursuant to Interest Rate Protection Agreement . All payments due to Borrowers pursuant to any Interest Rate Protection Agreement shall be payable to Agent (and any such sums received by Agent shall be applied to the next payment of interest due and payable). All periodic “net payments” due to Borrowers and so received by Agent in connection with a payment made by a counterparty to an Interest Rate Protection Agreement shall be applied by Agent in accordance with Section 2.4 hereof.

(e) No Obligation of Lender Regarding Interest Rate Protection Agreement . Borrowers agree that, except to the extent of (i) Lenders’ obligations with respect to any Lender Interest Rate Protection Agreement to which such Lender is a party and (ii) Agent’s obligation with respect to the application by Agent of “net payments” received by Agent as required in Section 4.3(d) hereof, neither Agent nor any Lender shall have any obligation, duty or responsibility to Borrowers or any other Person by reason of, or in connection with, any Interest Rate Protection Agreement (including any duty to provide or arrange any Interest Rate Protection Agreement, to consent to any mortgage or pledge of the Collateral or any portion thereof as security for Borrowers’

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performance of its obligations under any Interest Rate Protection Agreement, or to provide any credit or financial support for the obligations of Borrowers or any other Person thereunder or with respect thereto). No Interest Rate Protection Agreement shall alter, impair, restrict, limit or modify in any respect the obligation of Borrowers to pay Interest arising with respect to the Loan as and when the same becomes due and payable in accordance with the provisions of the Loan Documents except to the extent that “net payments” under an Interest Rate Protection Agreement are received by Agent and applied in accordance with Section 2.4(c) hereof.

(f) Intentionally Omitted.

(g) Failure to Maintain Interest Rate Protection Agreement . In the event that Borrowers have breached their obligations under this Section 4.3 , in addition to Agent’s rights and remedies hereunder or under the other Loan Documents, Agent may, but shall have no obligation to, at Borrowers’ sole cost and expense and on Borrowers’ behalf, enter into an Interest Rate Protection Agreement as may be required pursuant to this Section 4.3 . In the event that Agent shall elect to enter into an Interest Rate Protection Agreement on Borrowers’ behalf, such Interest Rate Protection Agreement, at Agent’s election, may be a Lender Interest Rate Protection Agreement and secured by an interest in all or any portion of the Collateral. Agent is hereby irrevocably appointed the true and lawful attorney of Borrowers (coupled with an interest), in its name and stead, during the occurrence of an Event of Default arising by reason of a breach of Borrowers’ obligations under this Section 4.3 to execute such an Interest Rate Protection Agreement and all necessary documents ancillary thereto, and for that purpose Agent may execute all necessary agreements and instruments, and may substitute one or more Persons with like power, Borrowers hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof. All sums paid and liabilities incurred by Agent pursuant to this Section 4.3(g) shall be paid by Borrowers upon demand with interest at the Default Rate to the date of payment to Agent.

Section 4.4 Leases .

(a) Material Leases . Borrower Parties shall not , without the prior written consent of Agent, enter into, amend or modify in any material respect, cancel, terminate, accept a surrender or shorten the term of, or waive any term, condition or requirement under, any Material Lease. Borrower Parties shall not shorten the term of, reduce the rent payable under or otherwise amend or modify, supplement, or waive any term, condition or requirement of any Material Lease without Agent’s prior consent.

(b) Provided that no Event of Default is continuing, Borrower Parties may, without the approval of Agent, enter into, renew, amend and/or modify Leases which are not Material Leases; provided that, Borrower Parties may enter into Leases which (i) provide for net effective rental rates comparable to existing local market rates, (ii) provide for automatic self-operative subordination to the Mortgage and, at Agent’s option, (x) attornment to Agent and (y) with respect to the Torrey Pines Property, the unilateral right by Agent, at the option of Agent, to subordinate the Lien of the Mortgage to the Lease, and (ii) do not contain any option to purchase, any right of first refusal to purchase, any requirement for a non-disturbance or recognition agreement, or any other provision which could reasonably be expected to cause a Material Adverse Effect.

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(c) Compliance with Leases . Borrower Parties shall, and shall cause Manager to, observe, perform, and discharge all obligations, covenants, and warranties provided for under the terms of the Leases to be kept, observed, and performed by Borrower Parties in all material respects.

(d) Enforcement of Leases . Borrower Parties shall, and shall cause Manager to, diligently enforce or secure the performance of each and every material obligation, term, covenant, condition, and agreement to be performed by any Lessee under the terms of the applicable Lease in a commercially reasonable manner. Borrower Parties shall, and shall cause Manager to, appear in and defend any action or proceeding arising under, occurring out of, or in any manner connected with, the Leases or the obligations, duties, or liabilities of Borrower Parties or any Lessee thereunder.

(e) No Collection of Rents in Advance . Borrower Parties shall not, and shall not permit Manager to, receive or collect any Rents for a period of more than one (1) month in advance (excluding for purposes of this Section 4.4(e) , security deposits).

(f) No Transfer of Interest in Leases . Borrower Parties shall not pledge, transfer, assign, mortgage, encumber, or allow to be encumbered any Leases or Rents except to Agent as provided herein or in the Loan Documents.

(g) Subordination of Leases . All Leases entered into after the Closing Date shall contain provisions obligating the Lessees thereunder to attorn to Agent or any purchaser therefrom in the event Agent or such purchaser succeeds to the interest of Borrower Parties under such Leases. Each Lease Guaranty entered into after the date hereof shall provide that it shall remain in full force and effect, and that one guarantor thereunder shall perform for the benefit of Agent or such purchaser, upon the attornment by the Lessee to Agent or such purchaser.

(h) Leasing Commissions . Borrower Parties shall not enter, and shall not allow any Person on behalf of Borrower Parties to enter, into any agreement with any Person to pay leasing commissions with regard to any Lease if such leasing commissions are in excess of the leasing commissions which generally would be payable in the market in which the applicable Property is located with respect to a similar lease as of the date of determination without Agent’s prior consent.

(i) Delivery of Copies of Leases, etc. to Agent . Within ten (10) days after execution of any Lease or any amendment, modification, restatement, extension, renewal or supplement of any Lease or termination or acceptance of surrender of any Lease, Borrower Parties shall deliver to Agent certified true, correct and complete copies of such Lease, amendment, modification, restatement, extension, renewal or supplement or document terminating or accepting such a surrender, together with a copy of any Lease Security and/or Lease Guaranty which is entered into in connection therewith.

(j) Security Deposits . Any letter of credit or other instrument that a Borrower Party receives as a security deposit (or in lieu of a cash security deposit) under any Lease (“ Lease Security ”) shall be (i) maintained in full force and effect in the full amount required under the applicable Lease (less any amounts drawn in accordance with the terms of the applicable Lease, this Loan Agreement, the other Loan Documents and Legal Requirements) unless replaced by a cash deposit, and (ii) fully transferable or assignable to Agent to the extent permissible under applicable Legal Requirements.

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(k) Lease Guaranties . Borrower Parties shall not amend or modify in any material respect, cancel, terminate, accept a surrender or shorten the term of, or waive any term, condition or requirement under, any Lease Guaranty executed in connection with any Material Lease.

Section 4.5 Management and Operation of Property .

(a) Borrower Parties shall, and shall cause Manager to, operate and manage each Property in a manner consistent in all material respects with Comparable Standards. Each Property shall at all times be managed directly and exclusively by Manager under the applicable Management Agreement. Borrower Parties shall cause the Management Agreements and the Material Operating Agreements to remain in full force and effect at all times (unless replaced with similar agreements in the ordinary course of business and in accordance with the terms and conditions hereof), and shall comply with the Management Agreements and Material Operating Agreements in all material respects at all times. Borrower Parties shall cause each Property to be at all times open for business as a hotel except for temporary closing due to a Force Majeure Event; provided that (i) at all times during such temporary closing Borrower Parties shall, to the extent within the control of Borrower Parties, diligently pursue a cure of the applicable Force Majeure Event and (ii) no such temporary closing shall be deemed to waive, stay or otherwise limit any other Obligations. Borrower Parties shall cause each Property to be at all times operated, managed and, without limiting Section 4.6 hereof, maintained, at all times and in the manner and accordance with the standards required pursuant to the applicable Management Agreements (including all marketing, advertising, promotional and reservation programs), but in no event below Comparable Standards.

(b) Borrower Parties shall not (i) amend, modify, waive or terminate any material provision of any Management Agreement (provided that any amendment or modification which increases any amounts payable to Manager shall be deemed to be material) or (ii) replace, terminate or otherwise substitute Manager except, in each case, with the prior consent of Agent (provided that no such consent shall be required to the extent Manager is permitted to assign the Management Agreement pursuant to Section 9.02.2 the applicable Management Agreement). Any replacement Manager permitted hereunder shall execute a Manager SNDA substantially in the form of the Manager SNDA with such modifications thereto as Agent reasonably shall require.

(c) Each Management Agreement, including all of Manager’s rights thereunder, subject to the terms of the Manager SNDAs, shall at all times be unconditionally subject, junior and subordinate to the terms and the Lien of this Loan Agreement, the applicable Mortgage and the other Loan Documents.

(d) Each Borrower Party shall observe, perform, and discharge all material obligations, covenants, and warranties provided for under the Management Agreements and the Material Operating Agreements to be kept, observed, and performed by such Borrower Party. Each Operating Lessee shall diligently enforce its material rights and or secure the performance of each and every obligation, term, covenant, condition, and agreement to be performed by Manager under the Management Agreements in a commercially reasonable manner. Each Borrower Party shall diligently enforce its material rights and to secure the performance of each material obligation of each Person under the Material Operating Agreements in a commercially reasonable manner. No Borrower Party shall surrender, terminate, cancel, modify, amend or enter into any agreement in

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substitution for, or consent to the assignment of any of the Material Operating Agreements without, in each case, the prior consent of Agent.

(e) No Borrower Party shall consent to any assignment by the Manager of its rights and obligations under any Management Agreement without Agent’s prior written consent (provided that no such consent shall be required to the extent Manager is permitted to assign the Management Agreement pursuant to Section 9.02.2 of the applicable Management Agreement).

Section 4.6 Maintenance, Repairs and Alterations .

(a) Generally . Borrower Parties will keep or cause each Property, including all FF&E, to be kept in good working order and condition, ordinary wear and tear excepted. Borrower Parties shall maintain each Property, including all FF&E, in a manner consistent with Comparable Standards and as otherwise required by the Management Agreements, and shall make such repairs, replacements and alterations as will be necessary to maintain Comparable Standards and as otherwise required by the Management Agreements, the Loan Documents or Legal Requirements. All repairs, replacements and alterations at each Property shall be done in a good and workmanlike manner and shall be completed in accordance with all Legal Requirements in all material respects and free and clear of Liens or claims for materials supplied or for labor or services performed in connection with such repairs and alterations or otherwise. Borrower Parties may make alterations and/or improvements to the Properties which are not Significant Improvements without the prior consent of Agent. Borrower Parties shall not perform any Significant Improvement without Agent’s prior written consent, which consent shall not be unreasonably withheld or delayed. Agent may condition its consent on the satisfaction of the following requirements and conditions:

(iii) Agent shall have determined that (x) Borrower Parties have the financial resources to complete the Significant Improvement on a timely and Lien-free basis and (y) the Significant Improvements can be completed within the time period estimated by Borrower Parties;

(iv) If requested by Agent, Agent shall have received architectural or engineering plans and specifications for the Significant Improvement and an estimate of the costs and expenses of such Significant Improvement, all of which shall be reasonably acceptable to Agent;

(v) If requested by Agent, Agent shall have received copies of the agreements pursuant to which the Significant Improvement shall be done, all of which shall be in form and substance satisfactory to Agent and which also shall be satisfactory to Agent as to the party performing the construction obligations thereunder;

(vi) Agent shall have received such other information and documentation as Agent may reasonably request regarding the Significant Improvement and the restoration or repairs and the cost thereof; and

(vii) No Event of Default shall have occurred and be continuing.

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(b) Agent’s Inspection . From time to time and upon at least 24 hours’ prior notice to Borrower Parties (except in cases of emergency in which case no notice need be given), as required by Agent, Borrower Parties shall permit Agent, any Lender and their respective agents and representatives, to enter upon any of the Properties during normal business hours for the purpose of inspection thereof. All costs and expenses incurred by Agent or any Lender in connection with such inspection shall be paid by Borrowers. Without limiting the foregoing, Borrower Parties shall, and shall cause Manager to, permit Agent, any Lender and their respective representatives to enter upon any of the Properties, at any reasonable times during business hours on at least 24 hours’ prior notice, to inspect or examine:

(i) All materials and shop drawings pertaining to the performance of the Significant Improvements;

(ii) Any contracts, bills of sale, statements, receipts or vouchers pertaining to the Significant Improvements;

(iii) All work done, labor performed or materials furnished in connection with the Significant Improvements; and

(iv) All books, contracts and records of Borrower Parties pertaining to the Significant Improvements.

Section 4.7 Inspection of Books and Records . Borrower Parties shall at all times keep or cause to be kept complete and accurate books, records and accounts of its transactions and permit representatives of Agent or any Lender, during normal business hours upon at least 24 hours’ prior notice, to examine and copy the books and records of Borrower Parties, the Leases, all Operating Agreements, and all contracts, statements, invoices, bills, and claims for labor, materials, and services supplied for the construction, reconstruction, management, maintenance, operation, leasing and repair of the Properties.

Section 4.8 Compliance with Legal Requirements, Etc.

(a) Compliance . Borrower Parties shall timely comply with all Legal Requirements, Property Document Requirements and all Permitted Encumbrances affecting the Properties which, if not complied with could have a Material Adverse Effect, and, upon request by Agent, deliver to Agent evidence thereof as may be required by Agent. Without limiting the generality of the foregoing, Borrower Parties shall obtain and keep in effect at all times all Permits and contractual arrangements as may be necessary to operate and maintain the Properties in accordance with the Loan Documents and all Legal Requirements, Property Document Requirements and Permitted Encumbrances. Borrower Parties assume full responsibility for the compliance with all Legal Requirements, Property Document Requirements and Permitted Encumbrances affecting the Properties and, notwithstanding any approvals by Agent, Agent shall not have any obligation or responsibility whatsoever for any matter incident to any Property or the construction, renovation or maintenance of any portion of any Property.

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(b) Contested Legal Requirement . Notwithstanding the provisions of Section 4.8(a) hereof, Borrower Parties shall have the right, provided no Event of Default shall have occurred and be continuing, in good faith, to contest by appropriate legal proceedings (without cost or expense to Agent or Lenders) the validity of any Legal Requirement and to postpone the compliance therewith, provided that (i) such contest shall operate to prevent the enforcement thereof, (ii) such contest shall be promptly and diligently prosecuted by and at the expense of Borrowers, (iii) neither Agent nor Lenders shall suffer or would be the subject of any civil or criminal liabilities, penalties or sanctions, (iv) Borrower Parties shall comply with such contested Legal Requirement if at any time all or any part of any Property shall be in imminent danger of being foreclosed, sold, forfeited, or otherwise lost or impaired or if such contest shall be discontinued, (v) Borrowers shall protect, indemnify, hold harmless Agent and Lenders from and against any liability and claims arising out of the postponement of the compliance with such Legal Requirement, (vi) such contest shall not be prohibited by any Property Document, and (vii) Borrower Parties shall, prior to commencing any such proceedings, furnish proof satisfactory to Agent that Borrowers have established a reserve account or provided collateral acceptable to Agent in which Agent and Lenders shall have a security interest and which reserve or collateral, as the case may be, shall be in an amount not less than the amount of any penalties, including interest and additional charges which may be incurred as a result of such contest or has otherwise provided for the payment of such amounts, in all cases to the satisfaction of Agent.

Section 4.9 Appraisals . Agent or any Lender shall have the right to cause an Appraisal or if Agent shall elect, an Appraisal Update, of any Property to be performed at such times, if any, as (a) Agent or any Lender may elect to obtain an Appraisal or an Appraisal Update of such Property or (b) such an Appraisal or Appraisal Update may be required under FIRREA or any other statute or regulations applicable to Agent or any Lender; provided , however in the event that an Appraisal Update in lieu of an Appraisal would be sufficient under a requirement of FIRREA or other statute or regulation, Agent and Lenders agree that an Appraisal Update shall be sufficient for purposes of clause (b) above. The cost of any such Appraisal and/or Appraisal Update shall be paid by Borrowers (i) if an Event of Default shall then be continuing (if such request is made by Agent not more than twice in any calendar year), (ii) if no Event of Default is continuing, if such request is made by Agent not more than once in any twenty four (24) month period (exclusive of requests made under clauses (i) and (ii)), (iii) if such Appraisal or Appraisal Update is performed pursuant to clause (b) of this Section 4.9 , (iv) if such Appraisal or Appraisal Update provided to Agent to establish satisfaction with the Release Conditions in accordance with Section 4.12 or Section 4.13 hereof, and/or (v) if such Appraisal or Appraisal Update is performed in connection with an exercise by Borrowers of their right to extend the then current Maturity Date in accordance with Section 2.15 hereof. Except as set forth in the immediately preceding sentence, the costs of any Appraisal and/or Appraisal Update requested by Agent after the Closing Date shall be paid by Agent. In all events, Borrower Parties shall cooperate and cause Manager to cooperate with Agent and any such appraiser and their agents and employees in connection with such Appraisal or Appraisal Update.

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Section 4.10 Insurance .

(a) Borrower Parties shall maintain, or cause to be maintained, in full force and effect at all times, until all Obligations have been paid in full, insurance as evidenced by the Insurance Policies, and shall deliver or cause to be delivered to Agent, (i) contemporaneously with the execution hereof, certificates of insurance evidencing the insurance to be maintained pursuant to this Agreement, (ii) provide for inspection all Insurance Policies within sixty (60) days following the policy inception date, and (iii) and within ten (10) days after such renewal, Borrowers shall deliver to Agent evidence satisfactory to Agent of Borrower’s payment of the premium for such Insurance Policy.

(b) All Insurance Policies shall name Borrowers Parties as a named insured. All Insurance Policies shall be issued by an insurer or insurers acceptable to Agent with an A.M. Best rating and size of A:X or better or otherwise acceptable to Agent, or equivalent rating from another agency acceptable to Agent and be licensed or authorized in the State where the applicable Property is located; provided that, so long as i nsurance carriers with a rating of A:X or better will be the carriers of the primary insurance layer, insurance companies with ratings of A-:VII or better may issue policies in the excess layers, so long as no more than 20 percent (20%) of the insurance companies in the first excess layer have ratings less that A:X and each such insurance company has an A.M. Best “Stable” outlook . Agent may, in its sole discretion, accept insurance companies not meeting the above noted rating minimum.

(c) The property, boiler and machinery Insurance Policies, including loss of rental income insurance, shall also name Agent under a non-contributing New York standard mortgagee clause and lender loss payee endorsement or equivalent endorsements satisfactory to Agent in form and content. Loss of rental income insurance shall name Agent as lender loss payee. All property Insurance Policies also shall contain an agreed amount (coinsurance waiver) and replacement cost value endorsement and shall cover, without limitation, all tenant improvements and betterments which Borrower Parties are required to insure in accordance with any Lease. The liability insurance policies shall name Agent as an additional insured on an endorsement acceptable to Agent. The amount of any deductible under any Insurance Policy shall be acceptable to Agent. Without Agent’s prior consent, Borrower Parties shall not name any Person other than Agent, as loss payee under any property Insurance Policies covering the Improvements and such tenant improvements and betterments that Borrower Parties are required to insure pursuant to this Loan Agreement; provided that, if blanket policies are obtained, this sentence shall not apply to property covered by such blanket policies other than the Improvements and such tenant improvements and betterments which Borrower Parties are required to insure pursuant to this Loan Agreement. Notwithstanding the immediately preceding sentence, such Insurance Policy shall provide that any proceeds that are payable to a loss payee shall be payable by check to Agent and Borrower.

(d) Each Insurance Policy shall contain a provision whereby the insurer (i) agrees that such policy shall not be canceled, terminated or non-renewed without, in each case, at least thirty (30) days’ prior written notice by the insurer to Agent, (ii) waives any right to claim any premiums and commissions against Agent provided that such policy need not waive the requirement that the premium be paid in order for a claim to be paid to the insured, and (iii) provides that Agent

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is permitted, but not obligated, to make payments to effect the continuation of such policy upon notice of cancellation due to nonpayment of premiums. In the event any Insurance Policy shall contain breach of warranty provisions, such policy shall provide that with respect to the interest of Agent, such Insurance Policy shall not be invalidated by and shall insure Agent regardless of (A) any act, failure to act or negligence of or violation of warranties, declarations or conditions contained in such policy by any named insured, (B) the occupancy or use of the applicable Property for purposes more hazardous than permitted by the term thereof, or (C) any foreclosure or other action or proceeding taken by Agent pursuant to any provision of the Mortgages. Borrower Parties shall not modify any provision of any Insurance Policy relating to coverage, deductibles or limits without the prior consent of Agent if, after giving effect to such modification, such Insurance Policy would no longer satisfy the provisions of this Loan Agreement.

(e) Borrowers shall pay or cause to be paid the premiums for the Insurance Policies as the same become due and payable. Borrowers also shall deliver to Agent, within ten (10) days of Agent’s request, a certificate of Borrowers or Borrower Parties’ insurance agent setting forth the particulars as to all such Insurance Policies, that all premiums due thereon have been paid and that the same are in full force and effect. Not later than thirty (30) days prior to the expiration date of each of the Insurance Policies, Borrowers shall deliver to Agent a certificate of insurance evidencing renewal of coverage as required herein or binders of all such renewal Insurance Policies, if available, provided that if the foregoing are not available as of such date, then Borrower shall deliver to Agent evidence reasonably satisfactory to Agent that the coverages required herein shall be timely renewed and shall promptly deliver to Agent such certificates once they are available; however, the certificates shall be delivered not later than the expiration of the current insurance. Borrowers shall deliver to Agent no later than then (10) days after the expiration date, proof that the necessary premium for the Insurance Policies have been paid. Agent reserves the right to request certified copies of the Insurance Policies, placed directly by the Borrowers. Borrowers shall, at Agent’s request, make arrangements for Agent, or their designated representative to review and take detailed notes about the policies placed on behalf of Borrowers.

(f) Notwithstanding anything to the contrary contained herein, if at any time Agent is not in receipt of written evidence that all insurance required hereunder is maintained in full force and effect, Agent shall have the right (but not the obligation), after the expiration of any applicable notice and cure period and upon five (5) Business Days prior notice to Borrowers, to take such action as Agent deems necessary to protect its interest in the applicable Property, including the obtaining of such insurance coverage as Agent shall deem appropriate, and all expenses incurred by Agent in connection with such action shall be paid by Borrowers.

(g) Any insurance maintained pursuant to this Section 4.10 may be evidenced by blanket insurance policies covering the Properties and other properties or assets of Borrower Parties or its Affiliates, provided that (i) any such policy shall in all other respects comply with the requirements of this Section 4.10 and (ii) Agent shall have determined that such blanket policies provide sufficient limits of insurance.

Section 4.11 Payment of Taxes . Borrower shall pay and discharge or shall cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed upon

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Borrowers or Borrower Parties (whether imposed by contract or agreement or by Legal Requirements), or upon Borrowers’ or Borrower Parties’ income or profits, or upon the Properties or upon any other property belonging to Borrowers or Borrower Parties, in each case prior to such time as such tax, assessment, charge or levy is to become delinquent; provided , however , that Borrower Parties shall not be required to pay any such tax, assessment, charge, or levy if and so long as (a) the amount, applicability, or validity thereof shall currently be contested in good faith by appropriate proceedings, and (b) such contest shall not be prohibited by the Property Documents, (c) no Event of Default shall have occurred and is continuing, (d) Borrower Parties shall have provided Agent with at least twenty (20) days prior notice that such tax, assessment, charge or levy is being contested, and (d) Borrower Parties shall, prior to commencing any such proceedings to contest such tax, assessment, charge or levy, furnish proof satisfactory to Agent that Borrowers have established a reserve account or provided collateral acceptable to Agent in which Agent and Lenders shall have a security interest and which reserve or collateral, as the case may be, and which shall be in an amount not less than the amount of any penalties, including interest and additional charges which may be incurred as a result of such contest, or has otherwise provided for the payment of such amounts, in all cases, to the satisfaction of Agent.

Section 4.12 Damage or Destruction .

(a) Promptly, and in any case within three (3) Business Days after the occurrence thereof, Borrower Parties shall notify Agent of any fire or other Casualty with respect to any portion of any Property with an estimated claims value in excess of $100,000. Such notice also shall generally describe the nature and extent of such Casualty and set forth Borrower Parties’ best estimate of the cost of Restoration.

(b) Agent shall be entitled to receive all insurance proceeds payable with respect to any Property on account of a Casualty in excess of the Casualty Threshold. Each Borrower Party hereby irrevocably assigns, transfers and sets over to Agent all rights of such Borrower Party’s right to any such insurance proceeds, award or payment. Each Borrower Party hereby irrevocably authorizes and empowers Agent, in the name of such Borrower Party or otherwise, to file for and prosecute in its own name what would otherwise be such Borrower Party’s claim for any such insurance proceeds. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and shall then be continuing and provided Borrower Parties promptly file all claims and diligently prosecutes same, Borrower Parties shall have the right to file, adjust, settle and prosecute any claim for such insurance proceeds; provided , however , that Borrower Parties shall not agree to any adjustment or settlement of any such claim payable with respect to a Casualty the insurance proceeds with respect to which are greater than Casualty Threshold without Agent’s prior consent. Borrower Parties shall promptly after demand pay to Agent all reasonable costs and expenses (including the fee of any insurance consultant or adjuster and reasonable attorneys’ fees and disbursements) incurred by Agent in connection with a Casualty and seeking and obtaining any insurance proceeds, award or payment with respect thereto. Net Proceeds held by Agent, together with any interest earned thereon, shall constitute additional security for the payment of the Obligations (a security interest therein being granted hereby), until disbursed in accordance with this Section 4.12 .

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(c) Borrower Parties shall, at the sole cost and expense of Borrowers, promptly commence and diligently and continuously perform to completion the Restoration in a good and workmanlike manner and in compliance with all Legal Requirements and the requirements of the Permitted Encumbrances which, if not complied with could have a Material Adverse Effect, whether or not Borrower Parties shall have satisfied the requirements of Section 4.12(d) hereof in order to cause the Net Proceeds to be made available for such Restoration and whether or not such insurance proceeds on account of the Casualty shall be sufficient for such purpose.

(d) In the case of any Casualty with respect to which the insurance proceeds payable are less than the Casualty Threshold and provided that no Event of Default shall then exist, the Net Proceeds shall be held by Borrower Parties (or if required under the Management Agreement, Manager) to be applied and used for the Restoration. If the insurance proceeds are equal to or greater than the Casualty Threshold, the Net Proceeds shall be held by Agent, if Agent so elects, as a part of the Collateral and shall be applied or dealt with by Agent as follows:

(i) The Net Proceeds shall be made available to reimburse Borrower Parties for the costs of Restoration or to be applied directly to such costs provided that the following conditions are satisfied (each a “ Release Condition ” and collectively, the “ Release Conditions ”):


(A)	no Event of Default shall have occurred and be continuing;


(B)	the loss is in an aggregate amount less than 25% of the Allocated Loan Amount of the affected Property (or such higher amount agreed to by Agent in its sole and absolute discretion);


(C)	Borrower Parties shall have demonstrated to the reasonable satisfaction of Agent that the Restoration can be completed at least six (6) months prior to the then-current Maturity Date, or such earlier time as may be required by applicable Legal Requirements;

(D)

Borrower Parties shall have demonstrated to the satisfaction of Agent that sufficient funds are available to Borrower Parties through rent and/or business interruption insurance maintained pursuant to this Agreement, cash, and/or a Letter of Credit or other similar cash-equivalent security reasonably satisfactory to Agent as to form, content and issuer, and which shall be for the benefit of Agent, to pay all debt service with respect to the Loan and all operating expenses with respect to the affected Property during the period reasonably estimated by Borrower Parties as necessary for the completion of the Restoration;

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(E)	If requested by Agent, Borrower Parties shall have provided Agent with a guaranty of completion satisfactory to Agent in form and content and as to guarantor which, among other things, guarantees the timely and lien-free completion of the Restoration;


(F)	to the extent, in Agent’s reasonable judgment, the Net Proceeds are insufficient to pay the costs of the Restoration, Borrower Parties shall have provided Agent with a Letter of Credit, cash deposit or similar equivalent security in the amount of such deficiency in form, content and issuer satisfactory to Agent;


(G)	Agent shall have been provided an Appraisal or any Appraisal Update, certifying that upon completion of the repairs and restoration of the affected Property the Loan-to-Value Ratio shall not exceed sixty five percent (65%); and


(H)	Agent shall have received architectural plans and specifications for all restoration and repairs and an estimate of the costs and expenses of all such restoration and repairs, all of which shall be in form acceptable to Agent.

(ii) Notwithstanding Section 4.12(d)(i) hereof, if Agent does not elect to hold the Net Proceeds in excess of the Casualty Threshold, Borrower Parties shall not disburse any Net Proceeds other than in accordance with the conditions of this Section 4.12(d) and Sections 4.12(e) and 4.12(f) hereof.

(e) If one or more of the Release Conditions are not satisfied or otherwise waived by Lender, all Net Proceeds shall be applied in accordance with Section 4.12(h) hereof.

(f) All reasonable costs and expenses incurred by Agent in connection with making the Net Proceeds available for the Restoration (including reasonable attorneys’ fees and disbursements and reasonable fees and actual out-of-pocket expenses of Agent’s construction consultants and inspectors) shall be paid by Borrowers. Any Net Proceeds (including, without limitation, any excess business interruption/rent loss proceeds, remaining after the Restoration and the payment in full of all costs incurred in connection with the Restoration shall, provided that no Default or Event of Default shall be continuing, be distributed by Agent to Borrowers.

(g) Business interruption/rent loss insurance proceeds of Borrower Parties shall be deposited into either (i) an account or subaccount of Agent or (ii) an account at a bank or other financial institution approved by Agent (and in each case, segregated from other funds of Agent) and shall be disbursed to Borrower Parties each month in the amount equal to the proceeds allocable to such month. Borrower Parties hereby grant to Agent a security interest in all rights of Borrower Parties in and to such account and all sums on deposit therein as additional security for the Obligations. Upon the occurrence and during the continuation of an Event of Default, Agent shall

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have the rights and remedies with respect to such account specified in this Loan Agreement and in any other Loan Document, subject to the Manager SNDA. If held by Agent, the credit balance in such account or subaccount may not be commingled with the general funds of Agent. If not held by Agent, Borrower Parties shall cause the bank or financial institution at which such account is held to execute and deliver to Agent an Account Agreement with respect to such account in substantially the form as attached hereto as Exhibit B , Borrower shall pay all fees and costs with respect thereto and Borrower Parties shall not close such account without obtaining the prior consent of Agent. Neither Agent nor Lenders shall be liable for any loss of interest on or any penalty or charge assessed against the funds in, payable on, or credited to such account as a result of the exercise by Agent of any of its rights, remedies or obligations hereunder or under any other Loan Document. Any interest earned on the balance of such account shall be deposited into such account and be applied with the balance of such account in accordance with this Section 4.12(g) . Agent shall have sole control over such account.

(h) Upon a Casualty, if the disposition of the Net Proceeds is governed by Section 4.12(e) hereof, at the option of Agent, the Loan shall be due and payable upon sixty (60) days’ written notice from Agent or, if earlier, the Maturity Date. Regardless of whether Agent shall so elect to accelerate the maturity of the Loan as aforesaid, Agent shall have the option to (a) make available the Net Proceeds to Borrowers for Restoration in the manner provided in Section 4.12(d) hereof or (b) apply the Net Proceeds to the Obligations, in such order and manner as Agent determines, as the case may be.

(i) With respect to any Net Proceeds which Agent is required to make available (or otherwise elects to make available in its sole discretion), such Net Proceeds shall be disbursed to Borrower Parties from time to time in accordance with Agent’s standard construction lending practices and the upon the receipt of the following, each in form and substance satisfactory to Agent:

(i) A request for disbursement signed by Borrowers, accompanied by billing statements, vouchers or invoices, which request for disbursement shall expressly warrant that the work with respect to which the advance is requested has been performed in accordance with the approved plans and specifications for the restoration or repair;

(ii) Proof that all invoices for labor and materials previously submitted by Borrowers and approved and reimbursed or paid by Agent have been paid, except for those the subject of the current request for disbursement;

(iii) Lien waivers for all payees under previous requests for disbursements;

(iv) If requested by Agent, a report from Borrower Parties’ architect or, if Agent shall elect, Agent’s consultant, which shall specify the percentage of completion of restoration or repair, shall provide reasonably detailed comments on specific work performed since the date of the last such report, and, if required by Agent, an estimate of the cost to complete the restoration and repair after taking into account the work then completed;

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(v) At the request of Agent, an endorsement of the Title Insurance Policy, which endorsement shall show no Liens of record or additional encumbrances (other than Permitted Encumbrances) not acceptable to Agent;

(vi) If requested by Agent, copies of the agreements pursuant to which the restoration or repair shall be done, all of which shall be in form and substance satisfactory to Agent, and which also shall be satisfactory to Agent as to the party performing the construction obligations thereunder;

(vii) If requested by Agent, an assignment to Agent of all construction and design-professional contracts (which may be pursuant to the Mortgages and the Assignment of Agreements), together with the written consent to such assignments by all parties to such contracts (which may be included in any such contract); and

(viii) Such other information and documentation as Agent may request regarding the Improvements and the restoration or repairs and the cost thereof.

(j) Notwithstanding anything to the contrary contained in this Section 4.12 , in the event of any conflict between the provisions of this Section 4.12 and the Ground Lease with respect to the payment or application of Net Proceeds, the provisions of the Ground Lease shall control; provided that in all cases (i) the Release Conditions (D), (E), (F) and (H) set forth in Section 4.12(d) have been satisfied and (ii) the disbursement of any Net Proceeds shall be subject to Section 4.12(i) . If a Borrower Party or its Affiliate should hereafter acquire the lessor’s interest in the Ground Lease, the provisions of this Section 4.12(j) shall automatically cease to be of any force or effect.

Section 4.13 Taking of the Mortgaged Property .

(a) Promptly, and in any case within three (3) Business Days after the occurrence thereof, Borrower Parties shall notify Agent of any Taking of any portion of any Property or the commencement of any proceedings or negotiations which might result in such a Taking. Such notice shall generally describe the nature and extent of such Taking or the nature of such proceedings or negotiations and the nature and extent of the Taking which might result therefrom. Agent shall be entitled hereunder to all awards or compensation payable on account of a Taking if such awards or compensation exceed the Condemnation Threshold. Each Borrower Party hereby irrevocably assigns, transfers and sets over to Agent all rights of such Borrower Party to any such awards or compensation and irrevocably authorizes and empowers Agent, in the name of such Borrower Party or otherwise, to collect and receipt for any such award or compensation and delegate to Agent the right to file and prosecute any and all claims for any such awards or compensation and to participate in any and all hearings, trials and appeals in connection with a Taking on behalf of Borrower Parties to the extent the condemnation award or compensation exceeds the Condemnation Threshold; provided that, so long as no Event of Default shall be continuing, Agent shall not exercise the right to file and/or prosecute any such claim and Borrower Parties shall have the right to settle claims with the prior consent of Agent (not to be unreasonably withheld, conditioned or delayed). Upon the occurrence and continuance of an Event of Default, Agent may participate in such proceedings or negotiations upon prior notice to Borrower Parties and Borrower Parties will deliver or cause to

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be delivered to Agent all instruments requested by Agent to permit such participation; provided , however , that Agent shall be under no obligation to question the amount of the award or compensation. Although it is hereby expressly agreed that the same shall not be necessary, and in any event, Borrower Parties shall, upon demand of Agent, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or compensation in excess of the Condemnation Threshold to Agent, free and clear of any encumbrances of any kind or nature whatsoever. Agent may be represented by counsel satisfactory to it at the expense of Borrowers. Borrowers will pay promptly after demand all costs and expenses (including reasonable attorneys’ fees and disbursements and costs and expenses of any appraiser or other consultant) incurred by Agent in connection with any Taking and seeking and obtaining any award or payment on account thereof.

(b) Borrower Parties shall, at the sole cost and expense of Borrowers, promptly commence and diligently and continuously perform to completion the Restoration in a good and workmanlike manner and in compliance with all Legal Requirements and the requirements of the Permitted Encumbrances, whether or not Borrower Parties shall have satisfied the Release Conditions in order to cause the Net Restoration Award to be made available for such Restoration and whether or not such awards or compensation, if any, on account of the Taking shall be sufficient for such purpose.

(c) All Net Restoration Awards in excess of the Condemnation Threshold shall be held by Agent at its election. All such Net Restoration Awards shall be applied as follows:

(iii) If the Release Conditions are satisfied (other than the Release Condition described in Section 4.12(d)(i)(B) , which Release Condition shall not be applicable to a Taking), and the Taking is not a Material Taking, all Net Restoration Awards shall be applied to pay the cost of Restoration, such application to be effected in the same manner as provided in Section 4.12(d) hereof with respect to Net Proceeds and the balance, if any, of such Net Restoration Awards shall, at the option of Agent, be applied as a prepayment of the principal amount of the Loan or be paid over or assigned to Borrowers following completion of the Restoration.

(iv) If the Taking is a Material Taking or one more of the Release Conditions are not satisfied (other than the Release Condition described in Section 4.12(d)(i)(B) , which Release Condition shall not be applicable to a Taking), all Net Restoration Awards being held by Agent shall be applied in accordance with Section 4.13(d) hereof.

(v) In the case of a Taking for temporary use, any Net Restoration Awards shall be applied to the Obligations in such order as Agent may elect.

(d) Upon a Taking, if the disposition of the Net Restoration Awards is governed by Section 4.13(c)(ii) hereof, at the option of Agent, the Loan shall be due and payable upon sixty (60) days’ written notice from Agent or, if earlier, the Maturity Date. Regardless of whether Agent shall so elect to accelerate the maturity of the Loan as aforesaid, Agent shall have the option to (a) make available the Net Restoration Awards to Borrower for Restoration in the manner provided in Section 4.12(d) hereof or (b) apply the Net Restoration Awards to the Obligations, in such order and manner as Agent determines, as the case may be.

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(e) Notwithstanding anything to the contrary contained in this Section 4.13 , in the event of any conflict between the provisions of this Section 4.13 and the Ground Lease with respect to the payment or application of Net Proceeds, the provisions of the Ground Lease shall control; provided that, in all cases (i) the Release Conditions (D), (E), (F) and (H) set forth in Section 4.12(d) have been satisfied and (ii) the disbursement of any Net Proceeds shall be subject to Section 4.12(i) . If a Borrower Party or its Affiliate should hereafter acquire the lessor’s interest in the Ground Lease, the provisions of this Section 4.12(e) shall automatically cease to be of any force or effect.

Section 4.14 Costs and Expenses .

(a) Except as otherwise provided herein, Borrowers shall pay when due all costs and expenses related to the Loan, including (i) all fees and taxes for filing or recording the applicable Loan Documents, including mortgage recording taxes, documentary stamp taxes and similar taxes or fees and foreign notary charges, (ii) all reasonable fees, disbursements and expenses of legal counsel and any consultant to Agent, (iii) all title insurance and title examination charges, including premiums for the Title Insurance Policy, (iv) all survey costs and expenses, including the cost of the Survey, (v) all premiums for the Insurance Policies, (vi) all costs and expenses of the Environmental Audit, the Engineer’s Audit, the Insurance Review and any additional engineering, environmental or insurance audit required by Agent, including any asbestos inspection, a seismic probable maximum loss study and any Appraisal or any Appraisal Update, (vii) all taxes and recording expenses, including all filing fees and mortgage recording taxes, with respect to the Loan Documents, and any other documents modifying, extending or consolidating the Loan Documents, (viii) in the event any Property, or any portion thereof, shall be advertised for foreclosure sale and not sold, all costs in connection therewith, including attorneys’ fees and disbursements, advertising costs and trustees’ commission, (ix) all costs and expenses relating to any tax, lien, UCC, bankruptcy, judgment and title searches required by Agent and (x) all other costs and expenses payable to third parties (including the reasonable fees and expenses of Agent’s Construction Consultant but excluding all participation, assignment or syndication costs) which are incurred by Agent or any Lender in connection with the Loan, whether incurred prior to or after the Closing Date.

(b) Borrowers further agree to pay upon demand all out-of-pocket expenses to third parties (including reasonable attorney’s fees and disbursements) incurred by Agent in connection with any amendments, modifications, waivers, approvals or consents in connection with the Loan or any Loan Document thereof (whether or not the transactions thereby contemplated shall be consummated) or incurred by Agent in connection with the enforcement or protection of its rights and obligations in connection with this Loan Agreement and the other Loan Documents or in connection with the Loan made hereunder, including all reasonable attorney’s fees and disbursements.

Section 4.15 Indemnity by Borrowers . Borrowers shall indemnify and hold harmless Agent, Lenders and their respective Affiliates, directors, officers, shareholders, partners, members, agents, attorneys and employees (individually and collectively, the “ Indemnitee ”) from and against any loss, cost, expense, damage or liability (including reasonable legal fees and disbursements and costs incurred in the enforcement of the indemnity granted pursuant to this

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Section 4.15 ), which the Indemnitee may suffer or incur by reason of or in connection with any claim of injury or damage to Persons or property arising out of or in any way resulting from or in connection with Borrower Parties, Guarantors, Manager, the Properties, the Loan, any Loan Document, the Property Documents or the Permitted Encumbrances, including, without limitation, any loss, cost, expense, damage or liability (including reasonable legal fees and disbursements and costs) incurred by or asserted against any Indemnitee in connection with or arising out of any investigation, litigation, enforecement or proceeding related to the Loan or the Properties; provided , however , that Borrowers shall have no obligation under this Section 4.15 to any Indemnitee with respect to any of the foregoing to the extent the same has arisen solely out of the gross negligence or willful misconduct of such Indemnitee or any of such Indemnitee’s agents or employees. If any claim, demand, action or cause of action is asserted against any Indemnitee, such Indemnitee shall promptly notify Borrowers, but the failure to do so shall not affect Borrowers’ obligations under this Section 4.15 unless such failure materially prejudices Borrowers’ right to participate in the contest of such claim, demand, action or cause of action. The provisions of this Section 4.15 shall survive the repayment of the Loan.

Section 4.16 Further Assurances . Borrowers shall, within seven (7) days after written request, make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings, conveyances, deeds of trust, mortgages, transfers, assignments, financing statements or other assurances, and take all such other action, as Agent may, from time to time, deem necessary in order to give effect to the rights and benefits conferred on Agent and Lenders pursuant to this Loan Agreement, the Mortgages or any of the other Loan Documents, all or any part of the security intended to be provided pursuant to this Loan Agreement or any of the other Loan Documents, for any of the Obligations.

Section 4.17 Ownership of Properties . Capital Borrower shall at all times be the sole legal and beneficial owner of the Capital Property and Torrey Pines Borrower shall at all times be the sole legal and beneficial owner of the leasehold interest in Torrey Pines Property created by the Ground Lease. Capital Operating Lessee shall at all times be the sole legal and beneficial owner of the leasehold estate in the Capital Property created by the Capital Operating Lease and Torrey Pines Borrower shall at all times be the sole legal and beneficial owner of the leasehold interest in Torrey Pines Property created by the Torrey Pines Operating Lease. Each Borrower Party shall at all times be the sole legal and beneficial owner of the other Collateral which is encumbered by the Mortgages and/or the Manager SNDA, subject only to (a) the Permitted Encumbrances, (b) the Liens created pursuant to the Loan Documents, and (c) such other claims and interests as may be otherwise expressly allowed by the terms of the Loan Documents.

Section 4.18 Maintenance of Liens . Borrower Parties shall perform all such acts and execute all such documents as Agent may request in order to enable Agent to report, file, and record every instrument that Agent may deem necessary in order to perfect and maintain Agent’s Liens in the Properties, and otherwise to preserve and protect the rights of Agent and Lenders therein.

Section 4.19 Defense of Title . Borrower Parties hereby warrant and agree to forever defend, all and singular, title to the Collateral unto Agent, Lenders and their respective

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successors and assigns, forever, against every Person whomsoever claiming the same or any part thereof, subject , however , to the Permitted Encumbrances. Borrower Parties will take all actions necessary or proper to defend title to their interest in the Properties, but at any time that any Event of Default shall have occurred and be continuing, Agent shall have the right, to intervene in any suit affecting such title and to employ independent counsel in connection with any such suit to which it may be a party by intervention or otherwise; and upon demand, Borrowers agree to pay Agent all expenses paid or incurred by Agent in respect of any such suit affecting title to any such property or affecting Agent’s and Lenders’ Lien or rights hereunder, including, fees and disbursements to Agent’s attorneys. Borrowers will indemnify and hold harmless Agent and Lenders from and against any and all costs, expenses, loss, damage or liability including any and all cost, expense, loss, damage or liability which Agent or Lenders may suffer or incur by reason of the failure of the title to all or any part of any Property or by reason of the failure or liability of Borrower Parties, for any reason, to convey the rights, titles and interests which the Mortgages and the Subordination and Security Agreements purport to mortgage or assign, and all amounts at any time so payable by Borrowers shall be secured by the Lien of the Mortgages and the Subordination and Security Agreements.

Section 4.20 Property Document Covenants . Borrower Parties shall observe, perform, and discharge in all material respects all obligations, covenants, and warranties provided for under the terms of the Property Documents to be kept, observed, and performed by Borrower Parties to the extent that failure to do so would have a Material Adverse Effect. Borrower Parties shall keep the Property Documents in full force and effect to the extent that failure to do so would have a Material Adverse Effect. Without Agent’s prior consent, Borrower Parties shall not (a) modify, change, supplement, alter, amend or terminate any material Property Documents or (b) waive or release any of Borrower Parties’ rights under any material Property Documents. Borrower Parties shall pay when due all charges, dues and assessments imposed on Borrower Parties under the Property Documents. If Borrower Parties fail to pay such charges, dues and assessments, Agent shall have the right, but not the obligation, to pay the same on behalf of Borrower Parties and such amounts shall be payable by Borrowers to Agent upon demand and shall accrue interest at the Default Rate until paid.

Section 4.21 Ground Lease .

(a) Torrey Pines Borrower shall:

(i) pay all rents, additional rents and other sums required to be paid by Torrey Pines Borrower, as tenant under and pursuant to the provisions of the Ground Lease as and when such rent or other charge is payable,

(ii) diligently perform and observe all of the terms, covenants and conditions of the Ground Lease on the part of Torrey Pines Borrower, as tenant thereunder, to be performed and observed prior to the expiration of any applicable grace period therein provided, and

(iii) promptly notify Agent of the giving of any written notice by the Ground Lessor under the Ground Lease of any default by the tenant in the performance or

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observance of any of the terms, covenants or conditions of the Ground Lease on the part of the tenant thereunder, to be performed or observed and deliver to Agent a true copy of each such notice.

(b) Torrey Pines Borrower shall not, without the prior consent of Agent, surrender the leasehold estate created by the Ground Lease or terminate or cancel the Ground Lease or modify, change, supplement, alter or amend in any material respect the Ground Lease, either orally or in writing, and Torrey Pines Borrower hereby collaterally assigns to Lender, as further security for the payment of the Obligations and for the performance and observance of the terms, covenants and conditions of the Loan Documents all of the rights, privileges and prerogatives of Torrey Pines Borrower, as tenant under the Ground Lease. Any such surrender of the leasehold estate created by the Ground Lease or termination, cancellation, or material modification, change, supplement, alteration or amendment of the Ground Lease without the prior consent of Lender shall be void and of no force and effect.

(c) Notwithstanding the foregoing, it is expressly understood and agreed that Torrey Pines Borrower may enter into an agreement with Ground Lessor to extend the term of the Ground Lease; provided that (i) such extension shall be effected pursuant to an agreement reasonably approved by Agent in advance (unless such agreement does not otherwise amend, modify or supplement the terms of the Ground Lease and is limited to extending the term thereunder in which case (1) the prior approval of Agent shall not be required and (2) Borrowers shall deliver a copy of such extension agreement to Agent within ten (10) days after the execution thereof) and (ii) Borrowers shall, at Borrowers’ sole cost, execute all documents and deliver any title insurance endorsement deemed reasonably necessary by Agent to confirm that the lien of the Torrey Pines Mortgage remains unimpaired.

(d) If Torrey Pines Borrower shall default in the performance or observance of any material term, covenant or condition of the Ground Lease on the part of Torrey Pines Borrower, as the tenant thereunder, to be performed or observed, then, without limiting the generality of the other provisions of the Torrey Pines Mortgage and this Loan Agreement and without waiving or releasing any Borrower Party from any of its obligations hereunder, Agent shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all of the material terms, covenants and conditions of the Ground Lease on the part of Torrey Pines Borrower, as a tenant thereunder, to be performed or observed or to be promptly performed or observed on behalf of Torrey Pines Borrower, to the end that the rights of Torrey Pines Borrower in, to and under the Ground Lease shall be kept unimpaired as a result thereof and free from default, even though the existence of such event of default or the nature thereof be questioned or denied by Torrey Pines Borrower or by any party on behalf of Torrey Pines Borrower. If Agent shall make any payment or perform any act or take action in accordance with the preceding sentence, Agent will notify Borrowers of the making of any such payment, the performance of any such act, or the taking of any such action. If Ground Lessor shall deliver to Agent a copy of any notice of default sent by Ground Lessor to Torrey Pines Borrower, as tenant under the Ground Lease, such notice shall constitute full protection to Agent for any action taken or omitted to be taken by Agent, in good faith, in reliance thereon. Torrey Pines Borrower shall not subordinate or consent to the subordination of the Ground Lease to any mortgage, security deed, lease or other interest on or in

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the landlord’s interest in all or any part of the Torrey Pines Property, unless, in each such case, the written consent of Agent shall have been first had and obtained.

Section 4.22 Operating Leases .

(a) Each Borrower Party shall (i) perform and observe as and when required thereunder all of the covenants required to be performed and observed by it under the Operating Lease to which it is a party; (ii) promptly notify Agent of any default (beyond any applicable notice, grace or cure period) under any Operating Lease; and (iii) promptly deliver to Agent (without duplication) a copy of any notice of default or other material notice under any Operating Lease delivered to or from a Borrower Party.

(b) If at any time, (i) any Operating Lessee shall become insolvent or a debtor in a bankruptcy proceeding or (ii) Agent or its designee has taken title to a Property by foreclosure or deed in lieu (or assignment in lieu, with respect to the Torrey Pines Property) of foreclosure, has become a mortgagee-in-possession, has appointed a receiver with respect to a Property or has otherwise taken title to a Property, Agent shall have the absolute right to (and each Borrower Party shall reasonably cooperate and not in any way hinder, delay or otherwise interfere with Agent’s right to), immediately terminate the affected Operating Lease under and in accordance with the terms of the applicable Subordination and Security Agreement.

(c) Except with respect to any Property which is the subject of a Release pursuant to Section 2.14 hereof, Borrower Parties shall not, without the prior written consent of Agent, which consent shall not be unreasonably withheld: (i) surrender, terminate or cancel any Operating Lease or otherwise replace any Operating Lessee or enter into any other operating lease with respect to any Property, provided, however, at the end of the term of the Operating Lease, Borrowers may renew any Operating Lease or enter into a replacement Operating Lease with the applicable Operating Lessee at a fair market rent required pursuant to the Internal Revenue Code (if applicable) or which Borrowers may establish using a transfer pricing report obtained from a Big 4 accounting firm, and otherwise on substantially the same terms as the expiring Operating Lease or (ii) reduce or consent to the reduction of the term of any Operating Lease.

Section 4.23 Compliance with Anti-Money Laundering and OFAC Laws .

(a) Borrower Parties shall at all times comply in all material respects with the requirements of all Anti-Money Laundering Laws.

(b) Borrower Parties shall provide Agent any information regarding Borrower Parties, their Affiliates, and its subsidiaries necessary for Agent to comply with all Anti-Money Laundering Laws.

(d) Borrower Parties shall not, and shall cause their Affiliates and subsidiaries and any Persons holding any legal or beneficial interest in Borrower Parties equal to or greater than

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twenty percent (20%) (whether directly or indirectly but in any case excluding publicly traded shares) not to, conduct business with or engage in any transaction with any Person named in any Government List or any Person included in, owned by, Controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to any of the Persons referred to or described in any Government List. For purposes of this Section 4.23 , the term “Affiliates” and the phrase “any Persons holding any legal or beneficial interest in Borrowers” shall be deemed to exclude Persons who would not fit such descriptions but for the fact that they hold a legal or beneficial interest in Hilton Worldwide, Inc.

(e) If Borrower Parties obtain actual knowledge or receive any written notice that Borrower Parties or any Affiliate or subsidiary of Borrower Parties or any Person holding any legal or beneficial interest whatsoever therein (whether directly or indirectly) is named on any Government List (such occurrence, an “ OFAC Violation ”), Borrowers shall promptly (i) give written notice to Agent of such OFAC Violation and (ii) comply with all applicable laws with respect to such OFAC Violation (regardless of whether the party included on the OFAC SDN List is located within the jurisdiction of the United States of America), including the OFAC Laws, and Borrower Parties hereby authorize and consent to Agent’s taking any and all steps Agent deems necessary, in its sole and absolute discretion, to comply with all applicable laws with respect to any such OFAC Violation, including the requirements of the OFAC Laws (including the “freezing” and/or “blocking” of assets and reporting such action to OFAC).

(f) Upon Agent’s request from time to time, Borrower Parties shall deliver a certification confirming its compliance with the covenants set forth in this Section 4.23 .

ARTICLE V

NEGATIVE COVENANTS

Until payment in full of all principal, interest and other sums outstanding under this Loan Agreement and the other Loan Documents, Borrower Parties agree that:

Section 5.1 Name, Fiscal Year and Accounting Method . (a) No Borrower Party will change its Fiscal Year or its method of accounting and will not permit any Guarantor to change its method of accounting, in each case, without the prior consent of Agent, and (b) no Borrower Party will or permit any Guarantor to, change its name or its principal or executive office, in each case without providing at least ten (10) days’ notice to Agent prior thereto.

Section 5.2 Consolidation or Merger . No Borrower Party shall consolidate with or merge into any other Person except to the extent such consolidation or merger constitutes a Permitted Transfer.

Section 5.3 Transactions with Affiliates . No Borrower Party shall enter into, or be a party to, any transaction with any Affiliate, partner, member, shareholder, director or employee of a Borrower Party or a Guarantor except for any contracts for the providing of goods and services in the ordinary course of such Borrower Party’s business and upon fair and reasonable terms which are fully disclosed to Agent and are no more onerous to such Borrower Party than it would obtain

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in a comparable arm’s length transaction with a Person not its Affiliate, partner, member, shareholder, director or employee of a Borrower Party or a Guarantor. Agent and Lenders acknowledge that, for purposes of this Section 5.3 , the Management Agreements are not prohibited hereby.

Section 5.4 Lines of Business . No Borrower Party shall, directly or indirectly, engage in any business other than that directly related to the Property owned or leased, as the case may be, by such Borrower Party, or, except after the occurrence of a casualty or a condemnation which makes the continued operation of its Property impracticable, discontinue the operation of its Property.

Section 5.5 Easements and Restrictions . No Borrower Party shall enter into or grant any covenants, restrictions, easements or other encumbrances with respect to the Properties, including any easements or licenses for utilities, roads or any other purposes over, under or on any portion of any Property, to the extent any such change could have a Material Adverse Effect, without the prior consent of Agent.

Section 5.6 Changes in Zoning; Changes in Use .

(a) No Borrower Party shall request or seek to obtain any change to, or consent to any request for or change in, any Legal Requirement, Property Document Requirement, Permitted Encumbrance or other restriction applicable to any Property or any portion thereof or any other law, ordinance, rule, regulation, restrictive covenant or restriction affecting the zoning, development or use of any Property or any portion thereof, or any variance or special exception therefrom which could have a Material Adverse Effect; provided that in no event shall any Borrower Party request or seek to obtain any change to the zoning affecting any Property without the prior written consent of Agent.

(b) No Borrower Party shall change the use of any Property as a hotel or take any actions which would interfere with the use and operation of any Property as presently used and operated in any material respect.

Section 5.7 Waste . No Borrower Party shall commit or permit any waste or deterioration of or to any Property or any portion thereof which have a Material Adverse Effect, ordinary wear and tear excepted.

Section 5.8 Limitation on Indebtedness . No Borrower Party shall incur, create, contract for, waive, assume, have outstanding, guaranty or otherwise become liable with respect to Indebtedness other than Permitted Indebtedness.

Section 5.9 Distributions, Dividends or Repayments . No Borrower shall make any payments (other than for fees and other amounts payable to Manager pursuant to a Management Agreement existing on the date hereof or subsequently entered into in accordance with the terms hereof), dividends or distributions to any of its constituent partners, members, shareholders or other equity holders, to a Guarantor or to any Affiliate of any of the foregoing, including on account of any Indebtedness, investment or any services rendered or goods supplied if, at the time of such payment, dividends or distribution, (a) any Default, Event of Default or Cash Sweep Condition

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shall exist and be continuing or (b) the making of such payments, dividends or distributions would (i) cause a Default, Event of Default or a Cash Sweep Condition to exist or (ii) cause such Borrower not to have enough cash on hand to pay its then current or foreseeable obligations on a timely basis for the most recent calendar month for which a Monthly Operating Statement was then required to have been delivered to Agent pursuant to this Loan Agreement.

Section 5.10 Organizational Documents . No Borrower Party or Borrower Party Partner shall amend, modify, restate or supplement any Organizational Document of such Borrower Party or Borrower Party Partner, as the case may be, in any way which would impair its status as a Special Purpose Bankruptcy Remote Entity .

Section 5.11 ERISA Plans, Collective Bargaining Agreement .

(k) No Borrower Party or Borrower Party Partner shall establish, maintain or have any obligation, or liability with respect to any Plan other than under the Multiemployer Plan executed by Manager identified on Exhibit O , provided that the foregoing shall not limit Manager’s ability to execute or be a party to any such Plan as the employer of the employees of the hotels located on the Properties. Borrower Parties shall not enter into any collective bargaining agreement relating to any employees working at any Property (other than those existing on the date hereof with respect to the Capital Property and described on Exhibit O ) and except as executed by Manager as employer of the employees at the hotels located on the Properties; provided, that nothing herein is intended to limit Manager’s ability to enter into a collective bargaining agreement at a Property to the extent that Manager may do so under the applicable Management Agreement without first obtaining Borrower Parties’ consent. Borrower Parties shall not execute any formal consent or other “owner agreement” with respect to a collective bargaining agreement at any Property without first obtaining Agent’s consent, which consent shall not be unreasonably withheld, conditioned or delayed. In the event that Borrower Parties request Agent’s consent under this Section 5.11(a) , Agent shall be deemed to have given such consent in the event Agent fails to notify Borrower Parties whether or not it consents to such requested action within three (3) Business Days after the following conditions are satisfied:

(i) Borrower Parties shall have delivered to Agent a notice requesting Agent’s consent, together with the relevant collective bargaining agreements and such other information as may be reasonably necessary for Agent to respond to such request; and

(ii) In the event that Agent shall have failed to respond to Borrower Parties’ notice within seven (7) Business Days after delivery of the notice and other materials set forth in clause (y) above, Borrower Parties shall have delivered to Agent another notice which shall contain in boldface type at the beginning of such notice text to the following effect: “THIS IS A SECOND REQUEST MADE PURSUANT TO SECTION 5.11(a) OF THE LOAN AGREEMENT BETWEEN CHH TORREY PINES HOTEL PARTNERS, LP, CHH CAPITAL HOTEL PARTNERS, LP, CHH TORREY PINES TENANT CORP., CHH CAPITAL TENANT CORP., AAREAL CAPITAL CORPORATION and WESTDEUTSCHE IMMOBILIENBANK AG, WITH RESPECT TO APPROVAL OF A PROPOSED COLLECTIVE BARGAINING AGREEMENT. FAILURE TO RESPOND

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WITHIN THREE (3) BUSINESS DAYS OF RECEIPT OF THIS NOTICE SHALL BE DEEMED TO BE A CONSENT TO SAID COLLECTIBE BARGAINING AGREEMENT.

(l) Borrower Parties shall not permit the assets of Borrower Parties to become “plan assets,” whether by operation of law or under regulations promulgated under ERISA. Each Borrower Party, Borrower Party Partner and Guarantor shall pay and discharge promptly (or shall cause the payment and prompt discharge of) any liability imposed upon it pursuant to the provisions of Section 412 of the Code or Title IV of ERISA; provided, however , that such parties shall not be required to pay any such liability if (i) the amount, applicability or validity thereof shall be diligently contested in good faith by appropriate proceedings, and (ii) the relevant party shall have set aside on its books reserves which, in the opinion of its independent certified public accountants are adequate with respect thereto.

(m) Borrower Parties shall deliver to Agent such certifications or other evidence from time to time throughout the Term, as requested by Agent (which request Agent shall only make if required in connection with a syndication, participation or sale of the Loan), that the representations in this Section 5.11 remain true and accurate in all material respects.

(n) Borrower Parties shall (a) give prompt written notice to Agent of: (i) the incurrence by any Borrower Party, Borrower Party Partner or Guarantor or, to the knowledge of any one of them, by any ERISA Affiliate, of any material liability, or the occurrence of any event or action that could reasonably be expected to cause any one of them to incur any material liability, (x) with respect to any Plan, including without limitation, any material liability under Section 412 of the Code or Title IV of ERISA, or (y) on account of a partial or complete withdrawal (as such terms are defined in Section 4203 and 4205 of ERISA, respectively) from, or unpaid contributions to, any Multiemployer Plan, or the termination, reorganization or insolvency of any such Multiemployer Plan; or (ii) any Borrower Party engages in any transaction in connection with which it could be subject to either a material civil penalty assessed pursuant to Section 502 of ERISA or a material tax imposed under Section 4975 of the Code, and (b) furnish and provide to Agent within ten (10) days of the filing or receipt thereof, a copy of any report or notice that any Borrower Party, Borrower Party Partner, Guarantor or any ERISA Affiliate files under ERISA or the Code with the Internal Revenue Service, the PBGC or the Department of Labor (or distributes to all of the participants of any Plan) with respect to any Plan or Multiemployer Plan, or receives from the Internal Revenue Service, the PBGC or the Department of Labor or from any Multiemployer Plan, if such report or notice concerns an event or action that could reasonably be expected to cause any of them to incur any material liability.

Section 5.12 Organizational and Operational Restrictions . Each Borrower Party and each Borrower Party Partner shall continue to be a Special Purpose Bankruptcy Remote Entity.

Section 5.13 Maintenance of Existence . Each Borrower Party and Borrower Party Partner shall (i) remain in good standing under the laws of its state of formation and the state where its Property is located, (ii) preserve, renew and keep in full force and effect its existence as an entity duly organized and existing pursuant to the laws of its state of formation, (iii) take all action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its

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business and (iv) comply with all Legal Requirements to the extent that the failure to comply could have a Material Adverse Effect.

Section 5.14 Loans to Affiliates and Employees . No Borrower Party or Borrower Party Partner shall make any loan or advance to any Affiliate, shareholder, partner, member, officer or director or employee of any Borrower Party or Borrower Party Partner, except for business travel, entertainment and similar advances in the ordinary course of business.

Section 5.15 Adverse Contracts . No Borrower Party shall enter into any contract or agreement which would materially and adversely affect its business, property, assets, operations, condition (financial or otherwise) taken as a whole, or its ability to perform its obligations under this Loan Agreement or any of the other Loan Documents.

Section 5.16 Liens . No Borrower Party or Borrower Party Partner shall (i) Transfer, sell or assign or (ii) create, incur, assume, or, subject to Borrower Parties contest rights under Section 4. 8 hereof, permit or suffer to exist any mechanic’s, materialmen’s or other Lien on any portion of the Collateral or any direct or indirect legal or beneficial ownership interest in any Borrower Partner or Borrower Party Partner, except for Permitted Transfers and Permitted Encumbrances unless such Lien is bonded or discharged within thirty (30) days after Borrower Parties first receive notice of such Lien. Except as expressly provided in clauses (b) and (c) of the definition of Permitted Transfer, no owner of any direct or indirect interests in any Borrower Party shall pledge such interests as security for Indebtedness without the prior written consent of Agent, which may be given or denied in Agent’s sole but good faith discretion.

Section 5.17 Transfers.

(a) No Transfer shall be made without the prior consent of Agent except for a Permitted Transfer. No change in Control of Borrower Parties that is not otherwise a Permitted Transfer shall occur if after giving effect thereto, Borrower Parties are not Controlled by or under common Control with a Sponsor.

(b) Notwithstanding Section 5.17(a) , Subject to the terms and satisfaction of all the conditions precedent set forth in this Section 5.17(b) , Borrower Parties shall have a one-time right to sell and convey the Properties to another party (the “ Transferee Borrower ”) and have the Transferee Borrower assume all of Borrower Parties obligations under the Loan Documents, and have replacement guarantors and indemnitors assume all of the obligations of the indemnitors and guarantors of the Loan Documents (collectively, a “ Transfer and Assumption ”). Borrower Parties may make a written application to Agent for Requisite Lenders’ consent to the Transfer and Assumption, subject to the conditions set forth in paragraphs (i) and (ii) of this Section 5.17(b) . Together with such written application, Borrower Parties will pay to Agent a reasonable review fee then required by Agent. Borrower Parties also shall pay on demand all of the reasonable costs and expenses incurred by Agent, including reasonable attorneys’ fees and expenses in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs.

(i) Agent shall have consented to such Transfer and Assumption, which consent may be withheld in Agent’s sole and absolute discretion (except that, subject

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to the maximum credit exposure of any Lender with respect to either Sponsor, a Transfer and Assumption in which the Transferee Borrower shall be wholly-owned and Controlled by a Sponsor shall be approved by Agent). In addition to the consent of Agent as set forth in this Section 5.17(b)(i) , a Transfer and Assumption shall be subject to the following conditions:

(1) Borrower Parties have provided Agent with not less than sixty (60) days prior notice, which notice shall contain sufficient detail to enable Agent to determine that the Transferee Borrower complies with the requirements set forth in this Loan Agreement;


(2)	No Event of Default has occurred and is continuing;

(3) Borrower Parties have submitted to Agent true, correct and complete copies of any and all information and documents of any kind requested by Agent concerning the Properties, the Transferee Borrower, replacement guarantors and indemnitors and Borrower Parties;

(4) Evidence satisfactory to Agent has been provided showing that the Transferee Borrower and such of its Affiliates as shall be designated by Agent comply and will comply with Exhibit I hereof, as those provisions may be modified by Agent taking into account the ownership structure of the Transferee Borrower and its Affiliates;

(5) Borrower Parties shall have paid all of Agent’s reasonable costs and expenses in connection with considering the Transfer and Assumption, and shall have paid the amount requested by Agent as a deposit against Agent’s costs and expenses in connection with the effecting the Transfer and Assumption;

(6) Borrower Parties, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Agent their readiness and ability to satisfy the conditions set forth in Section 5.17(b)(ii) below;

(7) Satisfactory Patriot Act, OFAC and similar searches shall have been received by Agent with respect to (A) each replacement guarantor/indemnitor, (B) the Transferee Borrower, (C) any Person that Controls Transferee Borrower or owns an equity interest in any Borrower Party which equals or exceeds ten percent (10%) and (D) any other Person reasonably required by Agent in order for Agent to fulfill its then-current Patriot Act compliance guidelines; and

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(8) In the event a new Management Agreement is being entered into in connection with such Transfer and Assumption, the proposed property manager (if different from Manager or its permitted successors and assigns under the applicable Management Agreement) and proposed Management Agreement shall be satisfactory to Agent.

(ii) If Agent consents to the Transfer and Assumption, the Transferee Borrower and/or Borrower Parties as the case may be, shall immediately deliver the following to Agent:


(i)	Borrower Parties shall pay to Agent an assumption fee in the amount of one half of one percent (0.50%) of the then outstanding principal balance of the Loan (except where the Transferee Borrower is wholly-owned and Controlled by a Sponsor);


(ii)	Borrower Parties, the Transferee Borrower and the original and replacement guarantors and indemnitors shall execute and deliver to Agent any and all documents required by Agent, in form and substance required by Agent, in Agent’s sole and absolute discretion;


(iii)	Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Agent opinions in substantially the same form and substance as were required in connection with the origination of the Loan;


(iv)	Borrower Parties shall cause to be delivered to Agent, an endorsement (relating to the change in the identity of the vestee and execution and delivery of the Transfer and Assumption documents) to the existing Title Insurance Policies in form and substance acceptable to Agent, in Agent’s reasonable discretion (the “ Endorsement ”); and


(v)	Borrower Parties shall deliver to Agent a payment in the amount of all remaining unpaid costs incurred by Agent in connection with the Transfer and Assumption, including but not limited to, Agent’s reasonable attorneys fees and expenses, all recording fees, and all fees payable to the title company for the delivery to Agent of the Endorsement.

ARTICLE VI

CONDITIONS OF LENDING

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This Loan Agreement shall not be effective, and Lenders shall have no obligation to make the Loan, until the following conditions to closing shall have been satisfied, except to the extent that Agent and Lenders may elect (which election may be made without written or express notice of such waiver) to irrevocably waive any such conditions:

(a) Closing Documents, etc. Agent shall have received fully executed and, where appropriate, acknowledged counterparts of this Loan Agreement, each of the other Loan Documents and all other documents, agreements, instruments, certificates and other items which are expressly required under the Loan Documents or Agent shall otherwise require, each of which shall be dated as of the Closing Date, unless otherwise expressly stated (all of which shall be in such form, substance and content as Agent may require).

(b) Representations and Warranties . The representations and warranties made by Borrower Parties and Guarantor in the Loan Documents and in any certificate, document, or financial or other statement furnished by Borrower Parties or Guarantor pursuant to or in connection therewith, shall be true and correct in all material respects on and as of the Closing Date.

(c) Payment of Fees and Expenses . Payment of all other fees and expenses required to be paid pursuant to the Loan Agreement and/or the Loan Fee Letter, including all sums payable pursuant to Section 4.14 hereof.

(d) No Default or Event of Default . No Default or Event of Default shall have occurred and be continuing.

(e) No Casualty or Taking . No Casualty shall have occurred to any portion of the Properties. No Taking of any portion of the Properties or any modification, realignment or relocation of any streets or roadways abutting the Properties or denial of access to the Properties, from any point of access (public or private), shall have occurred or be threatened or pending.

(f) Financial Statements . Borrower Parties shall have delivered to Agent such balance sheets and other financial statements of Borrower Parties and Guarantor as Agent may reasonably request.

(g) Appraisal . Agent shall have received Appraisals, and confirmed in accordance with its internal underwriting criteria and standards, that the aggregate Appraised Value of the Properties is at least $304,615,385.

(h) Interest Rate Protection Agreement . Borrower shall have entered into and satisfied the conditions precedent to the effectiveness of the Initial IRPA.

(i) Compliance with Other Conditions . Borrower Parties and Guarantor shall have complied fully with all other conditions to funding set forth in the Term Sheet.

(j) Other Documents . Borrower Parties shall have delivered to Agent such other documents, instruments, opinions, reports, estoppel certificates and approvals as Agent or Agent’s Counsel shall have requested.

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(k) Adverse Conditions; Internal Approval . Agent shall be satisfied that there has been no material disruption or material adverse change in financial, banking or capital market conditions that could materially impair the sale or syndication of the Loan and that there has been no outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, and shall have received all internal underwriting approvals to make the Loan and otherwise pertaining to Borrower Parties and all other relevant parties.

ARTICLE VII

EVENTS OF DEFAULT

An “ Event of Default ” (herein so called) shall exist if any one or more of the following events shall occur:

(a) the failure of Borrowers to (i) pay any installment of Interest or principal when due (including, without limitation, the payment of principal and accrued and unpaid Interest on the Maturity Date), (ii) pay when due any payment on account of the Administration Fee;

(b) the failure of Borrowers to make any required deposit into any Account when due in accordance with Section 2.11 hereof and such failure continues for two (2) Business Days;

(c) the failure of Borrowers to pay when due any other monetary Obligations on or before the due date therefor, and such failure continues for five (5) days;

(d) the failure of any Borrower Party to punctually and properly perform any covenant, agreement, obligation, or condition contained in this Loan Agreement on the part of such Borrower Party to be performed (except for performance of any of the Obligations specifically addressed by any other clause of this Article VII , as to which such other clause shall control) and the continuance of such failure for a period of thirty (30) days following notice thereof to Borrower Parties from Agent, or if such failure is not reasonably susceptible of cure within said thirty (30)-day period, then for such additional period as is reasonably required for cure provided the cure thereof commences within said thirty (30)‑day period and thereafter Borrower Parties diligently pursues same, provided , however , that such additional cure period shall in no event exceed ninety (90) days;

(e) any warranty, representation or other statement made by or on behalf of a Borrower Party, a Borrower Party Partner, a Guarantor or any Affiliate of any of the foregoing in or pursuant to this Loan Agreement or any other Loan Document or any document, instrument or certificate heretofore or hereafter executed or delivered in connection herewith or therewith shall prove to have been false, incorrect or misleading in any material respect when made or deemed to have been made unless the breach of such representation, warranty or certification was unintentional and is susceptible to cure and such breach is cured to the reasonable satisfaction of Agent within thirty (30) days after Borrower Parties’ receipt of notice that the applicable certification, representation or warranty was false, incorrect or misleading;

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(f) any “Event of Default” or a default that continues beyond the applicable notice and/or cure period, if any, provided for therein, shall occur under any of the Loan Documents (other than this Loan Agreement, such a default being the subject of other provisions of this Article VII ), including a default by a Guarantor beyond any applicable notice and/or cure period, in the performance of any of its obligations under the Loan Documents to which a Guarantor is a party;

(g) Any Borrower Party, any Borrower Party Partner or any Guarantor shall become the subject, voluntarily or involuntarily, of, suffer to be entered or permit to be entered, a decree or order of a court or agency or supervisory authority having jurisdiction determining any Borrower Party, any Borrower Party Partner or any Guarantor, as the case may be, to be insolvent or providing for the appointment of a conservator, receiver, liquidator, custodian, trustee or any similar Person appointed in connection with any insolvency, readjustment of debt, marshaling of assets and liabilities, bankruptcy, reorganization or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property, or for the winding-up or liquidation of its affairs, provided , however , no Event of Default shall exist if, within ninety (90) days after such proceedings are instituted against such Person, if so instituted without such Person’s consent, such proceedings shall be dismissed;

(h) Any Borrower Party, any Borrower Party Partner or any Guarantor shall (i) consent to the appointment of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property, or for the winding-up or liquidation of its affairs, (ii) admit in writing its inability to pay its debts generally as they become due, (iii) file a petition, or otherwise institute, or consent to the institution against it of, proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors, (iv) make an assignment for the benefit of its creditors or (v) suspend payment of its obligations;

(i) there shall have been rendered against any Borrower Party or Guarantor a final non-appealable judgment(s) for the payment of money in excess of $250,000 in the aggregate and any such final non-appealable judgment(s) shall have continued unsatisfied and without a stay of execution thereon for a period of sixty (60) days after the entry of such judgment(s), or such judgment(s) shall have continued unsatisfied for a period of sixty (60) days after the termination of any stay of execution thereon obtained within such first mentioned sixty (60) days;

(j) the liquidation, dissolution or termination of any Borrower Party, any Guarantor or any Borrower Party Partner;

(k) any of the Loan Documents or the Liens created (or purported to be created) pursuant thereto shall for any reason cease to be in full force and effect except as provided in this Loan Agreement, or be declared null and void or unenforceable in whole or in part, or the validity or enforceability of any Loan Document shall be challenged or denied by any party thereto other than Lender or Agent;

(l) the Liens created (or purported to be created) by the Mortgages or any other Loan Documents should cease to be first priority Liens subject only to the Permitted Encumbrances;

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(m) a Transfer which is not a Permitted Transfer occurs;

(n) Any Borrower Party shall fail in the due performance and observance of any of its covenants contained in the following Sections of this Loan Agreement: 2.12 , 4.3 , 4.5(b) , 4.10 , 4.11 , 4.17 , 4.21 , 5.2 , 5.3 , 5.8 , 5.10 or 5.12 hereof; provided that, notwithstanding anything to the contrary set forth in Section 5.12 or Exhibit I to the contrary, a breach of the covenant set forth in clause (vi), (vii), (x), (xi), (xiii), (xxi) (but only to the extent that the breach is the result of de minimus non-compliance with clause (2) or (3) of the definition of ‘Permitted Indebtedness”), (xxiv), (xxvii), (xxx) or (xxxii) on Exhibit I shall not constitute and Event of Default if Borrower Parties cure such breach within thirty (30) days of first becoming aware thereof and deliver to Agent within such thirty (30) day period a substantive non-consolidation opinion from a bankruptcy counsel and in a form reasonably acceptable to Agent, pursuant to which such bankruptcy counsel opines that, notwithstanding such breach, the assets and liabilities of Borrower Parties will not be consolidated with those of Affiliates of Borrower Parties in the event of a bankruptcy of such Affiliates;

(o) a default by a Borrower Party beyond the applicable notice and/or cure periods therein shall occur under any Management Agreement, or any Material Operating Agreement provided said uncured default with respect to a Material Operating Agreement has a Material Adverse Effect, (unless such Management Agreement or Material Operating Agreement is replaced by a similar agreement in the ordinary course of business in accordance with the terms and conditions hereof or otherwise terminated pursuant to the terms of the Loan Agreement);

(p) the occurrence of an “Event of Default” or a termination event or a default after the expiration of any applicable notice and cure periods under any Interest Rate Protection Agreement;

(q) Any Borrower Party or Borrower Party Partner shall violate its Organizational Documents in any material respect and such violation could have a Material Adverse Effect;; or

(r) any Borrower Party (i) has incurred any liability or an event or action has occurred that could reasonably be expected to cause any Borrower Party to incur any liability (x) with respect to any Plan, including, without limitation, any liability under Section 412 of the Code or Title IV of ERISA, or (y) on account of a partial or complete withdrawal (as such terms are defined in Section 4203 and 4205 of ERISA, respectively) from, unpaid contributions to, or the reorganization, termination or insolvency of, any Multiemployer Plan, or (ii) engages in any transaction in connection with which any Borrower Party could be subject to either a material civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a material tax imposed under the provisions of Section 4975 of the Code, and in each case in clauses (i) and (ii) of this subsection, such event or condition, together with all other such event or conditions under this subsection, if any, could reasonably be expected to subject a Borrower Party to any material taxes, penalties or other liabilities.

ARTICLE VIII

RIGHTS AND REMEDIES OF LENDERS

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Section 8.1 Rights and Remedies Generally . Upon the occurrence and during the continuance of an Event of Default, Agent may proceed to exercise and enforce any of its rights, interests, benefits or privileges hereunder or under any of the other Loan Documents or which may be otherwise available to Agent at law or in equity. Notwithstanding anything to the contrary in the Loan Documents (and without limitation of the above), in lieu of and/or in addition to the other rights and remedies of Agent under the Loan Documents, Agent shall have all of the rights and remedies provided by the UCC which shall be applicable to and/or available in connection with Lender’s security interests in the Collateral, including the Accounts and any of Borrower Parties’ other deposit accounts, if any.

To the extent, if any, that applicable law requires that a notice need be given or any other action on Agent’s part (which is not specified in the Loan Documents) need be taken in order for Agent to realize the full benefit of any of Agent’s and Lenders’ rights and/or remedies under the Loan Documents, and Agent does provide such notice and/or take such other action so required, then such rights and/or remedies shall not be severed or impaired as a result of the absence of an express provision in the Loan Documents specifically requiring such notice or action. Further, notwithstanding anything to the contrary in any of the Loan Documents, Agent may choose to waive or to forego the benefits of any of its particular rights and/or remedies under the Loan Documents without otherwise adversely affecting any of its other rights or remedies.

Section 8.2 Rights of Agent with Respect to the Properties . Subject to the Manager SNDA, at any time upon the occurrence and during the continuance of any Event of Default, Agent shall have the right, in addition to any other rights or remedies of Agent hereunder or under the Mortgages or the other Loan Documents, but not the obligation, in its own name or in the name of Borrower Parties, to enter into possession of all or any portion of any Property, to perform all work necessary to complete the construction, reconstruction, maintenance or renovation of or to operate all or any portion of each Property and to employ watchmen and other safeguards to protect the Collateral. Each Borrower Party hereby appoints Agent as the attorney-in-fact of such Borrower Party (coupled with an interest), with full power of substitution, and in the name of such Borrower Party, if Agent elects to do so, at any time upon the occurrence and during the continuance of any Event of Default, (a) to use such sums as are necessary including, subject to the Manager SNDA, all or any portion of the funds in the Accounts to make such alterations, repairs, replacements and renovations to all or any portion of each Property and to employ such architects, engineers and contractors as may be required for the purpose of completing any construction, reconstruction, maintenance or renovation of all or any portion of the Properties as Agent may determine or to operate the Properties or any portion thereof, (b) to execute all applications and certificates which may be required for the alteration, repair or renovation of or the completion of construction, reconstruction, maintenance or renovation of all or any portion of the Properties or for the operation of the Properties or any portion thereof, (c) to endorse the name of such Borrower Party on any checks or drafts representing proceeds of the Insurance Policies or condemnation awards, or other checks or instruments payable to such Borrower Party with respect to any Property, (d) to do every act with respect to the alteration, repair or renovation of or the construction, repair, maintenance and operation of the Properties or any portion thereof which such Borrower Party otherwise may do, (e) to prosecute or defend any action or proceeding incident to the Properties, (f) to enforce or exercise any of such Borrower Party’s rights or benefits under the Leases, (g)subject

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to the Manager SNDA, to terminate any contract pertaining to any Property to which such Borrower Party is party, and (h) to negotiate and execute, on behalf of such Borrower Party, any Lease, any Ground Lease, Management Agreement, Operating Agreement or Property Document, or amendment, modification, extension or supplement to any such agreements. The power-of-attorney granted hereby is a power coupled with an interest and is irrevocable. Agent shall have no obligation to undertake any of the foregoing actions, and if Agent should do so, it shall have no liability to any Borrower Party for the sufficiency or adequacy of any such actions taken by Agent, except with respect to liability arising from Agent’s gross negligence or willful misconduct.

Notwithstanding the foregoing, it is expressly understood that Agent assumes no liability or responsibility for (i) performance of any duties of Borrower Parties hereunder or under any of the Loan Documents, (ii) compliance with any applicable Legal Requirements, Property Document Requirements, any Permitted Encumbrance, any Lease or any Management Agreement (except as expressly set forth in the Manager SNDA), or (iii) any other matters pertaining to control over the management and affairs of Borrower Parties, nor by any such action shall Agent or Lenders be deemed to create a partnership or joint venture with any Borrower Party.

Section 8.3 Acceleration . At any time upon the occurrence and during the continuance of any Event of Default, Agent, may, at its option, declare the Loan and the remaining Obligations to be immediately due and payable without presentment, demand, protest, notice of protest and non-payment, or other notice of default, notice of acceleration or intention to accelerate or other notice of any kind, all of which are expressly waived by Borrower Parties; provided , however , that if any Event of Default specified in clause (g) or (h) of Article VII hereof shall occur, the principal of and all interest on the Loan shall thereupon become due and payable concurrently therewith, without any further action by Agent and without presentment, demand, protest, notice of protest and non-payment, or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, all of which are expressly waived by Borrower Parties.

Section 8.4 Funds of Agent or Lenders . Any funds of Agent or Lenders used for any purpose referred to in this Article VIII shall constitute a portion of the Obligations, shall bear interest from the date advanced at the Default Rate, shall be secured pursuant to the Loan Documents by all Collateral thereunder and shall be due and payable upon demand.

Section 8.5 Accounts . Notwithstanding anything set forth in this Loan Agreement or any other Loan Document to the contrary, subject to the Manager SNDA, upon the occurrence and during the continuance of an Event of Default, the rights of Borrower Parties, Manager and each and every other Person (excluding Lenders and Agent) to withdraw funds with respect to the Accounts shall immediately terminate, and no such Person except Agent shall make any further withdrawal or disbursement therefrom without Agent’s prior consent. Upon the occurrence and during the continuance of an Event of Default, in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, Agent may from time to time designate such signatories with respect to the Accounts as Agent may elect, and, subject to the Manager SNDA, may make or authorize withdrawals from the Accounts to pay the Obligations in whole or in part and/or to make expenditures with respect to the Properties as Agent may deem necessary or appropriate, including expenditures on account of the maintenance, replacement,

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restoration, operation or leasing of all or any portion of the Properties. Subject to the Manager SNDA, upon the occurrence and during the continuation of an Event of Default in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, each of the depositories for the Accounts is hereby authorized and directed by Borrower Parties to make payment directly to or at the direction of Agent of the funds in or credited to the Accounts or such part thereof as Agent may request, and such depositories shall be fully protected in relying upon the written statement of Agent that any such Account is at the time of such demand assigned hereunder and that Agent is entitled to direct that payment shall be made therefrom. Agent or Agent’s designee’s receipt for sums paid to it pursuant to such demand shall be a full and complete release, discharge and acquittance to any such depository making such payment to the extent of the amount so paid. Neither any such depository nor Agent or any Lender shall be liable for any loss of interest on or any penalty or charge assessed against funds in, payable on, or credited to the Accounts as a result of the proper exercise by Agent or any such depository of any of their respective rights or remedies hereunder.

Section 8.6 Management Agreements . Upon the occurrence and during the continuance of any Event of Default, in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, Agent may exercise any rights and remedies available to Agent pursuant to the Manager SNDA, including, if permitted pursuant to the Manager SNDA, the termination of the Management Agreements and/or may require that Borrower Parties exercise any rights and remedies available to Borrower Parties pursuant to the Management Agreements, including the termination of any Management Agreement to the extent such termination is then permitted pursuant to the terms thereof or the applicable Manager SNDA. Upon a foreclosure or deed in lieu of foreclosure with respect to all or any portion of any Property, Agent shall, subject to the applicable Manager SNDA, have the right to terminate the applicable Management Agreement or exercise any other rights and remedies pursuant to and as and upon the terms described in such Management Agreement and the applicable Manager SNDA.

Section 8.7 No Waiver or Exhaustion . No waiver by Agent of any of its rights or remedies hereunder, in the other Loan Documents, or otherwise available to Agent at law or in equity, shall be considered a waiver of any other or subsequent right or remedy by Agent; no delay or omission in the exercise or enforcement of Agent of any rights or remedies shall ever be construed as a waiver of any right or remedy of Agent; and, no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Agent.

Section 8.8 Right of Offset . Borrower Parties hereby grant to Agent and each Lender a right of offset, exercisable at any time an Event of Default shall have occurred and be continuing, to secure the repayment of the Obligations, upon any and all monies, securities or other property of Borrower Parties, and the proceeds therefrom, now or hereafter held or received by or in transit to Agent, from or for the account of Borrower Parties, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special) and credits of Borrower Parties (including the Accounts), and any and all claims of Borrower Parties against Agent at any time existing. At any time upon the occurrence and during the continuance of any Event of Default, in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, Agent is hereby authorized at any time and from time to time, upon notice

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to Borrower Parties, to offset, appropriate, apply and enforce said liens at any and all times herein above referred to against the Loan and the remaining Obligations.

Section 8.9 Protective Advances . If any Borrower Party has failed to keep or perform any covenant or obligation whatsoever contained in any Loan Document, in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, Agent may, but shall not be obligated to any Person to, perform or attempt to perform said covenant or obligation, and any payment made or expense incurred in the performance or attempted performance of any such covenant or obligation shall be a part of the Obligations, and Borrowers shall to pay to Agent, upon demand, all sums so advanced or paid by Agent, together with interest at the Default Rate from the date when paid by Agent. No such payment by Agent shall constitute a waiver of any Event of Default. In addition to the Liens created pursuant to the Loan Documents, Agent shall be subrogated to all rights, titles and Liens securing the payment of any debt, claim, tax or assessment for the payment of which Agent may make an advance or which Agent may pay.

Section 8.10 Interest Rate Protection Agreement . Upon the occurrence and during the continuance of any Event of Default, in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, Agent may exercise all rights and remedies of Agent as a secured party with respect to the security interest of Agent or Lenders in any Interest Rate Protection Agreement or which otherwise arise pursuant to the Loan Documents. Without limiting the foregoing, Agent may cause any Lender Interest Rate Protection Agreement to be terminated or otherwise direct Borrowers’ counterparty under any Interest Rate Protection Agreement to take such actions or omit to take such actions as Agent shall determine. Borrowers covenant and agree to reimburse and indemnify Agent and Lenders for any termination or breakage costs Agent or Lenders may incur as a result of any such termination.

Section 8.11 No Liability of Agent . Whether or not Agent or Lenders elect to employ any or all of the remedies pursuant to the Loan Documents or otherwise available at law or equity upon the occurrence of a Default or an Event of Default, neither Agent nor any Lender shall be liable with respect to any rights or obligations of any Borrower Party or its Affiliates, shareholders, partners, members, officers, directors or employees, including the rights and obligations of any Borrower Party in and to any Leases or to protect the Properties or for payment of any expense incurred in connection with the exercise of any remedy available to Agent or Lenders or for the performance or non-performance of any other obligation of any Borrower Party.

ARTICLE IX

SYNDICATION

Section 9.1 Assignment and Participations .

(a) Assignments . Agent and Lenders shall have the right, subject to this Section 9.1 , to assign, sell, negotiate, pledge or hypothecate all or any portion of their rights and obligations hereunder. No Lender shall assign, sell, negotiate, pledge, hypothecate or otherwise transfer all or any portion of its rights in and to the Loan (i) to any Prohibited Assignee; (ii) to any other Person (such Person, an “ Assignee ”) without Agent’s prior consent; (iii) except with respect to an

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assignment, sale, pledge or other transfer to an Eligible Assignee and provided that no Event of Default shall be continuing, with the consent of Borrower Parties, not to be unreasonably withheld, it being agreed that Borrower Parties’ failure to consent to an assignment, sale, negotiation, pledge, hypothecation or other transfer to a Sponsor Competitor shall be deemed to be reasonable (for the avoidance of doubt, it is agreed that the consent of Borrower Parties shall not be required for any assignment, sale, pledge or other transfer to an Eligible Assignee or with respect to any assignment, sale, pledge or other transfer during the continuance of an Event of Default); (iv) other than in compliance with Section 9.4 hereof; (v) unless such transaction shall be an assignment of a constant (and not varying), ratable percentage of such Lender’s interest in the Loan; (vi) unless the aggregate principal amount of the Loan to be held by the Assignee after such transaction is Five Million Dollars ($5,000,000) or more (or such lesser amount approved by Agent) unless such transaction encompasses all of such Lender’s rights in and to the Loan, in which case such Lender shall have assigned all of its rights in and to the Loan; and (vii) unless, after giving effect to such transaction, such Lender’s aggregate unassigned interest in the Loan shall be in a principal amount of at least Five Million Dollars ($5,000,000) (or such lesser amount approved by Agent; provided , however , any Lender shall have the right at any time without the consent of or notice to Agent, any other Lender or other Person to grant a security interest in all or any portion of such Lender’s interest in the Note or the Loan (1) to any Federal Reserve Bank or the central reserve bank or similar authority of any other country to secure any obligation of such Lender to such bank or similar authority (a “ Central Bank Pledge ”) and/or (2) to the bondholders (as a collective whole) (or their nominee, collateral agent or security trustee) under, or the trustee, administrator or receiver (or their respective nominees, collateral agents or collateral trustees) of a mortgage pool securing covered mortgage bonds issued by a German mortgage bank, or any other Person meeting the Eligibility Requirements and permitted to issue covered mortgage bonds, under German Pfandbrief legislation, as such legislation may be amended and in effect from time to time, or any substitute or successor legislation (a “ Covered Bond Pool Pledge ”). Effective on any such assignment and assumption by the assignee and on compliance with Section 9.4 , the assigning Lender shall have no further liability hereunder with respect to the interest of such Lender that was the subject of such transfer and such Assignee shall be a Lender with respect to such interest. Except for a Central Bank Pledge or a Covered Bond Pool Pledge, a Lender making any such assignment shall notify Borrower Parties of same within a reasonable time after the occurrence thereof, specifying the Assignee thereof and the amount of the assignment. Any assignment, transfer, sale, negotiation, pledge or other hypothecation of all or any portion of any Lender’s rights in and to the Loan in contravention of this Section 9.1(a) shall be void ab initio .

(b) Participation . Any Lender may assign, sell or otherwise transfer a participation in and to all or any portion of its rights and obligations in and to the Loan, this Loan Agreement or the other Loan Documents to any other Person (a “ Participant ”) without the prior consent of Agent. No such participation shall (i) require the consent of any Lender or any other Person. Each Lender agrees to provide Agent prompt notice of all participations sold by such Lender together with a copy of the documentation governing such participations. Any assignment, sale or other transfer of any participation in all or any portion of any Lender’s rights in and to the Loan in contravention of this Section 9.1(b) shall be void ab initio .

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Section 9.2 Availability of Records . Borrower Parties acknowledge and agree that Agent and each Lender may provide on a confidential basis to any actual or proposed Assignee or Participant originals or copies of this Loan Agreement, any other Loan Documents and any other documents, instruments, certificates, opinions, insurance policies, financial statements and other information, letters of credit, reports, requisitions and other materials and information at any time submitted by or on behalf of any Borrower Party, Guarantor or other Persons and/or received by Agent or any Lender in connection with the Loan.

Section 9.3 Borrower Parties’ Facilitation of Transfer .

(a) In order to facilitate permitted assignments and other transfers to Assignees and sales to Participants, Borrower Parties shall execute and deliver to Agent one or more substitute promissory notes evidencing the Commitment of each Lender, provided that such promissory notes do not (i) increase the obligations or liabilities of any such Person hereunder or under any other Loan Documents in excess of the obligations or liabilities provided herein or in any other Loan Documents or (ii) decrease such Person’s rights hereunder or under any other Loan Documents to less than what they were prior to the execution of such promissory note(s). In addition, each Borrower Party agrees to reasonably cooperate with Agent and Lenders, including providing such information and documentation regarding the Properties as Agent or any Lender may reasonably request.

(b) Agent shall have the right, at any time (whether prior to, in connection with, or after any permitted assignment, participation and other transfers to Assignees and sales to Participants), with respect to all or any portion of the Loan, to modify, split and/or sever all or any portion of the Loan as hereinafter provided, and Borrowers and Guarantor shall cooperate with Agent in connection therewith. Without limiting the foregoing, Agent may (i) cause the Note, the Mortgages and the other Loan Documents to be split into multiple mortgage loans, (ii) create one or more senior and subordinate notes (e.g., an A/B or A/B/C structure), (iii) create multiple components of the Note or Notes (and allocate or reallocate the principal amount of the Loan among such components and/or assign different interest rates and/or LIBOR and/or Base Rate spreads to each Note), which components may be represented by separate Notes or (iv) otherwise sever the Loan into two or more loans secured by mortgages and by a pledge of partnership or membership interests (directly or indirectly) in each Borrower (i.e., a senior loan/mezzanine loan structure), in each such case, in whatever proportion and whatever priority Agent determines; provided , however , in each such instance the outstanding principal amount of all the Notes evidencing the Loan (or components of such Notes) immediately after the effective date of such modification equals the outstanding principal amount of the Loan immediately prior to such modification and the weighted average of the interest rates for all such Notes (or components of such Notes) immediately after the effective date of such modification equals the overall weighted average LIBOR Rate and Base Rate, as applicable, immediately prior to such modification; provided , further , however , all prepayments or repayments shall be applied to such tranches in a manner that shall not increase the weighted average interest rate of the Loan. If requested by Agent, Borrower Parties shall execute and deliver such documentation as Agent may reasonably request to evidence and/or effectuate any such modification or severance (and Guarantor shall execute and deliver a reaffirmation of the Recourse Liability Agreement and the Environmental Indemnity), provided , however , that neither Borrower

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Parties nor Guarantor shall be required to enter into any such documents and amendments that would alter the economic terms of the Loan Documents or that would create new or greater obligations or liabilities on or reduce the rights of Borrowers or Guarantor or any of their Affiliates under the Loan Documents. The assigning Lender shall pay the reasonable and documented out-of-pocket costs incurred by Borrower Parties and Guarantor under this Section 9.3(b) , including without limitation, Borrower Parties’ and Guarantor’s legal fees and expenses.

Section 9.4 Notice; Registration Requirement . No assignment, sale, negotiation, pledge, hypothecation or other transfer of any part of any Lender’s interest in and to the Loan shall be effective or permitted under this Article IX until (a) an assignment and acceptance agreement in the form attached hereto as Exhibit L (an “ Assignment and Acceptance ”) with such changes thereto as are reasonably acceptable to Agent (or such other form as may acceptable to Agent) with respect to such assignment, sale, negotiation, pledge, hypothecation or other transfer shall have been delivered to Agent, (b) Agent shall have registered such Assignee’s name and address in the Register that Agent maintains for the recordation of the names, addresses and interests of Lenders and (c) the parties to such transfer, assignment or purchase shall have paid to Agent a processing and registration fee determined by Agent. The entries in the Register shall be conclusive, absent manifest error. This Section 9.4 shall not apply to any Central Bank Pledge or Covered Bond Pool Pledge.

Section 9.5 Registry . Agent shall maintain a register (the “ Register ”) on which Agent will record the Commitments from time to time of each Lender, the portion each Disbursement of the Loan made by each Lender and each repayment with respect to the principal amount of the Loan of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the obligations of the Borrower Parties in respect of the Loan. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Disbursement made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by Agent with respect to ownership of such Commitments and prior to such recordation all amounts owing to the transferor with respect to such Commitments shall remain owing to the transferor. The registration of a transfer of all or part of any Commitment shall be recorded by Agent on the Register only upon the acceptance by Agent of a properly executed and delivered Assignment and Acceptance by the assignor and assignee. At the assigning Lender’s option, concurrently with the delivery of an Assignment and Acceptance pursuant to which an interest of such Lender in the Loan was assigned to such Assignee, the assigning Lender shall surrender its Note evidencing the portion of the Loan corresponding to the interest so transferred and Borrowers shall deliver to Agent one or more new promissory notes in the same aggregate principal amount issued to the assigning Lender and/or the Assignee.

Section 9.6 Lender Interest Rate Protection Agreements . Each Lender that is a party to any Interest Rate Protection Agreement acknowledges that the interest of Borrowers in and to such Interest Rate Protection Agreement will be pledged and collaterally assigned to Agent pursuant to the Loan Documents, and hereby consents without any restrictions to such pledge and collateral assignment. All payments, if any, due under such Interest Rate Protection Agreement shall be paid directly to Agent and all other rights of Borrowers shall, upon the occurrence and during the continuance of an Event of Default, be exercisable by Agent. Each Lender that is a party to any Interest Rate Protection Agreement shall execute and deliver to Agent, and cause any Affiliate

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of such Lender that is a party to any Interest Rate Protection Agreement to execute and deliver to Agent, upon entering into such agreement the Interest Rate Protection Agreement Acknowledgment in order to confirm the foregoing.

Section 9.7 Disclosure by Agent or Lender . Without limiting Section 9.2 , Borrower Parties consent to the issuance by Agent and Lenders of press releases, advertisements and other promotional materials in connection with the marketing activities of Agent and Lenders, including the disclosure that Aareal is the Agent for the Loan, the amount of the Loan and the name, location and use of the Properties; provided that the content of all such release, advertisements and promotional materials shall be subject to the reasonable approval of the Borrower Parties.

ARTICLE X

MISCELLANEOUS

Section 10.1 Notices . All notices, certificates, demands, requests, approvals, consents, waivers and other communications provided for herein the Note or any other Loan Documents shall be in writing and (a) mailed (registered or certified mail, return receipt requested, and postage prepaid), (b) hand-delivered, with signed receipt, (c) sent by nationally-recognized overnight courier or (d) sent by facsimile with electronic confirmation (as long as such notice, certificate, demand, request, approval, covenant, waiver or communication is also sent by one for the means described in clause (a) , (b) or (c) in this Section 10.1 ) as follows:

If to any Borrower Party, to:

14185 Dallas Parkway, Suite 1100

Dallas, TX 75254

Attention: David A. Brooks

Telephone: 972-778-9207

Facsimile: 972-490-9605

with a copy to:

Andrews Kurth LLP

1717 Main Street, Suite 3700

Dallas, TX 75201

Attention: Brigitte Gawenda Kimichik

Telephone: 214-659-4441

Facsimile: 214-659-4777

If to Agent or ACC, to:

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

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Attention: Credit Department
Linda Burg

with a copy similarly delivered to:

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177
Attention: Legal Department
Alan L. Griffin, Esq.

with a copy to:

Kaye Scholer LLP
250 West 55th Street

New York, New York 10019-9710

Attention: Warren J. Bernstein, Esq.
Telephone: 212-836-8000
Facsimile: 212-836-8689

If to Aareal Bank:

c/o Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention: Credit Department
Linda Burg

with a copy similarly delivered to:

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177
Attention: Legal Department
Alan L. Griffin, Esq.

If to WIB:

Westdeutsche ImmobilienBank AG
Grosse Bleiche 46
55116 Mainz, Germany
Attention: Klaus May

with a copy similarly delivered to:

Westdeutsche ImmobilienBank AG

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Grosse Bleiche 46
55116 Mainz, Germany
Attention: Sascha Matheis

with a copy similarly delivered to:

Westdeutsche ImmobilienBank AG
850 Third Avenue, 21st Floor
New York, NY 10022
Attention: Andrew S. Cooper

or to such other address with respect to any party, as such party shall notify the other parties in writing. All such notices, certificates, demands, requests, approvals, waivers and other communications given pursuant to this Section 10.1 shall be effective when received or refused at the address specified as aforesaid.

Notwithstanding any provision contained herein or in any of the other Loan Documents to the contrary, in the event that Agent shall fail to give any notice to any Borrower Party under this Loan Agreement, the sole and exclusive remedy for such failure shall be to seek appropriate equitable relief to enforce this Loan Agreement to give such notice and to have any action of such Borrower Party postponed or revoked and any proceedings in connection therewith delayed or terminated pending the giving of such notice by Agent, and no Borrower Party shall have any right to damages (whether actual or consequential) or any other type of relief against Agent not specifically provided for herein, all of which damages or other relief are hereby expressly waived. The foregoing is not intended and shall not be deemed under any circumstances to require Agent to give notice of any type or nature to any Borrower Party as expressly required hereby.

Section 10.2 Modifications . No provision of this Loan Agreement or of the other Loan Documents may be amended, modified, waived, or terminated except by an instrument in writing executed by each Borrower Party and Agent.

Section 10.3 No Other Party Beneficiary . This Loan Agreement and the other Loan Documents are for the sole benefit of Agent and Lenders and their successors and permitted assigns and Borrower Parties, and are not for the benefit of any other party. Nothing contained in this Loan Agreement or any Loan Document shall be deemed to confer upon any Person other than Agent and Lenders and their successors and permitted assigns and Borrower Parties any right to insist upon or to enforce performance or observance of any of the obligations contained herein.

Section 10.4 Gender . Whenever used herein, the use of any gender shall be applicable to all genders.

Section 10.5 Captions . The captions, headings, and arrangements used in this Loan Agreement are for convenience only and do not in any way affect, limit, amplify, or modify the terms and provisions hereof.

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Section 10.6 Survival of Agreement . All covenants, agreements, representations and warranties made by Borrower Parties herein or in the other Loan Documents shall be considered to have been relied upon by Agent and Lenders and shall survive the making of the Loan and the execution and delivery by Borrowers of the Note, regardless of any investigation made by Agent or any Lender or on their behalf, and shall continue in full force and effect as long as all or any portion of the Obligations is outstanding.

Section 10.7 Binding Effect . The provisions of this Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrower Parties may not assign or otherwise transfer any of their rights under this Loan Agreement.

Section 10.8 Governing Law; Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by Jury . This Loan Agreement shall be governed by, and construed in accordance with, the substantive and procedural laws of the State of New York. each Borrower Party irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Loan Agreement, the Note or the other Loan Documents may be brought in (i) the courts of the United States of America located in the Southern District of New York or the District where the affected Property is located or (ii) the state courts of the State and County of New York or the state courts of the state and county where the affected Property is located, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Each Borrower Party irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to such Borrower Party at its address provided in Section 10.1 hereof, as the same may be changed pursuant to Section 10.1 hereof. Nothing in this Section 10.8 , however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against any Borrower Party or its property in the courts of any other jurisdiction. EACH BORROWER PARTY, AGENT AND LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS LOAN AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 10.9 Time of the Essence . Time is of the essence with respect to the obligations of Borrower Parties under the Loan Documents. By accepting payment of any portion of the Obligations after its due date, Agent does not waive its right to require prompt payment when due of all other portions of the Obligations or to declare an Event of Default for any failure so to pay.

Section 10.10 Waivers, Consents and Approvals . No failure or delay of Agent in exercising any power or right hereunder or to demand payment for any sums due pursuant to this Loan Agreement or any other Loan Document, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any

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other right or power. The rights and remedies of Agent hereunder, under the other Loan Documents are cumulative and not exclusive of any rights or remedies which it would otherwise have. No waiver of any provision of this Loan Agreement, any of the other Loan Documents or consent to any departure by a Borrower Party or any other Person therefrom shall in any event be effective unless signed in writing by Agent, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Consents, approvals and waivers granted by Agent for any matters covered under this Loan Agreement or any Loan Document shall not be effective unless signed in writing by Agent, and such consents, approvals and waivers shall be narrowly construed to cover only the parties and facts identified in any such consent, approval or waiver. No notice or demand on a Borrower Party or any other Person in any case shall entitle any Borrower Party or such Person to any other or further notice or demand in similar or other circumstances. Unless expressly provided to the contrary, any consents, approvals, waivers or determinations of Agent or Lenders pursuant to this Loan Agreement or any other Loan Documents shall be granted or withheld in Agent’s or Lenders’ sole and absolute discretion, as the case may be.

Section 10.11 Severability . In the event any one or more of the provisions contained in this Loan Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect in a particular jurisdiction or as to particular Persons or circumstances, the validity, legality and enforceability of the remaining provisions contained herein or therein (or the effectiveness of the invalid, illegal or unenforceable provision in a different jurisdiction or as to different Persons or circumstances) shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. If the rights, remedies, powers, privileges and Liens created by this Loan Agreement shall be invalid or unenforceable as to any part of the Obligations, then the unsecured portion of the Obligations shall be completely paid prior to the payment of the remaining and secured portion of the Obligations, and all payments made on the Obligations shall be considered to have been paid on and applied first to the complete payment of the unsecured portion of the Obligations.

Section 10.12 When Effective . This Loan Agreement shall become effective when it shall have been executed and delivered by Borrower Parties, Agent and Lenders.

Section 10.13 Payments on Business Days . Except as otherwise expressly provided herein or in the Note, should the principal of or interest on the Note or any other portion of the Obligations become due and payable on other than a Business Day, payment in respect thereof shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in computing interest in connection with the payment.

Section 10.14 Limitation of Liability . Notwithstanding anything to the contrary contained in this Loan Agreement, the Note or the other Loan Documents, but subject to clauses (a) and (b) of this Section 10.14 , no recourse shall be had for the payment of the principal, Interest, Additional Interest, Spread Maintenance Premiums or other amounts owed hereunder or under the Note or the other Loan Documents, or for any claim based on this Loan Agreement, the Note or

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any other Loan Document, against any direct or indirect constituent partner, member or shareholder of any Borrower Party or any assets of such partner, member or shareholder, or against any officer, director, agent or employee of any Borrower Party or of any such partner, member or shareholder, it being expressly understood that the sole remedies of Agent and Lenders with respect to such amounts and claims shall be against the assets of Borrowers and the Collateral; provided , however , that:

(a) nothing contained in this Loan Agreement (including the provisions of this Section 10.14 ), the Note or the other Loan Documents shall constitute a waiver of any of Borrowers’ other obligations hereunder or under the Note or the other Loan Documents, or of any of Operating Lessees’ and/or Guarantors’ obligations under the Loan Documents to which such Operating Lessee or Guarantor is a party; and

(b) nothing contained in this Loan Agreement (including the provisions of this Section 10.14 ), the Note or the other Loan Documents shall constitute a limitation of liability of Borrowers or Guarantor or any of its respective assets with respect to any liability or obligation of Borrowers and/or Guarantors under the Recourse Liability Agreement or the Environmental Indemnity, including, without limitation the fully recourse obligation to repay the Obligations in full after the occurrence of a Full Recourse Event.

(c) Notwithstanding anything contained in this Loan Agreement, the Recourse Liability Agreement and the Environmental Indemnity, or the other Loan Documents to the contrary, Borrower and/or Guarantor shall have no liability under the Recourse Liability Agreement or the Environmental Indemnity for liabilities arising solely as a result of (i) the exercise of remedies by Lender under the Loan Documents, including any foreclosure or deed-in-lieu of foreclosure, or (ii) any action or omission of Lender, its affiliates, agents or receivers from and after a foreclosure, deed-in-lieu of foreclosure or appointment of a receiver on all or any portion of the Property or Collateral (or any purchaser at foreclosure or any transferee of Lender or such purchaser).

Section 10.15 Further Assurances; Filing of Financing Statements . Borrowers promptly shall make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings, conveyances, deeds of trust, mortgages, transfers, assignments, financing statements or other assurances, and take all such other action, as Agent may, from time to time, reasonably deem necessary or proper in connection with this Loan Agreement or any of the other Loan Documents, the obligations of Borrowers hereunder or thereunder, or for better assuring and confirming unto Agent and Lenders the full benefits and rights granted or purported to be granted by this Loan Agreement or the other Loan Documents. Borrower Parties hereby agree that, without notice to or the consent of Borrower Parties, Agent may file with the appropriate public officials such financing statements or similar documents as are or may become necessary to perfect and continue the perfection of the security interest granted by any Loan Document.

Section 10.16 Third Party Payments . Whenever this Loan Agreement or any other Loan Document requires that amounts payable by a third party be paid directly to Agent or Lenders, Agent may enforce such right with a preliminary injunction, a temporary restraining order or other

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injunctive relief. Borrowers agree that irreparable harm may result if such payments are not made directly to Agent, or if otherwise provided or agreed to, to Agent.

Section 10.17 Controlling Document . In the event of any conflict between the provisions of this Loan Agreement and any of the other Loan Documents, the provision of this Loan Agreement, shall control.

Section 10.18 No Acknowledgement or Representation by Agent or any Lender . Agent’s concurrence with any request or the making of any advance hereunder shall not be deemed to constitute an acknowledgement or a representation by Agent or any Lender that no Default, Event of Default or Cash Sweep Condition shall have occurred or shall be continuing, or a waiver of any Default, Event of Default or Cash Sweep Condition, or any right or remedy relating therefrom.

Section 10.19 Entire Agreement . The Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings.

Section 10.20 Counterparts . This Loan Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement.

Section 10.21 Cross Default; Cross Collateralization . Each Borrower Party acknowledges that Lender has made the Loan to Borrowers upon the security of its collective interest in the Properties and in reliance upon the aggregate of the Properties taken together being of greater value as collateral security than the sum of the Properties taken separately. Each Borrower Parties agrees that the Mortgages are and will be cross-collateralized and cross-defaulted with each other so that (i) an Event of Default under any of the Mortgages shall constitute an Event of Default under each of the other Mortgages which secure the Note; (ii) an Event of Default under the Note or this Loan Agreement shall constitute an Event of Default under each Mortgage; and (iii) each Mortgage shall constitute security for the Note as if a single blanket lien were placed on all of the Properties as security for the Note.

Section 10.22 Joint and Several Liability . Each of the Borrowers shall be jointly and severally liable for payment of the Obligations and performance of all other obligations of Borrowers (or any of them) under this Loan Agreement or any other Loan Document.

Section 10.23 Contribution Among Borrowers . Notwithstanding that the Borrowers are jointly and severally liable to Lender for payment of the Loan, as among the Borrowers, each shall be liable only for such Borrower’s Allocated Amount (as hereinafter defined) and, accordingly, each Borrower whose Property or other assets are, from time to time, utilized to satisfy a portion of the Obligations in excess of such Borrower’s Allocated Loan Amount, shall be entitled, commencing 95 days after payment in full of the Obligations, to contribution from each of the other Borrowers pro-rata in accordance with their respective liabilities in accordance with this Loan Agreement. This “Allocated Amount” for each Borrower shall equal the Allocated Loan Amount for the Property owned or leased by such Borrower, as the case may be.

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Section 10.24 Employer Identification Number Etc . Borrower Parties acknowledge that in order for Lenders to comply with the requirements under the Patriot Act, Borrower Parties must provide to Agent certain information or supporting documentation (collectively “ Documentation ”) at the time of execution of this Loan Agreement. Lenders may be required by the Patriot Act to verify and record any Documentation provided by Borrower Parties to validate each Borrower Party’s identity. Documentation that may be requested from Borrower Parties may include, but is not limited to, a Federal Employer Identification Number (FEIN), a Certificate of Good Standing to validate each Borrower Party’s corporate, partnership or limited liability company existence, a Certificate of Incumbency to authenticate the management of each Borrower Party, and other government issued certified documents to validate Borrower Party’s authorization to conduct business.

ARTICLE XI

AGENT AND LENDERS

Section 11.1 Scope of Article XI . This Article XI shall be binding on Agent and Lenders but shall not be binding on or enforceable by Borrower Parties except as otherwise expressly provided in this Article XI . As among Agent and Lenders, the provisions of this Article XI may be amended, waived or otherwise modified by Agent and Lenders without Borrower Parties’ consent and without the need for any Borrower Party to be party to any of the same. Without limiting the foregoing, nothing contained in this Article XI or any amendments, waivers or modifications thereof by Agent and Lenders, shall limit or modify the rights and obligations of, and restrictions applicable to, Borrower Parties, Agent or Lenders set forth in any other provision of this Loan Agreement or in the other Loan Documents, except as among Agent and Lenders.

Section 11.2 Agent .

(a) Appointment . Each Lender hereby irrevocably designates and appoints Agent as the agent of such Lender with respect to the Loan and to act as “Agent” under the Loan Documents. Each Lender hereby irrevocably authorizes Agent, as its agent, to take such action and to exercise such powers on such Lender’s behalf as may be taken by Agent under any Loan Document, including as a payee, mortgagee, assignee or beneficiary or otherwise, together with such other powers as are reasonably incidental thereto. Nothing contained in this Loan Agreement, any Assignment and Acceptance or in any other Loan Document is intended to create or shall be construed as imposing on Agent any obligations except as expressly set forth in this Loan Agreement or in any other Loan Document. Agent shall not have any fiduciary or trustee relationship with Lenders.

(b) Duties of Agent. Agent shall not have any duties or responsibilities except those expressly set forth in this Loan Agreement and in the other Loan Documents; no implied covenants, functions, responsibilities, duties, obligations or liabilities of Agent shall be construed to exist under this Loan Agreement or any other Loan Document. Agent shall perform its duties hereunder in accordance with the same standard of care as that customarily exercised by Agent with respect to the administration of a loan similar to the Loan held entirely for its own account. Agent shall not have any duty to ascertain or inquire into or verify the performance or observance of any covenants or agreements in any Loan Documents by Borrower Parties or any other Person or the satisfaction

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of any condition or to inspect the Properties. Agent shall not be liable for any undertaking of Borrower Parties or any other Person or for any error of judgment, or for any action taken or omitted to be taken by Agent other than willful misconduct or gross negligence of Agent.

(c) Reliance by Agent. Agent is entitled to rely upon (and shall be protected in relying upon) any written or oral statement and notices or any other certification or documents believed by Agent to be genuine and correct and to have been signed or made by the proper Person and, with respect to all of its duties under the Loan Documents, upon advice of counsel (including counsel for Borrower Parties and Guarantor), independent public accountants, engineers, architects and other experts selected by Agent and shall not be liable for any action taken or omitted to be taken by Agent in good faith in accordance with the advice of such counsel, independent public accountants, engineers, architects and other experts.

(d) Delegation of Duties. Agent may execute any of its duties under this Loan Agreement and any duties as Agent or as a party, payee, mortgagee, assignee or beneficiary under any Loan Document, by or through agents, servicers, affiliates or attorneys-in-fact. Agent shall not be responsible for the negligence or misconduct of any agents, affiliates or attorneys-in-fact selected by Agent with reasonable care and prudence.

(e) Agent in its Capacity as a Lender . With respect to Aareal’s ownership interest in the Loan as a Lender, Aareal in its capacity as Lender shall have the rights and powers of a Lender under this Loan Agreement and the other Loan Documents as set forth herein and therein and may exercise or refrain from exercising the same as though it were not Agent, and the term “Lender” and “Lenders” shall include Aareal in its individual capacity for so long as Aareal shall hold any interest in the Loan.

(f) Relationship with Borrower Parties.

(xii) Each Lender acknowledges that, with respect to the Loan and the Loan Documents, Agent shall have the sole and exclusive authority to deal and communicate with Borrower Parties and any other Person on behalf of Lenders and each Lender acknowledges that any notices or demands from such Lender to Borrower Parties or such Person must be promptly forwarded to Agent for delivery. This subclause (i) may not be amended without the consent of Borrower Parties.

(xiii) Each Lender agrees that it will not take any legal action, nor institute any actions or proceedings, against any Borrower Party or any other Person with respect to any of the Obligations, without the prior consent of Agent, which consent may be withheld by Agent in its discretion.

Section 11.3 Distributions . Each Lender shall be entitled to receive, and Agent shall transfer to each Lender, each Lender’s Pro Rata Share of all payments received by Agent pursuant to the Loan Documents on account of principal, interest and other sums, excluding, however, (a) any sums payable to Agent or any Lender in a manner other than in proportion to each Lender’s Pro Rata Share in connection with any Lender Interest Rate Protection Agreement or pursuant to Section 2.7 , 2.8 or 2.9 hereof, without regard as to whether such sums constitute

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Additional Interest, (b) fees payable pursuant to the Loan Fee Letter and (c) any sums payable to Agent in its capacity as Agent, including any sums payable on account of expenses incurred by Agent which Borrower Parties are obligated to reimburse Agent pursuant to the Loan Documents to the extent that Lenders have not made a payment on account thereof pursuant to Section 11.9 hereof (the sums referred to in clauses (a) through (c) above are hereinafter referred to as, “ Excluded Sums ”).

Section 11.4 Authority, No Reliance; Binding Effect . Each Lender (a) represents and warrants that it is legally authorized to enter into this Loan Agreement, (b) agrees that neither Agent nor any Lender shall be responsible to one another for the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any of the Loan Documents or any other instrument or document furnished pursuant thereto or in connection with the Obligations, (c) confirms and agrees that neither Agent nor any Lender has made or will be deemed to have made any warranty or representation to another or shall be responsible to another for any statements, warranties or representations (written or otherwise) made in or in connection with the Loan or the Loan Documents or for the financial condition of Borrower Parties or any other Person or for the title or the value of any portion of the Mortgaged Property or other Collateral and (d) agrees that it will be bound by the provisions of this Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of this Loan Agreement are required to be performed by it as a Lender. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Loan Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Loan Agreement.

Section 11.5 Loan .

(o) Amendments and Modifications; Exercise of Rights and Remedies . Subject to Section 11.5 (b) hereof, Agent reserves the right, in its discretion, in each instance without prior notice to Lenders, (i) to exercise or refrain from exercising any powers or rights which Agent or Lenders may have under or with respect to the Note, this Loan Agreement or any other Loan Document, (ii) to enforce or forbear from enforcing the Loan Documents, (iii) to grant or withhold consents, approvals or waivers and to make any other determinations in connection with the Loan and the Loan Documents, (iv) to amend or modify the Loan Documents, (v) to acquire additional security or release any security given with respect to the Loan, (vi) to collect all sums due under the Loan Documents, (vii) to declare the Loan due and payable when permitted to do so pursuant to the terms of the Loan Documents, (viii) to enforce the Loan Documents, (ix) to take possession of, foreclose or accept a deed and/or assignment of the Collateral or any portion thereof in lieu of foreclosure, (x) to sell, dispose of or otherwise deal with the ownership and operation of the Collateral, (xi) to bid at foreclosure of the Mortgages such amount as Agent shall determine in its discretion and (xii) to exercise or determine not to exercise all powers which are incidental to any of the foregoing. Agent shall provide Lenders with written notice of any actions taken by Agent with respect to the foregoing within five (5) days after the occurrence thereof. Notwithstanding

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anything to the contrary contained in this Loan Agreement, any modification or supplement of Article XI , or of any of the rights or duties of the Agent hereunder, shall require the consent of the Agent.

(p) Restrictions of Power of Agent; Consent of Lenders . Notwithstanding anything to the contrary contained in Section 11.5(a) or elsewhere in this Loan Agreement, Agent shall not (x) without the prior written consent of all Lenders, consent to any Transfer (where consent is required) or agree to any amendment to or waiver of any of the terms or conditions of the Note, this Loan Agreement or any other Loan Document which would (i) modify the definition of “Permitted Transfer” (or waive any conditions thereto), (ii) amend the definition of “Requisite Lenders” or amend this Section 11.5(b), (iii) extend the time for any payments required under this Loan Agreement, including the Maturity Date (other than as a result of an extension of the Term pursuant to Section 2.15) , (iv) reduce amounts payable to any Lender pursuant to the Loan Documents, (v) increase the principal amount of the Loan, (vi) release any material portion of the Collateral granted under the Loan Documents except as required hereunder or thereunder, or (vii) release Borrower Parties, Guarantor or any other guarantor of the Loan from any of their material obligations with respect to the Loan or (y) without the consent of the Requisite Lenders either (i) agree to any other material amendment to or material waiver of any of the terms or conditions of the Note, this Loan Agreement or any other Loan Documents, (ii) declare the Loan due and payable, (iii) take possession of, foreclose or accept a deed and/or assignment of the Collateral or any portion thereof in lieu of foreclosure, (iv) sell or dispose of the Collateral or (v) bid at any foreclosure of the Mortgage.

(q) Deemed Consent . In the event that Agent requests a Lender’s consent pursuant to Section 11.5(b) hereof and Agent does not receive the Lender’s written response within ten (10) Business Days of the request therefor, or such shorter period that Agent in the exercise of its reasonable business judgment determines is necessary under the circumstances, such Lender shall be deemed to have consented to the action or determination proposed in such request. All such requests for consent from Agent to Lenders shall (i) be given in the form of a notice to each Lender, (ii) be accompanied by a description of the matter or item as to which such consent is requested, or shall advise each Lender where such matter or item may be inspected, or shall otherwise describe the matter or issue to be resolved and (iii) shall include Agent’s proposal in respect thereof.

(r) Instructions from Lenders . Agent may at any time request instructions from Lenders with respect to any actions, consents, waivers or approvals which, by the terms of any of the Loan Documents, Agent is permitted or required to take or to grant, and Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval, consent or waiver and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval, consent or waiver under any of the Loan Documents until Agent shall have received such instructions.

Section 11.6 Equitable Adjustments; Offset . If a Lender shall obtain any payment (whether voluntary, involuntary or otherwise) on account of such Lender’s interest in the Loan in excess of such Lender’s Pro Rata Share to which such Lender is entitled (other than payments on account of Excluded Sums payable to such Lender) or payment on account of Excluded Sums

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payable to another Person, such Lender shall forthwith pay over to Agent an amount sufficient to enable Agent to cause such excess payment to be shared ratably with the other Lenders or, in the case of Excluded Sums payable to another Person, such Excluded Sums.

Section 11.7 Other Transactions . Agent and each Lender and their respective Affiliates and subsidiaries may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, Borrower Parties, any Affiliate of any Borrower Party, any subsidiaries of any Borrower Party or its respective Affiliates and any Person who may do business with or own interests in or securities of Borrower Parties or any such Affiliate or subsidiary without any duty to account therefor to each other. In the event that Agent or a Lender shall enter into an Interest Rate Protection Agreement, Agent or such Lender, as the case may be, shall be free to exercise its rights and remedies pursuant to the terms of the applicable Interest Rate Protection Agreement as if Agent or Lender, as the case may be, was not Agent or a Lender hereunder.

Section 11.8 Obligations Absolute Each Lender acknowledges and agrees that its obligations hereunder are absolute and unconditional and shall not be affected by any circumstance whatsoever, including any breach by Agent or a Lender of their obligations under this Loan Agreement or any other Loan Document, any lack of validity or enforceability of the Note, this Loan Agreement or any other Loan Document, the occurrence and continuance of any Default or Event of Default or the failure to satisfy any term or condition of the Note, this Loan Agreement or any other Loan Document. Without limiting the generality of the immediately preceding sentence, each Lender agrees that any payment required to be made by it shall be made without any offset, abatement, withholding or reduction whatsoever and a breach by Agent or any Lender of any of their obligations pursuant to this Loan Agreement or any other Loan Document shall not limit or otherwise affect a Lender’s obligations pursuant to this Loan Agreement.

Section 11.9 Indemnification .

(a) Generally . Lenders hereby agree to indemnify Agent (to the extent Agent is not otherwise reimbursed hereunder or under the Loan Documents by Borrower Parties), on demand, in proportion to their Pro Rata Shares, for and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable fees and disbursements of counsel) of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against Agent in any way relating to or arising hereunder or out of any of the Loan Documents, any action taken or omitted by Agent hereunder or thereunder, the Properties or the Collateral, including any matter required to be indemnified by Borrower Parties pursuant to Section 4.15 hereof; provided , however , that Lenders shall not be liable for (a) any of such claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from Agent’s willful misconduct or gross negligence or (b) any of such claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements which arise pursuant to any Lender Interest Rate Protection Agreement to which Agent or its Affiliate is party. A certificate of Agent as to the amount for which Lenders are required to reimburse Agent pursuant to this Section 11.9 shall be prima facie evidence as to such amount. Lenders’ obligations under this Section 11.9 shall survive the termination of this Loan Agreement and the Loan Documents. Without limiting the

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foregoing, in the event Agent elects to make a protective advance, each Lender shall fund its Pro Rata Share thereof. If Agent advances its own funds for any protective advance, each Lender shall upon Agent’s demand reimburse Agent for same in the amount of its Pro Rata Share thereof.

(b) Indemnification Regarding Certain Actions . Unless indemnified to Agent’s satisfaction against any claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable fees and disbursements of counsel), Agent may not be compelled to do any act under this Loan Agreement or any other Loan Document or to take any action toward the execution or enforcement of the powers hereby or thereby created or to prosecute or defend any suit with respect to this Loan Agreement or any other Loan Document. In no event, however, shall Agent be required to take any action that Agent determines would be in violation of any applicable regulatory requirements, or could incur for Agent criminal or onerous civil liability.

Section 11.10 Taxes . All taxes due and payable on any payments to be made to any Lender with respect to the Obligations or under the Loan Documents shall be such Lender’s sole responsibility. All payments payable by Agent to any Lender hereunder or otherwise with respect to the Obligations shall be made without deduction for any taxes, charges, levies or withholdings, except to the extent, if any, that such amounts are required to be withheld by Agent under applicable law or the terms of the Loan Documents or this Loan Agreement. Each Lender shall provide to Agent and Borrowers before the first Payment Date after the execution of any Assignment and Acceptance pursuant to which it becomes a Lender hereunder, and from time to time thereafter, including upon a change in circumstances and upon the expiration of a previously delivered form, a completed and signed copy of any form(s) (including Internal Revenue Service Forms W-8 BEN, W-8 ECI and/or W-9) that may be required by the United States Internal Revenue Service in order to certify such Lender’s and/or Agent’s exemption from United States withholding and backup withholding taxes with respect to payments to be made to such Lender with respect to the Obligations or under the Loan Documents and/or such other documents as are necessary to indicate that all such payments are exempt from such taxes (or subject to such taxes at a rate reduced by an applicable tax treaty, in which case Agent and/or Borrowers, as applicable, shall withhold Taxes to the extent required by law and, to the extent such Taxes are Excluded Taxes, shall not be required to pay any additional amounts to such Lender by reason of such withholding).

Section 11.11 Return of Payments . If Agent has received or applied any payment with respect to the Loan and has paid to any Lender any portion of such payment, and thereafter such payment or application is rescinded or must otherwise be returned or paid over by Agent, whether required pursuant to any bankruptcy or insolvency law, the Loan Documents, or otherwise, such Lender shall, at Agent’s request, promptly return its share of such payment or application to Agent. In addition, such Lender shall simultaneously remit its Pro Rata Share of any interest or other amounts required to be paid by Agent with respect to such payment or application. If any Lender fails to remit such payment to Agent prior to 10:00 a.m. (New York City time) on the second (2 ^nd ) Business Day following Agent’s request for such funds, the payment owed to Agent shall earn interest at the Base Rate for each day from the date of Agent’s request until its payment to Agent.

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Section 11.12 No Partnership . This Loan Agreement, the Assignment and Acceptances and the other Loan Documents do not create a partnership or joint venture among Agent and/or Lenders.

Section 11.13 Resignation and Removal of Agent; Successor Agent .

(d) Resignation . Agent may resign, without the consent of any Lender, from the performance of all its functions and duties hereunder at any time by giving at least fifteen (15) Business Days’ prior written notice to Borrower Parties and Lenders, unless applicable law requires a shorter notice period or that there be no notice period, in which instance such applicable law shall control. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to Section 11.13(c) or, if applicable, the appointment by Agent of a successor Agent pursuant to Section 11.13(d) .

(e) Removal of Agent . (i) In the event of the occurrence of any material gross negligence or willful misconduct of Agent, if all of the Lenders (other than a Lender that is then acting as Agent) agree or (ii) if Agent is a Defaulting Lender and the Requisite Lenders agree, then Agent may be removed as Agent; provided , however , that no such removal of Agent shall in any way affect the rights of Agent in its individual capacity as a Lender.

(f) Appointment of Successor Agent by Requisite Lenders . Upon any resignation or removal of Agent, the Requisite Lenders (including in the determination of the Requisite Lenders, the Pro Rata Shares of such Lender that is also the resigning or removed Agent) shall appoint a successor Agent (who shall also be a Lender).

(g) Appointment by Resigning Agent . If, upon the resignation of Agent, a successor Agent shall not have been appointed within the fifteen (15) Business Days or shorter period provided in Section 11.13(a) , the resigning Agent shall then appoint a successor Agent (who also shall be a Lender), which successor shall serve as Agent until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above.

(h) Rights of the Successor and Retiring Agent . Upon the acceptance of any appointment as Agent hereunder by a successor Agent, or, if applicable, the appointment of a successor Agent by Agent pursuant to Section 11.13(d) , such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent arising from and after the date of such acceptance and appointment, and the retiring Agent shall be discharged from the duties and obligations of Agent arising from and after such date. After the resignation or removal of Agent as provided herein, the provisions of this Loan Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Loan Agreement.

Section 11.14 Defaults by any Lender .

(e) Consequences of Lender’s Default . If for any reason any Lender shall be in default of any of its obligations pursuant to this Loan Agreement or any other Loan Document (a “ Defaulting Lender ”), then, in addition to the rights and remedies that may be available to Agent

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and any other Lender under this Loan Agreement, at law and in equity, such Defaulting Lender’s right to participate as a Lender in decisions under this Loan Agreement, including any rights to approve or direct any determination, action or inaction of Agent where the approval or direction of Lenders is required or permitted hereby, and such Defaulting Lender’s right to assign, transfer, sell all or any portion of its rights in and to the Loan or a participation therein pursuant to Article IX hereof, shall be suspended during the pendency of such failure or refusal.

(f) Remedies . If for any reason the Defaulting Lender fails to make timely payment of any amount required to be paid by such Defaulting Lender to or for the benefit of Agent or any other Lender hereunder, then, in addition to other rights and remedies that Agent or such other Lender may have hereunder or otherwise, Agent or any Lender shall be entitled, but not obligated (i) to advance funds on behalf of any Defaulting Lender, (ii) to the extent not paid by Borrower Parties, to collect interest from the Defaulting Lender at the Base Rate until the date on which the payment is made, (iii) to withhold or set off or in the case of a Lender, to cause Agent to withhold or setoff, and to apply to the payment of the defaulted amount and any related interest, any amounts to be paid to the Defaulting Lender under this Loan Agreement, (iv) to bring an action or suit against the Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest and (v) to purchase the Defaulting Lender’s interest in the Loan in the manner set forth in this Section 11.14 . Upon the Defaulting Lender’s failure to make payments as set forth herein and so long as such failure remains uncured (and it is agreed an advance of funds by any other Lender pursuant to clause (i) above shall not be considered a cure of the Defaulting Lender’s default), the Defaulting Lender shall not be entitled to receive its share of any payments made by Borrower Parties (or amounts owed by Borrower Parties) after such date pursuant to the Loan Documents. If Agent receives any payment with respect to the Obligations from Borrower Parties as to which a Defaulting Lender would otherwise have been entitled, then such Defaulting Lender’s share of such payment shall be credited toward the amount owed hereunder by such Defaulting Lender on a dollar for dollar basis.

(g) Purchase of Defaulting Lender’s Interest After Default . In the event of a default by a Lender as referred to in Section 11.14 (a) hereof, each Lender which is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire such Defaulting Lender’s interest in the Loan. If more than one Lender exercises such right, each such Lender which is not a Defaulting Lender shall have the right to acquire (in accordance with such acquiring Lender’s Pro Rata Share or upon agreement of the Lenders which desire to so purchase the Defaulting Lender’s interest, any other proportion) the Defaulting Lender’s interest in the Loan. Such right to purchase shall be exercised by written notice from the applicable Lender(s) electing to exercise such right to the Defaulting Lender (an “ Exercise Notice ”), copies of which shall also be sent concurrently to each other Lender. The Exercise Notice shall specify (i) the purchase price for the interest of the Defaulting Lender, determined in accordance with Section 11.14(d) and (ii) the date on which such purchase is to occur, which shall be any Business Day which is not less than fifteen (15) days after the date on which the Exercise Notice is given, provided that if such Defaulting Lender shall have cured its default in full (including with the payment of any interest and other amounts due in connection therewith) to the satisfaction of Agent within said fifteen (15) day period, then the Exercise Notice shall be of no further effect and the non-defaulting Lender(s) shall no longer have a right to purchase such Defaulting Lender’s interest. Upon any such purchase of a Defaulting

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Lender’s interest and as of the date of such purchase (the “ Purchase Date ”), the Defaulting Lender’s interest in the Loan, and its rights hereunder as a Lender arising from and after the Purchase Date (but not its rights and liabilities with respect thereto or under this Loan Agreement or the other Loan Documents for obligations, indemnities and other matters arising or matters occurring before the Purchase Date) shall terminate on the Purchase Date, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest. Without in any manner limiting the remedies of Agent or any other Lender, the obligation of a Defaulting Lender to sell and assign its interest in the Loan under this Section 11.14 shall be specifically enforceable by Agent and/or any other Lender by an action brought in any court of competent jurisdiction for such purpose, it being acknowledged and agreed that, in light of the disruption in the administration of the Loan and the other terms of the Loan Documents that a Defaulting Lender may cause, damages and other remedies at law are not adequate.

(h) Purchase Price; Payment for Defaulting Lender’s Pro Rata Share . The purchase price for the interest of a Defaulting Lender in the Loan shall be equal to the sum of all of the Defaulting Lender’s advances under the Loan Documents outstanding as of the Purchase Date, less the costs and expenses incurred by Agent and any non-defaulting Lender directly as a result of the Defaulting Lender’s default hereunder, including interest accrued on such unpaid amounts (at the Base Rate), court costs and including reasonable attorneys’ fees and disbursements, and fees for accountants and other similar advisors (provided that such costs and expenses are paid by the Lenders acquiring the interest of such Defaulting Lender to Agent and the Lenders incurring same).

Section 11.15 Enforcement Action Plan .

(d) Promptly after Agent acquires knowledge (as defined below) thereof, Agent shall give written notice to each Lender of any Event of Default which in Agent’s reasonable judgment materially and adversely affects any of the Lenders’ interests in the Loan or the value of the Properties. If Agent determines that remedial action should not be taken, it shall so advise the Lenders, setting forth Agent’s reasons therefor. Otherwise Agent shall prepare a recommended course of remedial action (other than the giving of notices of default and demands for performance) (the “ Enforcement Action Plan ”), which shall be subject to the approval of the Requisite Lenders to the extent provided in Section 11.5(b) of this Loan Agreement. Agent agrees to consult with Lenders in respect of and shall act substantially in accordance with the decision of the Requisite Lenders (and shall be fully protected by all Lenders in so acting), subject, however, to Section 11.9(b) of this Loan Agreement, and provided that Agent shall not be obligated to take any action which Agent determines is not consistent with the Loan Documents or is not in accordance with applicable law, or exercise any remedy unless Agent determines that the underlying Event of Default permits the exercise of such remedy in accordance with applicable law and the Loan Documents and that exercising any such remedy at such time would not preclude it from thereafter commencing and prosecuting a foreclosure of the Mortgage. As used in this Section 11.15 of this Loan Agreement, the term “knowledge” shall mean the actual knowledge of the officer of Agent then primarily responsible for the administration of the Loan. The provisions of Section 11.5(c) of this Loan Agreement shall apply to each Lender’s consent to any Enforcement Action Plan proposed by Agent.

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(e) If the Requisite Lenders have not agreed on a proposed course of action by the end of ninety (90) days after the occurrence of the Maturity Date or the acceleration of the Loan, as applicable, notwithstanding anything to the contrary set forth in Section 11.5(b) , Agent shall commence to foreclose on, or otherwise realize on, the Collateral and otherwise exercise such other remedies as Agent determines.

(Signatures follow)

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IN WITNESS WHEREOF , the parties hereto have caused this Loan Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written.

BORROWERS :

CHH CAPITAL HOTEL PARTNERS, LP , a Delaware limited partnership

By: CHH Capital Hotel GP, LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks
David A. Brooks, Vice President

CHH TORREY PINES HOTEL PARTNERS, LP , a Delaware limited partnership

By: CHH Torrey Pines Hotel GP, LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks
David A. Brooks, Vice President

OPERATING LESSEES :

CHH TORREY PINES TENANT CORP., a Delaware corporation

By: /s/ Deric S. Eubanks


	Deric S. Eubanks, President

CHH CAPITAL TENANT CORP., a Delaware corporation

By: /s/ Deric S. Eubanks


	Deric S. Eubanks, President

[Signatures continue on the following page]

61046467.DOC

AGENT :

AAREAL CAPITAL CORPORATION

By: /s/ David Lee
Name: David Lee

Title:Director

By: /s/ Alan Griffin Name:Alan Griffin
Title:General Counsel

[Signatures continue on the following page]

61046467.DOC

LENDERS :

AAREAL CAPITAL CORPORATION

By: /s/ David Lee
Name: David Lee

Title:Director

By: /s/ Alan Griffin Name:Alan Griffin
Title:General Counsel

Commitment: $

AAREAL BANK AG
Frank Wieland, Director,

By: /s/ Frank Wieland

Name: Frank Wieland

Title: Director

By: /s/ Jan Lerch
Name: Jan Lerch
Title:Director

Commitment: $

WESTDEUTSCHE IMMOBILIENBANK AG

By: /s/ Sascha Mathels

Name:Sascha Mathels

Title:Executive Director

By: /s/ Martin Stevener
Name:Martin Stevener

Title:Director

Commitment: $

61046467.DOC

Exhibit A-1

Legal Description of the Capital Property

All of that certain lot or parcel of land situated, lying and being in the District of Columbia, and being more particularly described as follows:

Parcel 1

Lot numbered Thirty-nine (39) in Square numbered One Hundred Ninety-eight (198) in the subdivision made by Hilton Hotels Corporation, as per plat recorded in the Office of the Surveyor for the District of Columbia in Liber 152 at folio 24.

Parcel 2

All that part of Public Alley Closed designated as "Reverts to the owners of Lot 39" as shown on plat entitled "Public Alley Closed Easement Established Square 198", and recorded in the Office of the Surveyor for the District of Columbia in Liber 192 at folio 164.

NOTE: The above described part of alley closed is designated on the records to the Assessor for the District of Columbia for assessment and taxation purposes as Lot numbered Eight Hundred Forty (840) in

Square numbered One Hundred Nighty-eight (198)

TOGETHER WITH those non-exclusive easements granted in Easement Agreement recorded as Instrument number 34748 and re-recorded as Instrument Number 69959 .

TOGETHER WITH those non-exclusive easements granted in Easement Relocation Agreement recorded as Instrument Number 42390 .

A-1 - 1

61046467.DOC

Exhibit A-2

Legal Description of the Torrey Pines Property

ALL IMPROVEMENTS CONSTITUTING REAL PROPERTY, AS SET FORTH AND GRANTED IN THAT CERTAIN ASSIGNMENT AND ASSUMPTION OF PERCENTAGE LEASE AND DEED TO IMPROVEMENTS, RECORDED DECEMBER 29, 1998 AS INSTRUMENT NO. 1998-0853813, OFFICIAL RECORDS, LOCATED ON THE FOLLOWING DESCRIBED PROPERTY:

ALL THOSE PORTIONS OF PUEBLO LOTS 1325, 1326, 1330 AND 1331 OF THE PUEBLO LANDS OF SAN DIEGO IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF BY JAMES PASCOE, IN 1870, A COPY OF WHICH MAP WAS FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, NOVEMBER 14, 1921 AS MISCELLANEOUS MAP 36, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF PUEBLO LOT 1325, WHICH IS THE COMMON CORNER OF PUEBLO LOTS 1325, 1326, 1330 AND 1331; THENCE ALONG THE COMMON LINE OF PUEBLO LOTS 1325 AND 1331 NORTH 89 ° 05’90” WEST, 255.74 FEET; THENCE LEAVING SAID COMMON LINE NORTH 2 ° 48’32” WEST 285.07 FEET; THENCE NORTH 7 ° 31’23” WEST, 399.47 FEET; THENCE NORTH 6 ° 28’50” WEST, 134.23 FEET TO A POINT THAT BEARS SOUTH 82 ° 32’25” WEST 42.90 FEET FROM THE SOUTHWEST CORNER OF THE PROPERTY DESCRIBED IN THAT CERTAIN LEASE AGREEMENT EXECUTED OCTOBER 2, 1961, FILED IN THE OFFICE OF THE CITY CLERK OF THE CITY OF SAN DIEGO AS DOCUMENT NO. 629873, OFFICIAL RECORDS, THE BOUNDARIES OF WHICH ARE SET OUT ON CITY ENGINEER’S DRAWING 13929-CL ON FILE IN THE OFFICE OF THE CITY ENGINEER OF THE CITY OF SAN DIEGO; THENCE NORTH 82 ° 32’25” EAST 42.90 FEET TO SAID SOUTHWEST CORNER; THENCE CONTINUING ALONG THE SOUTH LINE OF SAID PROPERTY DESCRIBED IN SAID LEASE AGREEMENT NORTH 82 ° 32’25” EAST TO THE SOUTHEAST CORNER OF LAST SAID PROPERTY; SAID POINT ALSO BEING A POINT IN THE WESTERLY RIGHT OF WAY LINE OF TORREY PINES ROAD, AS DEDICATED BY CITY OF SAN DIEGO ORDINANCE 7634 DATED MARCH 24, 1919; THENCE ALONG SAID WESTERLY RIGHT OF WAY LINE SOUTH 9 ° 28’56” EAST 842.58 FEET TO A POINT “A”; THENCE SOUTH 80 ° 31’04” WEST 368.36 FEET TO THE POINT OF BEGINNING.

THE ABOVE DESCRIBED LAND IS NOW COMMONLY KNOWN AS:

LOT 1 OF SHERATON HOTEL AT TORREY PINES UNIT NO. 2, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 12164, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, AUGUST 12, 1988.

A-2 - 1

61046467.DOC

ALL THOSE PORTIONS OF PUEBLO LOTS 1325, 1326, 1330 AND 1331 OF THE PUEBLO LANDS OF SAN DIEGO IN THE C ITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF BY JAMES PASCOE, IN 1870, A COPY OF WHICH MAP WAS FILED IN THE OFFICE OF COUNTY RECORDER OF SAN DIEGO COUNTY, NOVEMBER 14, 1921 AS MISCELLANEOUS MAP 36, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

THE ABOVE DESCRIBED LAND IS NOW COMMONLY KNOWN AS:

EXCEPTING THEREFROM, ALL IMPROVEMENTS CONSTITUTING REAL PROPERTY, AS SET FORTH AND GRANTED IN THAT CERTAIN ASSIGNMENT AND ASSUMPTION OF PERCENTAGE LEASE AND DEED TO IMPROVEMENTS, RECORDED DECEMBER 29, 1998 AS INSTRUMENT NO. 1998-0853813, OFFICIAL RECORDS.

APN: 760-103-60; 340-011-08

A-2 - 2

61046467.DOC

Exhibit B-1

Account Agreement

B - 1 - 1

61046467.DOC

Exhibit B-2

Account Agreement

B-2 - 1

61046467.DOC

Exhibit C

Allocated Loan Amounts

Capital Property: $128,775,000

Torrey Pines Property: $69,225,000

C - 1

61046467.DOC

Exhibit D

Disclosed Litigation

Capital Hilton



Pending Litigation (Employment-Related)	Pending Litigation (Non-Employment)	Union Charges	EEOC Charges
NONE	NONE	NONE	NONE

Torrey Pines Hilton



Pending Litigation (Worker’s Comp)	Pending Litigation (Non-Employment)	Union Charges	EEOC Charges
NONE	NONE	N/A	Charles T. Merrick v. Hilton Worldwide, Inc., et al. Wrongful termination, age discrimination and disability discrimination lawsuit brought by a former Director of Property Operations at the hotel. Hilton filed its Motion for Summary Judgment in June 2014. Hilton is awaiting the Court’s ruling on that motion. In the interim, the parties to such lawsuit will meet for a Pretrial Conference on November 3, 2014, where Hilton expects a trial date to be set. This lawsuit is covered by EPL Insurance and the hotel has already paid its $50,000 deductible related to the lawsuit. All legal fees and costs are now being paid out of Hilton’s EPLI self-insured retention fund.

Ex. D - 1

61046467.DOC

Exhibit E

Insurance Policies

With respect to each Property,

(a) Property insurance against loss customarily included under standard “all-risk” policies or special causes of loss insurance policies, as is available in the insurance market as of the closing date, including flood, earthquake, terrorism, vandalism and malicious mischief, boiler and machinery and such other insurable hazards as, under good insurance practices, from time to time are insured against for other properties and buildings meeting Comparable Standards and which are otherwise similar to such Property in nature, use, location, height and type of construction. Such insurance policy also shall insure the additional expense of demolition and increased cost of construction due to the enforcement of any law regulating reconstruction at the time of rebuilding following a loss, in an amount acceptable to Agent. The amount of such “all risk” or special causes of loss insurance shall be not less than one hundred percent (100%) of the replacement cost value of the Improvements. (The perils of earthquake and flood shall have sublimits acceptable to Agent). If any portion of the Improvements is currently or at any time in the future located in a federally designated “special flood hazard area,” flood hazard insurance in an amount equal to the full replacement cost of the Improvements or such lesser amount as Agent may approve. The earthquake insurance provided shall be in form and substance reasonably satisfactory to Agent and in the event the applicable Property is located in an area with a high degree of seismic activity in an amount equal to the amount derived from a “SUL(Scenario Upper Loss)” seismic engineering study, plus an additional 20% and having a deductible in an amount not greater than five (5%) percent of the total insured value of the Improvements. The named windstorm insurance provided, if the Improvements are located in a Tier 1 designated area and if not covered in the “Special Perils” policy required hereunder, shall be in form and substance satisfactory to Agent, in an amount of not less than the full replacement cost of the Improvements. The named windstorm coverage shall be provided with deductibles as are customary in the market for insurance of similar properties. In no event shall the deductible for any peril required herein shall be greater than five percent (5%) of the location insurable values; Agent reserves the right to require coverage for flood and earth movement irrespective of the locations designation in a high hazard zone for such perils. Each such insurance policy shall contain an agreed-amount replacement cost endorsement. In the event local building code prevents the Improvements from being replaced to the same state as they were prior to a loss, and if such action causes the Borrower to suffer a diminution in the value of the Improvements, then Borrower shall be required to purchase insurance to cover said diminution in value. Such policy shall be purchased in an amount acceptable to Agent, and name Agent as mortgagee;

(b) rent loss and/or business interruption insurance on an actual loss sustained basis as an extension to coverage required by paragraphs (a) and (c) of this Exhibit E in an amount not less than one year’s rental income or business interruption value and including

E - 1

61046467.DOC

a 365-day extended period of indemnity following restoration of the Improvements to restore operation of the affected Property to levels that existed prior to such loss;

(c) comprehensive boiler and machinery insurance covering all mechanical and electrical equipment against physical damage, rent loss and improvements loss and covering, without limitation, all tenant improvements and betterments which Borrower is required to insure pursuant to any Lease on a replacement cost basis. The minimum amount of limits to be provided shall be $50,000,000 per accident;

(d) commercial general liability insurance, including public liability insurance, on owned (if any), hired and non-owned auto liability and excess liability coverage for personal injury, bodily injury, death, accident and property damage, with limits no less than $75,000,000 per occurrence ($150,000,000 during construction, if the cost of such construction exceeds $50,000,000) and $75,000,000 in the annual aggregate per location. If any liability insurance also covers other locations with a shared aggregate limit, then the minimum liability insurance shall be increased to $100,000,000. The policies described in this paragraph (d) shall cover, without limitation, elevators, escalators, independent contractors, contractual liability covering to the maximum extent permitted by law, Borrower’s obligations to indemnify Agent as required pursuant to this Agreement, products and completed operations liability coverage, wrongful entry or evicting, invasion of privacy, products and completed operations liability, and false arrest and imprisonment;

(e) during any period of repair or restoration, builder’s “all-risk” insurance in an amount equal to not less than the full insurable value of the Improvements against such risks (including standard “all risk” perils coverage and collapse of the Improvements to agreed limits as Agent may request, each in form and substance acceptable to Agent);

(f) workers’ compensation and disability insurance as required by law;

(g) special hotel insurance, including coverage for products liability; liquor liability; garagekeepers liability; innkeepers liability (which includes safe deposit box liability) and crime insurance, all in amounts satisfactory to Agent;

(h) intentionally omitted; and

(i) such other types and amounts of insurance with respect to the each Property and the operation thereof which are commonly maintained in the case of other properties and building meeting Comparable Standards and which are otherwise similar to such Property in nature, use, location, height and type of construction, as may be required from time to time by Agent.

All such insurance policies shall name Agent as mortgagee, additional insured and loss payee, either on a specific standard mortgagee endorsement or under a blanket endorsement satisfactory to Agent.

E - 2

61046467.DOC

Exhibit F

Accounts

Wells Fargo Bank National Association

333 S. Grand Avenue

Los Angeles, California 90071

Wells Fargo Restricted Account Numbers :


•	Operating Account: 4040004681 - Torrey Pines;


•	FF& E Account: 4121557219 - Torrey Pines;


•	Tax & Insurance Account: 4121756126 - Torrey Pines;


•	Ground Rent Account: 4121756720 - Torrey Pines;

Bank of America, N. A.

Blocked Account Support

800-5th Avenue

Mail Code: WA1-501-08-21

Seattle, WA 98104

Bank of America Deposit Account Numbers :


•	Operating Account: 12355-57746 - Capital Hilton;


•	FF&E Account: 12330-59099 - Capital Hilton;


•	Tax & Insurance Account: 12331-64019 - Capital Hilton;

F - 1

61046467.DOC

Exhibit G-1

Material Operating Agreements

Capital Hilton



Vendor	Type	Name of Contract	Contract Date	Term	Description
Lodge Net	Service License Agreement	Hotel Service License Agreement	June 7, 2012	Sixty (60) month term	Agreement for Free-to-Guests Programming
Schindler Elevator Corporation	Maintenance Agreement	Individual Maintenance Agreement	May 29, 2012	Ten (10) year term	Elevator maintenance

61046467.DOC G - 1

Exhibit G-2

Material Operating Agreements

Hilton La Jolla Torrey Pines



Vendor	Type	Name of Contract	Contract Date	Term	Description
The City of San Diego	Golf Course Usage Agreement	Amended Torrey Pines Golf Course Agreement on Reserved Nonresident Tee Times	February 13, 2007	Ten years	Reservation agreement for tee times on Torrey Pines Golf Course
Lodge Net	Service Agreement	Hotel Service License Agreement	October 5, 2012	Expires February 8, 2017	Agreement for Free-to Guests Programming

61046467.DOC G - 2

Exhibit H

INTEREST RATE PROTECTION AGREEMENT ACKNOWLEDGMENT

[Letterhead of Issuer]

November [__], 2014

[__________] (the “ Issuer ”) hereby acknowledges that it has been advised that the interest of CHH Capital Hotel Partners, LP and CHH Torrey Pines Hotel Partners, LP (collectively, the “ Purchaser ”) in and to the [describe Interest Rate Protection Agreement] (the “ Agreement ”) has been pledged and collaterally assigned to Aareal Capital Corporation, a Delaware corporation, having an office at 250 Park Avenue, Suite 820, New York, New York 10177, as agent for itself and other lenders (in such capacity, “ Agent ”) as security for a loan made by such lenders to Purchaser and its affiliates. Issuer hereby acknowledges, without any restrictions, such pledge and collateral assignment.

All payments, if any, due under the Agreement shall be paid directly to Agent and all rights of the Purchaser shall be exercisable by Agent.

In consideration of the following agreement by the Issuer, Purchaser agrees that (a) Issuer shall be entitled to conclusively rely (without any independent investigation) on any notice or instructions from Agent in respect of the Interest Rate Cap Agreement and (b) Issuer shall be held harmless and shall be fully indemnified by Purchaser, from and against (i) any and all claims and (ii) from and against any damages, penalties, judgments, liabilities, losses or expenses (including reasonable attorney’s fees and disbursements), other than those arising out of the gross negligence or willful misconduct of Issuer, reasonably incurred by Issuer as a result of the assertion of any claim, by any person or entity, arising out of, or otherwise related to, any actions taken or omitted to be taken by Issuer in reliance upon any such instructions or notice provided by Agent.

61046467.DOC H - 1

ISSUER:

By:____________________________________

Name:

Title: Officer

By:____________________________________

Name:

Title:

Dated:_____________, 2014

61046467.DOC H - 2

AGENT:

AAREAL CAPITAL CORPORATION

By:    ____________________________
    Name:
    Title:

By:    ____________________________
    Name:
    Title:

Dated:_______________, 2014

61046467.DOC H - 3

ACKNOWLEDGED AND AGREED:

PURCHASER:

CHH CAPITAL HOTEL PARTNERS, LP , a Delaware limited partnership

By: CHH Capital Hotel GP, LLC, a Delaware limited

liability company, its general partner

By: _______________________
David A. Brooks, Vice President

CHH TORREY PINES HOTEL PARTNERS, LP , a

Delaware limited partnership

By: CHH Torrey Pines Hotel GP, LLC, a Delaware limited liability company, its general partner

By: _____________________ _
David A. Brooks, Vice President

Dated:_______________, 2014

61046467.DOC H - 4

Exhibit I

Special Purpose Bankruptcy Remote Entity Definitions

“ Special Purpose Bankruptcy Remote Entity ” means (x) a limited liability company that is a Single Member Bankruptcy Remote LLC or (y) a corporation, limited partnership or limited liability company, in each case that at all times since its formation and at all times thereafter

(i) was and will be organized solely for the purpose of (A) owning the Property or (B) acting as a general partner of the limited partnership that owns the Property or member of the limited liability company that owns the Property;

(ii) has not engaged and will not engage in any business unrelated to (A) the ownership of the Property, (B) acting as general partner of the limited partnership that owns the Property or (C) acting as a member of the limited liability company that owns the Property, as applicable;

(iii) has not had and will not have any assets other than those related to the Property or its partnership or member interest in the limited partnership or limited liability company that owns the Property, as applicable;

(iv) has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation or merger and, except as otherwise expressly permitted by this Loan Agreement, not engage in, seek or consent to any asset sale, transfer of partnership or membership interests or the like, or amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation or operating agreement, as applicable;

(v) if such entity is a limited partnership, has and will have, as its only general partners, Special Purpose Bankruptcy Remote Entities, each of which owns at least a one-half percent (0.5%) beneficial interest in such limited partnership;

(vi) if such entity is a corporation, has and will have at least one (1) Independent Director, and has not caused or allowed and will not cause or allow the board of directors of such entity to take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless all of the directors and all Independent Directors shall have participated in such vote;

(vii) if such entity is a limited liability company, has and will have at least one (1) member that has been and will be a Special Purpose Bankruptcy Remote Entity that has been and will be a corporation and such corporation is the managing member of, and owns at least a one-half percent (0.5%) beneficial interest in, such limited liability company;

(viii) if such entity is a limited liability company, has and will have articles of organization, a certificate of formation and/or an operating agreement, as applicable, providing that (A) such entity will dissolve only upon the bankruptcy of the managing member, (B) the vote of a majority-in-interest of the remaining members is sufficient to

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continue the life of the limited liability company in the event of such bankruptcy of the managing member and (C) if the vote of a majority-in-interest of the remaining members to continue the life of the limited liability company following the bankruptcy of the managing member is not obtained, the limited liability company may not liquidate the Property without the consent of Agent (or the applicable rating agencies following a securitization of the Loan) for as long as the Loan is outstanding;

(ix) has not, and without the unanimous consent of all of its partners, directors or members (including all Independent Directors), as applicable, will not, with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest (A) file a bankruptcy, insolvency or reorganization petition or otherwise institute insolvency proceedings or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally, (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such entity or for all or any portion of such entity’s properties, (C) make any assignment for the benefit of such entity’s creditors or (D) take any action that might cause such entity to become insolvent;

(x) has maintained and will maintain adequate capital in light of its contemplated business operations (provided that no partner or member shall be required to contribute additional capital);

(xi) has not failed and will not fail to correct any known misunderstanding regarding the separate identity of such entity;

(xii) has maintained and will maintain its accounts, books and records separate from any other Person and will file its own tax returns, except to the extent that any other Person is required to file consolidated tax returns by law; provided, that any such consolidated financial statement shall contain a footnote indicating the separate assets and liabilities are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity;

(xiii) has maintained and will maintain its books, records, resolutions and agreements as official records;

(xiv) has not commingled and will not commingle its funds or assets with those of any other Person, except as permitted by the Loan Documents;

(xv) has held and will hold its assets in its own name;

(xvi) has conducted and will conduct its business in its name and not permit its name, identity or type of entity to be changed,

(xvii) has maintained and will maintain its financial statements and accounting records separate from any other Person;

61046467.DOC I - 2

(xviii) has paid and will pay its own liabilities, including the salaries of its own employees (except to the extent such salaries are fairly allocated as set forth in clause (xxiv) below), out of its own funds and assets;

(xix) has observed and will observe all partnership, corporate or limited liability company formalities, as applicable;

(xx) has maintained and will maintain an arm’s-length relationship with its Affiliates;

(xxi) has no indebtedness other than Permitted Indebtedness;

(xxii) has not and will not assume or guarantee or become obligated for the debts of any other Person (other than guarantying any Operating Lessee’s obligations under any Management Agreement) or hold out its credit as being available to satisfy the obligations of any other Person except for the Loan;

(xxiii) has not and will not acquire obligations or securities of its partners, members or shareholders;

(xxiv) has allocated and will allocate fairly and reasonably shared expenses, including shared office space, and uses separate stationery, invoices and checks;

(xxv) except in connection with the Loan, has not pledged and will not pledge its assets for the benefit of any other Person;

(xxvi) has held itself out and identified itself and will hold itself out and identify itself as a separate and distinct entity under its own name and not as a division or part of any other Person;

(xxvii) has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xxviii) has not made and will not make loans to any Person;

(xxix) has not identified and will not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it;

(xxx) has not entered into or been a party to, and will not enter into or be a party to, any transaction with its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are intrinsically fair and are no less favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated third party;

(xxxi) has and will have no obligation to indemnify its partners, officers, directors, members or Special Members (as hereinafter defined), as the case may be, or has such an

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obligation that is fully subordinated to the Obligations and will not constitute a claim against it if cash flow in excess of the amount required to pay the Obligations is insufficient to pay the Obligations; and

(xxxii) will consider the interests of its creditors in connection with all corporate, partnership or limited liability actions, as applicable.

“ Independent Director ” means (x) in the case of a Single Member Bankruptcy Remote LLC: a natural person selected by Borrower and reasonably satisfactory to Agent who shall not have been at the time of such individual’s appointment as an Independent Director of the Single Member Bankruptcy Remote LLC, does not thereafter become while serving as an Independent Director (except pursuant to an express provision in the Single Member Bankruptcy Remote LLC’s limited liability company agreement providing for the Independent Director to become a Special Member upon the sole member of such Single Member Bankruptcy Remote LLC (the “ Sole Member ” ) ceasing to be a member in such Single Member Bankruptcy Remote LLC) and shall not have been at any time during the preceding five (5) years (i) a shareholder/partner/member of, or an officer or employee of, Borrower or any of its shareholders, subsidiaries or Affiliates, (ii) a director (other than as an Independent Director) of any shareholder, subsidiary or Affiliate of Borrower, (iii) a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or Affiliates, (iv) a Person who Controls any such shareholder, supplier or customer, or (v) a member of the immediate family of any such shareholder/ director/partner/member, officer, employee, supplier or customer or of any director of Borrower (other than as an Independent Director); and (y) in the case of a corporation, an individual selected by Borrower and reasonably satisfactory to Agent who shall not have been at the time of such individual’s appointment as a director, does not thereafter become while serving as an Independent Director and shall not have been at any time during the preceding five (5) years (i) a shareholder/partner/member of, or an officer, employee, consultant, agent or advisor of, Borrower or any of its shareholders, subsidiaries, members or Affiliates, (ii) a director of any shareholder, subsidiary, member, or Affiliate of Borrower other than Borrower’s general partner or managing member, (iii) a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or Affiliates that derives more than ten percent (10%) of its purchases or income from its activities with Borrower or any Affiliate of Borrower, (iv) a Person who Controls any such shareholder, supplier or customer, or (v) a member of the immediate family (including a grandchild or sibling) of any such shareholder/director/partner/member, officer, employee, supplier or customer or of any other director of Borrower’s general partner or managing member.

“ Single Member Bankruptcy Remote LLC ” means a limited liability company organized under the laws of the State of Delaware which at all times since its formation and at all times thereafter (i) complies with the following clauses of the definition of Special Purpose Bankruptcy Remote Entity above: (i)(A) , (ii)(A) , (iii) , (iv) , (ix) , (x) , (xi) and (xiii) through (xxxii) ; (ii) has and will have an operating agreement which provides that the business and affairs of Borrower shall be managed by or under the direction of a board of one or more directors designated by Sole Member, and at all times there shall be at least one (1) duly appointed Independent Director on the board of directors, and the board of directors will not take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless, at

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the time of such action there is at least one (1) member of the board of directors who is an Independent Director, and all of the directors and all Independent Director(s) shall have participated in such vote; (iii) has and will have an operating agreement which provides that, as long as any portion of the Debt remains outstanding, (A) upon the occurrence of any event that causes Sole Member to cease to be a member of Borrower (other than (x) upon an assignment by Sole Member of all of its limited liability company interest in Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of Borrower and the Loan Documents, or (y) the resignation of Sole Member and the admission of an additional member of Borrower, if permitted pursuant to the organizational documents of Borrower and the Loan Documents), the person acting as an Independent Director of Borrower shall, without any action of any Person and simultaneously with Sole Member ceasing to be a member of Borrower, automatically be admitted as the sole member of Borrower (the “ Special Member ”) and shall preserve and continue the existence of Borrower without dissolution, (B) no Special Member may resign or transfer its rights as Special Member unless (x) a successor Special Member has been admitted to Borrower as a Special Member, and (y) such successor Special Member has also accepted its appointment as an Independent Director and (C) except as expressly permitted pursuant to the terms of this Loan Agreement, Sole Member may not resign and no additional member shall be admitted to Borrower; and (iv) has and will have an operating agreement which provides that, as long as any portion of the Debt remains outstanding, (A) Borrower shall be dissolved, and its affairs shall be would up only upon the first to occur of the following: (x) the termination of the legal existence of the last remaining member of Borrower or the occurrence of any other event which terminates the continued membership of the last remaining member of Borrower in Borrower unless the business of Borrower is continued in a manner permitted by its operating agreement or the Delaware Limited Liability Company Act (the “ Act ”) or (y) the entry of a decree of judicial dissolution under Section 18‑802 of the Act; (B) upon the occurrence of any event that causes the last remaining member of Borrower to cease to be a member of Borrower or that causes Sole Member to cease to be a member of Borrower (other than (x) upon an assignment by Sole Member of all of its limited liability company interest in Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of Borrower and the Loan Documents, or (y) the resignation of Sole Member and the admission of an additional member of Borrower, if permitted pursuant to the organizational documents of Borrower and the Loan Documents), to the fullest extent permitted by law, the personal representative of such member shall be authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such member in Borrower, agree in writing to continue the existence of Borrower and to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of Borrower, effective as of the occurrence of the event that terminated the continued membership of such member in Borrower; (C) the bankruptcy of Sole Member or a Special Member shall not cause such member or Special Member, respectively, to cease to be a member of Borrower and upon the occurrence of such an event, the business of Borrower shall continue without dissolution; (D) in the event of dissolution of Borrower, Borrower shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of Borrower in an orderly manner), and the assets of Borrower shall be applied in the manner, and in the order of priority, set forth in Section 18‑804 of the Act; and (E) to the fullest extent permitted by law, each of Sole Member and the Special Members shall irrevocably waive any right or power that they might have to cause Borrower or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of Borrower, to compel any sale of all

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or any portion of the assets of Borrower pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of Borrower.

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Exhibit J

Agent’s Wiring Instructions



Bank:	Bank of New York One Wall Street New York, NY10286
ABA/Routing No.:	21000018
Routing No.:	IRVTUS3NXXX
Account Name:	Aareal Bank AG, Wiesbaden / AARBDE5WXXX
Account No.:	8900492465
Reference:	10380756 / 9000140622
FFC Account Name:	Aareal Capital Corporation New York
FFC Account No.:	DE77 5101 0400 0150 1501 01

61046467.DOC J - 1

Exhibit K

Form of Quarterly Compliance Statement

CHH Torrey Pines Hotel Partners, LP & CHH Capital Hotel Partners, LP.

_______________, 201___

Aareal Capital Corporation,

as Agent and Administrative Agent for Lenders

250 Park Avenue, Suite 820

New York, New York 10177


Re:	Capital Hilton & Hilton Torrey Pines – Quarterly Compliance Statement

Ladies and Gentlemen:

This quarterly compliance statement is being delivered pursuant to Section [

____] of that certain Second Amended and Restated Loan Agreement (the “ Loan Agreement ”) dated as of [________, 2014] between Aareal Capital Corporation, as agent for Lenders (in such capacity, “ Agent ”) and CHH Torrey Pines Hotel Partners, LP & CHH Capital Hotel Partners, LP. (“ Borrowers ”). All capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement. Borrowers hereby represent and warrant to Agent and Lenders as follows:

Test Determination Date: ___


(1)	Gross Revenues for the twelve months period ending on the Test Determination Date ____


(2)	Operating Expenses for the twelve months period ending on the Test Determination Date ____


(3)	Cash Available for Debt Service for the twelve months period ending on the Test Determination Date ____ (please include calculation)


(4)	Applicable Interest Rate on the Test Determination Date ___%


(5)	Scheduled interest and principal payments for the twelve months immediately following the Test Determination Date ___


(6)	Debt Service Coverage Ratio on the Test Determination Date ___ (please include calculation):

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a.	Required level of 1.05 to 1.00 met: Y/N


b.	If no, amount of necessary partial prepayment pursuant to Article VII (r) of the Loan Agreement dated ___


(7)	Assumed Debt Service on the Test Determination Date ____ (please include calculation)


(8)	Assumed Debt Service Coverage Ratio on the Test Determination Date ____ (please include calculation)


(9)	Cash Sweep Condition exists/continues on the Test Determination Date: Y/N


(10)	If yes, Cash Collateral Payment Amount to be transferred to Cash Collateral Account for the quarter ended on the Test Determination Date ___ (please include calculation)


(11)	Cash Sweep Condition has continued for more than twelve consecutive months: Y/N


(12)	If yes, amount no longer available for disbursement from Cash Collateral Account to Borrowers


(13)	Attached hereto are quarterly bank statements from each Account from the bank or financial institution at which such Accounts are held.


(14)	We herewith confirm that the presented leases are still in place and have not changed.


(15)	We herewith confirm that, as of the date of this Quarterly Compliance Statement, to the best knowledge of Borrowers, no Default or Event of Default has occurred and is continuing

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

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Very truly yours,

BORROWERS:

CHH CAPITAL HOTEL PARTNERS, LP ,

a Delaware limited partnership


By:	CHH Capital Hotel GP, LLC, a Delaware limited liability company, its general partner


By:	Name: David A. Brooks Title: Vice President

CHH TORREY PINES HOTEL PARTNERS, LP , a Delaware limited partnership


By:	CHH Torrey Pines Hotel GP, LLC, a Delaware limited liability company, its general partner


By:	Name: David A. Brooks Title: Vice President

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Exhibit L

Form of Assignment and Acceptance

This ASSIGNMENT AND ACCEPTANCE (this “ Assignment ”) made as of _________, 201_ by and between __________________________ (“ Assignor ”), as a Lender (as defined in the Loan Agreement (as defined below)), and __________________________ (together with its successors and assigns, “ Assignee ”). Capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Loan Agreement (as hereinafter defined).

WHEREAS , _______________, a _______________ (“ Borrower ”), ________________, as agent for Lenders (in such capacity as agent, “ Agent ”) and the Lenders that are a party thereto, are parties to that certain Loan Agreement dated as of ______________, 20___ (as the same may have been or may hereafter be amended, restated, extended or otherwise modified from time to time pursuant to the terms thereof, the “ Loan Agreement ”), pursuant to which Lenders have agreed to make, and Agent has agreed to administer, a loan to Borrower in the maximum principal amount of $[_____________] (the “ Loan ”);

WHEREAS , Assignor is one of the “Lenders” under the Loan Agreement; and

WHEREAS , Assignor wishes to sell and assign to Assignee all of Assignor’s right, title and interest in and the portion of the Loan in an amount equal to [$_____], which constitutes____ percent (___%) of Assignor’s interest in the entire Loan, together with all of Assignor’s right, title, and interest in the other Loan Documents in respect of such portion (the “ Assigned Interest ”).

NOW, THEREFORE , in consideration of ($[_________]) with respect to the Loan paid by Assignee to Assignor, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:


1.	As of the date hereof, Assignor hereby sells, assigns, transfers and grants to Assignee, and Assignee hereby purchases and assumes, the Assigned Interest.

Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other Loan Documents, or any other instrument or document furnished pursuant thereto, or any collateral security granted in connection therewith, if any, other than that there is no adverse claim upon the Assigned Interest and that the Assigned Interest is free and clear of any adverse claim; and (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower, any Guarantor, any of their respective Affiliates or any other obligor for the performance or the observance by Borrower, any Guarantor, any of their respective Affiliates or any other obligor of any of their respective obligations under the Loan Agreement, any other Loan Documents or any other instrument or document furnished pursuant hereto or thereto.

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Assignee (a) represents and warrants to Agent and Lenders that it is legally authorized to enter into this Assignment; (b) confirms that it has received copies of the Loan Agreement, together with copies of the financial statements delivered pursuant thereto and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (c) agrees that it will, independently and without reliance upon Agent, Assignor or any other Lender, based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in granting or withholding any consent or approval under the Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) confirms that Agent shall act as agent for Assignee and the other Lenders and shall take such action as agent on its behalf and to exercise such powers and discretion under the Loan Agreement, the other Loan Documents or other instruments or documents furnished pursuant hereto or thereto as are delegated to Agent by the terms thereof; and (e) agrees that it will be bound by the provisions of the Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender.


4.	Assignor represents and warrants that (a) the current outstanding principal amount of the Loan is _____________ Dollars ($___________), (b) Assignor has not previously assigned, pledged, transferred or hypothecated all or any portion of the Assigned Interest and (c) it is legally authorized to enter into this Assignment.

From and after the date hereof, (a) Assignee shall be a party to the Loan Agreement and, to the extent of the Assigned Interest in the Loan, shall have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) Assignor shall relinquish its rights as a Lender and be released from its obligations as a Lender under the Loan Documents and to the Loan with respect to the Assigned Interest.


6.	The address of Assignee to which notices under the Loan Documents shall be sent is:

_______________________
_______________________
_______________________
_______________________
_______________________
Attn:___________________

Telephone: ____________________
Facsimile: ____________________

with copies similarly delivered to:

_______________________

61046467.DOC L - 2

_______________________
_______________________
_______________________
_______________________
Attn:___________________

Telephone: ____________________
Facsimile: ____________________


7.	This Assignment shall be governed by and construed in accordance with the laws of the State of New York.


8.	This Assignment may be executed in any number of counterparts, with the same effect as if all of the parties had signed the same document. All counterparts shall be construed together and constitute one agreement.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

61046467.DOC L - 3

IN WITNESS WHEREOF , the parties have duly executed this Assignment as of the day and the year first above written.

ASSIGNOR:

By:
Name:
Title:

ASSIGNEE:

By:
     Name:
     Title:

___________________________, as agent for Lenders
signs below for the sole purpose of consenting to
this Assignment. Such consent is not, and shall
not be construed to be, a consent or waiver to any
other assignment or any other provision of any
Loan Document. Agent shall retain all of its respective
rights under the Loan Documents.

__________________________, as agent for Lenders

By:
    Name:
    Title:

61046467.DOC L - 1

Exhibit M

Form of Monthly Operating Statement

(see attached)

61046467.DOC M- 1

Exhibit N

Schedule of Amortization Payments

61046467.DOC N - 1

Exhibit O

Collective Bargaining Agreements

Agreement (UNITE HERE Local 25) dated September 16, 2010 to September 15, 2017.

Collective Bargaining Agreement dated November 14, 2010 to October 31, 2014, by and between The Capital Hilton Hotel and Local 99-99A, International Union of Operating Engineers, Affiliated with the Greater Washington Central Labor Council, AFL-CI0 and the Maryland State and District of Columbia AFL-CI0. There is a one month extension in place to November 30, 2014 and negotiations are ongoing.

Collective Bargaining Agreement dated September 1, 2014 to August 31, 2018 by and between Hilton Worldwide, Inc., Employer at The Capital Hilton Hotel and Painters and Allied Trades District Council No. 51, of the International Union of Painters and Allied Trade, AFL-CI0.

61046467.DOC N - 2

EXHIBIT 10.31

AMENDED AND RESTATED RECOURSE LIABILITY AGREEMENT

This AMENDED AND RESTATED RECOURSE LIABILITY AGREEMENT is made as of November 7, 2014 among ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited partnership (“ Sponsor ”), CHH CAPITAL HOTEL PARTNERS, LP , a Delaware limited partnership (“ Capital Borrower ”) and CHH TORREY PINES HOTEL PARTNERS, LP , a Delaware limited partnership (together with Capital Borrower, individually and collectively, “ Borrower ”; Borrower and Sponsor, individually and collectively, “ Recourse Liability Party ”), and AAREAL CAPITAL CORPORATION , a Delaware corporation, as agent (in such capacity, “ Agent ”) for Lenders as more particularly set forth in the Loan Agreement (as hereinafter defined). All capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

W I T N E S S E T H :

WHEREAS , Ashford Hospitality Limited Partnership, a Delaware limited partnership (“Former Sponsor”), and Borrower executed and delivered that certain Recourse Liability Agreement to and for the benefit of Aareal Bank AG (as predecessor to Agent), dated as of August 8, 2008, (the “ Original Agreement ”), which was given in connection with a loan in the original principal sum of up to $160,000,000 (the “ Original Loan ”) to Borrower pursuant to that certain Loan Agreement, dated as of August 8, 2008, by and among Borrower, CHH Capital Tenant Corp., CHH Torrey Pines Tenant Corp., Aareal Bank AG (as predecessor to Agent), as agent, and the Lenders party thereto (the “ Original Loan Agreement ”);

WHEREAS, the Original Loan Agreement was amended by that certain Amended and Restated Loan Agreement, dated as of February 26, 2013, by and among Borrower, CHH Capital Tenant Corp., CHH Torrey Pines Tenant Corp., Agent and the Lenders party thereto, (the “ A&R Loan Agreement ”), and the Original Loan, as amended and increased to $199,875,000 of which $195,700,646.72 remains outstanding as of the date hereof (the “ Existing Loan ”) was evidenced by that certain Amended and Restated Promissory Note dated as of February 26, 2013 in the original principal amount of One Hundred Ninety-Nine Million Eight Hundred Seventy-Five Thousand and No/100 Dollars ($199,875,000) as replaced, amended and restated by that certain (i) Substitute Promissory Note made as of August 20, 2013 in favor of Aareal Bank AG, a German banking corporation, in the principal amount of Sixty Five Million and No/100 Dollars ($65,000,000), (ii) Substitute Promissory Note made as of August 20, 2013 in favor of Aareal Capital Corporation, a Delaware corporation, in the principal amount of Eighty-One Million Two Hundred Sixty Thousand Nine Hundred Fifty and No/100 Dollars ($81,260,950), and (iii) Substitute Promissory Note made as of August 20, 2013 in favor of Westdeutsche ImmobilienBank AG, a German banking corporation, in the principal amount of Fifty-Two Million Six Hundred Nine Thousand One Hundred Sixty-Eight and 24/100 Dollars ($52,609,168.24) (as so amended, restated, replaced, substituted supplemented or otherwise modified, collectively, the “ Existing Notes );

WHEREAS, in connection with the execution and delivery of the A&R Loan Agreement, the Original Agreement was amended and restated by that certain Amended and Restated Recourse

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Liability Agreement, dated as of February 26, 2013 (the “ A&R Agreement ”), by Former Sponsor and Borrower to and for the benefit of Agent;

WHEREAS, the A&R Loan Agreement was subsequently amended by that certain First Amendment to the Loan Agreement dated November 19, 2013 (the A&R Loan Agreement, as so amended, restated, replaced, supplemented or otherwise modified, the “ Existing Loan Agreement ”), and concurrently therewith, (i) the A&R Agreement was amended pursuant to that certain Amendment and Ratification of Recourse Liability Agreement and Environmental Indemnity Agreement, dated as of November 19, 2013 (the “ Amendment and Ratification ;” the A&R Agreement, as amended by the Amendment and Ratification, called the “ Existing A&R Agreement ”), among Former Sponsor, Ashford Hospitality Trust Inc., Borrower and Agent, to, among other things, release Former Sponsor from liability under the A&R Agreement with respect to events, acts or omissions occurring from and after the date of the Amendment and Ratification, and (ii) Sponsor and Borrower executed and delivered that certain supplemental Recourse Liability Agreement (“ Existing Agreement ”), dated as of November 19, 2013, to, among other things, obligate Sponsor with respect to events, acts or omissions first accruing from and after the Amendment and Ratification pursuant to the terms of the Existing Agreement;

WHEREAS, Borrower has requested, and Agent and Lenders have agreed, to amend, restate and consolidate the terms and provisions of the Existing Loan Agreement and the other Loan Documents (as such term is defined in the Existing Loan Agreement) in their entirety pursuant to the terms and conditions set forth in that certain Second Amended and Restated Loan Agreement of even date herewith by and among Borrower, CHH Capital Tenant Corp., CHH Torrey Pines Tenant Corp., Agent and Lenders (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “ Loan Agreement ”) and increase the principal amount of the Existing Loan to $198,000,000 (the Existing Loan, as so modified and increased, the “ Loan ”), which Loan is evidenced by (a) that certain Second Amended and Restated Promissory Note A in the original principal amount of $82,265,215.47, (b) that certain Second Amended and Restated Promissory Note B in the original principal amount of $63,964,069.38 and (c) that certain Second Amended and Restated Promissory Note C in the original principal amount of $51,770,715.15 (collectively the “ Notes ”) dated as of the date hereof in said principal amount made by Borrower, which Notes amend, restate and replace the respective Existing Notes in their entirety and secured by, among other things, that certain Second Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement, Fixture Filing, and Assignment of Rents dated as of the date hereof by CHH Torrey Pines Hotel Partners, LP in favor of Agent and that certain Second Amended and Restated Deed of Trust, Security Agreement, Financing Statement, Fixture Filing, and Assignment of Rents dated as of the date hereof by CHH Capital Hotel Partners, LP in favor of Agent (collectively, the “ Mortgage ”) encumbering, inter alia , certain real property and improvements located in LaJolla, California and Washington, D.C. (individually and collectively, the “ Property ”, as such defined term is more particularly described in the Loan Agreement);

WHEREAS, Sponsor is an Affiliate of Borrower and will obtain substantial benefits from Lenders making, and Agent administering, the Loan; and

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WHEREAS, to induce Lenders to make, and Agent to administer, the Loan, Former Sponsor has agreed to execute a Ratification of Recourse Liability Agreement and Environmental Indemnity Agreement to reaffirm its obligations under the Existing A&R Agreement, and Recourse Liability Party has agreed to execute and deliver this agreement to amend and restate the Existing Agreement in its entirety to inter alia indemnify and compensate Agent and Lenders for Recourse Liability Events with respect to any events, acts or omissions first accruing from and after the Amendment and Ratification as hereinafter set forth (this “ Agreement ”).

NOW, THEREFORE , for and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by all parties, the parties hereto agree, and the Existing Agreement is hereby amended and restated in its entirety pursuant to this Agreement, as follows:

Section 1. Recourse Liability Events . Recourse Liability Party hereby irrevocably, unconditionally, absolutely, jointly and severally agrees to indemnify and hold harmless Agent and Lenders from and against any and all loss, cost, damage, liability or expense, including attorney’s fees and disbursements, suffered or incurred by Agent or Lenders by reason of the occurrence of any of the Recourse Liability Events first arising from and after November 19, 2013.

Section 2. Full Recourse Events . In the event of the occurrence of any Full Recourse Event, Recourse Liability Party hereby irrevocably, unconditionally, absolutely, jointly and severally agrees to assume and be responsible for the prompt and complete observance, fulfillment and performance of all of the Obligations of Borrower under the Loan Documents, including the making of all payments of all principal, Interest, Additional Interest and other sums evidenced by the Note. Such assumption and responsibility shall occur automatically upon the occurrence of any Full Recourse Event without further action on the part of any Person.

Section 3. Termination . The obligations of Recourse Liability Party under this Agreement shall terminate upon the actual and irrevocable receipt by Agent of payment in full of all of the Obligations.

Section 4. Application of Amounts Realized. In the event Agent has caused a foreclosure sale or has otherwise caused a transfer of the Property, Agent shall not be required to apply any net proceeds of any such sale on account of any sums which are the subject of any obligation of Recourse Liability Party pursuant to this Agreement unless such net proceeds shall be in excess of the amount which would satisfy in full all of the Obligations (other than obligations of Recourse Liability Party arising pursuant to this Agreement), in which case Agent shall apply such excess, if any, on account of any sums which are the obligation of Recourse Liability Party pursuant to this Agreement.

Section 5. Default Rate . Any amount payable by Recourse Liability Party pursuant to Sections 1 and 2 hereof, that is not paid by Recourse Liability Party within five (5) Business Days after demand therefor from Agent shall bear interest from the date of such demand at the Default Rate.

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Section 6. Representations and Warranties . Sponsor represents and warrants to Agent and Lenders (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Agreement) that:

(a) Sponsor is a corporation, partnership, limited liability company or other entity (as recited in the preamble to this Recourse Liability Agreement) duly formed, validly existing and in good standing pursuant to the laws of its state of formation (which state of formation is as recited in the preamble to this Recourse Liability Agreement), and is qualified to do business in each other jurisdiction where such qualification is necessary to carry out its business.

(b) Sponsor has the power and requisite authority and is duly authorized to execute and deliver this Agreement and perform its obligations under this Agreement and the other Loan Documents to which it is a party.

(c) This Agreement constitutes the legal, valid and binding obligation of each Sponsor, enforceable against each Sponsor in accordance with its terms.

(d) Neither the execution and delivery of this Agreement, nor consummation of any of the transactions herein contemplated nor compliance with the terms and provisions hereof, will (i) to the actual knowledge of Sponsor, contravene any provision of law, statute, rule or regulation to which Sponsor is subject or any judgment, decree, license, order or permit applicable to Sponsor, or (ii) materially conflict or be inconsistent with, or result in any material breach of any of the terms of the covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of a Lien (except liens in favor of Agent or Lenders) upon any of the property or assets of Sponsor pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which Sponsor is a party or, to the actual knowledge of Sponsor, by which Sponsor may be bound, or to which Sponsor may be subject, or (iii) violate any provision of any organizational document of Sponsor.

(e) All consents, approvals, authorizations or orders of any Person, court or Governmental Authority or any third party that are required in connection with the execution and delivery by any Sponsor of this Agreement or to consummate the transactions contemplated hereby have been obtained and are in full force and effect. To the actual knowledge of Sponsor, Sponsor is not in default with respect to any law, statute, rule, regulation, judgment, license, permit, order, writ injunction or decree of any court or Governmental Authority applicable to Sponsor.

(f) There are no actions, suits or proceedings at law or at equity, pending or, to Sponsor’s actual knowledge, threatened against or affecting any Sponsor which involve or might involve the validity or enforceability of this Agreement or which might materially adversely affect the financial condition of any Sponsor or the ability of any Sponsor to perform any of its respective obligations under this Agreement.

(g) All statements of financial condition and related schedules and all certificates, statements, documents or other information of or relating to any Sponsor heretofore delivered to Agent or its agents or counsel (i) are true, correct and complete in all material respects, (ii) do not contain any misleading information or any untrue statements of a material fact, (iii) do not omit to

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state a material fact and (iv) fairly present the financial condition of the subjects thereof as of the respective dates thereof in all material respects. No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof. No representation or warranty made by any Sponsor in this Agreement or any other Loan Document contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading.

Section 7. Liability Not Limited . Except as expressly set forth herein, Recourse Liability Party’s liability hereunder shall not be subject to, limited by or affected in any way by any nonrecourse provisions or provisions limiting liability contained in the Loan Agreement, the Note, the Mortgage or any other Loan Document. Recourse Liability Party agrees that the indemnities made in Sections 1 and 2 hereof and given in this Agreement are separate and distinct from, independent of and in addition to Borrower’s undertakings under the Note, the Mortgage and the other Loan Documents. Recourse Liability Party agrees that a separate action may be brought to enforce the provisions of this Agreement which shall in no way be deemed to be an action on the Note, the Loan Agreement or any other Loan Document. Recourse Liability Party hereby waives the defenses of laches and any applicable statute of limitations.

Section 8. Unconditional Character of Obligations .

(a) Obligations . The obligations of Recourse Liability Party hereunder shall be absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgage or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against Borrower or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrower, Recourse Liability Party or any other Person under any Loan Document, or any setoff, counterclaim, recoupment, limitation or termination, and irrespective of any other circumstances which might otherwise limit recourse against Recourse Liability Party by Agent or constitute a legal or equitable discharge or defense of a guarantor or surety. Agent may enforce the obligations of Recourse Liability Party hereunder by a proceeding at law, in equity or otherwise, independent of any foreclosure or similar proceeding or any deficiency action against Borrower or any other Person at any time, and either before or after an action against the Collateral or any part thereof, Borrower or any other Person. Recourse Liability Party waives diligence, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgage or any other Loan Documents against Borrower or any other Person, any right to require a proceeding first against Borrower or any other Person (or, if Recourse Liability Party consists of more than one Person, to proceed against the Persons constituting Recourse Liability Party in any particular order), or to exhaust any security (including the Collateral) for the performance of the obligations of Borrower or any other Person, or to cause a marshalling of Borrower’s assets, and any protest, presentment, notice of default or other notice or demand whatsoever.

(b) Agreement and Collateral . Without limiting the generality of the provisions of Section 8(a) hereof and except as otherwise limited by applicable law, the obligations of Recourse

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Liability Party under this Agreement, and the rights of Agent to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following:

(i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Borrower, Recourse Liability Party or any other Person or the Collateral or any part thereof, including any automatic stay granted pursuant to any provision of a bankruptcy or similar law;

(ii) any failure by Agent, any Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Loan Agreement, or any other Loan Documents or any document or instrument relating thereto;

(iii) the sale, transfer or conveyance of the Collateral or any interest therein to any Person, whether now or hereafter having or acquiring an interest in the Collateral or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against Borrower or the Collateral or any part thereof;

(iv) the conveyance to Agent, any Lender, any Affiliate of Agent or any Lender or Agent’s or any Lender’s nominee of the Collateral or any interest therein by a deed in lieu of foreclosure;

(v) the release of Borrower, another Recourse Liability Party or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise;

(vi) the release in whole or in part of the Collateral;

(vii) any failure by Agent to record, register or file the Mortgage, any UCC financing statements or other security document or to otherwise perfect, protect, secure or insure any security interest or lien given as security for the Obligations;

(viii) any recovery from Recourse Liability Party or any other obligor of any of the Obligations, which recovery is obtained under this Agreement or any other guaranty or indemnity executed in connection with the Loan; or

(ix) any accuracy or inaccuracy of any representations or warranties made by Borrower, Recourse Liability Party or any other Person in any of the Loan Documents.

(c) Waiver . Recourse Liability Party hereby expressly and irrevocably waives all defenses in an action brought by Agent to enforce this Agreement based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise.

(d) Agent’s and Lenders’ Ability to Act . Agent and Lenders may deal with Borrower, Affiliates of Borrower and the Collateral in the same manner and as freely as if this Agreement did

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not exist and shall be entitled, among other things, to grant Borrower or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Agent, at any time and from time to time, without terminating, affecting or impairing the validity of this Agreement or the obligations of Recourse Liability Party hereunder.

(e) Changes to Loan Documents and Other Documents . No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Loan Agreement, the Mortgage or the other Loan Documents shall in any way alter, impair or affect any of the obligations of Recourse Liability Party hereunder.

(f) Agent’s Remedies . Agent may proceed to protect and enforce any or all of its rights under this Agreement by suit in equity or action at law against Recourse Liability Party, whether for the specific performance of any covenants or agreements contained in this Agreement or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Recourse Liability Party. All rights, remedies, powers and privileges conferred by the other Loan Documents are cumulative of all other rights, remedies, powers and privileges herein or by law or in equity provided, or provided in any other Loan Document, and shall not be deemed to deprive Agent of any such other legal or equitable rights, remedies, powers and privileges to enforce the conditions, covenants and terms of this Agreement or the other Loan Documents by judicial proceedings or otherwise, and the employment of any rights, remedies, powers and privileges hereunder or otherwise, shall not prevent the concurrent or subsequent employment of any other appropriate rights, remedies, powers and privileges.

(g) Actions. At the option of Agent, Recourse Liability Party may be joined in any action or proceeding commenced by Agent against Borrower in connection with or based upon the Note, the Loan Agreement, the Mortgage or any other Loan Documents and recovery may be had against Recourse Liability Party in such action or proceeding or in any independent action or proceeding against Recourse Liability Party to the extent of Recourse Liability Party’s liability hereunder, without any requirement that Agent first assert, prosecute or exhaust any remedy or claim against Borrower or any other Person, or any security for the obligations of Borrower or any other Person. Any demand by Agent for payments, or performance of the obligations under, this Agreement upon Recourse Liability Party shall not be and shall not be construed to be a release or waiver by Agent of any other obligor with respect to such payment or obligation.

(h) Continuance or Reinstatement of Agreement . Notwithstanding anything to the contrary contained in this Agreement, Recourse Liability Party agrees that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Recourse Liability Party to Agent or any Lender and such payment is rescinded or must otherwise be returned by Agent or such Lender upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Recourse Liability Party, all as though such

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payment had not been made. Agent may, but shall not be required to, litigate or otherwise dispute such rescission or its obligation to make such repayments.

(i) Payments to Recourse Liability Party; Subrogation . In the event that Recourse Liability Party shall advance or become obligated to pay any sums under this Agreement, or in the event that for any reason whatsoever Borrower or any subsequent owner of the Collateral or any part thereof is now, or shall hereafter become, indebted to Recourse Liability Party, Recourse Liability Party agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to lien, the time of payment and in all other respects to all Obligations, including principal and interest and other amounts, at any time owed to Agent and/or Lenders under the Loan Documents, and (ii) Recourse Liability Party shall not be entitled to enforce or receive payment thereof until the actual and irrevocable receipt by Agent of payment in full of all Obligations. Nothing herein contained is intended or shall be construed to give Recourse Liability Party any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Agent or any Lender in or to the Collateral, notwithstanding any payments made by Recourse Liability Party under this Agreement, all such rights of subrogation and participation, if any, being hereby expressly postponed until the actual and irrevocable receipt by Agent of payment in full of all Obligations. If any amount shall be paid to Recourse Liability Party by reason of the payment of sums by Recourse Liability Party under this Agreement at any time when any such sums due and owing to Agent and/or Lenders shall not have been fully paid, such amount shall be paid by Recourse Liability Party to Agent for credit and application against such sums due and owing to Agent and/or Lenders.

(j) Effect of Foreclosure, Exercise of Remedies . Recourse Liability Party’s obligations hereunder shall continue notwithstanding a foreclosure, deed in lieu of foreclosure or similar proceeding or transaction involving the Mortgaged Property or any part thereof or other exercise by Agent of the other remedies under the Loan Documents, at law or in equity.

Section 9. Additional Covenants . Sponsor shall not make (or permit to be made) any transfer with respect to (i) any direct or indirect ownership interest of Sponsor in any Borrower Party or Borrower Party Partner except, in each case, for a Permitted Transfer in accordance with the Loan Agreement. Any breach of the covenant contained in this Section 9 shall constitute an immediate Event of Default hereunder and under the Loan Agreement.

Section 10. Rights of Agent . Unless expressly provided to the contrary in any particular instance, with respect to any and all rights of Agent to (a) give or withhold any consent, approval or other authorization requested by Recourse Liability Party with respect to this Agreement, (b) make any election or exercise any option granted herein, (c) make any decision, judgment or determination with respect hereto, (d) modify or amend this Agreement or waive any obligation of Recourse Liability Party hereunder or grant any extension of time for performance of the same or (e) take or omit to take any other action of any kind whatsoever, Agent shall, to the maximum extent permitted by law, have the right, and Recourse Liability Party expressly acknowledges Agent’s right, in each instance, to make or give the same or take such action or to omit to take such action, as the case may be, in its sole and absolute discretion.

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Section 11. Further Assurances . Recourse Liability Party shall, within five (5) Business Days after written request, make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings or other assurances, and take all such other action, as Agent may, from time to time, deem reasonably necessary in order to give effect to the rights and benefits conferred on Agent and Lenders pursuant to this Agreement.

Section 12. Amendment, Waivers, Consents and Approvals . No failure or delay of Agent in exercising any power or right hereunder or to demand payment for any sums due pursuant to this Agreement or any other Loan Document, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No waiver of any provision of this Agreement or in any of the other Loan Documents or consent to any departure by any Recourse Liability Party or any other Person therefrom shall in any event be effective unless signed in writing by Agent, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Consents, approvals and waivers granted by Agent for any matters covered under this Agreement or any Loan Document shall not be effective unless signed in writing by Agent, and such consents, approvals and waivers shall be narrowly construed to cover only the parties and facts identified in any such consent, approval or waiver. No notice or demand on any Recourse Liability Party or any other Person in any case shall entitle such Recourse Liability Party or such Person to any other or further notice or demand in similar or other circumstances. Unless expressly provided to the contrary, any consents, approvals or waivers of Agent or Lenders pursuant to this Agreement or any other Loan Documents shall be granted or withheld in Agent’s or Lenders’ sole discretion, as the case may be. No amendment, modification or termination of any provision of this Agreement shall be effective unless in writing and signed by Recourse Liability Party and Agent.

Section 13. Binding Effect . This Agreement shall be binding upon Recourse Liability Party and its heirs, legatees, personal representatives, successors and assigns, and shall inure to the benefit of and shall be enforceable by Agent, Lenders and their respective successors and assigns.

Section 14. Counterparts . This Agreement may be executed in any number of counterparts each of which shall be deemed an original, and all of which when taken together shall be one and the same Agreement.

Section 15. Notices . Any notice, demand, request, consent, approval or other communication, which any party hereto may be required or may desire to give hereunder, shall be made in accordance with Section 10.1 of the Loan Agreement to the party to whom notice is being given, in any of the foregoing cases, at the address set forth below:


Agent :	Aareal Capital Corporation

250 Park Avenue, Suite 820
New York, New York 10177
Attention: Linda Burg

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Telephone: 646-205-4513
Facsimile: 917-322-0290

with a copy similarly delivered to:

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention: Alan L. Griffin, Esq.
Telephone: 646-465-8619
Facsimile: 917-322-0285

with a copy to:

Kaye Scholer LLP
250 West 55th Street
New York, New York 10019
Attention: Warren J. Bernstein, Esq.
Telephone: 212-836-8000
Facsimile: 212-836-8689


Recourse Liability Party :	Ashford Hospitality Prime Limited Partnership 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 Attention: David A. Brooks Telephone: 972-778-9207 Facsimile: 972-490-9605

and to:

CHH Capital Hotel Partners, LP
14185 Dallas Parkway, Suite 1100
Dallas, Texas 75254
Attention: David A. Brooks
Telephone: 972-778-9207
Facsimile: 972-490-9605

and to:

CHH Torrey Pines Hotel Partners, LP
14185 Dallas Parkway, Suite 1100
Dallas, Texas 75254
Attention: David A. Brooks
Telephone: 972-778-9207
Facsimile: 972-490-9605

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with a copy to:

Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201-4605
Attention: Brigitte G. Kimichik, Esq.
Telephone: 214-659-4441
Facsimile: 214-659-4777

Any party may change its address for purposes of this Agreement by giving notice of such change to the other parties pursuant to this Section 15 . All such notices, certificates, demands, requests, approvals, waivers and other communications given pursuant to this Section 15 shall be effective when received or refused at the address specified as aforesaid.

Notwithstanding any provision contained herein or in any of the other Loan Documents to the contrary, in the event that Agent shall fail to give any notice to Recourse Liability Party under this Agreement, the sole and exclusive remedy for such failure shall be to seek appropriate equitable relief to enforce this Agreement to give such notice and to have any action of Recourse Liability Party postponed or revoked and any proceedings in connection therewith delayed or terminated pending the giving of such notice by Agent, and Recourse Liability Party shall not have any right to damages (whether actual or consequential) or any other type of relief against Agent not specifically provided for herein, all of which damages or other relief are hereby expressly waived. The foregoing is not intended and shall not be deemed under any circumstances to require Agent to give notice of any type or nature to Recourse Liability Party except as expressly required hereby.

Section 16. Severability . In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect in a particular jurisdiction or as to particular Persons or circumstances, the validity, legality and enforceability of the remaining provisions contained herein (or the effectiveness of the invalid, illegal or unenforceable provision in a different jurisdiction or as to different Persons or circumstances) shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 17. Captions . The captions, headings and arrangements used in this Agreement are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions hereof.

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court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Each Recourse Liability Party irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to such Recourse Liability Party at its address provided in Section 15 hereof, as the same may be changed pursuant to Section 15 hereof. Nothing in this Section 18 , however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against Recourse Liability Party or its property in the courts of any other jurisdiction. EACH RECOURSE LIABILITY PARTY HEREBY WAIVES, AND AGENT, BY ACCEPTANCE OF THIS AGREEMENT HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT, WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 19. Definitional Provisions. For purposes of this Agreement, (a) defined terms used in the singular shall import the plural and vice-versa; (b) the words “hereof,” “herein,” “hereunder” and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (c) the words “include” and “including” wherever used in this Agreement shall be deemed to be followed by the words “without limitation” and (d) all of the agreements or instruments referred to in this Agreement shall mean such agreements or instruments as the same may, from time to time, be modified, supplemented or amended, or the terms thereof waived or modified to the extent permitted by, and in accordance with, the terms and conditions thereof and of this Agreement and the other Loan Documents.

Section 20. No Other Party Beneficiary . This Agreement is for the sole benefit of Agent, Lenders and their successors and assigns, and is not for the benefit of any other party. Nothing contained in this Agreement shall be deemed to confer upon anyone other than Agent, Lenders and their successors and assigns any right to insist upon or to enforce the performance or observance of any of the obligations contained herein.

Section 21. Joint and Several Obligations . The obligations of Recourse Liability Party under this Agreement shall be joint and several.

Section 22. Entire Agreement . This Agreement and the other Loan Documents constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter contained in this Agreement.

Section 23. Special State Provisions .

(a) To the extent California law applies, nothing herein shall be deemed to limit the right of Agent and/or Lenders to recover in accordance with California Code of Civil Procedure Section 736 (as such Section may be amended from time to time), any costs, expenses, liabilities or damages, including reasonable attorneys’ fees and costs, incurred by Agent and/or Lenders and arising from any covenant, obligation, liability, representation or warranty contained in any indemnity agreement given to Agent and/or Lenders, or any order, consent decree or settlement

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relating to the cleanup of Hazardous Substances or any other “environmental provision” (as defined in such Section 736) relating to the Property or any portion thereof or the right of Agent and/or Lenders to waive, in accordance with the California Code of Civil Procedure Section 726.5 (as such Section may be amended from time to time), the security of the Mortgages as to any parcel of the Mortgaged Property that is “environmentally impaired” or is an “affected parcel” (as such terms are defined in such Section 726.5), and as to any personal property attached to such parcel, and thereafter to exercise against Borrower, to the extent permitted by such Section 726.5, the rights and remedies of any unsecured creditor, including reduction of Agent and/or Lender’s claim against Borrower to judgment, and any other rights and remedies permitted by law.

(b) To the extent California law applies, each Recourse Liability Party hereby waives all rights and defenses arising out of an election of remedies by Agent and/or Lenders even though that election of remedies, such as a nonjudicial foreclosure with respect to security for guaranteed obligations, has destroyed such Recourse Liability Party’s rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise. Specifically, and without in any way limiting the foregoing, each Recourse Liability Party hereby waives any rights of subrogation, indemnification, contribution or reimbursement arising under Sections 2846, 2847, 2848 and 2849 of the California Civil Code or any right of recourse to or with respect to Borrower or the assets or property of Borrower or to any collateral for the Loan. In connection with the foregoing, each Recourse Liability Party expressly waives any and all rights of subrogation against Borrower, and such Recourse Liability Party hereby waives any rights to enforce any remedy which Agent and/or Lenders may have against Borrower and any right to participate in any collateral for the Loan. Each Recourse Liability Party recognizes that, pursuant to Section 580d of the California Code of Civil Procedure, Agent and/or Lenders’ realization through nonjudicial foreclosure upon any real property constituting security for Borrower’s obligations under the Loan Documents could terminate any right of Agent and/or Lenders’ to recover a deficiency judgment against Borrower, thereby terminating subrogation rights which such parties otherwise might have against Borrower. In the absence of an adequate waiver, such a termination of subrogation rights could create a defense to enforcement of this Agreement against such parties. Each Recourse Liability Party hereby unconditionally and irrevocably waives any such defense. In addition to and without in any way limiting the foregoing, each Recourse Liability Party hereby subordinates any and all indebtedness of Borrower now or hereafter owed to such Recourse Liability Party to all the indebtedness of Borrower to Lenders and agrees with Agent and Lenders that until such time as Agent and Lenders may have no further claim against Borrower, such Recourse Liability Party shall not demand or accept any payment of principal or interest from Borrower, claim any offset or other reduction of such Recourse Liability Party’s obligations hereunder because of any such indebtedness and shall not take any action to obtain any of the collateral for the Loan. Further, no Recourse Liability Party shall have any right of recourse against Agent or Lenders by reason of any action Agent or Lenders may take or omit to take under the provisions of this Agreement or under the provisions of any of the Loan Documents. If any amount shall nevertheless be paid to a Recourse Liability Party by Borrower or another guarantor prior to payment in full of the Obligations, such amount shall be held in trust for the benefit of Agent and Lenders and shall forthwith be paid to Agent to be credited and applied to the Obligations, whether matured or unmatured. The provisions of this paragraph shall survive any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law, except payment

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in full of the Obligations. Without limiting the foregoing, each Recourse Liability Party waives (i) all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to such Recourse Liability Party by reason of California Civil Code Sections 2787 to 2855, inclusive; (ii) any rights or defenses such Recourse Liability Party may have with respect to its obligations as a guarantor by reason of any election of remedies by Agent and/or Lenders; and (iii) all rights and defenses that such Recourse Liability Party may have because Borrower’s debt is secured by real property. This means, among other things, that Agent and/or Lenders may collect from each Recourse Liability Party without first foreclosing on any real or personal property collateral pledged by Borrower, and that if Agent or Lenders foreclose on any real property collateral pledged by Borrower (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Agent and Lenders may collect from such Recourse Liability Party even if Agent or Lenders, by foreclosing on the real property collateral, have destroyed any rights such Recourse Liability Party may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses each Recourse Liability Party may have because Borrower’s debt evidenced by the Note is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure.

Section 24. Limitation of Liability . Notwithstanding anything to the contrary contained in this Agreement, Recourse Liability Party’s liability under this Agreement shall be limited as may expressly be set forth in the Loan Agreement, including, without limitation, Section 10.14(c) of the Loan Agreement.

Section 24.

[Signatures follow]

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IN WITNESS WHEREOF , Recourse Liability Party has executed this instrument the day and year first above written.

BORROWER:

CHH CAPITAL HOTEL PARTNERS, LP , a Delaware limited partnership


By:	CHH Torrey Pines Hotel GP, LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks
David A. Brooks, Vice President

CHH TORREY PINES HOTEL PARTNERS, LP , a Delaware limited partnership


By:	CHH Capital Hotel GP, LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks
David A. Brooks, Vice President

ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited partnership

By: Ashford Prime OP General Partner LLC


By:	/s/ David A. Brooks Name: David A. Brooks Title:Vice President

61047437.DOC

Agent is executing this Agreement to confirm Agent’s agreement to the amendment and restatement of the Existing Agreement as evidenced by this Agreement.

AAREAL CAPITAL CORPORATION, as Agent

By: /s/ David C. Lee

Name: David C. Lee

Title: Director

By: /s/ Alan L. Griffin

Name: Alan, L. Griffin

Title: General Counsel

61047437.DOC

EXHIBIT 10.32

AMENDED AND RESTATED ENVIRONMENTAL INDEMNITY

This AMENDED AND RESTATED ENVIRONMENTAL INDEMNITY is made as of November 7, 2014 among ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited partnership (“ Sponsor ”), CHH CAPITAL HOTEL PARTNERS, LP and CHH TORREY PINES HOTEL PARTNERS, LP , each a Delaware limited partnership (individually and collectively, “ Borrower ”; and together with Sponsor, individually and collectively, “ Indemnitor ”), and AAREAL CAPITAL CORPORATION , a Delaware corporation, as agent (in such capacity, “ Agent ”) for Lenders as more particularly set forth in the Loan Agreement (as hereinafter defined). All capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

W I T N E S S E T H:

WHEREAS , Ashford Hospitality Limited Partnership, a Delaware limited partnership (“Former Sponsor”), and Borrower executed and delivered that certain Environmental Indemnity, dated as of August 8, 2008, (the “ Original Agreement ”) which was given in connection with a loan in the original principal sum of up to $160,000,000 (the “ Original Loan ”) to Borrower pursuant to that certain Loan Agreement, dated as of August 8, 2008, by and among Borrower, CHH Capital Tenant Corp., CHH Torrey Pines Tenant Corp., Aareal Bank AG (as predecessor to Agent), as agent, and the Lenders party thereto (the “ Original Loan Agreement ”);

WHEREAS, the Original Loan Agreement was amended by that certain Amended and Restated Loan Agreement, dated as of February 26, 2013, by and among Borrower, CHH Capital Tenant Corp., CHH Torrey Pines Tenant Corp., Agent and the Lenders party thereto (the “ A&R Loan Agreement ”), and the Original Loan, as amended and increased to $199,875,000 of which $195,700,646.72 remains outstanding as of the date hereof (the “ Existing Loan ”) was evidenced by that certain Amended and Restated Promissory Note dated as of February 26, 2013 in the original principal amount of One Hundred Ninety-Nine Million Eight Hundred Seventy-Five Thousand and No/100 Dollars ($199,875,000) made by Borrower to Agent and as replaced, amended and restated by that certain (i) Substitute Promissory Note made as of August 20, 2013 in favor of Aareal Bank AG, a German banking corporation, in the principal amount of Sixty Five Million and No/100 Dollars ($65,000,000), (ii) Substitute Promissory Note made as of August 20, 2013 in favor of Aareal Capital Corporation, a Delaware corporation, in the principal amount of Eighty-One Million Two Hundred Sixty Thousand Nine Hundred Fifty and No/100 Dollars ($81,260,950), and (iii) Substitute Promissory Note made as of August 20, 2013 in favor of Westdeutsche ImmobilienBank AG, a German banking corporation, in the principal amount of Fifty-Two Million Six Hundred Nine Thousand One Hundred Sixty-Eight and 24/100 Dollars ($52,609,168.24) (as so amended, restated, replaced, substituted supplemented or otherwise modified, collectively, the “ Existing Notes );

WHEREAS, in connection with the execution and delivery of the A&R Loan Agreement, the Original Agreement was amended and restated by that certain Amended and Restated Environmental Indemnity, dated as of February 26, 2013 (the “ A&R Agreement ”), by Former Sponsor and Borrower to and for the benefit of Agent;

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WHEREAS, the A&R Loan Agreement was subsequently amended by that certain First Amendment to the Loan Agreement dated November 19, 2013 (the A&R Loan Agreement, as so amended, restated, replaced, supplemented or otherwise modified, the “ Existing Loan Agreement ”), and concurrently therewith, (i) the A&R Agreement was amended pursuant to that certain Amendment and Ratification of Recourse Liability Agreement and Environmental Indemnity Agreement, dated as of November 19, 2013 (the “ Amendment and Ratification ;” the A&R Agreement, as amended by the Amendment and Ratification, called the “ Existing A&R Agreement ”), among Former Sponsor, Ashford Hospitality Trust Inc., Borrower and Agent, to, among other things, release Former Sponsor from liability under the A&R Agreement with respect to events, acts or omissions occurring from and after the date of the Amendment and Ratification, and (ii) Sponsor and Borrower executed and delivered that certain supplemental Environmental Indemnity (“ Existing Indemnity ”), dated as of November 19, 2013, to, among other things, obligate Sponsor with respect to events, acts or omissions first accruing from and after the Amendment and Ratification pursuant to the terms of the Existing Indemnity;

WHEREAS, Borrower has requested, and Agent and Lenders have agreed, to amend, restate and consolidate the terms and provisions of the Existing Loan Agreement and the other Loan Documents (as such term is defined in the Existing Loan Agreement) in their entirety pursuant to the terms and conditions set forth in that certain Second Amended and Restated Loan Agreement of even date herewith by and among Borrower, CHH Capital Tenant Corp., CHH Torrey Pines Tenant Corp., Agent and Lenders (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “ Loan Agreement ”) and increase the principal amount of the Existing Loan to $198,000,000 (the Existing Loan, as so modified and increased, the “ Loan ”), which Loan is evidenced by (a) that certain Second Amended and Restated Promissory Note A in the original principal amount of $82,265,215.47, (b) that certain Second Amended and Restated Promissory Note B in the original principal amount of $63,964,069.38 and (c) that certain Second Amended and Restated Promissory Note C in the original principal amount of $51,770,715.15 (collectively, the “ Notes ”) dated as of the date hereof in the same amount by Borrower and secured by, among other things, that certain Second Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement, Fixture Filing, and Assignment of Rents dated as of the date hereof by CHH Torrey Pines Hotel Partners, LP in favor of Agent and that certain Second Amended and Restated Deed of Trust, Security Agreement, Financing Statement, Fixture Filing, and Assignment of Rents dated as of the date hereof by CHH Capital Hotel Partners, LP in favor of Agent (collectively, the “ Mortgage ”) encumbering, inter alia , certain real property and improvements located in LaJolla, California and Washington, D.C. (individually and collectively, the “ Property ”, as such defined term is more particularly described in the Loan Agreement);

WHEREAS, as a result of Lenders making, and Agent administering, the Loan, Agent and/or Lenders may hereafter incur or suffer certain Environmental Losses (as hereinafter defined);

WHEREAS, Sponsor is an Affiliate of Borrower and will obtain substantial benefits from Lenders making, and Agent administering, the Loan; and

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WHEREAS, to induce Lenders to make, and Agent to administer, the Loan, Former Sponsor has agreed to execute a Ratification of Recourse Liability Agreement and Environmental Indemnity Agreement to reaffirm its obligations under the Existing A&R Agreement, and Indemnitor has agreed to execute and deliver this agreement to amend and restate the Existing Indemnity in its entirety to inter alia indemnify Agent and Lenders for Environmental Losses for any events, acts or omissions first accruing from and after the Amendment.

NOW, THEREFORE, for and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by all parties, the parties hereto agree, and the Existing Indemnity is hereby amended and restated in its entirety pursuant to this Indemnity, as follows:

Section 1. Definitions . The following terms used in this Indemnity shall have the meanings indicated:

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601, et seq.), as heretofore or hereafter amended from time to time.

“ Environmental Laws ” collectively means and includes all present and future laws and any and all amendments (whether common law, statute, rule, order, decree, regulation, ordinance, resolution, code or otherwise), permits, and other requirements or guidelines of governmental authorities, whether federal, state or local, applicable to the Property or Indemnitor and relating to the environment and environmental conditions or to any Hazardous Substance or Hazardous Substance Activity (including CERCLA, the Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq., the Clean Water Act, 33 U.S.C. § 1251, et seq., the Clean Air Act, 42 U.S.C. § 7401, et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601-2629, the Safe Drinking Water Act, 42 U.S.C. § 300f‑300j, the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. § 11001, et seq., and any so-called “Super Fund” or “Super Lien” law, environmental laws administered by the Environmental Protection Agency, any similar state and local laws and regulations, all amendments thereto and all regulations, orders, decisions, and decrees now or hereafter promulgated thereunder).

“ Environmental Losses ” means Losses suffered or incurred by any Indemnified Party first arising from and after November 13, 2013, arising out of or as a result of: (i) the occurrence of any Hazardous Substance Activity; (ii) any violation of any applicable Environmental Laws; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental agency in connection with any Hazardous Substance Activity; (iv) any breach by Indemnitor of any of the representations, warranties, covenants or obligations under this Indemnity, or (v) any claim, demand or cause of action, or any action or other proceeding brought or asserted by any party, whether meritorious or not, against any Indemnified Party, regardless of when such claim, demand, or cause of action or other proceeding is brought or asserted, which directly or indirectly relates to, arises from or is based on any of the matters described in clause (i) , (ii) , (iii) or (iv) above or any allegation of any such matters. Notwithstanding the foregoing, “Environmental

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Losses” shall not include any Losses arising solely from any Hazardous Substances that are first present, used and stored at, on or under the Property after the Property has been transferred to an Indemnified Party or any third party purchaser by foreclosure, deed in lieu of foreclosure or similar transaction.

“ Hazardous Substance ” means, at any time, (i) asbestos and any asbestos containing material (collectively, “ Asbestos ”), (ii) any substance that is then defined or listed in, or otherwise classified pursuant to, any Environmental Laws or any applicable laws or regulations as a “hazardous substance”, “hazardous material”, “hazardous waste”, “infectious waste”, “toxic substance”, “toxic pollutant” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or “EP toxicity”, (iii) any petroleum and drilling fluids, produced waters, and other wastes associated with the exploration, development, processing or production of crude oil, natural gas, or geothermal resources and (iv) petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter, medical waste, mold and mildew.

“ Hazardous Substance Activity ” means any actual or alleged use, packaging, labeling, treatment, leaching, presence, possession, spill, cleanup, storage, holding, existence, release, emission, discharge, generation, processing, refining, abatement, removal, disposition, handling, transferring or transportation of any Hazardous Substance from, in, under, above, into or on the Property or any other Collateral, or any property surrounding the Property, or otherwise being in the possession of Borrower at the Property, whether or not known to Indemnitor, and regardless of the source or time of occurrence of such actual or alleged use, packaging, labeling, treatment, leaching, presence, possession, spill, cleanup, storage, holding, existence, release, emission, discharge, generation, processing, refining, abatement, removal, disposition, handling, transferring or transportation.

“ Indemnified Parties ” means, collectively, Agent, any Lender, any of their participants, any successor to any interest of Agent or Lenders in or to the Property (including any Affiliate, nominee or designee of Agent or Lenders that acquires all or part of the Property by any sale, assignment, foreclosure or other exercise of remedies under the Mortgage or other Loan Documents or by conveyance in lieu thereof) and any officers, directors, shareholders, agents and/or employees of any of the foregoing (together with their successors and assigns), excluding , any successor to any interest of Agent or Lenders in or to the Property that acquires all or part of the Property by any sale, assignment, foreclosure or other exercise of remedies under the Mortgage or other Loan Documents or by conveyance in lieu thereof that is not Agent, any Lender, any of their participants or an Affiliate, nominee or designee of Agent or Lenders.

“ Indemnitor ” has the meaning set forth in the first paragraph of this Indemnity. In amplification of the foregoing, all representations, warranties, covenants, certifications and acknowledgements made by Indemnitor shall be deemed made by each Indemnitor individually and all Indemnitors collectively.

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Indemnified Party, including (a) all costs and expenses incurred in evaluating and defending against actual or threatened claims, actions, proceedings or notices of violation, (b) all amounts paid or contributed for Remedial Actions, (c) the reasonable fees and disbursements of legal counsel, environmental experts, consultants and accountants in connection with any of the foregoing and (d) any diminution in the economic value of the Property as a result of Hazardous Substance Activity.

“ Remedial Actions ” means all investigation, monitoring, testing, remediation, response action, removal, containment, restoration, permit acquisition and disposal of or with respect to any Hazardous Substances as required by applicable Environmental Laws.

Section 2. Indemnification . (i) Indemnitor hereby irrevocably, unconditionally and absolutely, agrees to indemnify and keep indemnified each Indemnified Party and to defend, hold and save each Indemnified Party harmless from and against, any and all Environmental Losses.

(b) Within five (5) Business Days of demand by any Indemnified Party, Indemnitor shall commence to defend, and shall thereafter diligently pursue defense of, any investigation, action or proceeding in connection with any claim or liability, or alleged claim or liability, that would, if determined adversely to such Indemnified Party, be covered by the indemnification provisions contained herein, such defense to be at the sole cost and expense of Indemnitor and by counsel selected by Indemnitor and reasonably approved by such Indemnified Party, which counsel may, without limiting the rights of an Indemnified Party pursuant to the next succeeding sentence of this Section 2(b) , also represent Indemnitor in such investigation, action or proceeding. In the alternative, an Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the reasonable expense of Indemnitor upon prior written notice to Indemnitor. Nothing contained herein shall be construed as requiring any Indemnified Party to expend funds or incur costs to defend any claim in connection with the matters contained herein.

(c) The obligations of Indemnitor hereunder shall specifically include the obligation to expend its own funds, to incur costs in its own name and to perform all actions (including, completing Remedial Actions in a timely manner) as may be necessary to protect the Indemnified Parties from the necessity of expending their own funds, incurring costs or performing any actions in connection with the matters contained herein.

(d) Without limiting any other provision of this Indemnity, the obligations of Indemnitor hereunder shall apply to all Environmental Losses that arise out of or are attributable to, whether directly or indirectly, in whole or in part, any claim or allegation against an Indemnified Party relating to any act or omission of such Indemnified Party in respect of the Loan or the Property, or in connection with any exercise of such Indemnified Party’s rights under any of the Loan Documents, unless the same shall result solely from any Indemnified Party’s acts constituting gross negligence or willful misconduct, in which case such acts or omissions and any Losses resulting therefrom shall not be covered by this Indemnity and shall be the sole responsibility of such Indemnified Party or Parties. The rights and remedies of the Indemnified Parties under this Indemnity shall be in addition to any other rights and remedies of such Indemnified Parties under any guaranty or any other document or instrument now or hereafter executed in connection with the Loan or at law or in equity.

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Section 3. Representations and Warranties . Sponsor represents and warrants to Agent and Lenders (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Indemnity) that:

(a) Sponsor is a corporation, partnership, limited liability company or other entity (as recited in the preamble to this Indemnity) duly formed, validly existing and in good standing pursuant to the laws of its state of formation (which state of formation is as recited in the preamble to this Indemnity), and is qualified to do business in each other jurisdiction where such qualification is necessary to carry on its business.

(b) Sponsor has the power and requisite authority and is duly authorized to execute and deliver this Indemnity and perform its obligations under this Indemnity and the other Loan Documents to which it is a party.

(c) This Indemnity constitutes the legal, valid and binding obligation of Sponsor, enforceable against Sponsor in accordance with its terms.

(d) Neither the execution and delivery of this Indemnity, nor consummation of any of the transactions herein contemplated nor compliance with the terms and provisions hereof, will (i) to the actual knowledge of Sponsor, contravene any provision of law, statute, rule or regulation to which Sponsor is subject or any judgment, decree, license, order or permit applicable to Sponsor, or (ii) materially conflict or be inconsistent with, or result in any material breach of any of the terms of the covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of a Lien (except liens in favor of Agent or Lenders) upon any of the property or assets of Sponsor pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which Sponsor is a party or, to the actual knowledge of Sponsor, by which Sponsor may be bound, or to which Sponsor may be subject, or (iii) violate any provision of any organizational document of Sponsor.

(e) All consents, approvals, authorizations or orders of any Person, court or Governmental Authority or any third party that are required in connection with the execution and delivery by Sponsor of this Indemnity or to consummate the transactions contemplated hereby have been obtained and are in full force and effect. To the actual knowledge of Sponsor, Sponsor is not in default with respect to any law, statute, rule, regulation, judgment, license, permit, order, writ, injunction or decree of any court or Governmental Authority applicable to Sponsor.

(f) There are no actions, suits or proceedings at law or at equity, pending or, to Sponsor’s actual knowledge, threatened against or affecting Sponsor which involve or might involve the validity or enforceability of this Indemnity or which might materially adversely affect the financial condition of Sponsor or the ability of Sponsor to perform any of its respective obligations under this Indemnity.

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state a material fact and (iv) fairly present the financial condition of the subjects thereof as of the respective dates thereof in all material respects. No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof. No representation or warranty made by any Sponsor in this Indemnity or any other Loan Document contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading.

(h) Except as disclosed in the Environmental Audit, the Property is not now used, nor, to Indemnitor’s actual knowledge, has the Property ever been used by any previous owner, tenant, occupant or user of the Property, to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process or in any manner deal with Hazardous Substances (except in compliance with Environmental Laws), and no Hazardous Substances are installed, placed, handled or in any manner dealt with on the Property except in compliance with Environmental Laws.

(i) Except as disclosed in the Environmental Audit, neither Indemnitor nor, to Indemnitor’s actual knowledge, any previous owner, tenant, occupant or user of the Property, has received any notice, order or request from any Governmental Authority or third party concerning the presence or suspected presence of any Hazardous Substances on, under, in or about the Property or the presence or suspected presence of any Hazardous Substances on, under, in or about any real property adjoining the Property other than, in each case, in compliance with Environmental Laws.

(j) The Property and its actual and intended uses, including all permitted uses under all Leases, comply in all material respects with all Environmental Laws, and all permits, licenses, approvals, identification numbers and other authorizations required by all Environmental Laws have been obtained and are in effect for the operations conducted on the Property.

(k) Except as disclosed in the Environmental Audit, no underground storage tanks, whether or not containing Hazardous Substances or any other substance, are located on or under the Property.

(l) Except as disclosed in the Environmental Audit, no above-ground storage tanks containing any Hazardous Substances are located on the Property.

(m) Except as disclosed in the Environmental Audit, no lead-based paint or Asbestos are present in the Property.

Section 4. Compliance with Environmental Laws . Indemnitor shall comply with all Environmental Laws in effect from time to time. To the extent required by any Environmental Law, Indemnitor shall promptly remove and dispose of any Hazardous Substances found on, in, under, about or affecting the Property, and all such removals and disposals shall be undertaken and performed in compliance with all Environmental Laws. Except for the storage, handling and disposal of de minimis amounts of Hazardous Substances performed in the ordinary course of business of operating the Property and in strict compliance with all Environmental Laws, Indemnitor shall not (a) release, or permit, allow or suffer any release or threat of release of any Hazardous Substances

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into, on, in, under, about or affecting the Property or from the Property onto, into or under any properties adjacent to the Property, or any waterways located upon or near the Property; (b) generate, manufacture, refine, transport, treat, handle, dispose or in any other manner deal with any Hazardous Substances or permit, allow or suffer any such activities from, into, on, in, under or about the Property, surrounding property or any waterways located upon or near the Property; or (c) store or permit, allow or suffer Hazardous Substances to be stored on, in, under or about the Property (other than de minimus quantities of such Hazardous Substances commonly used in the day-to-day operation and maintenance by Borrower or any tenant of the Property which do not require remediation under the Environmental Laws, and are otherwise in compliance with all Environmental Laws). Indemnitor shall not permit, allow or suffer any Lien under any Environmental Law to attach to or encumber the Property or any part thereof or interest therein. If prior to the date hereof, it was determined that the Property contains Asbestos, Borrower had prepared an assessment report describing the location and condition of the Asbestos (an “ Asbestos Report ” ), or if at any time hereafter, Asbestos is suspected of being present on the Property, Indemnitors agree, at their sole cost and expense and within twenty (20) days thereafter, to cause to be prepared an Asbestos Report prepared by an expert, and in form, scope and substance, acceptable to Agent. If it has been, or if at any time hereafter it is, determined that the Property contains Asbestos, on or before thirty (30) days following (i) the date hereof, if such determination was made prior to the date hereof, or (ii) the date of such determination, if such determination is hereafter made, as applicable, Indemnitors shall, at their sole cost and expense, develop and implement, and thereafter diligently and continuously carry out (or cause to be developed and implemented and thereafter diligently and continually to be carried out), an operations, abatement and maintenance plan for the Asbestos on the Property, which plan shall be prepared by an expert, and be in form, scope and substance, acceptable to Agent (the “ O&M Plan ” ), and if an O&M Plan has been prepared prior to the date hereof, Indemnitors agree to diligently and continually carry out (or cause to be carried out) the provisions thereof, it being understood and agreed that compliance with the O&M Plan shall require or be deemed to require, without limitation, the proper preparation and maintenance of all records, papers and forms required under the Environmental Laws.. In the event Indemnitor shall fail to comply with any Environmental Laws, Agent may, but shall not be obligated to, cause the Property, the surrounding property or any waterways located upon or near the Property to be freed from Hazardous Substances or take other Remedial Actions. The cost of any action taken by Agent pursuant to the immediately preceding sentence shall be payable by Indemnitor within five (5) Business Days after Agent’s demand therefor. Indemnitor shall give Agent and its agents and employees such access to the Property as Agent shall reasonably deem to be necessary or desirable to cause such removal of Hazardous Substances.

Section 5. Notification of Hazardous Substances and Actions . Indemnitor shall within ten (10) days notify Agent, or cause Agent to be promptly notified, if (a) Indemnitor knows, suspects or believes that there may be any Hazardous Substances in, on or under the Property, or in the soil, groundwater or soil vapor on, over or under the Property that are in violation of Environmental Laws, (b) any action by any Governmental Authority is instituted or threatened under any Environmental Laws affecting Indemnitor or the Property, including any notice of inspection, abatement or noncompliance, or (c) any claim is made or threatened by any third party against Indemnitor or the Property relating to any Hazardous Substances or a violation of any Environmental Laws.

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Section 6. Environmental Audits . Agent shall have the right (but not the obligation), from time to time, to conduct an environmental audit of the Property (a) to confirm completion of Remedial Actions and compliance with Environmental Laws in connection therewith, (b) after the occurrence and continuance of an Event of Default after the expiration of all notice and cure periods set forth herein and/or in the other Loan Documents, if, in Agent’s reasonable judgment, it is appropriate under the circumstances (including in connection with any action to foreclose the Mortgage), (c) Agent in its reasonable discretion believes that the Property violates Environmental Laws in any material respect or (d) to the extent necessary or desirable with a Securitization and/or full or partial sale of any portion of Agent’s rights in the Loan. Indemnitor shall cooperate in the conduct of all such environmental audits and pay the costs of any such audits (except for an audit prepared in connection with subparagraph (d) which shall be at Agent’s sole cost and expense).

Section 7. Liability Not Limited . Indemnitor agrees that the indemnities made and given in this Indemnity are separate and distinct from, independent of and in addition to Indemnitor’s other undertakings under the Loan Documents. Indemnitor agrees that to the extent permitted by applicable law, a separate action may be brought to enforce the provisions of this Indemnity, which shall in no way be deemed to be an action on the Note or on any of the other Loan Documents. Agent shall have the right to waive all or any portion of its Liens against the Collateral or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against Indemnitor and all of Indemnitor’s assets and property for the recovery of any amount due hereunder. Indemnitor acknowledges and agrees that notwithstanding any term or provision contained herein or in the Loan Documents, all judgments and awards entered against Indemnitor pursuant to this Indemnity shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Indemnitor shall be fully and personally liable for all judgments and awards entered against Indemnitor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by the Mortgage. Indemnitor hereby waives the defense of laches and any applicable statute of limitations.

Section 8. Independent Obligations . The obligations of Indemnitor under this Indemnity are independent of, and shall not be measured, limited or otherwise affected by (a) any amounts at any time owing under the Loan or secured by the Mortgage, (b) the sufficiency or insufficiency of any Collateral (including the Mortgaged Property) given to Agent to secure repayment of the Loan, (c) the consideration given by Agent or any other party in order to acquire the Property or the Collateral or any portion thereof, (d) the expiration or termination of any of the other Loan Documents or (e) the discharge or repayment in full of the Loan (whether by amounts paid or credit bid at a foreclosure sale or by discharge in connection with a deed in lieu of foreclosure, or otherwise).

Section 9. Unconditional Character of Obligations of Indemnitor .

(a) Obligations . The obligations of Indemnitor hereunder shall be absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgage or the other Loan Documents or any provision thereof,

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or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against Borrower or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrower or any other Person under any Loan Document, or any setoff, counterclaim, recoupment, limitation or termination, and irrespective of any other circumstances which might otherwise limit recourse against Indemnitor by Agent or constitute a legal or equitable discharge or defense of a guarantor or surety. Agent may enforce the obligations of Indemnitor hereunder by a proceeding at law, in equity or otherwise, independent of any foreclosure or similar proceeding or any deficiency action against Borrower or any other Person at any time, and either before or after an action against the Collateral or any part thereof, Borrower or any other Person. Indemnitor waives diligence, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgage or any other Loan Documents against Borrower or any other Person, any right to require a proceeding first against Borrower or any other Person (or, if Indemnitor consists of more than one Person, to proceed against the Persons constituting Indemnitor in any particular order), or to exhaust any security (including the Collateral) for the performance of the obligations of Borrower or any other Person, or to cause a marshalling of Borrower’s assets, and any protest, presentment, notice of default or other notice or demand whatsoever.

(b) Indemnity and Collateral . Without limiting the generality of the provisions of Section 9(a) hereof and except as otherwise limited by applicable law, the obligations of Indemnitor under this Indemnity, and the rights of Agent to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following:

(i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting, Borrower or any other Person or the Collateral or any part thereof, including any automatic stay granted pursuant to any provision of a bankruptcy or similar law;

(iv) the conveyance to Agent, any Lender, any Affiliate of Agent or any Lender or Agent’s or any Lender’s nominee of the Collateral or any interest therein by a deed in lieu of foreclosure;

(v) the release of Borrower, Indemnitor or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise;

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(vi) the release in whole or in part of the Collateral;

(viii) any recovery from Indemnitor or any other obligor of any of the Obligations, which recovery is obtained under this Indemnity or any other guaranty or indemnity executed in connection with the Loan; or

(ix) any accuracy or inaccuracy of any representations or warranties made by Borrower, Indemnitor or any other Person in any of the Loan Documents.

(c) Waiver . Indemnitor hereby expressly and irrevocably waives all defenses in an action brought by Agent to enforce this Indemnity based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise.

(d) Agent’s and Lenders’ Ability to Act . Agent and Lenders may deal with Borrower, Affiliates of Borrower and the Collateral in the same manner and as freely as if this Indemnity did not exist and shall be entitled, among other things, to grant Borrower or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Agent, at any time and from time to time, without terminating, affecting or impairing the validity of this Indemnity or the obligations of Indemnitor hereunder.

(f) Agent’s Remedies . Agent may proceed to protect and enforce any or all of its rights under this Indemnity by suit in equity or action at law against Indemnitor, whether for the specific performance of any covenants or agreements contained in this Indemnity or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Indemnitor. All rights, remedies, powers and privileges conferred by the other Loan Documents are cumulative of all other rights, remedies, powers and privileges herein or by law or in equity provided, or provided in any other Loan Document, and shall not be deemed to deprive Agent of any such other legal or equitable rights, remedies, powers and privileges to enforce the conditions, covenants and terms of this Indemnity or the other Loan Documents by judicial proceedings or otherwise, and the employment of any rights, remedies, powers and privileges hereunder or otherwise, shall not prevent the concurrent or subsequent employment of any other appropriate rights, remedies, powers and privileges.

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(g) Actions. At the option of Agent, Indemnitor may be joined in any action or proceeding commenced by Agent against Borrower or any other Person in connection with or based upon the Note, the Loan Agreement, the Mortgage or any other Loan Documents and recovery may be had against Indemnitor in such action or proceeding or in any independent action or proceeding against Indemnitor to the extent of Indemnitor’s liability hereunder, without any requirement that Agent first assert, prosecute or exhaust any remedy or claim against Borrower or any other Person, or any security for the obligations of Borrower or any other Person. Any demand by Agent for payments, or performance of the obligations under, this Indemnity upon Indemnitor shall not be and shall not be construed to be a release or waiver by Agent of any other obligor with respect to such payment or obligation.

(h) Continuance or Reinstatement of Indemnity Notwithstanding anything to the contrary contained in this Indemnity, Indemnitor agrees that this Indemnity shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Indemnitor to Agent or any Lender and such payment is rescinded or must otherwise be returned by Agent or such Lender upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Indemnitor, all as though such payment had not been made. Agent may, but shall not be required to, litigate or otherwise dispute such rescission or its obligation to make such repayments.

(i) Payments to Indemnitor; Subrogation . In the event that Indemnitor shall advance or become obligated to pay any sums under this Indemnity, or in the event that for any reason whatsoever, Borrower or any subsequent owner of the Collateral or any part thereof is now, or shall hereafter become, indebted to Indemnitor, Indemnitor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to lien, the time of payment and in all other respects to all Obligations, including principal and interest and other amounts, at any time owed to Agent and/or Lenders under the Loan Documents, and (ii) Indemnitor shall not be entitled to enforce or receive payment thereof until the actual and irrevocable receipt by Agent of payment in full of all Obligations. Nothing herein contained is intended or shall be construed to give Indemnitor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Agent or any Lender in or to the Collateral, notwithstanding any payments made by Indemnitor under this Indemnity, all such rights of subrogation and participation, if any, being hereby expressly postponed until the actual and irrevocable receipt by Agent of payment in full of all Obligations. If any amount shall be paid to Indemnitor by reason of the payment of sums by Indemnitor under this Indemnity at any time when any such sums due and owing to Agent and/or Lenders shall not have been fully paid, such amount shall be paid by Indemnitor to Agent for credit and application against such sums due and owing to Agent and/or Lenders.

(j) Effect of Foreclosure, Exercise of Remedies . Indemnitor’s obligations hereunder shall continue notwithstanding a foreclosure, deed in lieu of foreclosure or similar proceeding or transaction involving the Mortgaged Property or any part thereof or other exercise by Agent of the other remedies under the Loan Documents, at law or in equity.

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Section 10. Transfers . Sponsor shall not make (or permit to be made) any Transfer with respect to any direct or indirect ownership interest of Sponsor in Borrower except for a Permitted Transfer in accordance with the Loan Agreement.

Section 11. Rights of Agent . Unless expressly provided to the contrary in any particular instance, with respect to any and all rights of Agent to (a) give or withhold any consent, approval or other authorization requested by Indemnitor with respect to this Indemnity, (b) make any election or exercise any option granted herein, (c) make any decision, judgment or determination with respect hereto, (d) modify or amend this Indemnity or waive any obligation of Indemnitor hereunder or grant any extension of time for performance of the same or (e) take or omit to take any other action of any kind whatsoever, Agent shall, to the maximum extent permitted by law, have the right, and Indemnitor expressly acknowledges Agent’s right, in each instance, to make or give the same or take such action or to omit to take such action, as the case may be, in its sole and absolute discretion.

Section 12. Further Assurances . Indemnitor shall, within five (5) Business Days after written request, make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings or other assurances, and take all such other action, as Agent may, from time to time, deem reasonably necessary in order to give effect to the rights and benefits conferred on Agent and Lenders pursuant to this Indemnity.

Section 13. Amendments, Waivers, Consents and Approvals . No failure or delay of Agent in exercising any power or right hereunder or to demand payment for any sums due pursuant to this Indemnity or any other Loan Document, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No waiver of any provision of this Indemnity or in any of the other Loan Documents or consent to any departure by Indemnitor or any other Person therefrom shall in any event be effective unless signed in writing by Agent, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Consents, approvals and waivers granted by Agent for any matters covered under this Indemnity or any Loan Document shall not be effective unless signed in writing by Agent, and such consents, approvals and waivers shall be narrowly construed to cover only the parties and facts identified in any such consent, approval or waiver. No notice or demand on Indemnitor or any other Person in any case shall entitle Indemnitor or such Person to any other or further notice or demand in similar or other circumstances. Unless expressly provided to the contrary, any consents, approvals or waivers of Agent or Lenders pursuant to this Indemnity or any other Loan Documents shall be granted or withheld in Agent’s or Lenders’ sole discretion, as the case may be. No amendment, modification or termination of any provision of this Indemnity shall be effective unless in writing and signed by Indemnitor and Agent.

Section 14. Binding Effect . This Indemnity shall be binding upon Indemnitor and its heirs, legatees, personal representatives, successors and assigns, and shall inure to the benefit of and shall be enforceable by Agent, Lenders and their respective successors and assigns.

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Section 15. Counterparts . This Indemnity may be executed in any number of counterparts, each of which shall be deemed an original, and all of which when taken together shall be one and the same Indemnity.

Section 16. Notices . Any notice, demand, request, consent, approval or other communication, which any party hereto may be required or may desire to give hereunder, shall be made in accordance with Section 10.1 of the Loan Agreement to the party to whom notice is being given, in any of the foregoing cases at the address set forth below:


Agent :	Aareal Capital Corporation

250 Park Avenue, Suite 820
New York, New York 10177
Attention: Linda Burg
Telephone: 646-205-4513
Facsimile: 917-322-0290

with a copy similarly delivered to:

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention: Alan L. Griffin, Esq.
Telephone: 646-465-8619
Facsimile: 917-322-0285

with a copy to:

Kaye Scholer LLP
250 West 55th Street
New York, New York 10019-9710
Attention: Warren J. Bernstein, Esq.
Telephone: 212-836-8000
Facsimile: 212-836-8689


Indemnitor :	Ashford Hospitality Prime Limited Partnership 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 Attention: David A. Brooks Telephone: 972-778-9207 Facsimile: 972-490-9605

and to:

CHH Capital Hotel Partners, LP
14185 Dallas Parkway, Suite 1100
Dallas, Texas 75254

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Attention: David A. Brooks
Telephone: 972-778-9207
Facsimile: 972-490-9605

and to:

CHH Torrey Pines Hotel Partners, LP
14185 Dallas Parkway, Suite 1100
Dallas, Texas 75254
Attention: David A. Brooks
Telephone: 972-778-9207
Facsimile: 972-490-9605

and to:

Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201-4605
Attention: Brigitte G. Kimichik, Esq.
Telephone: 214-659-4441
Facsimile: 214-659-4777

Any party may change its address for purposes of this Indemnity by giving notice of such change to the other parties pursuant to this Section 16 . All such notices, certificates, demands, requests, approvals, waivers and other communications given pursuant to this Section 16 shall be effective when received or refused at the address specified as aforesaid.

Notwithstanding any provision contained herein or in any of the other Loan Documents to the contrary, in the event that Agent shall fail to give any notice to Indemnitor under this Indemnity, the sole and exclusive remedy for such failure shall be to seek appropriate equitable relief to enforce this Indemnity to give such notice and to have any action of Indemnitor postponed or revoked and any proceedings in connection therewith delayed or terminated pending the giving of such notice by Agent, and no Indemnitor shall have any right to damages (whether actual or consequential) or any other type of relief against Agent not specifically provided for herein, all of which damages or other relief are hereby expressly waived. The foregoing is not intended and shall not be deemed under any circumstances to require Agent to give notice of any type or nature to Indemnitor as expressly required hereby.

Section 17. Severability . In the event any one or more of the provisions contained in this Indemnity should be held invalid, illegal or unenforceable in any respect in a particular jurisdiction or as to particular Persons or circumstances, the validity, legality and enforceability of the remaining provisions contained herein (or the application of the invalid, illegal or unenforceable provision in a different jurisdiction or to other Persons or circumstances) shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

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Section 18. Captions . The captions, headings and arrangements used in this Indemnity are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions hereof.

Section 19. Governing Law; Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by Jury . This Indemnity shall be governed by, and construed in accordance with, the substantive and procedural laws of the State of New York. Indemnitor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Indemnity, the Note or the other Loan Documents may be brought in (i) the courts of the United States of America located in the Southern District of New York or the District where the Property is located or (ii) in the state courts of the State and County of New York or the state courts of the State and County where the Property is located, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Indemnitor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Indemnitor at its address provided in Section 16 hereof, as the same may be changed pursuant to Section 16 hereof. Nothing in this Section 19 , however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against Indemnitor or its property in the courts of any other jurisdiction. INDEMNITOR HEREBY WAIVES, AND AGENT, BY ACCEPTANCE OF THIS INDEMNITY, HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS INDEMNITY, WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 20. Definitional Provisions . For purposes of this Indemnity, (a) defined terms used in the singular shall import the plural and vice-versa; (b) the words “hereof,” “herein,” “hereunder” and similar terms when used in this Indemnity shall refer to this Indemnity as a whole and not to any particular provision of this Indemnity; (c) the words “include” and “including” wherever used in this Indemnity shall be deemed to be followed by the words “without limitation” and (d) all of the agreements or instruments referred to in this Indemnity shall mean such agreements or instruments as the same may, from time to time, be modified, supplemented or amended, or the terms thereof waived or modified to the extent permitted by, and in accordance with, the terms and conditions thereof and of this Indemnity and the other Loan Documents.

Section 21. No Other Party Beneficiary . This Indemnity is for the sole benefit of Agent, Lenders and their successors and assigns, and is not for the benefit of any other party. Nothing contained in this Indemnity shall be deemed to confer upon anyone other than Agent, Lenders and their successors and assigns any right to insist upon or to enforce the performance or observance of any of the obligations contained herein.

Section 22. Joint and Several Obligations . The obligations of Indemnitor under this Indemnity shall be joint and several.

Section 23. Entire Agreement . This Indemnity and the other Loan Documents constitute the entire agreement between the parties hereto with respect to the subject matter hereof

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and supersede all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter contained in this Indemnity.

Section 24. Default Rate . Any amount payable hereunder by Indemnitor that is not paid by Indemnitor within five (5) Business Days after demand therefor by Agent shall bear interest from the date of such written demand at the Default Rate.

Section 25. Release of Indemnity . NOTWITHSTANDING THE FOREGOING, PROVIDED THAT INDEMNITOR DELIVERS TO AGENT A CURRENT ENVIRONMENTAL AUDIT COVERING THE PROPERTY AND EVIDENCING THE PRESENCE OF NO HAZARDOUS SUBSTANCES (EXCEPT AS PERMITTED UNDER APPLICABLE ENVIRONMENTAL LAWS) ON THE PROPERTY AND NO VIOLATIONS OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO THE PROPERTY NOT EARLIER THAN NINETY (90) DAYS AND NOT LATER THAN TEN (10) DAYS PRIOR TO (A) THE DATE OF PAYMENT IN FULL OF THE OBLIGATIONS SECURED BY THE MORTGAGE, OR (B) THE EFFECTIVE DATE OF A FORECLOSURE OR DEED IN LIEU OF FORECLOSURE OF THE PROPERTY, INDEMNITOR SHALL BE RELEASED FROM ANY SUCH INDEMNIFIED MATTERS CREATED OR ARISING SOLELY FROM EVENTS OR CONDITIONS FIRST EXISTING AFTER THE DATE OF PAYMENT IN FULL OF THE OBLIGATIONS SECURED BY THE MORTGAGE OR THE EFFECTIVE DATE OF SUCH FORECLOSURE OR DEED IN LIEU OF FORECLOSURE OF THE PROPERTY. IN NO EVENT SHALL INDEMNITOR BE LIABLE FOR INDEMNIFIED MATTERS CREATED OR ARISING SOLELY FROM EVENTS OR CONDITIONS FIRST EXISTING AFTER AGENT’S SUCCESSION TO TITLE OF THE PROPERTY BY FORECLOSURE OR ACCEPTANCE OF A DEED IN LIEU OF FORECLOSURE OR OTHER SIMILAR TRANSFER.

Section 26. Special State Provisions .

(a) To the extent California law applies, nothing herein shall be deemed to limit the right of Agent to recover in accordance with California Code of Civil Procedure Section 736 (as such Section may be amended from time to time), any costs, expenses, liabilities or damages, including reasonable attorneys’ fees and costs, incurred by Agent and arising from any covenant, obligation, liability, representation or warranty contained in any indemnity agreement given to Agent, or any order, consent decree or settlement relating to the cleanup of Hazardous Substances or any other “environmental provision” (as defined in such Section 736) relating to the Property or any portion thereof or the right of Agent to waive, in accordance with the California Code of Civil Procedure Section 726.5 (as such Section may be amended from time to time), the security of the Deed of Trust as to any parcel of the Property that is “environmentally impaired” or is an “affected parcel” (as such terms are defined in such Section 726.5), and as to any personal property attached to such parcel, and thereafter to exercise against Borrower, to the extent permitted by such Section 726.5, the rights and remedies of any unsecured creditor, including reduction of Agent’s claim against Borrower to judgment, and any other rights and remedies permitted by law.

(b) To the extent California law applies, each Indemnitor hereby waives all rights and defenses arising out of an election of remedies by Agent even though that election of remedies,

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such as a nonjudicial foreclosure with respect to security for guaranteed obligations, has destroyed such Indemnitor’s rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise. Specifically, and without in any way limiting the foregoing, each Indemnitor hereby waives any rights of subrogation, indemnification, contribution or reimbursement arising under Sections 2846, 2847, 2848 and 2849 of the California Civil Code or any right of recourse to or with respect to Borrower or the assets or property of Borrower or to any collateral for the Loan. In connection with the foregoing, each Indemnitor expressly waives any and all rights of subrogation against Borrower, and such Indemnitor hereby waives any rights to enforce any remedy which Agent may have against Borrower and any right to participate in any collateral for the Loan. Each Indemnitor recognizes that, pursuant to Section 580d of the California Code of Civil Procedure, Agent’s realization through nonjudicial foreclosure upon any real property constituting security for Borrower’s obligations under the Loan Documents could terminate any right of Agent to recover a deficiency judgment against Borrower, thereby terminating subrogation rights which such parties otherwise might have against Borrower. In the absence of an adequate waiver, such a termination of subrogation rights could create a defense to enforcement of this Guaranty against such parties. Each Indemnitor hereby unconditionally and irrevocably waives any such defense. In addition to and without in any way limiting the foregoing, each Indemnitor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to such Indemnitor to all the indebtedness of Borrower to Agent and agrees with Agent that until such time as Agent may have no further claim against Borrower, such Indemnitor shall not demand or accept any payment of principal or interest from Borrower, claim any offset or other reduction of such Indemnitor’s obligations hereunder because of any such indebtedness and shall not take any action to obtain any of the collateral for the Loan. Further, each Indemnitor shall not have any right of recourse against Agent by reason of any action Agent may take or omit to take under the provisions of this Guaranty or under the provisions of any of the Loan Documents. If any amount shall nevertheless be paid to either Indemnitor by Borrower or another guarantor prior to payment in full of the Guaranteed Obligations, such amount shall be held in trust for the benefit of Agent and shall forthwith be paid to Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured. The provisions of this paragraph shall survive any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law, except payment in full of the Guaranteed Obligations. Without limiting the foregoing, each Indemnitor waives (i) all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to such Indemnitor by reason of California Civil Code Sections 2787 to 2855, inclusive; (ii) any rights or defenses such Indemnitor may have with respect to its obligations as a guarantor by reason of any election of remedies by Agent; and (iii) all rights and defenses that such Indemnitor may have because Borrower’s debt is secured by real property. This means, among other things, that Agent may collect from each Indemnitor without first foreclosing on any real or personal property collateral pledged by Borrower, and that if Agent forecloses on any real property collateral pledged by Borrower (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Agent may collect from such Indemnitor even if Agent, by foreclosing on the real property collateral, has destroyed any rights such Indemnitor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses each Indemnitor may have because Borrower’s debt evidenced by the Note is secured by real

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property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure.

Section 27. Limitation of Liability . Notwithstanding anything to the contrary contained in this Indemnity, Indemnitor’s liability under this Indemnity shall be limited as may expressly be set forth in the Loan Agreement, including, without limitation, Section 10.14(c) of the Loan Agreement.

[Signatures follow]

Section 27.

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IN WITNESS WHEREOF , Indemnitor has given this Indemnity as of the date first written above.

BORROWER:

CHH CAPITAL HOTEL PARTNERS, LP , a Delaware limited partnership


By:	CHH Capital Hotel GP, LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks

David A. Brooks, Vice President

CHH TORREY PINES HOTEL PARTNERS, LP , a Delaware limited partnership


By:	CHH Torrey Pines Hotel GP, LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks

David A. Brooks, Vice President

ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited partnership

By: Ashford Prime OP General Partner LLC


By:	/s/ David A. Brooks Name: David A. Brooks Title:Vice President

62362349

Agent is executing this Indemnity to confirm Agent’s agreement to the amendment and restatement of the Existing Indemnity as evidenced by this Indemnity.

AAREAL CAPITAL CORPORATION, as Agent

By: /s/ David C. Lee

Name: David C. Lee

Title: Director

By: /s/ Alan L. Griffin

Name: Alan, L. Griffin

Title: General Counsel

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EXHIBIT 10.33

LOAN AGREEMENT

Dated as of March 9, 2015

among

ASHFORD PIER HOUSE LP,

as Borrower,

ASHFORD TRS PIER HOUSE LLC,

as Operating Lessee,

THE LENDERS PARTY HERETO FROM TIME TO TIME,

as Lenders,

and

CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK,

as Agent for the Lenders

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TABLE OF CONTENTS

Page


ARTICLE I DEFINITIONS	1

SECTION 1.1. Definitions 1

SECTION 1.2. Other Definitional Provisions 26

ARTICLE II THE LOAN 27

SECTION 2.1. The Loan; Use of Funds 27

SECTION 2.2. Interest 27

SECTION 2.3. Determination of Applicable Interest Rate 28

SECTION 2.4. Principal Payments 29

SECTION 2.5. Payment; Default Rate; Application of Certain Monies; Priority of Payments; Set-offs 30

SECTION 2.6. Interest Rate Protection Agreement 32

SECTION 2.7. Additional Interest 34

SECTION 2.8. No Withholdings 35

SECTION 2.9. Unavailability of LIBOR; Illegality 35

SECTION 2.10. Increased Costs and Capital Adequacy 37

SECTION 2.11. Usury 38

SECTION 2.12. Closing 38

SECTION 2.13. Loan Fee Letter 38

SECTION 2.14. Cash Sweep Provisions 38

SECTION 2.15. FF&E/Capital Reserve Account 39

SECTION 2.16. Operating Account 40

SECTION 2.17. Tenant Security Deposits 41

SECTION 2.18. Intentionally Omitted 41

SECTION 2.19. Extension of Loan 41

ARTICLE III CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS LOAN AGREEMENT 44

SECTION 3.1. Representations and Warranties 45

SECTION 3.2. Miscellaneous Closing Deliveries 45

SECTION 3.3. Payment of Fees and Expenses 47

SECTION 3.4. No Default or Event of Default 47

SECTION 3.5. No Casualty or Taking 47

SECTION 3.6. Adverse Conditions; Internal Approval 47

ARTICLE IV REPRESENTATIONS AND WARRANTIES 47

SECTION 4.1. Due Organization 47

SECTION 4.2. Due Execution 48

SECTION 4.3. Enforceability 48

SECTION 4.4. No Violation 48

SECTION 4.5. No Litigation 48

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SECTION 4.6. No Default or Event of Default 49

SECTION 4.7. Offsets, Defenses, Etc. 49

SECTION 4.8. Consents 49

SECTION 4.9. Financial Statements and Other Information 49

SECTION 4.10. Full Disclosure 49

SECTION 4.11. Accounts 49

SECTION 4.12. Indebtedness 50

SECTION 4.13. Insurance Policies 50

SECTION 4.14. Availability of Utilities and Access 50

SECTION 4.15. No Liens 50

SECTION 4.16. Compliance with Legal Requirements 50

SECTION 4.17. Certain Agreements 51

SECTION 4.18. Security Documents 51

SECTION 4.19. Casualty and Taking 52

SECTION 4.20. Brokerage 52

SECTION 4.21. Encroachments 52

SECTION 4.22. Foreign Person 52

SECTION 4.23. Control Person 52

SECTION 4.24. Government Regulation 52

SECTION 4.25. ERISA 52

SECTION 4.26. Labor Relations 53

SECTION 4.27. Name; Principal Place of Business 53

SECTION 4.28. Intellectual Property 53

SECTION 4.29. Flood Zone 53

SECTION 4.30. Condition of Property 54

SECTION 4.31. Taxes 54

SECTION 4.32. Adverse Contracts 54

SECTION 4.33. Adverse Claims 54

SECTION 4.34. Creditworthiness 54

SECTION 4.35. Patriot Act 54

SECTION 4.36. Leases 55

SECTION 4.37. Special Purpose Entity 55

ARTICLE V GENERAL AND OPERATIONAL COVENANTS 55

SECTION 5.1. Financial Statements, Reports and Documents 55

SECTION 5.2. Management, Maintenance and Repairs 60

SECTION 5.3. Inspection of Premises and Books and Records 62

SECTION 5.4. Compliance with Legal, Insurance and Contractual Requirements 63

SECTION 5.5. Appraisals 64

SECTION 5.6. Payment of Impositions 64

SECTION 5.7. Liens and Encumbrances; Ownership of Collateral 64

SECTION 5.8. Permitted Contests 65

SECTION 5.9. Alterations 66

SECTION 5.10. Leases 67

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Page

SECTION 5.11. Required Insurance 68

SECTION 5.12. Damage or Destruction 69

SECTION 5.13. Taking of the Mortgaged Property 74

SECTION 5.14. Application of Proceeds of Casualty or Taking to Loan; Loan Repayment 75

SECTION 5.15. Costs and Expenses 75

SECTION 5.16. Transfers 76

SECTION 5.17. Defense of Title 77

SECTION 5.18. Recordation and Certain Taxes 77

SECTION 5.19. Name, Fiscal Year and Accounting Method 77

SECTION 5.20. Consolidation, Merger, Conveyance, Transfer or Lease 77

SECTION 5.21. Organization Restrictions 78

SECTION 5.22. Changes in Zoning 78

SECTION 5.23. Limitation on Indebtedness 78

SECTION 5.24. Distributions, Dividends and Affiliate Payments; Management Fees 78

SECTION 5.25. ERISA 78

SECTION 5.26. Maintenance of Existence 79

SECTION 5.27. Subsidiaries and Joint Ventures 79

SECTION 5.28. Loans to Members, Etc. 79

SECTION 5.29. Transactions with Affiliates 79

SECTION 5.30. Adverse Contracts 79

SECTION 5.31. Utilities 79

SECTION 5.32. Margin Stock 80

SECTION 5.33. Patriot Act Compliance 80

SECTION 5.34. Operating Lease 80

ARTICLE VI EVENTS OF DEFAULT 81

SECTION 6.1. Events of Default 81

SECTION 6.2. Acceleration of Loan 84

SECTION 6.3. Agent’s Right to Operate; Sums Advanced 84

SECTION 6.4. Assignment of Funds 85

SECTION 6.5. Accounts 85

SECTION 6.6. No Liability of Agent or Lenders 86

SECTION 6.7. Right of Offset 86

SECTION 6.8. Termination of Loan Agreement 86

SECTION 6.9. Right to Perform 87

ARTICLE VII ASSIGNMENTS AND PARTICIPATIONS 87

SECTION 7.1. Assignment and Participations 87

SECTION 7.2. Participation 88

SECTION 7.3. Availability of Records 88

SECTION 7.4. Borrower’s Facilitation of Transfer 88

SECTION 7.5. Notice; Registration Requirement 89

SECTION 7.6. Registry 89

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Page

SECTION 7.7. Interest Rate Protection Agreement 90

SECTION 7.8. Disclosure by Agent or Lender 90

ARTICLE VIII AGENT AND LENDERS 90

SECTION 8.1. Scope of Article VIII 90

SECTION 8.2. Agent 91

SECTION 8.3. Distributions 92

SECTION 8.4. Authority, No Reliance; Binding Effect 93

SECTION 8.5. Loan 93

SECTION 8.6. Equitable Adjustments 95

SECTION 8.7. Other Transactions 95

SECTION 8.8. Obligations Absolute 95

SECTION 8.9. Indemnification 95

SECTION 8.10. Taxes 96

SECTION 8.11. Return of Payments 96

SECTION 8.12. No Partnership 96

SECTION 8.13. Resignation and Removal of Agent; Successor Agent 97

SECTION 8.14. Defaults by any Lender 97

SECTION 8.15. Purchase Price; Payment for Defaulting Lender’s Pro Rata Share 99

SECTION 8.16. Election of Interest Rate; Distribution of Funds to Lenders 99

ARTICLE IX GENERAL CONDITIONS 99

SECTION 9.1. Indemnity 99

SECTION 9.2. No Waivers 102

SECTION 9.3. Submission of Evidence 102

SECTION 9.4. Agent and Lenders Sole Beneficiaries 102

SECTION 9.5. Entire Agreement 102

SECTION 9.6. Assignment 102

SECTION 9.7. Further Assurances; Filing of Financing Statements 102

SECTION 9.8. Cumulative Remedies 103

SECTION 9.9. Amendments, Consents, Waivers, Approvals, Etc. 103

SECTION 9.10. Notices 103

SECTION 9.11. Limitation on Liability 104

SECTION 9.12. Binding Effect 106

SECTION 9.13. Severability of Provisions 106

SECTION 9.14. Governing Law and Consent to Jurisdiction 106

SECTION 9.15. Waiver of Jury Trial 106

SECTION 9.16. No Joint Venture 106

SECTION 9.17. Determinations and Consents of Agent 107

SECTION 9.18. Reliance by Agent on Action on Behalf of Borrower 107

SECTION 9.19. Headings, Etc. 107

SECTION 9.20. Incorporation by Reference 107

SECTION 9.21. Counterparts 107

SECTION 9.22. Attorneys’ Fees 107

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Page

SECTION 9.23. Employer Identification Number Etc 108

SECTION 9.24. Joint and Several Liability 108

SECTION 9.25. Waiver of Consequential Damages Etc. 109

62528184 v

Exhibits and Schedules

Exhibit A: The Land
Exhibit B: Intentionally Omitted

Exhibit C: Reports

Exhibit D: Form of FF&E/Capital Disbursement Request

Exhibit E: Definition of Special Purpose Bankruptcy Remote Entity

Exhibit F: Agent Wiring Instructions

Exhibit G: Form of Assignment of Interest Rate Protection Agreement

Schedule 4.5: Schedule of Disclosed Litigation

Schedule 4.11:    Schedule of Accounts
Schedule 4.36:    Lease Disclosures
Schedule 5.11:    Schedule of Insurance Policies and Requirements
Schedule 7.5:    Form of Assignment and Acceptance

62528184 vi

LOAN AGREEMENT

This LOAN AGREEMENT (this “ Loan Agreement ”) dated as of March 9, 2015, by and among ASHFORD PIER HOUSE LP , a Delaware limited partnership having an office at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254 (“ Borrower ”), ASHFORD TRS PIER HOUSE LLC , a Delaware limited liability company having an office at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254 (“ Operating Lessee ”), THE LENDERS PARTY HERETO FROM TIME TO TIME (together with their respective successors and assigns in their capacities as lenders, including any Assignees (as hereinafter defined) hereunder, each a “ Lender ” and collectively “ Lenders ”), and CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK , a banking corporation organized under the laws of the Republic of France, having an office at 1301 Avenue of the Americas, New York, New York 10019, in its capacity as the agent for the Lenders (together with its successors and assigns in such capacity as the agent for Lenders, “ Agent ”).

W I T N E S S E T H :

WHEREAS , Borrower is the owner of certain real property located in Monroe County, Florida, which property is more particularly described in Exhibit A attached hereto (the “ Land ”), together with the improvements now or hereafter located thereon;

WHEREAS , Borrower, as lessor, and Operating Lessee, as lessee, are parties to that certain Lease Agreement dated as of May 14, 2013 (as same may hereafter be amended or otherwise modified in accordance with this Loan Agreement, the “ Operating Lease ”) of the Land and the improvements now or hereafter located thereon;

WHEREAS , Borrower has requested that Lenders make, and Agent administer, a loan to Borrower in the principal amount of $70,000,000 (the “ Loan Amount ”); and

WHEREAS , Lenders are willing to make, and Agent is willing to administer, such loan to Borrower subject to and upon the terms and conditions hereinafter set forth.

ARTICLE I

DEFINITIONS

SECTION 1.1. Definitions. For purposes of this Loan Agreement, the following terms shall have the respective meanings set forth in this Article I :

“ Accounts ” means, collectively, all accounts of Borrower and Operating Lessee and all accounts of any Person held on behalf of or for the benefit of Borrower or Operating Lessee, including the Cash Sweep Account, the Operating Account and the FF&E/Capital Reserve Account.

62528184

“ Additional Interest ” means all sums payable pursuant to Sections 2.7 , 2.8 and 2.10 hereof.

“ Affiliate ” means, with respect to any Person, any other Person:

(a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person; or

(b) which, directly or indirectly, beneficially owns or holds fifty percent (50%) or more of (y) any class of stock or (z) any other ownership interest in such Person; or

(c) fifty percent (50%) or more of the direct or indirect ownership of which is beneficially owned or held by such Person; or

(d) which is a member of the family (as defined in Section 267(c)(4) of the IRC) of such Person or which is a trust or estate, the beneficial owners of which are members of the family (as defined in Section 267(c)(4) of the IRC) of such Person.

For purposes of this definition, (i) the term “control” (and its correlative meanings) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of stock, by contract or otherwise, and (ii) Borrower, Operating Lessee, each Borrower Party Partner and Guarantor shall be deemed to be Affiliates of Borrower and each other.

“ Agent ” has the meaning set forth in the first paragraph of this Loan Agreement.

“ Agent’s Counsel ” means such counsel as Agent from time to time may engage on behalf of itself and/or Lenders.

“ Agent’s Counsel Fees ” means the reasonable fees and disbursements of Agent’s Counsel for services heretofore or hereafter rendered to Agent on behalf of itself and/or Lenders in connection with the Loan, including the preparation, negotiation, administration and modification of the Loan Documents, and the enforcement of Agent’s and Lenders’ rights and remedies under the Loan Documents.

“ Amortization Payment Amount ” means, as of any Amortization Payment Date:

(a) during the Initial Term, if and for so long as the Loan-to-Value Ratio as of such Amortization Payment Date is greater than sixty percent (60%), an amount equal to the product of (y) the Loan Amount multiplied by (z) one-quarter of one percent (0.25%), and

(b) during the Extension Periods (if any), if and for so long as (i) the Loan-to-Value Ratio as of such Amortization Payment Date is greater than fifty-five percent (55%) or (ii) the Debt Yield as of such Amortization Payment Date is less than eleven and one-half of one percent (11.5%) (provided that, if the Borrower shall not have delivered financial reporting under

62528184 2

Section 5.1 hereof sufficient to determine such Debt Yield, then such Debt Yield shall be deemed to be less than eleven and one-half of one percent (11.5%) for purposes of this definition), an amount equal to the product of (y) the Loan Amount multiplied by (z) three-eighths of one percent (0.375%).

The parties acknowledge that, as of the Closing Date, the Loan-to-Value Ratio is less than or equal to sixty percent (60%). Any change in the Amortization Payment Amount as a result of a change in the Loan-to-Value Ratio shall become effective as of the first Amortization Payment Date following the effective date of the applicable Appraisal or Appraisal Update.

“ Amortization Payment Date ” means each Payment Date in April, July, October and January.

“ Applicable Accounting Standards ” means (a) GAAP, and (b) where applicable to such Person, at any time, the Uniform System of Accounts.

“ Applicable Interest Rate ” has the meaning set forth in Section 2.2(a) hereof.

“ Appraisal ” means a written appraisal report of the Premises as the term “appraisal” is defined in the Code of Professional Ethics of the Appraisal Institute, meeting the requirements of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, prepared by a professional appraiser retained by Agent at Borrower’s expense who is a member of the Appraisal Institute, addressed to Agent and in form, scope and substance satisfactory to Agent, setting forth such appraiser’s determination of the Appraised Value.

“ Appraisal Update ” means any written supplement or “update” to an Appraisal, prepared by a professional appraiser retained by Agent at Borrower’s expense who is a member of the Appraisal Institute, addressed to Agent and in form, scope and substance satisfactory to Agent, setting forth such appraiser’s determination of the Appraised Value.

“ Appraised Value ” means the “as-is” fair market value of the Premises, which would be obtained in an arm’s length transaction between an informed and willing buyer and an informed and willing seller, under no compulsion, respectively, to buy or sell, on the appraisal date of the Appraisal or Appraisal Update, as applicable.

“ Approved Capital Expenditures ” means, for any fiscal year of Borrower and Operating Lessee, the Capital Expenditures set forth in the Approved FF&E/Capital Budget for such fiscal year that are actually incurred by either Borrower or Operating Lessee (without duplication) during such fiscal year, or are otherwise approved by Agent, such approval not to be unreasonably withheld, conditioned or delayed.

“ Approved FF&E/Capital Budget ” means, for any fiscal year of Borrower and Operating Lessee, the FF&E/Capital Budget for such fiscal year and any amendments thereto, in each case, approved or deemed approved by Agent pursuant to Section 5.1(e) hereof, to the extent such approval is required pursuant to said Section.

62528184 3

“ Approved FF&E Expenditures ” means, for any fiscal year of Borrower and Operating Lessee, the FF&E Expenditures set forth in the Approved FF&E/Capital Budget for such fiscal year that are actually incurred by either Borrower or Operating Lessee (without duplication) during such fiscal year, or are otherwise approved by Agent, such approval not to be unreasonably withheld, conditioned or delayed.

“ Ashford REIT ” means Ashford Hospitality Prime, Inc., a Maryland corporation.

“ Assignee ” has the meaning set forth in Section 7.1 hereof.

“ Assignment and Acceptance ” has the meaning set forth in Section 7.5 hereof.

“ Assignments of Agreements ” means, collectively, (i) that certain Assignment of Agreements dated as of the Closing Date made by Borrower in favor of Agent and Lenders and (ii) that certain Assignment of Agreements dated as of the Closing Date made by Operating Lessee in favor of Agent and Lenders.

“ Assignment of Interest Rate Protection Agreement ” means each Assignment of Interest Rate Protection Agreement in the form attached hereto as Exhibit G made by Borrower in favor of Agent and Lenders.

“ Assignments of Leases and Rents ” means, collectively, (i) that certain Assignment of Leases and Rents dated as of the Closing Date made by Borrower in favor of Agent and Lenders and (ii) that certain Assignment of Leases and Rents dated as of the Closing Date made by Operating Lessee in favor of Agent and Lenders.

“ Assumed Interest Expense ” means, as of any Testing Determination Date, the product of (a) the outstanding principal amount of the Loan and (b) a percentage equal to the Assumed Interest Rate.

“ Assumed Interest Rate ” means, as of any Testing Determination Date, a per annum interest rate equal to the greatest of (a) seven percent (7.0%), (b) the sum of (i) the then current weekly average yield on United States Treasury Securities adjusted to constant maturities of five (5) years, as made available by the Federal Reserve Board and published in Federal Reserve Statistical Release H.15 (519), or if not so published, determined on the basis of comparable yields published in a publication designated by Agent, as of such Testing Determination Date and (ii) the then-applicable LIBOR Rate Margin, and (c) the Applicable Interest Rate in effect as of such Testing Determination Date (without giving effect to any Interest Rate Protection Agreement), subject to the following sentence. For purposes of calculating the rate pursuant to the preceding clause (c) as of any Testing Determination Date, in the event that as of such Testing Determination Date, there shall be more than one Applicable Interest Rate in effect, such rate shall be determined on a weighted average basis based on the respective principal balances of each Loan Portion.

62528184 4

“ Authorized Agent Representative ” means Agent’s Client Banking Services department or as otherwise designated as such by Agent from time to time for purposes of Section 2.3 hereof by delivery of a notice to Borrower.

“ Authorized Borrower Representative ” means Deric Eubanks and any other person designated as such by Borrower from time to time for purposes of Section 2.3 hereof by delivery of a notice to Agent.

“ Base Management Fee ” means, for any period, three percent (3%) of Gross Revenues for such period.

“ Base Rate ” means, a rate of interest per annum equal to the sum of (a) the greater of (i) the rate per annum established by Agent from time to time as its reference rate (which Borrower acknowledges is not necessarily Agent’s lowest rate) for short-term commercial loans in Dollars to United States domestic corporate borrowers, as determined by Agent on a daily basis, such rate to change as and when such reference rate changes, and (ii) the Federal Funds Rate, plus one percent (1.00%) per annum, and (b) the Base Rate Margin; provided that in no event shall the Base Rate be less than the LIBOR Rate for a LIBOR Rate Period of one (1) month commencing as of the date of determination of the Base Rate.

“ Base Rate Margin ” means the LIBOR Rate Margin less one percent (1.00%) per annum.

“ Basel III ” has the meaning set forth in Section 2.10(b) hereof.

“ Borrower ” has the meaning set forth in the first paragraph of this Loan Agreement.

“ Borrower Party Partner ” means any current or future general partner or managing or sole member of Borrower and/or Operating Lessee .

“ Borrower’s Certificate ” means that certain Borrower’s Certificate by Borrower in favor of Agent dated as of the Closing Date.

“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law, governmental decree or executive order to close.

“ CA-CIB ” means Crédit Agricole Corporate and Investment Bank.

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“ Capital Expenditures ” means expenditures for repairs, replacements or improvements of or to the Premises the cost of which would be capitalized under GAAP. “ Capital Expenditures ” does not include FF&E Expenditures.

“ Cash Available for Debt Service ” means, with respect to any period in which a determination is being made, the excess of (a) Gross Revenues for such period over (b) Expenses for such period , provided that, solely for purposes of this definition when used to calculate the amount of Net Cash Flow for any period, “Expenses” shall include non-recurring and other extraordinary items not expected to be incurred annually and, for purposes of calculating Net Cash Flow only, exclude any amounts paid or directed to be paid by Borrower, Operating Lessee, Guarantor or any of their Affiliates in contravention of, or on account of or in connection with any action taken in contravention of, the terms of this Loan Agreement or any other Loan Document, and “Gross Revenues” shall include all income of an extraordinary or non-recurring nature, including amounts paid to Borrower under Interest Rate Protection Agreements.

“ Cash Sweep Account ” means an account at Agent established for the purpose of Section 2.14 hereof and any account(s) in substitution thereof or in addition thereto hereafter established in accordance with this Loan Agreement.

“ Cash Sweep Condition ” shall exist

(a) as of any Testing Determination Date if as of such Testing Determination Date, the Interest Coverage Ratio shall be less than 1.25:1.00. If a Cash Sweep Condition exists with respect to any Testing Determination Date pursuant to this clause (a) , then such Cash Sweep Condition shall be deemed to continue to exist until there have been two (2) consecutive subsequent Testing Determination Dates as of which the Interest Coverage Ratio shall be equal to or greater than the applicable foregoing ratio and the financial statements and other documents required to be delivered to Agent pursuant to Section 5.1(b) hereof with respect to the Calendar Quarters ending on such Testing Determination Dates have been delivered to Agent; and

(b) as of any Testing Determination Date if Borrower shall have failed to deliver to Agent the financial statements and other documents required to be delivered to Agent pursuant to Section 5.1(b) hereof with respect to the Calendar Quarter ending on such Testing Determination Date, and such a Cash Sweep Condition shall continue to exist until Borrower delivers such financial statements and other documents to Agent (and a Cash Sweep Condition does not otherwise exist pursuant to the other terms of this definition);

provided, however, that Borrower may cure or prevent the occurrence of a Cash Sweep Condition as a result of clause (a) above by either (y) prepaying the Loan in accordance with Section 2.4(d) hereof or (z) making a deposit into the Cash Sweep Account, in either case in an amount equal to the ICR Cure Payment.

“ Cash Sweep Limit ” means, with respect to any Cash Sweep Condition caused by the failure to satisfy clause (a) of the definition of such term in this Section 1.1 , as of any date of determination, an amount which, if applied in reduction of the outstanding principal amount of the Loan, would have resulted in the applicable Cash Sweep Condition not existing.

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“ Casualty ” means damage or destruction to all or any part of the Mortgaged Property.

“ Casualty Proceeds Disbursement Threshold ” has the meaning set forth in Section 5.12(b) hereof.

“ Central Bank Pledge ” has the meaning set forth in Section 7.1 hereof.

“ Change in Control ” means the occurrence of any of the following: (a) any Person other than (x) Archie Bennett or Montgomery Bennett or group of related Persons, or (y) (so long as the same is a Public Company) Ashford, Inc. or its Affiliate or (z) any Person externally advised by Ashford, Inc. or its Affiliate shall have acquired direct or indirect beneficial ownership of more than thirty‑five percent (35%) of the outstanding beneficial or other ownership interests (including warrants, options or other rights entitling the holder thereof to purchase or acquire any such interest) of Ashford REIT, (b) the occurrence of a change in the composition of the governing body of Ashford REIT such that a majority of the members of any such governing body (x) were not members of such governing body on the Closing Date and (y) were not (A) nominated for election or elected to such governing body with the affirmative vote of a majority of the members who were either members of such governing body on the Closing Date or whose nomination or election was previously so approved or (B) nominated to such governing body with the affirmative vote of a nominating committee, the majority of the members of which were (i) members of such governing body on the Closing Date, (ii) members whose nomination was previously so approved by such a nominating committee and/or (iii) members whose nomination or election was previously approved in accordance with the immediately preceding clause (A), (c) Ashford REIT (together with Ashford Hospitality Limited Partnership, a Delaware limited partnership) ceases to own, directly or indirectly, at least 51% of all equitable and beneficial ownership interests (including warrants, options or other rights entitling the holder thereof to purchase or acquire any such interest) in Guarantor or (d) Ashford REIT ceases to control (as “control” is defined in the definition of “Affiliate” set forth in this Section 1.1 ) Guarantor.

“ Closing ” means the execution and delivery of this Loan Agreement by Borrower, Operating Lessee, Agent and Lenders.

“ Closing Date ” means the date upon which the Closing occurs.

“ Collateral ” means the Mortgaged Property and all other property, real or personal, tangible or intangible, and all rights thereto, now or hereafter pledged, mortgaged, assigned or delivered pursuant or with respect to the Loan Documents or otherwise by Borrower, Operating Lessee or any other Person to Agent and/or Lenders as security for the Obligations.

“ Commitment ” means, (a) as to any Lender, the commitment of such Lender to make its Pro Rata Share of the Loan in an amount (i) as of the Closing Date with respect to CA-CIB equal to the Loan Amount and (ii) thereafter, as such commitment shall be set forth in any Assignment and Acceptance by which such Lender becomes a Lender or by which such Lender assigns all or any portion of its rights and/or obligations in and to the Loan and the other Loan

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Documents to an Assignee, and (b) as to all Lenders, the aggregate commitment of all Lenders to make the Loan, which aggregate commitment shall be the Loan Amount on the Closing Date, as the amounts set forth in the foregoing clauses (a) and (b) may be adjusted in accordance with this Loan Agreement.

“ Comparable Standards ” means the standards of management, operation, use and maintenance of first-class, full service hotels that are comparable to the Premises in location, price, size, facilities, amenities, quality and nature and typical of a first-class, full service hotel.

“ Debt Service ” means, as to any period with respect to which Debt Service is being determined, the amount of Interest due for any such period , giving effect to any Interest Rate Protection Agreement then in effect , principal payments due hereunder for such period, and all other amounts due under the Loan Documents for such period.

“ Debt Service Coverage Ratio ” means, as of any date of determination for purposes of Section 2.6(b) hereof, the ratio of (a) Cash Available for Debt Service for the twelve (12)- month period ending with the most recent month for which Borrower is then required to have delivered monthly financial statements pursuant to Section 5.1(d) hereof to (b) scheduled interest and amortization payments due on the Loan during the twelve (12)-month period immediately following such date of determination, assuming, for purposes of this definition, that (i) the LIBOR Rate Margin throughout the twelve (12)-month period immediately following such date of determination shall be equal to the LIBOR Rate Margin as of such date of determination, (ii) the Applicable Interest Rate throughout such twelve (12)-month period shall be the fixed or capped rate under the applicable Interest Rate Protection Agreement plus the LIBOR Rate Margin and (iii) each scheduled amortization payment (if any) during such twelve (12)-month period shall be in the amount required as of the first Amortization Payment Date during the applicable Extension Period.

“ Debt Yield ” means, for any date of determination, the ratio of (a) Cash Available for Debt Service for the twelve (12)-calendar month period ending with the most recent month for which Borrower is then required to have delivered monthly financial statements pursuant to Section 5.1(d) hereof to (b) the then outstanding principal amount of the Loan as of the date of determination.

“ Default ” means any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

“ Default Rate ” means, as to any date, the actual Applicable Interest Rate for that date plus five percent (5%) per annum.

“ Defaulting Lender ” has the meaning set forth in Section 8.14(a) hereof.

“ Documentation ” has the meaning set forth in Section 9.23 hereof.

“ Dollars ” or the sign “ $ ” means dollars in the lawful currency of the United States of America.

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“ Engineering Report ” means, collectively, those certain reports and assessments set forth on Exhibit C attached hereto as the “Engineering Report”.

“ Environmental Indemnity ” means that certain Environmental Indemnity dated as of the Closing Date made by Borrower, Operating Lessee and Guarantor in favor of Agent and Lenders.

“ Environmental Report ” means, collectively, those certain reports and assessments set forth on Exhibit C attached hereto as the “Environmental Report”.

“ Equipment Leases ” shall mean any leases executed in connection with the financing and leasing of equipment or other Personal Property used in the ordinary course of operation of the Premises.

“ ERISA Affiliate ” means any organization, trade or business, or other arrangement (whether or not incorporated) which is a member of a group of which Borrower or Operating Lessee is also a member and which is treated as a single employer within the meaning of IRC Section 414(b), (c), (m) or (o) or Section 4001 of ERISA.

“ ERISA Event ” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the withdrawal of Borrower, Operating Lessee or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partial withdrawal of Borrower, Operating Lessee or any ERISA Affiliate from any Multiemployer Plan, (d) notice of reorganization or insolvency of a Multiemployer Plan, (e) the filing of a notice of intent to terminate a Pension Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA, (f) the institution, or threat of institution, of proceedings to terminate or appoint a trustee to administer a Pension Plan or Multiemployer Plan by the PBGC, (g) the failure to make any required contribution to a Pension Plan or Multiemployer Plan, (h) the imposition of a lien under IRC Section 430(k) or Section 303(k) of ERISA on Borrower, Operating Lessee or any ERISA Affiliate, (i) the existence with respect to any Pension Plan of an “accumulated funding deficiency” (as defined in IRC Section 412 or Section 302 of ERISA), whether or not waived, or (j) any event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA.

“ Event of Default ” has the meaning set forth in Section 6.1 hereof.

“ Excluded Sums ” has the meaning set forth in Section 8.3 hereof.

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“ Excluded Taxes ” means, with respect to any Lender, (a) income, franchise or similar Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such Lender is organized or in which its principal office is located or in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar law imposed by any other jurisdiction in which such Lender is organized or in which its principal office is located or in which its applicable lending office is located and (c) any United States federal withholding tax that would not have been imposed but for a failure by a Lender (or by any financial institution through which any payment is made to such Lender) to comply with the procedures certifications, information reporting disclosure, or other related requirements of Sections 1471-1474 of the IRC and any amended or successor provisions or any regulations or official guidance thereunder.

“ Exercise Notice ” has the meaning set forth in Section 8.14(c) hereof.

“Expenses ” means, for any period, operating costs and expenses (including fees under the Property Management Agreement) that are either (a) actually incurred or (b) accrued (in accordance with Applicable Accounting Standards, consistently applied) by or on behalf of Borrower or Operating Lessee (without duplication) during such period in connection with Borrower’s ownership and Operating Lessee’s operation of the Premises (without duplication of any costs and expenses prepaid during a prior period or otherwise paid prior to being incurred or accrued), subject to annualized adjustments for taxes, insurance premiums, and other operating expenses determined by Agent, and without duplication, amounts reserved by or on behalf of Borrower or Operating Lessee (including the FF&E/Capital Reserve Amount) for the Premises to the extent such reserves are established and maintained in the ordinary course of business and in a manner consistent with good business practices, but excluding (t) nonrecurring and other extraordinary items not expected to be incurred on an annual basis, (u) capital expenditures, (v) amounts funded from Loan, insurance or condemnation proceeds, (w) amounts paid from any reserve (including, amounts paid from the FF&E/Capital Reserve Account) maintained by Borrower, Operating Lessee or any other Person, including Property Manager and Agent, on behalf of or for the benefit of Borrower or Operating Lessee to the extent payment to such reserve previously constituted an “Expense,” (x) Debt Service, (y) federal and state income taxes (or any other taxes based on income), franchise taxes, other taxes based on income or gross receipts due and owing from Borrower, Property or any direct or indirect owner of Borrower and any taxes in lieu of or in the nature of the foregoing, and (z) depreciation, amortization and any other non-cash items.

“ Extension Period ” means each of the First Extension Period, the Second Extension Period and the Third Extension Period. “ Extension Periods ” means the First Extension Period, the Second Extension Period and the Third Extension Period, collectively.

“ FF&E ” has the meaning set forth in the Mortgage.

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“ FF&E Expenditures ” means expenditures for the repair, replacement or acquisition (as appropriate) of furniture, fixtures and equipment for the Premises, so long as such repairs, replacements or acquisitions would be capitalized as an asset for accounting purposes under GAAP.

“ FF&E/Capital Budget ” means an annual budget for FF&E Expenditures and Capital Expenditures as described in Section 5.1(e) of this Loan Agreement and any amendments thereto.

“ FF&E/Capital Reserve Account ” has the meaning set forth in Section 2.15(a) hereof.

“ FF&E/Capital Reserve Amount ” means, for any calendar month, an amount equal to four percent (4%) of Gross Revenues for such calendar month.

“ FF&E/Capital Disbursement Request ” means a written request for disbursement from the FF&E/Capital Reserve Account pursuant to Section 2.15 hereof in the form attached hereto as Exhibit D .

“ First Extended Maturity Date ” has the meaning set forth in Section 2.19(a) hereof.

“ First Extension Period ” has the meaning set forth in Section 2.19(a) hereof.

“ First Tier Default ” means a Default arising from the existence of any facts or conditions described in clause (a)(ii) , (b) or (j) of Section 6.1 hereof (for clarification purposes, without taking into account any period of time set forth in such clauses).

“ Franchise Agreement ” has the meaning set forth in Section 5.2(e) hereof.

“ Full Recourse Event ” means, collectively, any or all of the following:

(a) the appointment at Borrower’s, Operating Lessee’s or either’s Affiliate’s initiation or with Borrower’s, Operating Lessee’s or either’s Affiliate’s consent or approval, express or implied, of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings with respect to Borrower, Operating Lessee or a Borrower Party Partner or with respect to all, or substantially all, of Borrower’s, Operating Lessee’s or a Borrower Party Partner’s property, or for the winding-up or liquidation of Borrower’s, Operating Lessee’s or Borrower Party Partner’s affairs (in each case, other than at the direction or request of Agent); and/or

(b) the filing by Borrower, Operating Lessee or a Borrower Party Partner of a petition, or the institution by Borrower, Operating Lessee or either’s Affiliate or consent or approval by Borrower, Operating Lessee or either’s Affiliate, express or implied, to the institution against Borrower, Operating Lessee or a Borrower Party Partner of, proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors.

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“ Funding Direction Letter ” means that certain letter agreement regarding disbursement of the Loan executed by Borrower effective as of the date hereof.

“ GAAP ” means those generally accepted accounting principles and practices which are recognized as such by the American Institute of Certified Public Accountants or by the Financial Accounting Standards Board or through appropriate boards or committees of that Board after the Closing Date, and which are consistently applied for all periods, so as to properly reflect the financial position of a Person, except that any accounting principle or practice required or permitted to be changed by the American Institute of Certified Public Accountants or the Financial Accounting Standards Board (or other appropriate board or committee of that Board) in order to continue as a generally accepted accounting principle or practice may be so changed only so long as such required or permitted change shall not have the effect of permitting Borrower’s or Operating Lessee’s compliance with any financial covenants or performance tests contained in this Loan Agreement when without such change, Borrower or Operating Lessee would not so comply.

“ Government Lists ” means (A) the OFAC SDN List, (B) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Agent shall have notified Borrower in writing is now included in “Government Lists” or (C) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other government authority or pursuant to any Executive Order of the President of the United States of America that Agent notified Borrower in writing is now included in “Government Lists.”

“ Governmental Authority ” means any federal, state, county, municipal, parish, provincial or other government, or any department, commission, board, court, agency, committee, or quasi-governmental unit whether of the United States of America or any other country, or any instrumentality of any of them, or any other political subdivision thereof with jurisdiction over the Premises, Borrower, Operating Lessee, any Borrower Party Partner or Guarantor.

“ Gross Revenues ” means, for any period, collectively but without duplication, all Operating Revenues for such period but excluding proceeds of the Loan, any loan, equity investment or capital contribution made by Borrower, Operating Lessee, any member, partner or shareholder of Borrower or Operating Lessee or any other Person to Borrower or Operating Lessee, Security Deposits until they are forfeited by the depositor, interest income, net payments to Borrower resulting from any Interest Rate Protection Agreement, insurance proceeds (except for business interruption or rent loss insurance proceeds), condemnation awards, income of Lessees (other than Operating Lessee) or concessionaires, and Rent received by Borrower from Operating Lessee under the Operating Lease. Other income of an extraordinary or non-recurring nature shall also be excluded from the computation of “Gross Revenues” for purposes of calculating “Cash Available for Debt Service,” but not for purposes of calculating “Net Cash Flow”. Gross Revenues shall be determined in accordance with the cash basis of accounting.

“ Guarantor ” means Ashford Hospitality Prime Limited Partnership, a Delaware limited partnership.

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“ ICR Cure Payment ” has the meaning set forth in Section 2.14(b) hereof.

“ Impositions ” means and includes all taxes, assessments for public improvements or benefits and any payments in lieu thereof, whether or not commenced or completed prior to the date hereof or while any of the Obligations are outstanding, water rates and sewer rents, charges, license fees, permit fees, inspection fees and other governmental levies or payments, of every kind and nature whatsoever, general and special, foreseen or unforeseen, ordinary and extraordinary, which now or at any time hereafter may be assessed, levied, confirmed, imposed or which may become a lien upon the Mortgaged Property, or any portion thereof, or which are payable with respect thereto, or upon the rents, issues, revenue, income, proceeds or profits thereof, or on the occupancy, operation, use, possession or activities thereof, whether any or all of the same be levied directly or indirectly or as excise or income or franchise taxes in lieu of taxes which are otherwise imposed upon property of the same type as the Mortgaged Property, together with any penalties or other charges with respect to the late payment or non-payment thereof.

“ Improvements ” has the meaning set forth in the Mortgage.

“ Indebtedness ” means:

(a) all indebtedness for borrowed money or for the deferred purchase price of property or services (including all obligations, contingent or otherwise in connection with letter of credit facilities, acceptance facilities or other similar facilities);

(b) all obligations evidenced by bonds, notes, debentures or other similar instruments;

(c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property);

(d) all capital lease obligations;

(e) all obligations, contingent or otherwise, in connection with interest rate exchange agreements and similar instruments; and

(f) all indebtedness of the nature referred to in clauses (a) through (e) above of another Person guaranteed directly or indirectly or secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien, security interest or other charge or encumbrance upon or in property (including accounts and contract rights) owned by the Person with respect to whom Indebtedness is being determined, even though such Person has not assumed or become liable for the payment of such Indebtedness.

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“ Indemnified Party ” has the meaning set forth in Section 9.1 hereof.

“ Initial Maturity Date ” means March 9, 2017, or such earlier date as the entire principal amount of the Loan shall become due and payable by acceleration or otherwise.

“ Initial Term ” means the period commencing on the Closing Date and ending on the Initial Maturity Date.

“ Insurance Policies ” means the insurance policies described on Schedule 5.11 hereto.

“ Insurance Requirements ” means and includes all provisions of any Insurance Policy, all requirements of the issuer of any such Insurance Policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to or affecting the Premises.

“ Interest ” means interest payable on the Loan at the Applicable Interest Rate or the Default Rate, as applicable.

“ Interest Coverage Ratio ” means, as of any Testing Determination Date, the ratio of (a) Cash Available for Debt Service for the twelve (12)-calendar month period ending with the most recent month for which Borrower is then required to have delivered monthly financial statements pursuant to Section 5.1(d) hereof, to (b) Assumed Interest Expense as of such Testing Determination Date.

“ Interest Period ” means the period commencing on each Payment Date and ending on the day immediately preceding the next succeeding Payment Date, with the first Interest Period commencing on the Closing Date.

“ Interest Rate Protection Agreement ” means an agreement with respect to an interest rate cap which conforms to the requirements set forth in Section 2.6(a) hereof or, with respect to any Extension Period, Section 2.6(b) hereof, and the effect of which is to protect Borrower from an increase in the rate of interest payable by Borrower on the Loan at the Applicable Interest Rate.

“ Interest Rate Protection Agreement Consent ” has the meaning set forth in Section 2.6(a) hereof.

“ IRC ” means the Internal Revenue Code of 1986, as amended.

“ Land ” has the meaning set forth in the recitals hereof.

“ Lease ” has the meaning set forth in the Mortgage, but shall exclude the Equipment Leases and the Operating Lease.

“ Lease Letter of Credit ” means any letter of credit provided to Borrower or Operating Lessee by any Lessee under, or guarantor of, any Lease as security or otherwise.

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“ Legal Requirements ” means, collectively, (a) all current and future laws, statutes, regulations, ordinances, codes, rules, rulings, orders, judgments, decrees, injunctions and other requirements of any Governmental Authority (including those regarding fire, health, handicapped access, sanitation, ecological, historic, zoning, environmental protection, wetlands and building laws and the Americans with Disabilities Act of 1990, Pub. L. No. 89-670, 104 Stat. 327 (1990), as amended, and all regulations promulgated pursuant thereto) in any way directly or indirectly applicable to Borrower or Operating Lessee or to the acquisition, construction, development, sale, use, occupancy, possession, operation, management, maintenance or ownership of the Premises, or any part thereof; and (b) all requirements of each Operating Permit.

“ Lender ” and “ Lenders ” have the meaning set forth in the first paragraph of this Loan Agreement.

“ Lessee ” means a lessee, sublessee, tenant, subtenant, licensee, concession holder or other Person having the right to use or occupy all or any portion of the Premises pursuant to a Lease or otherwise.

“ LIBOR ” means (a) the London Interbank Offered Rate for Dollar deposits in an amount comparable to the Loan Portion with respect to which the applicable LIBOR Rate is being determined as appearing on Reuters Screen LIBOR 01 Page (formerly known as Telerate display page 3750) (or such other page as may replace LIBOR 01 Page on that service or such other service as may be nominated by the ICE Benchmark Administration as the information vendor for the purpose of displaying ICE Benchmark Administration Interest Settlement Rates for Dollar deposits) at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date that is three (3) LIBOR Banking Days prior to the first day of the applicable LIBOR Rate Period and with respect to which LIBOR is being determined for a time period equal to, or if no equal time period is so appearing on Reuters Screen LIBOR 01 Page (formerly known as Telerate display page 3750) (or substitute thereof as aforesaid), the time period so appearing which is most approximately equal to such LIBOR Rate Period; or (b) if such method for determining “LIBOR” shall not be available, the rate per annum quoted by Agent’s principal London, England office at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date which is three (3) LIBOR Banking Days prior to the first day of the LIBOR Rate Period for the offering by Agent (or Agent’s London or other office, if applicable) to leading banks in the London interbank market of Dollar deposits having a term comparable to such LIBOR Rate Period and in an amount comparable to the principal amount of the Loan Portion with respect to which the applicable LIBOR Rate is being determined.

“ LIBOR Banking Day ” means any Business Day on which dealings in deposits in Dollars are transacted in the London interbank market and banks are also open for business in London, England.

“ LIBOR Rate ” means, with respect to any period during which an Applicable Interest Rate shall be a LIBOR Rate, an interest rate per annum equal to the sum of (a) the applicable LIBOR, plus (b) the LIBOR Rate Margin.

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“ LIBOR Rate Margin ” means a fluctuating amount that shall initially be two and one-quarter of one percent (2.25%) per annum and shall be adjusted thereafter based upon the Loan-to-Value Ratio based upon Appraisals or Appraisal Updates obtained by Agent in accordance with Section 5.5 hereof, as follows:

(a) if the Loan-to-Value Ratio is greater than sixty percent (60%), the LIBOR Rate Margin shall be two and one-half of one percent (2.50%) per annum, or

(b) if the Loan-to-Value Ratio is equal to or less than sixty percent (60%), the LIBOR Rate Margin shall be two and one-quarter of one percent (2.25%) per annum.

Any change in the LIBOR Rate Margin shall become effective as of the first Payment Date following the effective date of the applicable Appraisal or Appraisal Update.

“ LIBOR Rate Period ” means for any Loan Portion, each period for the computation of Interest on a Loan Portion at a LIBOR Rate. Subject to Section 2.3(d) hereof, each LIBOR Rate Period shall have a duration of one (1), three (3) or six (6) months (in each case, subject to general availability), as selected by Borrower in accordance with Section 2.3(b) hereof, or such other period as Borrower and Agent shall agree. Notwithstanding the foregoing, in the case of a LIBOR Rate Period which would otherwise end after the date which is the Maturity Date, such LIBOR Rate Period shall have a duration equal to the period commencing on the effective date of such LIBOR Rate Period and ending on and including the Maturity Date. Each LIBOR Rate Period shall commence, with respect to any outstanding principal of the Loan, on any date selected by Borrower in accordance with Section 2.3 hereof; provided , however , that notwithstanding anything in this definition of LIBOR Rate Period to the contrary, (i) if any LIBOR Rate Period would otherwise end on a day which is not a LIBOR Banking Day, such LIBOR Rate Period shall be extended to the next succeeding LIBOR Banking Day, unless the result of such extension would be to carry such LIBOR Rate Period over into another calendar month, in which event such LIBOR Rate Period shall end on the immediately preceding LIBOR Banking Day and (ii) any LIBOR Rate Period that begins on the last LIBOR Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Rate Period) shall end on the last LIBOR Banking Day of the calendar month in which such LIBOR Rate Period would have ended if there were a numerically corresponding day in such calendar month.

“ Lien ” means any deed of trust, mortgage, pledge, assignment of leases and rents, security interest, encumbrance, lien or charge of any kind including any conditional sale or other title retention agreement, any lease in the nature thereof, or the filing of, or any agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.

“ Loan ” has the meaning set forth in Section 2.1 hereof.

“ Loan Agreement ” has the meaning set forth in the first paragraph of this Loan Agreement.

“ Loan Amount ” has the meaning set forth in the recitals hereof.

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“ Loan Documents ” means, collectively, this Loan Agreement, the Note, the Mortgage, the Assignments of Leases and Rents, the Assignments of Agreements, each Assignment of Interest Rate Protection Agreement, the Environmental Indemnity, the Recourse Liability Agreement, the Loan Fee Letter, the Borrower’s Certificate, the UCC Financing Statements, the Property Manager Subordination Agreement and all other agreements, certificates or other documents now or hereafter evidencing or securing or executed in connection with the Loan.

“ Loan Fee Letter ” means that certain letter dated as of the Closing Date between Agent and Borrower pertaining to fees payable with respect to the Loan.

“ Loan Portion ” means any principal of the Loan with respect to which an Applicable Interest Rate has been established (and, in the case of any LIBOR Rate, whether or not such Applicable Interest Rate has become effective); provided , however , that the amount of any Loan Portion with respect to which a LIBOR Rate is established shall be at least equal to $1,000,000.

“ Loan-to-Value Ratio ” means the ratio of the outstanding principal amount of the Loan as of the date of determination to the Appraised Value of the Premises and based on the then-most current Appraisal or Appraisal Update, with such adjustments thereto as reasonably determined by Agent.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, property or other assets, operations, prospects or condition (financial or otherwise), taken as a whole, of Borrower, Operating Lessee or Guarantor, (b) the ownership, value, income, revenues, construction or operation of or from the Premises or the Collateral, (c) the ability of Borrower, Operating Lessee or Guarantor to perform its obligations under the Loan Documents to which it is a party, (d) the Liens therein securing the Obligations or (e) the ability of Agent to enforce or collect any of the Obligations.

“ Material Lease ” means any Lease which, individually or in the aggregate with respect to the same Lessee and its Affiliates, is for 5,000 or more net rentable square feet of the Premises.

“ Material Operating Agreement ” means the Operating Agreements existing on the date hereof or entered into after the date hereof which (a) have non-cancelable terms of one (1) year or longer and are not terminable at any time without cause by Borrower or Operating Lessee without any material penalty or other fee and (b) require payments by Borrower, Operating Lessee or Property Manager in excess of $100,000 per calendar year.

“ Material Taking ” means a Taking (a) of any portion of the Premises unless the portion so taken constitutes less than ten percent (10%) of the Land, such land is located along the perimeter or periphery of the Land and no portion of the Improvements is located on such land, or (b) of such portion of the Premises which when so taken would, in Agent’s determination, leave remaining a balance of the Premises (and, if applicable, such other property) which, due to the amount and/or nature of the area so taken and/or the location of the area taken

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in relation to the area not so taken, (i) would not, under economic conditions, applicable zoning laws, building regulations and the requirements of this Loan Agreement, the Leases, the Permitted Encumbrances, the Premises Documents and the Property Management Agreement permit the Restoration of the Premises or (ii) would materially interfere with the marketing, operation, use, leasing or maintenance of the Premises in accordance with the standards set forth in Section 5.2(b) hereof.

“ Maturity Date ” means the Initial Maturity Date, as same may have been extended pursuant to Section 2.19 hereof, or such earlier date as the entire principal amount of the Loan shall become due and payable by acceleration or otherwise.

“ Mortgage ” means that certain Amended and Restated Mortgage, Security Agreement, Financing Statement, Fixture Filing and Assignment of Rents dated as of the Closing Date made by Borrower for the benefit of Agent, and joined in by Operating Lessee.

“ Mortgaged Property ” has the meaning set forth in the Mortgage.

“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which Borrower, Operating Lessee or any ERISA Affiliate has any obligation or liability, contingent or otherwise.

“ Net Cash Flow ” means, with respect to any period, the excess of (a) Cash Available for Debt Service for such period over (b) the amount of Debt Service for such period.

“ Non-Availability Notice ” has the meaning set forth in Section 2.9(a) hereof.

“ Note ” means that certain Consolidated, Amended and Restated Promissory Note dated as of the Closing Date in an amount equal to the Loan Amount made by Borrower in favor of Agent, together with any replacements or substitutes for the foregoing.

“ Obligations ” means, collectively, all present and future indebtedness, obligations, duties and liabilities of either or both of Borrower and Operating Lessee to Agent and Lenders arising pursuant to this Loan Agreement and the other Loan Documents or evidenced by the Note, and all interest accruing thereon, together with reasonable attorneys’ fees and disbursements incurred in the drafting, negotiation, enforcement or collection hereof and of the other Loan Documents, regardless of whether such indebtedness, obligations, duties or liabilities are direct, indirect, fixed, contingent, joint, several or joint and several.

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“ OFAC ” means the United States Department of Treasury Office of Foreign Assets Control.

“ OFAC SDN List ” means the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC.

“ Operating Account ” means, collectively, those certain accounts identified in Schedule 4.11 attached hereto as the “Operating Account” and any account(s) in substitution thereof or in addition thereto hereafter established in accordance with this Loan Agreement.

“ Operating Agreement ” means any agreement entered into by Borrower or Operating Lessee, other than the Leases, the Premises Documents, the Submerged Land Lease, the Franchise Agreement, if any, and the Property Management Agreement, which relates to the ownership, operation or maintenance of, or the use, licensing, financing or leasing of any personal property or equipment in connection with the operation and maintenance of the Premises.

“ Operating Lease ” has the meaning set forth in the recitals hereto.

“ Operating Lessee ” has the meaning set forth in the first paragraph of this Loan Agreement.

“ Operating Permits ” means, collectively, all authorizations, consents and approvals given by and licenses and permits issued by Governmental Authorities which are required for the ownership, use and occupancy of the Premises in accordance with this Loan Agreement, the Loan Documents, all Legal Requirements, the Permitted Encumbrances and the Property Management Agreement and for the performance and observance of all Legal Requirements and all agreements, provisions and conditions of Borrower and Operating Lessee contained herein and therein otherwise pertaining to the ownership, use and occupancy of the Premises.

“ Operating Revenues ” means all revenues, receipts, fees and proceeds of any kind actually received by Borrower and Operating Lessee (without duplication) or on behalf of Borrower and Operating Lessee (without duplication) from or related to the ownership, leasing, use and operation of, or otherwise derived from, the Premises, including all Rents, concession fees and charges, proceeds from rental or business interruption insurance, sums paid from users of parking spaces and other facilities or amenities located on the Premises, withdrawals from cash reserves and all other revenues and amounts arising from the leasing, use and operation of the Premises.

“ Participant ” has the meaning set forth in Section 7.2 hereof.

“ Participant Register ” has the meaning set forth in Section 7.6(b) hereof.

“ Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of

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2001, as the same may be amended from time to time, and corresponding provisions of future laws.

“ Patriot Act Offense ” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (i) the criminal laws against terrorism, (ii) the criminal laws against money laundering, (iii) the Bank Secrecy Act, as amended, (iv) the Money Laundering Control Act of 1986, as amended, or the (v) the Patriot Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense.

“ Payment Date ” means the first (1st) Business Day of each calendar month during the Term and the Maturity Date. “ Payment Date ” shall also include such earlier date, if any, on which the unpaid principal balance of the Loan is paid in full.

“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“ Pension Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA, IRC Section 412 or Section 302 of ERISA, and in respect of which Borrower, Operating Lessee or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“ Permitted Encumbrances ” means (a) the liens and security interests created by the Loan Documents, (b) liens and encumbrances constituting Permitted Transfers, (c) all liens, encumbrances and other matters listed in Schedule B of the Title Policy, (d) liens, if any, for taxes not yet due or delinquent, (e) the Property Management Agreement, any Franchise Agreement consented to by Agent in accordance with Section 5.2(e) , the Operating Lease and the Submerged Land Lease in effect on the Closing Date, or otherwise in accordance with the Loan Documents, (f) rights of existing and future tenants, licensees and concessionaries pursuant to Leases in effect as of the date hereof or entered into after the date hereof in accordance with the Loan Documents, (g) the lien in respect of any financing or leasing of equipment and other personal property to the extent not prohibited under the Loan Documents, (h) covenants, restrictions, and easements (including, utility easements servicing the Premises granted in the ordinary course of business of operating the Premises) that do not have a Material Adverse Effect, (i) such other encumbrances hereafter in existence approved by Agent and (j) Liens of mechanics or materialmen or Impositions that are being contested in accordance with the terms of the Loan Documents.

“ Permitted Equity Transfer ” means, so long as, after giving effect to each of the following, there is no Change of Control;

(a) a Transfer (including pledges), issuance, conversation or redemption of any interest in Ashford REIT, Ashford Prime OP General Partner LLC (or its successor by

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merger or consolidation), Ashford Prime OP Limited Partner LLC (or its successor by merger or consolidation) or Guarantor;

(b) the merger or consolidation of Ashford REIT so long as, after giving effect to each of the foregoing, the surviving entity is Ashford REIT;

(d) the merger or consolidation of Guarantor so long as, after giving effect to each of the foregoing, the surviving entity is Guarantor; and

(e) the pledges to (i) Bank of America, N.A., as administrative agent (but not the exercise of remedies with respect to such pledge or the foreclosure thereon), in connection with the corporate line of credit to Guarantor existing as of the Closing Date (as such corporate line of credit may be amended), or (ii) such other institutional lender(s) providing a replacement of the corporate line of credit to Guarantor referred to in clause (i) above (but not the exercise of remedies with respect to such pledge or the foreclosure thereon), provided that (A) such replacement line of credit is secured directly or indirectly by all or substantially all of the portfolio of Guarantor and (B) the value of the equity in the Premises which is indirectly pledged as collateral under such line of credit constitutes no more than twenty percent (20%) of the total value of all assets directly or indirectly securing such line of credit at the time of such pledge.

“ Permitted Indebtedness ” means any Indebtedness of Borrower and/or Operating Lessee under (a) the Loan Documents, (b) with respect to Borrower only, any Interest Rate Protection Agreement, (c) unsecured trade payables incurred by Borrower or Operating Lessee in the ordinary course of operating the Premises which (i) do not exceed, at any time, in the aggregate (inclusive of payables of Borrower and Operating Lessee) $2,000,000, and (ii) are paid within thirty (30) days of the date incurred, and (d) Equipment Leases entered into in the ordinary course of operating the Premises which do not exceed, at any time, in the aggregate per annum (inclusive of lease payments of Borrower and Operating Lessee) $2,000,000.

“ Permitted Personal Property Transaction ” means (I) any sale, assignment, trade, transfer, exchange or other disposition of any item of Personal Property in the ordinary course of business and in compliance with the operating standards set forth in Section 5.2(b) hereof which (a) has become obsolete or worn beyond practical use or inadequate, unfit or unadapted for use in the operation of the Premises or the removal and/or replacement of which would result in a cost savings, and (b) has been replaced by a substitute having a value or utility equal to or greater than the replaced item when new, which replacement item is owned or leased by Borrower or Operating Lessee and such ownership or leasehold interest is subject to a first, perfected security interest in favor of Agent for the benefit of Lenders, and (II) Equipment Leases entered into in the ordinary course of operating the Premises which do not exceed, at any time, in the aggregate per annum (inclusive of lease payments of Borrower and Operating Lessee) $2,000,000.

“ Permitted Transfer ” means (a) Permitted Personal Property Transaction, (b) Permitted Encumbrances, and (c) Permitted Equity Transfers.

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“ Person ” means an individual, partnership, limited partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, or other entity of any kind.

“ Personal Property ” has the meaning set forth in the Mortgage.

“ Premises ” has the meaning set forth in the Mortgage.

“ Premises Documents ” has the meaning set forth in the Mortgage.

“ Pro Rata Share ” means with respect to all matters relating to any Lender, the percentage obtained by dividing (a) the Commitment of such Lender by (b) the aggregate Commitment of all Lenders, in each case as of the date of determination.

“ Property Management Agreement ” means that certain Ashford Prime Hotel Master Management Agreement between Property Manager and Ashford Prime TRS Corporation, dated as of November 19, 2013, as joined in by Operating Lessee pursuant to an Addendum to Hotel Master Management Agreement, dated as of the Closing Date, together with such modifications as shall be consented to by Agent in accordance with this Loan Agreement.

“ Property Manager ” means Remington Lodging & Hospitality, LLC and any replacement property manager of the Premises approved by Agent in writing.

“ Property Manager Subordination Agreement ” means that certain Manager Subordination and Consent Agreement dated as of the Closing Date by and between Agent and Property Manager, and joined by Operating Lessee.

“ Public Company ” means a company whose common stock is listed on the New York Stock Exchange, Inc. or other national public exchange in the United States and is subject to the oversight of and regulation by the United States Securities and Exchange Commission.

“ Purchase Date ” has the meaning set forth in Section 8.14(c) hereof.

“ Purchase Price ” has the meaning set forth in Section 8.15 hereof.

“ Qualified Counterparty ” means a financial institution (other than a Lender) whose senior long term debt is rated A or better by Standard & Poor’s Ratings Group, A2 or better by Moody’s Investors Service, Inc., or equivalent rating by Fitch Inc. or other nationally recognized rating agency, and which is otherwise confirmed in writing by Agent as being reasonably acceptable to Agent.

“ Recourse Liability Agreement ” means that certain Recourse Liability Agreement dated the date hereof made by Borrower, Operating Lessee and Guarantor for the benefit of Agent.

“ Recourse Liability Events ” means, collectively, any or all of the following:

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(a) fraud or intentional misrepresentation on the part of Borrower, Operating Lessee, Guarantor, or any Borrower Party Partner in connection with the execution, delivery and/or performance of the Loan Documents or any certificate, report, financial statement or other instrument or document furnished to Agent or any Lender at the time of the closing of the Loan or during the term of the Loan;

(b) gross negligence or willful misconduct on the part of Borrower, Operating Lessee, Guarantor, any Borrower Party Partner or any Affiliate of any thereof;

(c) any application or appropriation, in contravention of any provision of this Loan Agreement or any other Loan Document, of Rents, Security Deposits, insurance proceeds, condemnation awards, sums payable pursuant to any Interest Rate Protection Agreement, proceeds of all or any portion of the Collateral or any sum held in any Account;

(d) any distribution or payments in violation of Section 5.24 hereof;

(e) the withdrawal or other removal of any sums held in any Account in violation of this Loan Agreement or any other Loan Document;

(f) any transfer or encumbrance of the Collateral or any interest therein or any interest in Borrower or Operating Lessee in violation of this Loan Agreement or any other Loan Document (excluding (i) any transfer by foreclosure, deed-in-lieu, or otherwise in connection with Lenders’ exercise of remedies), (ii) a transfer to a Governmental Authority as a result of a Taking, and (iii) the foreclosure of any pledge to the extent that such foreclosure is otherwise a Permitted Transfer);

(g) the incurrence of Indebtedness, other than Permitted Indebtedness, by Borrower, Operating Lessee or a Borrower Party Partner (provided that, any existence of Indebtedness which was Permitted Indebtedness when incurred but became non Permitted Indebtedness due to the inability of Borrower to repay such Indebtedness as it became due caused by the failure of the Premises to generate sufficient net operating income shall not constitute a Recourse Liability Event);

(h) the incurrence of any liability by Borrower, Operating Lessee or Borrower Party Partner pursuant to ERISA caused by any act or omission of Borrower, Operating Lessee, or either’s Affiliate;

(i) the attachment of any Lien to the Collateral, other than Permitted Encumbrances;

(j) the occurrence of any material physical waste of or to the Collateral or any portion thereof by Borrower, Operating Lessee, Guarantor, Manager or an Affiliate of any of the foregoing or any Person acting on behalf of Borrower, Operating Lessee, Guarantor, Manager or such Affiliate (provided that the occurrence of waste shall not constitute a Recourse Liability Event to the extent such waste occurs due to (i) insufficient revenues at the Property, (ii) the occurrence of a Casualty or Taking and/or the failure to complete the Restoration of the Property thereafter, or

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(iii) the failure of any owner of Borrower or Operating Lessee to make additional capital contributions or other advances to Borrower or Operating Lessee);

(l) the imposition of all transfer taxes and/or fees by a Governmental Authority as a result of the Transfer of any Collateral or any portion thereof, including pursuant to a foreclosure, deed in lieu of a foreclosure or otherwise which results from, is based upon or relates to (i) the occurrence of any Recourse Liability Event, or (ii) any bankruptcy or insolvency proceeding filed by or against Borrower, Operating Lessee, any Borrower Party Partner or Guarantor.

“ Register ” has the meaning set forth in Section 7.6(a) hereof.

“ Release Conditions ” has the meaning set forth in Section 5.12(d) hereof.

“ Rents ” has the meaning set forth in the Mortgage.

“ Requisite Lenders ” means, at any time, non-Defaulting Lenders having Commitments representing at least sixty-six and two-thirds percent (66 2/3%) of the total Commitments of all non-Defaulting Lenders at such time.

“ Restoration ” means in case of a Casualty or a Taking, the restoration, replacement or rebuilding of the portion of the Premises affected by the Casualty or Taking such that when such restoration, replacement or rebuilding is completed, the Premises shall have been restored, in the case of any Casualty, substantially to the same character and condition as prior to such Casualty, and in the case of any Taking, to an integral unit as substantially similar as possible, taking into account the extent of the Taking, to the character and condition of the Premises prior to such Taking, in each case in accordance with this Loan Agreement, all Legal Requirements, the Leases, the Premises Documents, the Permitted Encumbrances and the Property Management Agreement and to the extent any alterations or additions were made in compliance with this Loan Agreement, with any such alterations or additions. In any case, Restoration shall (i) provide substantially the same amount and type of, and rights with respect to, utilities and parking spaces applicable to the Premises as existed prior to such Casualty or Taking, (ii) provide sufficient (in Agent’s reasonable determination) access across and over the Premises to the public roads and highways and (iii) be such that the Loan-to-Value Ratio of the Premises, as determined by an Appraisal or Appraisal Update, as applicable, when so restored, together with the amount of any Net Proceeds or Net Restoration Award received by Agent and applied in repayment of the principal amount of the Loan, shall be equal to or less than sixty-five percent (65%).

“ Second Extension Period ” has the meaning set forth in Section 2.19(a) hereof.

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“ Second Extended Maturity Date ” has the meaning set forth in Section 2.19(a) hereof.

“ Security Deposit” means any cash security or other deposit given by or on behalf of a Lessee to the landlord under a Lease.

“ Security Documents ” means, collectively, this Loan Agreement, the Mortgage, the Assignments of Agreements, the Assignments of Leases and Rents, the UCC Financing Statements and any other Loan Document entered into to secure the Obligations.

“ Significant Alteration ” means with respect to any fiscal year of Borrower and Operating Lessee, any alteration, building or improvement in, to or otherwise with respect to the Premises which costs or will cost in excess of $2,000,000 or, when aggregated with all other alterations, buildings and improvements made by or on behalf of Borrower or Operating Lessee at the Premises during any fiscal year, costs or will cost in excess of $4,000,000.

“ Special Purpose Bankruptcy Remote Entity ” has the meaning set forth on Exhibit E attached hereto.

“ Submerged Land Lease ” has the meaning as set forth in the Mortgage.

“ Survey ” means that certain survey dated March 5, 2015 prepared by Island Surveying Inc..

“ Taking ” (and its correlative meanings) means any temporary or permanent taking by any Governmental Authority of the Premises or any portion thereof through eminent domain, condemnation or other proceedings or by any settlement or compromise of such proceedings, or any voluntary conveyance of such property or any portion thereof during the pendency of any such proceedings.

“ Taxes ” has the meaning set forth in Section 2.8 hereof.

“ Term ” means the period commencing on the Closing Date and ending on the Maturity Date.

“ Testing Determination Date ” means the last day of each Calendar Quarter and, for purposes of Section 2.19(b)(iv) , 2.19(c)(iv) and 2.19(d)(iv) hereof only, the last day of the second (2 ^nd ) calendar month immediately preceding the Initial Maturity Date, the First Extended Maturity Date or the Second Extended Maturity Date, respectively, referred to in said Sections .

“ Third Extension Period ” has the meaning set forth in Section 2.19(a) hereof.

“ Title Company ” means Chicago Title Insurance Company.

“ Title Policy ” means the mortgagee title insurance policy in favor of Agent issued on the Closing Date, including all endorsements thereto.

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“ Transfer ” means (a) the conveyance, transfer, assignment, pledge, mortgage, encumbrance, hypothecation or sale, by operation of law or otherwise, of (i) the Collateral, or any part thereof or interest therein, or (ii) a direct or indirect equity or beneficial interest in Borrower or Operating Lessee or in any Person having a direct or indirect equity or beneficial interest in Borrower or Operating Lessee respectively, (b) the leasing of all or substantially all of the Premises other than pursuant to the Operating Lease, or (c) any change in the composition of Borrower or Operating Lessee or form of business association or any modification of the operating agreement or any of the other organizational documents of Borrower, Operating Lessee or any member, partner or shareholder of Borrower or Operating Lessee which would result in a change in the ownership or control (as defined in the definition of “Affiliate” in this Section 1.1 ) of Borrower, Operating Lessee or any member, partner or shareholder of Borrower or Operating Lessee, as the case may be, or the rights of any member, partner or shareholder of either Borrower, Operating Lessee or Guarantor with respect thereto.

“ UCC Financing Statements ” means such UCC financing statements as Agent shall deem necessary or desirable to perfect Agent’s security interest in the Collateral (or any portion thereof).

“ Uniform System of Accounts ” means the accounting standards printed in the then most recently revised edition of A Uniform System of Accounts for Hotels, as adopted by the Hotel Association of New York City, Inc. and the American Hotel and Motel Association; except that any accounting principle or practice required or permitted to be changed by the Hotel Association of New York City, Inc. and the American Hotel and Motel Association (or other appropriate board or committee of both Associations) in order to continue as an accounting standard or practice permitted pursuant to clause (b) of the definition of Applicable Accounting Standards herein may be so changed, so long as (a) such required or permitted change shall not have the effect of permitting Borrower’s compliance with any financial covenants or performance tests contained in this Loan Agreement when without such change, Borrower would not so comply and (b) such required permitted change shall not require the modification of any provision of any Loan Document in order to effectuate the intent of such provision as originally contemplated, unless Agent and Borrower shall agree to such modification.

“ Withdrawal Liability ” means at any time the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in contributions required to be made pursuant to Section 4243 of ERISA.

“ Zoning Report ” means that certain Zoning and Site Requirements Summary with a last revision date of March 5, 2015 prepared by The Planning & Zoning Resource Corporation for Borrower and Agent.

SECTION 1.2. Other Definitional Provisions.

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(b) Whenever appropriate herein or required by the context or circumstances, the masculine shall be construed as the feminine and/or the neuter, the singular as the plural, and vice versa.

(d) The words “include” and “including” wherever used in this Loan Agreement or any other Loan Document shall be deemed to be followed by the words “without limitation”.

(e) Any reference to any Loan Document or any other document, instrument or agreement in this Loan Agreement or in any other Loan Document shall be deemed to mean such Loan Document or other document, instrument or agreement, as applicable, as it may from time to time be amended, supplemented, restated, consolidated, severed, split, extended, substituted for, partially released, replaced, increased, waived, cross-collateralized, renewed or otherwise modified in accordance with the terms of the Loan Documents.

ARTICLE II

THE LOAN

SECTION 2.1. The Loan; Use of Funds. Subject to the conditions and upon the terms herein provided, each Lender severally agrees to lend to Borrower and Borrower agrees to borrow from each Lender, on the Closing Date, an amount equal to such Lender’s Commitment, which Commitments in the aggregate shall equal the Loan Amount (the “ Loan ”). The Loan shall be made by Lenders ratably in proportion to their respective Commitments. The Loan shall be evidenced by the Note. Interest and Additional Interest, if any, shall be payable in accordance with the Note and this Loan Agreement. The Loan shall be repaid with Interest, Additional Interest, costs, fees and charges as more particularly set forth in this Loan Agreement, the Note, the Mortgage and the other Loan Documents. Principal amounts of the Loan which are repaid for any reason may not be reborrowed. Borrower shall use the proceeds of the Loan to refinance the existing indebtedness with respect to the Premises, to pay the costs incurred by Borrower and its Affiliates to close the Loan, and for Borrower’s other corporate purposes; provided , however , that in any case, Borrower shall not use any of the Loan proceeds in any manner or for any purpose that violates Legal Requirements or which could result in the Loan being in violation of, or in any penalty or liability of Agent or any Lender under, the Patriot Act or similar Legal Requirements. On the Closing Date, Lenders shall advance the Loan to Borrower severally in accordance with their respective Commitments, to be disbursed in accordance with the Funding Direction Letter.

SECTION 2.2. Interest.

(a) Interest at the Applicable Interest Rate. Until paid in full, and subject to Sections 2.5(c) and 2.9 hereof, each Loan Portion shall bear interest at an interest rate (an

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“ Applicable Interest Rate ”) which shall be a LIBOR Rate or the Base Rate as provided in this Loan Agreement.

(b) Interest Payments. Borrower shall pay Interest as provided in this Loan Agreement on each Loan Portion on each Payment Date, in arrears, for the Interest Period then ending. Borrower shall pay Additional Interest as and when provided herein.

(i) Interest accruing at the Applicable Interest Rate shall be calculated on the basis of the actual number of days elapsed and a year of 360 days.

(ii) Any change in the Base Rate shall be automatically effective as of the day on which such change in rate occurs.

(iii) Each determination of an interest rate by Agent pursuant to any provision of this Loan Agreement shall be conclusive and binding on Borrower in the absence of manifest error.

SECTION 2.3. Determination of Applicable Interest Rate.

(a) Applicable Interest Rate.

(i) The Applicable Interest Rate for the Loan shall be 2.56% per annum commencing on the Closing Date to but excluding April 1, 2015. From and after April 1, 2015, the Applicable Interest Rate for the Loan shall be determined as set forth in this Section 2.3 , it being acknowledged that Borrower has elected a LIBOR Rate having a one (1)-month LIBOR Rate Period to apply commencing on April 1, 2015.

(ii) The Applicable Interest Rate (and any related LIBOR Rate Period) from time to time applicable to any proceeds of the Loan upon and after the expiration of any LIBOR Rate Period shall be determined in the manner set forth in Section 2.3(b) and (c) hereof.

(iii) After a conversion election, each Loan Portion shall bear interest during each applicable Interest Period at the Applicable Interest Rate as shall have been designated pursuant to Section 2.3(b) hereof, or as otherwise provided in Section 2.3(c) hereof. In connection with the selection or conversion of the Applicable Interest Rate pursuant to Section 2.3(b) hereof, Borrower shall specify the principal amount of the Loan Portion for which such selection or conversion is being made.

(iv) At any particular time, the sum of all Loan Portions shall equal the outstanding principal amount of the Loan.

(b) LIBOR Rate Conversion Options. Subject to Sections 2.5(c) and 2.3(d) hereof, Borrower may elect to convert the Applicable Interest Rate with respect to any portion of the Loan which bears interest at a LIBOR Rate, from such LIBOR Rate to another LIBOR Rate effective upon the expiration of the then current LIBOR Rate Period; provided , however , that

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(x) there shall not have occurred and be continuing any Default or Event of Default, (y) the circumstances referred to in Section 2.9 hereof shall not have occurred and be continuing, and (z) after giving effect to such conversion, the number of LIBOR Rates in effect shall not exceed, in the aggregate, three (3). If Borrower wishes to convert the Applicable Interest Rate on any Loan Portion as permitted by the preceding sentence, an Authorized Borrower Representative shall give notice thereof (which shall be irrevocable) to Agent to the attention of an Authorized Agent Representative prior to 11:00 a.m. (New York City time) on the day that is not less than three (3) LIBOR Banking Days prior to the proposed conversion date specifying (A) the principal amount of the Loan with respect to which such conversion shall occur, (B) the proposed conversion date, which shall be determined in accordance with the preceding sentence, and (C) the applicable LIBOR Rate Period.

(c) Reversion to Base Rate or One-Month LIBOR Rate. If an Authorized Borrower Representative fails timely to notify Authorized Agent Representative in accordance with Section 2.3(b) hereof of Borrower’s election of a LIBOR Rate for any Loan Portion with an expiring LIBOR Rate Period or fails to provide all of the information required by Section 2.3(b) hereof, the Applicable Interest Rate on such Loan Portion shall automatically upon the expiration of such LIBOR Rate Period convert to (i) a LIBOR Rate having a LIBOR Rate Period of one (1) month or, if such one-month LIBOR Rate Period would end after the Maturity Date, a LIBOR Rate Period having a duration equal to the period commencing upon the expiration of such expiring LIBOR Rate Period and ending on and including the Maturity Date, subject to the proviso in the definition of “LIBOR Rate Period” herein, or (ii) if any of the circumstances referred to in Section 2.9 hereof shall have occurred and be continuing, or a Default or an Event of Default shall have occurred and be continuing, a Base Rate.

(d) Interest Rate Corresponding to Interest Rate Protection Agreements. Notwithstanding anything to the contrary set forth in this Section 2.3 , at all times that Borrower is required to cause one or more Interest Rate Protection Agreements to be in effect as required pursuant to Section 2.6(a) hereof, Borrower shall cause a portion of the Loan corresponding to the notional amount with respect to which any such Interest Rate Protection Agreements were established to have an Applicable Interest Rate which is a LIBOR Rate having a LIBOR Rate Period of one (1) month.

SECTION 2.4. Principal Payments.

(a) Principal Payment at Maturity. Borrower shall pay the unpaid principal balance of the Loan in a single installment on the Maturity Date, together with all accrued Interest and all other sums due under the Loan Documents.

(b) Amortization Payments. On each Amortization Payment Date, Borrower shall pay to Agent, in addition to Interest then due, the Amortization Payment Amount (if any) applicable to such Amortization Payment Date.

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(d) Optional Prepayments. Borrower may, upon at least five (5) Business Days’ prior written notice to Agent (provided that Borrower may revoke or modify the prepayment set forth in such notice if necessary due to unanticipated delays so long as Borrower pays to Agent on the date such prepayment is scheduled to be made all Additional Interest and other amounts due and payable under any Loan Document as a result of such prepayment not being made on the date set forth in such notice and Borrower shall have advised Agent of the delay on or before the date set forth in such notice), prepay the Loan, in whole or in part (in amounts equal to at least $1,000,000), in accordance with this Section 2.4(d) ; provided , however , that if such prepayment is made prior to September 9, 2016, as a condition to such prepayment, Borrower shall, concurrently with such prepayment, pay to Agent for the pro rata benefit of the Lenders a prepayment fee equal to one and one-quarter of one percent (1.25%) of the amount of such prepayment. Any such prepayment notice shall be irrevocable and shall specify the date and amount of the prepayment and the Applicable Interest Rate for each Loan Portion (or any portion thereof) being prepaid. Concurrently with, and as a condition to, any such prepayment, Borrower shall pay to Agent all sums required to be paid pursuant to, and shall otherwise comply with, Section 2.4(g) hereof.

(e) Other Sums. Borrower shall pay to Agent all other sums owed to Agent and/or Lenders pursuant to the Loan Documents when such sums are due and payable as provided in the applicable Loan Document, or if not provided therein, within five (5) days after the due date thereof or if demand is expressly required, within five (5) days after written demand by Agent. To the extent any other such sums are determined on a per diem or similar basis, such sums shall be calculated on the basis of a 360-day year and the actual number of days elapsed.

(f) Mandatory Prepayment. Borrower shall be required to prepay the Loan at any time and from time to time upon the occurrence of any of the circumstances requiring prepayment described in this Loan Agreement or the Mortgage by paying the principal amount so required to be prepaid. Concurrently with any such prepayment, Borrower shall pay to Agent all sums required to be paid pursuant to, and shall otherwise comply with, Section 2.4(g) hereof (except the prepayment fee set forth in Section 2.4(d) hereof shall not be payable).

(g) Payment of Other Sums. Concurrently with any repayments or prepayment of principal pursuant to this Section 2.4 (other than as to clause (x) below, prepayments pursuant to Section 2.4(b) hereof and under Section 5.14 hereof), Borrower shall, as a further condition of such prepayment (x) pay all accrued and unpaid Interest to and including the date of such prepayment on the amount being prepaid, (y) pay all Additional Interest and any other amounts due and payable under any Loan Document as a result of such repayment or prepayment, and (z) if such repayment or prepayment repays the entire outstanding amount of the Loan, pay all reasonable out-of-pocket expenses incurred by Agent in connection with such repayment or prepayment of the Loan plus all other out-of-pocket, expenses, Interest, Additional Interest and other amounts due and payable under any Loan Document.

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SECTION 2.5. Payment; Default Rate; Application of Certain Monies; Priority of Payments; Set-offs.

(a) Manner of Payment. All sums payable by Borrower to or for the account of Agent or any Lenders under this Loan Agreement or any other Loan Document shall be made in Dollars and in immediately available funds not later than 11:00 a.m. (New York City time) on the date when such payment is due and shall be payable by wire transfer in accordance with the wiring instructions attached hereto as Exhibit F or such other wiring instruction as Agent may provide to Borrower from time to time. Funds received by Agent after 11:00 a.m. (New York City time) shall be treated for all purposes as having been received by Agent on the immediately succeeding Business Day, and Borrower shall be responsible for any costs of Agent and Lenders resulting therefrom, including any Additional Interest or overdraft charges.

(b) Payment on a Non-Business Day. Whenever any payment to be made under the Loan Documents shall be stated to be due, or if the Maturity Date would otherwise occur, on a day which is not a Business Day, such payment shall be made, and the Maturity Date shall occur, as applicable, on the immediately succeeding Business Day. Any such extension of time shall be included in the computation of payment of Interest (including interest at the Default Rate), fees, and Additional Interest.

(i) Notwithstanding anything to the contrary contained herein or in another Loan Document, if an Event of Default shall have occurred and be continuing, each Loan Portion shall bear Interest from and including the date of the occurrence of such Event of Default (after as well as before judgment) at a fluctuating rate of interest per annum equal to the Default Rate with respect to each Loan Portion, which interest at the Default Rate shall be payable upon demand of Agent. Interest accruing at the Default Rate shall be calculated on the basis of the actual number of days elapsed and a year of 360 days.

(ii) If Borrower shall fail to make a payment on the due date therefor (i.e., the scheduled due date or within the required number of days following written demand therefor to the extent provided under the Loan Documents) of any sum under the Loan Documents (whether principal (other than principal which is accruing interest at the Default Rate pursuant to Section 2.5(c)(i) above), Interest, Additional Interest or other amounts), such sum shall bear Interest from and including the date such payment is due to but excluding the date such payment is made (after as well as before judgment) at a fluctuating rate of interest per annum equal to the Default Rate with respect to such sum.

(iii) Agent’s failure to collect interest at the Default Rate at any time shall not constitute a waiver of Agent’s right thereafter, at any time and from time to time (including upon acceleration of the Maturity Date or upon payment in full of the Loan), to collect such previously uncollected interest at the Default Rate or to collect subsequently accruing interest at the Default Rate.

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(d) Late Payment Fee. Borrower shall pay to Agent for the account of the Lenders a late payment premium in the amount of five percent (5%) of any principal payment (other than the principal payment due on the Maturity Date), Interest, Additional Interest, fee or other amount payable under any Note, this Loan Agreement or the other Loan Documents made more than five (5) days after the due date thereof, which late payment premium shall be due with any such late payment. The acceptance of a late payment premium shall not constitute a waiver of any Default or Event of Default then existing or thereafter arising. Agent’s failure to collect a late payment premium at any time shall not constitute a waiver of Agent’s right thereafter, at any time and from time to time (including upon acceleration of the Maturity Date or upon payment in full of the Loan), to collect such previously uncollected late payment premiums or to collect subsequently accruing late payment premiums.

(e) Priority of Payments. All payments received with respect to the Loan shall be applied on account of sums due and owing pursuant to the Note, this Loan Agreement, the Mortgage or the other Loan Documents in the following order of priority:

first , to the payment of all amounts due and then owing pursuant to the Note, the Loan Agreement and the other Loan Documents which do not constitute either principal or Interest;

second , to the payment of Interest due and then owing; and

third , to the unpaid principal balance of the Loan (and such payments applied to principal shall be applied first to the portion of the principal balance of the Loan, if any, not subject to an Interest Rate Protection Agreement, and then to the remaining portion of the principal balance of the Loan subject to an Interest Rate Protection Agreement).

provided , however , in the event that an Event of Default shall have occurred and shall then be continuing, or such payments are insufficient to pay all amounts then due and owing pursuant to the Loan Documents, all such payments, including sums received in connection with the exercise of any remedies pursuant to the Loan Documents, shall be applied in such order and manner as Agent shall elect; and provided , further , that, Agent may apply payments first to satisfy the portion of the Obligations, if any, for which Borrower, Operating Lessee, Guarantor or any other Person has no personal, partnership, company or corporate liability, and then to the remaining Obligations.

(f) No Set-offs. All sums payable by Borrower under the Note, this Loan Agreement and the other Loan Documents shall be paid in full and without set-offs, counterclaims, deductions or withholdings of any kind.

SECTION 2.6. Interest Rate Protection Agreement.

(a) Interest Rate Protection Agreement. On or before the Closing Date, Borrower shall enter into and satisfy all conditions precedent to the effectiveness of an Interest Rate Protection Agreement that shall satisfy all of the following conditions and shall thereafter

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maintain such Interest Rate Protection Agreement in full force and effect during the Term (or then-remaining Term, as applicable):

(i) The Interest Rate Protection Agreement shall be an interest rate, cap, acceptable to Agent, the effect of which is to protect Borrower against upward fluctuations of the LIBOR Rate (as distinguished from LIBOR) applicable to a LIBOR Rate Period of one (1) month in excess of seven percent (7.00%) per annum during the Initial Term and in a notional amount equal to at least eighty percent (80%) of the Loan Amount;

(ii) The Interest Rate Protection Agreement shall be entered into between Borrower and, at Borrower’s option, (A) Agent or an Affiliate of Agent if Agent or such Affiliate and Borrower shall elect to enter into an Interest Rate Protection Agreement, (B) CA-CIB or an Affiliate of CA-CIB if CA-CIB or such Affiliate and Borrower shall elect to enter into an Interest Rate Protection Agreement or (C) a Qualified Counterparty ;

(iii) In the case of an Interest Rate Protection Agreement which is an interest rate cap agreement, all sums payable by Borrower on account of the purchase price for the Interest Rate Protection Agreement during the term of the Interest Rate Protection Agreement shall have been paid in full on or prior to the effective date thereof;

(iv) Borrower’s interest in such Interest Rate Protection Agreement, including all rights of Borrower to payment thereunder and any residual value thereof, shall have been collaterally assigned to Agent pursuant to an Assignment of Interest Rate Protection Agreement;

(v) The financial institution which is party to such Interest Rate Protection Agreement shall have executed and delivered to Agent promptly after Closing or the extended Maturity Date, as applicable, a consent to the collateral assignment of Borrower’s interest in such Interest Rate Protection Agreement referred to in clause (iv) above pursuant to a consent in the form attached to the Assignment of Interest Rate Protection Agreement (the “ Interest Rate Protection Agreement Consent ”) in the form attached hereto as Exhibit G ; and

(vi) Such Interest Rate Protection Agreement shall otherwise be satisfactory to Agent in form and content.

(b) Extension Periods. If Borrower elects to extend the Maturity Date pursuant to Section 2.19 hereof for any Extension Period, then as a condition to each such extension, Borrower shall enter into and satisfy all conditions precedent to the effectiveness of an Interest Rate Protection Agreement that shall satisfy the following condition and also the conditions set forth in clauses (ii) through (vi) of Section 2.6(a) hereof and shall thereafter maintain such Interest Rate Protection Agreement in full force and effect during the then-remaining Term: The Interest Rate Protection Agreement shall be an interest rate cap, acceptable to Agent, the effect of which is to protect Borrower against upward fluctuations of the LIBOR Rate (as distinguished from LIBOR) during such Extension Period applicable to a LIBOR Rate Period of one (1) month in excess of the greater of (y) seven percent (7.00%) per annum and (z) such percentage rate per annum as would cause the Debt Service Coverage Ratio as of the last

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day of the calendar month immediately preceding the first (1 ^st ) day of such Extension Period to be equal to 1.25:1.00, and in a notional amount equal to at least eighty percent (80%) of the outstanding principal balance of the Loan as of the first day of such Extension Period.

(c) Failure to Provide Interest Rate Protection. In the event that Borrower breaches its obligation to enter into and maintain an Interest Rate Protection Agreement in full force and effect as set forth in Sections 2.6(a) or (b) hereof, in addition to Agent’s rights and remedies hereunder or under the other Loan Documents, Agent may, but shall have no obligation to, at Borrower’s sole cost and expense and on Borrower’s behalf, enter into an Interest Rate Protection Agreement as may be required pursuant to Sections 2.6(a) and (b) hereof. Agent is hereby irrevocably appointed the true and lawful attorney of Borrower (coupled with an interest), in its name and stead, to execute such an Interest Rate Protection Agreement and all necessary documents ancillary thereto, and for that purpose Agent may execute all necessary agreements and instruments, and may substitute one or more persons with like power, Borrower hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof. All sums paid and liabilities incurred by Agent pursuant to this Section 2.6 shall be paid by Borrower (and not from the proceeds of the Loan) within five (5) days after Agent’s demand with interest at the Default Rate to the date of payment to Agent and such sums and liabilities, including such interest, shall be deemed and shall constitute advances under this Loan Agreement and be evidenced by the Note and be secured by the Security Documents.

(d) Obligation of Borrower Unaffected by Interest Rate Protection Agreement. No Interest Rate Protection Agreement shall alter, impair, restrict, limit or modify in any respect the obligation of Borrower to pay Interest or Additional Interest on the Loan, as and when the same becomes due and payable in accordance with the provisions of the Loan Documents.

(e) Termination, etc. of Interest Rate Protection Agreement. Borrower shall not terminate, modify, cancel or surrender, or permit the termination, modification, cancellation or surrender of, any Interest Rate Protection Agreement without the prior consent of Agent. Within five (5) days after Borrower obtains actual knowledge of or receipt of written notice (which may be given by Agent or a Lender) of a default by the financial institution that is a party to any Interest Rate Protection Agreement, Borrower shall substitute for such defaulted Interest Rate Protection Agreement another Interest Rate Protection Agreement (to which the Person that defaulted under the defaulted Interest Rate Protection Agreement is not a party) so that, after giving effect to such substitution, Borrower is in compliance with the requirements of Sections 2.6(a) and (b) hereof. Notwithstanding the foregoing, (i) Borrower may terminate any Interest Rate Protection Agreement if it is required to enter into a new one pursuant to the immediately preceding sentence and provided that Borrower shall have entered into such new agreement upon or before terminating the existing one, and (ii) Agent’s consent to the modification of any Interest Rate Protection Agreement shall not be unreasonably withheld, conditioned or delayed so long as, giving effect to such modification, such Interest Rate Protection Agreement continues to comply with the requirements of Section 2.6(a) and (b) hereof, the payment dates and interest period (and manner of determining same) are not changed, the agreement is not cross-defaulted, no additional termination events with respect to Borrower

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or automatic early termination events are added and there are no other materially adverse amendments.

(f) Receipts from Interest Rate Protection Agreements. All payments due to Borrower pursuant to any Interest Rate Protection Agreement, including upon any termination thereof, shall be payable to and held by Agent; provided , however , that all periodic “net payments” due to Borrower so received by Agent in connection with a payment made by a counterparty to an Interest Rate Protection Agreement shall be applied by Agent on account of Interest then due and payable on the Loan. If an Event of Default occurs, Agent may, in its sole discretion, for so long as such Event of Default is continuing and in addition to any other rights and remedies hereunder, apply the amounts so held by Agent to the Loan or other amounts due under the Loan Documents at Agent’s election. Until such time as all Obligations have been paid in full, Borrower shall have no right to withdraw or otherwise apply any funds received by Agent on account of any Interest Rate Protection Agreement. Such funds shall constitute additional security for the Obligations, a security interest therein being granted hereby . In the event Borrower receives any sums pursuant to or in connection with any Interest Rate Protection Agreement, it shall immediately pay such sums to Agent.

SECTION 2.7. Additional Interest. Borrower shall pay to Agent the following losses, costs and expenses of Agent or any Lender incurred or estimated by Agent or such Lender, as applicable, to be incurred: all losses, costs and expenses incurred by reason of obtaining, liquidating or redeploying deposits or other funds acquired by Agent or such Lender to fund or maintain the Loan, including as a result of (i) a prepayment of the Loan, or (ii) a delay or failure to convert the Applicable Interest Rate to a LIBOR Rate, or to prepay the Loan when required hereunder or after Borrower has given a notice of prepayment, or otherwise. In any of the foregoing events, Borrower shall pay to Agent, concurrently with any principal payment and otherwise within five (5) days after written demand, such amount as shall equal the amount of the Additional Interest certified by Agent (or the applicable Lender) to Borrower by reason of such event. A certificate as to the amount of such Additional Interest submitted by Agent to Borrower setting forth Agent’s (or the applicable Lender’s) basis for the determination of Additional Interest shall be conclusive evidence of the amount thereof, absent manifest error. Failure on the part of Agent to demand payment from Borrower for any Additional Interest attributable to any particular period shall not constitute a waiver of Agent’s (or the applicable Lender’s) right to demand payment of such amount for any subsequent or prior period.

SECTION 2.8. No Withholdings. All sums payable by Borrower under the Note, this Loan Agreement and the other Loan Documents, shall be paid in full and without set-off or counterclaims and free of any deductions or withholdings for any and all present and future taxes, levies, imposts, deductions, duties, filing and other fees or charges (collectively, “ Taxes ”) other than Excluded Taxes. In the event that Borrower is prohibited by any law from making any such payment free of such deductions or withholdings with respect to Taxes, then Borrower shall pay such additional amount to Agent as may be necessary in order that the actual amount received by Lenders after such deduction or withholding (and after payment of any additional Taxes due as a consequence of the payment of such additional amount) shall equal the amount that would have been received if such deduction or withholding were not required;

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provided , however , that Borrower shall not be obligated to pay such additional amount on account of a specific Lender if at the time such Lender became a “Lender” hereunder, Borrower is required to deduct or withhold any sums solely because such Lender had a legal basis to deliver, but failed to deliver, to Borrower (a) a duly executed copy of United States Internal Revenue Service Form W-8 BEN, W-8 ECI or W-81MY or any successor form or any required renewal thereof, as the case may be, certifying in each case that such Lender is entitled to receive payments hereunder or under the other Loan Documents without deduction or withholding of any United States federal income taxes or at a reduced rate of withholding for such taxes or (b) a duly executed United States Internal Revenue Service Form W-8 BEN or W-9 or any successor form or any required renewal thereof, establishing that a full exemption exists from United States backup withholding tax, and as result of such failure, Borrower was prohibited by the IRC from making any such payment free of such deductions or withholding. Notwithstanding anything contained in this Section 2.8 , in no event will any Lender’s failure to deliver any such forms, or any renewal or extension thereof, affect, postpone or relieve Borrower from any obligation to pay Interest, principal, Additional Interest and other amounts due under the Loan Documents (other than amounts due under this Section 2.8 as a result of a Lender’s failure to deliver such forms). Such additional amount shall be due concurrently with the payment with respect to which such additional amount is owed in the amount of Taxes certified by Agent (or the applicable Lender). A certificate as to the amount of Taxes submitted by Agent to Borrower setting forth Agent’s (or the applicable Lender’s ) basis for the determination of Taxes shall be conclusive evidence of the amount thereof, absent manifest error. Failure on the part of Agent to demand payment from Borrower for any Taxes attributable to any particular period shall not constitute a waiver of Agent’s (or the applicable Lender’s) right to demand payment of such amount for any subsequent or prior period.

SECTION 2.9. Unavailability of LIBOR; Illegality.

(a) Unavailability of LIBOR. If on any date on which Borrower seeks to establish a LIBOR Rate as the Applicable Interest Rate pursuant to Section 2.3 hereof or if Section 2.3(c) hereof applies, Agent determines (which determination shall be conclusive and binding upon Borrower) that (i) Dollar deposits in an amount approximately equal to the then outstanding principal balance of the Loan Portion bearing interest at a LIBOR Rate are not generally available at such time in the London interbank Eurodollar market for deposits in Eurodollars, (ii) reasonable means do not exist for ascertaining LIBOR, or (iii) the Applicable Interest Rate would be in excess of the maximum interest rate which Borrower may by law pay, Agent shall promptly give notice (the “ Non-Availability Notice ”) of such fact to Borrower and the option to convert to or to continue the Applicable Interest Rate on such Loan Portion as a LIBOR Rate shall be suspended until such time as such condition no longer exists. In the event that the option to elect, to convert to or to continue an Applicable Interest Rate as a LIBOR Rate shall be suspended as provided in this Section 2.9(a) , effective upon the giving of the Non-Availability Notice, and if applicable, effective as of the first date that the applicable LIBOR Rate Period would otherwise be in effect pursuant to Section 2.3(c) hereof, interest on the Loan Portion for which a LIBOR Rate was to be determined shall be payable at the Base Rate, from and including the date of the giving of the Non-Availability Notice (or the date that such LIBOR Rate Period would otherwise be in effect pursuant to Section 2.3(c) hereof, if applicable) until

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the Maturity Date or until any earlier date on which a LIBOR Rate shall become effective for such Loan Portion pursuant to Section 2.3 hereof following the giving of notice by Agent to Borrower that the conditions referred to in this Section 2.9(a) no longer exist.

(b) Illegality. In the event that at any time while any Loan Portion bears interest at a LIBOR Rate, any Lender determines (which determination shall be conclusive and binding on Borrower) that it shall become illegal for such Lender to maintain the Loan or a portion thereof on the basis of one or more LIBOR Rates, Agent shall promptly after receiving notice thereof from such Lender give written notice of such fact to Borrower, and the option to elect, to convert to or to continue the Applicable Interest Rate on any Loan Portion as a LIBOR Rate shall be suspended until such time as such condition shall no longer exist. In the case of existing Loan Portions affected by the circumstances described in the immediately preceding sentence, the Applicable Interest Rate on such Loan Portion shall be converted automatically to the Base Rate (unless such Lender determines that such conversion is not required with respect to any existing Loan Portion) and shall be payable at the Base Rate in the same manner as provided in Section 2.9(a) hereof.

(c) Prepayment of Loan as Remedy. If Agent or any Lender, as applicable, gives notice to Borrower of the occurrence of the circumstances described in Section 2.9(a) or (b) hereof, or any Lender demands compensation under Section 2.8 or 2.10 hereof, Borrower may, within thirty (30) days of such notice, give notice to Agent and to each Lender of Borrower’s intention to prepay the entire outstanding principal balance of the Loan, together with accrued Interest and all other amounts owing under the Loan Documents (including Additional Interest in connection with such prepayment under Section 2.7 hereof). In the case of the circumstances described in Section 2.9(a) or (b ), Borrower may, within ten (10) days of giving such notice, prepay the Loan in full as aforesaid in accordance with Section 2.4(d) hereof, but without the payment of any prepayment fees set forth in said Section 2.4(d) . In the case of compensation demanded under Section 2.8 or 2.10 hereof, unless the affected Lender(s) agree(s), within ten (10) days after Borrower’s notice as aforesaid, to waive the application of said Sections, then Borrower may, within ten (10) days of giving such notice, prepay the Loan in full as aforesaid in accordance with Section 2.4(d) hereof, but without the payment of any prepayment fees set forth in said Section 2.4(d) .

SECTION 2.10. Increased Costs and Capital Adequacy.

(a) Borrower agrees to pay Agent additional amounts as Agent shall determine (which determination shall be conclusive and binding upon Borrower) will compensate Lenders for costs incurred in maintaining the Loan or any portion thereof outstanding or for the reduction of any amounts received or receivable as a result of any change in any applicable law, regulation or treaty, or in the interpretation or administration thereof by any domestic or foreign governmental authority charged with the interpretation or administration thereof (whether or not having the force of law), or by any domestic or foreign court, (i) changing the basis of taxation of payments to any Lender (other than taxes imposed on all or any portion of the overall net income of any Lender by the United States or by any political subdivision or taxing authority of the United States), (ii) imposing, modifying or applying any reserve, special deposit or similar

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requirement against assets of, deposits with or for the account of, credit extended by, or any other acquisition of funds for loans by any Lender (whether directly, indirectly or on a portfolio wide basis) or (iii) imposing on any Lender any other condition affecting the Note or the Loan.

(b) If any Lender shall determine that (i) any change in the application of any law, rule, regulation or guideline adopted or arising out of (y) the June 2006 report of the Basel Committee on Banking Regulations and Supervisory Practices entitled “Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework Comprehensive Version,” or (z) the reports and supporting documentation of the Basel Committee on Banking Supervision commonly referred to as the Basel III accord (“ Basel III ”), in each case together with any amendments thereto, or any change in the interpretation or administration thereof by any domestic or foreign governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, (ii) any change in or adoption of any other law, rule, regulation or guideline regarding capital adequacy, or (iii) compliance by any Lender, or any lending office of any Lender, or the holding company of any Lender, with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency based on any such change or adoption, has or would have the effect of reducing the rate of return on any Lender’s capital to a level below that which such Lender would have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender with respect to capital adequacy), then from time to time Borrower shall pay to Agent such additional amounts determined by Agent or any Lender (which determination shall be conclusive and binding upon Borrower absent manifest error) as will compensate Lenders for such actual reduction with respect to any portion of the Loan outstanding.

(c) Any amount payable by Borrower pursuant to Section 2.10(a) or (b) hereof shall be paid to Agent within ten (10) Business Days of receipt by Borrower of a certificate of Agent setting forth the amount due and Agent’s basis for the determination of such amount, which statement shall be conclusive and binding upon Borrower absent manifest error. Failure on the part of Agent to demand payment from Borrower for any such amount attributable to any particular period shall not constitute a waiver of Agent’s right to demand payment of such amount for any subsequent or prior period.

(d) Notwithstanding Sections 2.10(a) and (b) hereof, (i) all requests, rules, guidelines or directions under or in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and (ii) any change based on Basel III, shall be deemed not to have occurred on or prior to the Closing Date.

SECTION 2.11. Usury. The Note, this Loan Agreement, the Mortgage, and the other Loan Documents are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the Obligations at a rate which could subject any Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by law to contract for or to agree to pay. If by the terms of the Note, this Loan Agreement, the Mortgage or any other Loan Document, Borrower is at any time required or obligated to pay interest at a rate in excess of such maximum rate, the rate of interest

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shall be deemed to be immediately reduced to such maximum rate and the interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of principal.

SECTION 2.12. Closing. The Closing shall be held at the offices of Kaye Scholer LLP or such other place as Agent may designate in New York City or, at Agent’s election, pursuant to an escrow with the Title Company.

SECTION 2.13. Loan Fee Letter. Borrower shall pay to Agent the fees provided for in the Loan Fee Letter in accordance with the terms of this Loan Agreement and the Loan Fee Letter.

SECTION 2.14. Cash Sweep Provisions.

(a) Commencing on the third (3rd) Payment Date following any Testing Determination Date as of which a Cash Sweep Condition is determined or deemed to exist, and continuing on each Payment Date thereafter until such Cash Sweep Condition is cured or ceases to exist in accordance with this Loan Agreement, in addition to all other amounts then due and owing, Borrower shall (i) pay to Agent an amount equal to Net Cash Flow of the second preceding calendar month to such Payment Dates, respectively, and (ii) deliver to Agent a certificate setting forth in reasonable detail Borrower’s calculation of Net Cash Flow. In illustration of the foregoing, in the event that the Testing Determination Date with respect to which a Cash Sweep Condition exists would be March 31, (x) the third (3rd) Payment Date following such Testing Determination Date would be the first (1st) Business Day of June and the applicable calendar month for which Net Cash Flow would be payable on such Payment Date would be April, (y) the first immediately succeeding Payment Date would be the first (1st) Business Day of July and the applicable calendar month for which Net Cash Flow would be payable on such Payment Date would be May, and (z) the second immediately succeeding Payment Date would be the first (1st) Business Day of August and the applicable calendar month for which Net Cash Flow would be payable on such Payment Date would be June.

(b) The payments required above shall be deposited into the Cash Sweep Account to be held in accordance with this Section 2.14 . If, following the occurrence of a Cash Sweep Condition, either (i) Borrower deposits a sum equal to the Cash Sweep Limit into the Cash Sweep Account (“ ICR Cure Payment ”) (which shall be deemed to cure such Cash Sweep Condition), (ii) Borrower prepays the Loan in accordance with Section 2.4(d) hereof by an amount equal to the ICR Cure Payment (which shall be deemed to cure such Cash Sweep Condition) or (iii) such Cash Sweep Condition ceases to exist, then, provided no Event of Default exists and is continuing, Agent shall, promptly after Borrower’s request, remit to Borrower any sums on deposit in the Cash Sweep Account (in the case of the foregoing clause (i) , immediately prior to the ICR Cure Payment). For purposes of clarity, provided no Event of Default exists and is continuing, any ICR Cure Payments shall be promptly returned to Borrower if the Interest Coverage Ratio exceeds 1:25:1.00 for two (2) consecutive Testing Determination Dates pursuant to the definition of Cash Sweep Condition. Upon the occurrence and during the continuance of an Event of Default, Agent may apply any funds on deposit in the Cash Sweep Account as set forth in Sections 6.4 and 6.5 hereof and shall have all other rights and remedies

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with respect to the Cash Sweep Account specified in this Loan Agreement and in any other Loan Document, at law and in equity. Borrower and Operating Lessee hereby grant to Agent a security interest in all of their rights in and to the Cash Sweep Account and all sums on deposit therein as additional security for the Obligations, and agree that Agent shall have sole dominion and control of the Cash Sweep Account. Borrower and Operating Lessee shall maintain the Cash Sweep Account and shall pay all fees and charges with respect thereto when due. All interest earned on amounts deposited in the Cash Sweep Account shall be re-deposited therein and become part thereof.

SECTION 2.15. FF&E/Capital Reserve Account.

(a) On the Closing Date, Borrower and Operating Lessee shall cause to be deposited an amount equal to the sums on deposit in the pre-existing capital reserve for the Premises or similar account into an account or sub-account at Agent (the “ FF&E/Capital Reserve Account ”). Thereafter, on or before each Payment Date, Borrower and Operating Lessee shall (i) deposit or cause Property Manager to deposit into the FF&E/Capital Reserve Account in cash or other immediately available funds, an amount equal to at least the FF&E/Capital Reserve Amount for the second (2nd) calendar month immediately prior to such Payment Date (e.g., the payment due on or before July 1, 2015 shall be the FF&E/Capital Reserve Amount for May, 2015), and (ii) deliver to Agent a certificate setting forth in reasonable detail Operating Lessee’s calculation of such FF&E/Capital Reserve Amount.

(b) From time to time, but no more frequently than once per calendar month, Borrower and Operating Lessee may submit to Agent a FF&E/Capital Disbursement Request with respect to FF&E Expenditures and/or Capital Expenditures. So long as the expenditures that are the subject of such FF&E/Capital Disbursement Request are Approved FF&E Expenditures or Approved Capital Expenditures, Agent shall disburse to Borrower or Operating Lessee from the available balance of the FF&E/Capital Reserve Account an amount equal to the Approved FF&E Expenditures and/or Approved Capital Expenditures which were requested in such FF&E/Capital Disbursement Request. Borrower and Operating Lessee shall use disbursements from the FF&E/Capital Reserve Account solely for the purpose of paying those amounts specified in each FF&E/Capital Disbursement Request or reimbursing Borrower or Operating Lessee for such amounts. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, Agent shall have no obligation to make any disbursement from the FF&E/Capital Reserve Account. Agent’s concurrence with any FF&E/Capital Disbursement Request shall not be deemed to constitute a representation that no Default or Event of Default has occurred and/or is continuing or a waiver of any Default or Event of Default or any right or remedy resulting therefrom.

(c) Borrower and Operating Lessee hereby grant to Agent a security interest in all of their rights in and to the FF&E/Capital Reserve Account and all sums on deposit therein as additional security for the Obligations. Borrower and Operating Lessee hereby acknowledge and agree that Agent shall have sole dominion and control of the FF&E/Capital Reserve Account. The FF&E/Capital Reserve Account shall not be closed without obtaining the prior written consent of Agent. Borrower and Operating Lessee shall maintain the FF&E/Capital

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Reserve Account and shall pay all fees and charges with respect thereto when due. All interest (if any) earned on amounts deposited in the FF&E/Capital Reserve Account shall be re-deposited therein and become part thereof. Upon the occurrence and during the continuance of an Event of Default, Agent may apply any funds on deposit in the FF&E/Capital Reserve Account as set forth in Section 6.5 hereof and shall have all other rights and remedies with respect to the FF&E/Capital Reserve Account specified in this Loan Agreement and in any other Loan Document, at law and in equity. Neither Agent nor Lenders shall be liable for any loss of interest on or any penalty or charge assessed against the funds in, payable on, or credited to the FF&E/Capital Reserve Account as a result of the exercise by Agent of any of its rights, remedies or obligations hereunder or under any other Loan Document.

SECTION 2.16. Operating Account.

(a) Operating Lessee shall cause Property Manager to deposit all Gross Revenue into the Operating Account in accordance with the Property Management Agreement. Operating Lessee shall not close or agree to the closing of the Operating Account or open or agree to the opening of additional Operating Accounts without prior written notice thereof to Agent, which notice shall include the depository’s name and address and the account name and number of any new or replacement Operating Account. Operating Lessee shall not permit Property Manager to withdraw or otherwise use sums from the Operating Account except in accordance with the Property Management Agreement and the Property Manager Subordination Agreement. Neither Borrower nor Operating Lessee shall withdraw any amounts from the Operating Account except as may be approved by Agent in writing, it being acknowledged that Property Manager (and pursuant to the other provisions of this Section 2.16(a) , Agent) alone shall withdraw sums from the Operating Account pursuant to and in accordance with the Property Management Agreement and the Property Manager Subordination Agreement. Upon the occurrence and during the continuance of an Event of Default, Agent may notify Property Manager in writing to remit all amounts payable to Operating Lessee (after payment of all operating expenses, cost reimbursements, working capital and other amounts due Property Manager under the Property Management Agreement) to an account designated in writing by Agent. In addition, upon the occurrence and during the continuance of an Event of Default, Agent may apply any funds on deposit in the Operating Account as set forth in Section 6.5 hereof and shall have all other rights and remedies with respect to the Operating Account specified in this Loan Agreement and in any other Loan Document, at law and in equity, subject, however, to the last sentence of Section 6.5 hereof.

(b) Borrower and Operating Lessee shall not open any new Account or close any Account without prior written notice thereof to Agent, which notice shall include the depository’s name and address and the account name and number of any new or replacement Account.

(c) Borrower and Operating Lessee hereby grant to Agent a security interest in all of their rights in and to the Operating Account and any new Account established by either Borrower or Operating Lessee and all sums on deposit therein as additional security for the Obligations. Subject to the rights of Borrower and Operating Lessee expressly set forth herein to

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make and permit others to make withdrawals from the Operating Account and subject to the rights of Property Manager pursuant to the Property Management Agreement and the Property Manager Subordination Agreement, Borrower and Operating Lessee hereby acknowledge and agree that Agent shall have sole dominion and control of the Operating Account.

SECTION 2.17. Tenant Security Deposits.

(a) Borrower and Operating Lessee shall cause comply with all Legal Requirements and the applicable Lease applicable to any security given under any Lease.

(b) Borrower and Operating Lessee may only apply Security Deposits in the ordinary course of business to sums due under the applicable Lease when the terms of such Lease or applicable Legal Requirements permit the application thereof and to return any Security Deposit to the applicable Lessee pursuant to Legal Requirements or the terms of the applicable Lease which require Borrower or Operating Lessee to return such other Security Deposit. Borrower and Operating Lessee hereby grant to Agent a security interest in all Security Deposits as additional security for the Obligations. Upon the occurrence and during the continuance of an Event of Default, Agent may apply any Security Deposits which become forfeited or otherwise payable to Borrower or Operating Lessee to the Obligations in such order as Agent elects. Upon the occurrence and during the continuation of an Event of Default, Borrower and Operating Lessee shall, at Agent’s request, deposit all Security Deposits with Agent to hold and disburse same in accordance with this Section 2.17 .

SECTION 2.18. Intentionally Omitted.

SECTION 2.19. Extension of Loan.

(a) Generally. Subject to the conditions set forth in this Section 2.19 , Borrower shall have three (3) options to extend the Maturity Date. The first extension option shall be exercisable as provided in Section 2.19(b) hereof and shall extend the Maturity Date by one (1) year to the day which is the first (1 ^st ) anniversary of the Initial Maturity Date (such one (1) year period is referred to herein as the “ First Extension Period ” and such first (1 ^st ) anniversary date is referred to herein as the “ First Extended Maturity Date ”). The second extension option shall be exercisable as provided in Section 2.19(c) hereof and shall extend the Maturity Date by one (1) year to the day which is the first (1 ^st ) anniversary of the First Extended Maturity Date (such one (1) year period is referred to herein as the “ Second Extension Period ” and such first (1 ^st ) anniversary date is referred to herein as the “ Second Extended Maturity Date ”). The third extension option shall be exercisable as provided in Section 2.19(d) hereof and shall extend the Maturity Date by one (1) year to the day which is the first (1 ^st ) anniversary of the Second Extended Maturity Date (such one (1) year period is referred to herein as the “ Third Extension Period ”).

(b) Conditions to First Extension Period. Borrower’s option to extend the Maturity Date by one (1) year to the day which is the first (1 ^st ) anniversary of the Initial Maturity Date shall be subject to the following conditions being satisfied to the satisfaction of Agent, on or prior to the Initial Maturity Date (or such other date as may be provided below):

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(i) Borrower shall have delivered to Agent an irrevocable notice of Borrower’s election to so extend the Term no later than thirty (30) days prior to the Initial Maturity Date;

(ii) Borrower shall have paid to Agent for the pro rata benefit of Lenders an extension fee equal to one-eighth of one percent (0.125%) of the outstanding principal amount of the Loan as of the Initial Maturity Date (which fee shall be deemed earned in full on such date and shall not be refundable, in whole or in part, for any reason whatsoever);

(iii) Borrower shall have entered into an Interest Rate Protection Agreement for the First Extension Period which shall satisfy all of the conditions set forth in Section 2.6(b) hereof (and delivered a computation of the required fixed/capped rate required by said Section 2.6(b) ) through and including the last day of the First Extension Period, taken and completed all action required to be taken to cause such Interest Rate Protection Agreement to be in full force and effect, and delivered to Agent a copy of the trade confirmation for such Interest Rate Protection Agreement together with an Assignment of Interest Rate Protection Agreement executed by Borrower with respect to such Interest Rate Protection Agreement and an Interest Rate Protection Agreement Consent executed by the financial institution providing such Interest Rate Protection Agreement promptly after execution and delivery of the Interest Rate Protection Agreement;

(iv) Borrower shall have delivered to Agent the financial statements and other information required to be delivered to Agent pursuant to Section 5.1(d) hereof with respect to the twelve (12) month period ending on the last day of the second (2 ^nd ) calendar month immediately preceding the calendar month in which the Initial Maturity Date occurs and no Cash Sweep Condition shall have occurred or be deemed to have occurred as of said last day of the immediately preceding second (2 ^nd ) calendar month (it being understood that Borrower may satisfy the condition set forth in this clause (iv) by taking either of the actions described in Sections 2.14(b)(i) or (ii) of this Loan Agreement, provided that such action is taken prior to the Initial Maturity Date); and

(v) No Event of Default or Default shall have occurred and then be continuing as of the Initial Maturity Date.

(c) Conditions to Second Extension Period. Borrower’s option to extend the Maturity Date by one (1) year to the day which is the first (1 ^st ) anniversary of the First Extended Maturity Date shall be subject to the following conditions being satisfied to the satisfaction of Agent, on or prior to the First Extended Maturity Date (or such other date as may be provided below):

(i) Borrower shall have delivered to Agent an irrevocable notice of Borrower’s election to so extend the Term no later than thirty (30) days prior to the First Extended Maturity Date;

(ii) Borrower shall have paid to Agent for the pro rata benefit of Lenders an extension fee equal to one-eighth of one percent (0.125%) of the outstanding

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principal amount of the Loan as of the First Extended Maturity Date (which fee shall be deemed earned in full on the such date and shall not be refundable, in whole or in part, for any reason whatsoever);

(iii) Borrower shall have entered into an Interest Rate Protection Agreement for the Second Extension Period which shall satisfy all of the conditions set forth in Section 2.6(b) hereof (and delivered a computation of the required fixed/capped rate required by said Section 2.6(b) ) through and including the last day of the Second Extension Period, taken and completed all action required to be taken to cause such Interest Rate Protection Agreement to be in full force and effect, and delivered to Agent a copy of the trade confirmation for such Interest Rate Protection Agreement together with an Assignment of Interest Rate Protection Agreement executed by Borrower with respect to such Interest Rate Protection Agreement and an Interest Rate Protection Agreement Consent executed by the financial institution providing such Interest Rate Protection Agreement promptly after execution and delivery of the Interest Rate Protection Agreement;

(iv) Borrower shall have delivered to Agent the financial statements and other information required to be delivered to Agent pursuant to Section 5.1(d) hereof with respect to the twelve (12) month period ending on the last day of the second (2 ^nd ) calendar month immediately preceding the calendar month in which the First Extended Maturity Date occurs and no Cash Sweep Condition shall have occurred or be deemed to have occurred as of said last day of the immediately preceding second (2 ^nd ) calendar month (it being understood that Borrower may satisfy the condition set forth in this clause (iv) by taking either of the actions described in Sections 2.14(b)(i) or (ii) of this Loan Agreement, provided that such action is taken prior to the First Extended Maturity Date); and

(v) No Event of Default or Default shall have occurred and then be continuing as of the First Extended Maturity Date.

(d) Conditions to Third Extension Period. Borrower’s option to extend the Maturity Date by one (1) year to the day which is the first (1 ^st ) anniversary of the Second Extended Maturity Date shall be subject to the following conditions being satisfied to the satisfaction of Agent, on or prior to the Second Extended Maturity Date (or such other date as may be provided below):

(i) Borrower shall have delivered to Agent an irrevocable notice of Borrower’s election to so extend the Term no later than thirty (30) days prior to the Second Extended Maturity Date;

(ii) Borrower shall have paid to Agent for the pro rata benefit of Lenders an extension fee equal to one-eighth of one percent (0.125%) of the outstanding principal amount of the Loan as of the Second Extended Maturity Date (which fee shall be deemed earned in full on the such date and shall not be refundable, in whole or in part, for any reason whatsoever);

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(iii) Borrower shall have entered into an Interest Rate Protection Agreement for the Third Extension Period which shall satisfy all of the conditions set forth in Section 2.6(b) hereof (and delivered a computation of the required fixed/capped rate required by said Section 2.6(b) ) through and including the last day of the Third Extension Period, taken and completed all action required to be taken to cause such Interest Rate Protection Agreement to be in full force and effect, and delivered to Agent a copy of trade confirmation for such Interest Rate Protection Agreement together with an Assignment of Interest Rate Protection Agreement executed by Borrower with respect to such Interest Rate Protection Agreement, and an Interest Rate Protection Agreement Consent executed by the financial institution providing such Interest Rate Protection Agreement promptly after execution and delivery of the Interest Rate Protection Agreement;

(iv) Borrower shall have delivered to Agent the financial statements and other information required to be delivered to Agent pursuant to Section 5.1(d) hereof with respect to the twelve (12) month period ending on the last day of the second (2 ^nd ) calendar month immediately preceding the calendar month in which the Second Extended Maturity Date occurs and no Cash Sweep Condition shall have occurred or be deemed to have occurred as of said last day of the immediately preceding second (2 ^nd ) calendar month (it being understood that Borrower may satisfy the condition set forth in this clause (iv) by taking either of the actions described in Sections 2.14(b)(i) or (ii) of this Loan Agreement, provided that such action is taken prior to the Second Extended Maturity Date); and

(v) No Event of Default or Default shall have occurred and then be continuing as of the Second Extended Maturity Date.

ARTICLE III

CONDITIONS PRECEDENT TO THE
EFFECTIVENESS OF THIS LOAN AGREEMENT

This Loan Agreement shall not be effective until the following conditions shall have been satisfied, except to the extent that Agent may elect (which election may be made without written or express notice of such waiver) to waive any such conditions (provided, however, upon Closing, any conditions not satisfied shall be deemed waived unless otherwise agreed to by Borrower and Agent in writing at Closing):

SECTION 3.1. Representations and Warranties. The representations and warranties made by Borrower, Operating Lessee and Guarantor in the Loan Documents and in any certificate, document, or financial or other statement furnished by Borrower, Operating Lessee and Guarantor pursuant to or in connection therewith, shall be true and correct in all material respects on and as of the Closing Date.

SECTION 3.2. Miscellaneous Closing Deliveries. Agent shall have received and approved in its sole and absolute discretion the following items and documents, duly executed by all parties thereto (including Agent, if applicable) and in recordable form where applicable:

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(a) this Loan Agreement, the Note and the other Loan Documents;

(b) an Appraisal setting forth an Appraised Value acceptable to Agent;

(d) the Survey;

(e) unless such information is indicated on the Survey, a certificate from a licensed surveyor or an insurance broker as to whether the Premises or any portion thereof are located in a flood hazard plain as indicated on the maps of the Federal Emergency Management Agency;

(f) the Environmental Report;

(g) the Engineering Report;

(h) Intentionally Omitted;

(i) a report from Agent’s insurance consultant as to the insurance maintained by Borrower and Operating Lessee, together with such documents with respect to the Insurance Policies, evidence that the Insurance Policies are in full force and effect and reflect that Agent and Lenders are properly endorsed in accordance with Schedule 5.11 hereof, and that the requirements set forth in Schedule 5.11 hereof are otherwise met, and evidence that the premiums for same paid in full;

(j) an organizational chart of Borrower and Operating Lessee;

(k) copies of (y) transaction authorizations executed by Borrower, Operating Lessee, Guarantor, and each member, partner or shareholder thereof to the extent such authorizations by such members, partners or shareholders are required by the organizational documents of Borrower, Operating Lessee and Guarantor, authorizing the execution, delivery and performance of the Loan Documents to which Borrower, Operating Lessee and Guarantor, respectively, is a party and (z) the organizational documents of Borrower, Operating Lessee, Guarantor, and, if applicable each managing member or general partner of such entities;

(l) a good standing certificate for Borrower, Operating Lessee and Guarantor issued by the Secretary of State of the state of their formation within thirty (30) days of the Closing Date, and good standing certificates for Borrower and Operating Lessee issued by the Secretary of State of the state in which the Premises are located within thirty (30) days of the Closing Date;

(m) an incumbency certificate for Borrower, Operating Lessee and Guarantor executed by the secretary or other officer thereof (or the managing member or general partner thereof, if applicable) setting forth the offices and signatures of each officer of

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Borrower, Operating Lessee and Guarantor (or the managing member or general partner thereof, if applicable) executing the Loan Documents (who shall be different from the secretary);

(n) an IRS form W-9 executed by Borrower and Operating Lessee, setting forth their respective tax identification numbers;

(o) a copy of a valid driver’s license, passport or other government-issued identity card of each individual who executes the Loan Documents on behalf of Borrower, Operating Lessee and Guarantor, certified as true and correct by an attorney or notary public, and such other information and documentation as Agent reasonably requests concerning the Patriot Act;

(p) such financial and other information required by Agent with respect to the Premises, the other Collateral, Borrower, Operating Lessee and Guarantor and any Person that directly or indirectly holds any ownership interest therein, including such reports to confirm that the Cash Available for Debt Service for the twelve-month period ending in the most recent month prior to the Closing Date is at least $7,000,000;

(q) copies of the Property Management Agreement, each Lease, all Operating Agreements and all other written agreements to which Borrower or Operating Lessee is a party, all Permitted Encumbrances and Premises Documents and all other licenses, easements, plats and other agreements or instruments to which the Premises are subject;

(r) evidence of payment of all real estate taxes, assessments, and payments in lieu of taxes with respect to the Premises;

(s) copies of all certificates of occupancy and all other Operating Permits that exist as of the Closing Date;

(t) evidence that the Premises complies in all material respects with all zoning and building code requirements and that the uses thereof are permitted uses;

(u) opinion(s) of counsel for Borrower, Operating Lessee and Guarantor with respect to their formation, the Loan Documents and such other matters required by Agent; and

(v) all other documents, instruments, agreements, instruments, certificates, reports, opinions and information (including estoppel certificates and non-disturbance and attornment agreements) as Agent or Agent’s Counsel may reasonably require.

SECTION 3.3. Payment of Fees and Expenses. Agent shall have received payment of all fees and expenses required to be paid pursuant to the Loan Fee Letter, this Loan Agreement or the other Loan Documents. Borrower shall have deposited into the FF&E/Capital Reserve Account the deposit required pursuant to Section 2.15(a) hereof.

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SECTION 3.4. No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing.

SECTION 3.5. No Casualty or Taking. No Casualty shall have occurred to any portion of the Premises. No Taking of any portion of the Premises or any modification, realignment or relocation of any streets or roadways abutting the Premises or denial of access to the Premises, from any point of access (public or private), shall have occurred or be threatened or pending. There is no material deferred maintenance for the Premises.

SECTION 3.6. Adverse Conditions; Internal Approval. Agent shall be satisfied that (a) no material adverse change has occurred to the business, property (including the Premises and other Collateral) or other assets, operations, prospects or condition (financial or otherwise) taken as a whole of Borrower, Operating Lessee or Guarantor since the date of the financial statements referred to above, and (b) there has been no disruption or adverse change in loan syndication, financial, banking or capital market conditions that has materially impaired or is reasonably likely to materially impair, in Agent’s judgment, the completion of the sale or syndication of loans similar to the Loan and that there has been no outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, and shall have received all internal underwriting approvals to make the Loan and otherwise pertaining to Borrower, Operating Lessee, Guarantor and all other relevant parties.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

To induce Lenders to make the Loan and to induce Lenders and Agent to enter into this Loan Agreement and to perform Lenders’ and Agent’s obligations hereunder, Borrower hereby represents and warrants to Agent and Lenders as follows as of the date hereof (which representations and warranties shall survive the execution and delivery of this Loan Agreement and the other Loan Documents, regardless of any investigation made by Agent or Lenders or on its or their behalf).

SECTION 4.1. Due Organization. Borrower is a limited partnership and Operating Lessee is a limited liability company each duly organized and validly existing under the laws of the state of its formation, and Borrower and Operating Lessee are duly qualified to do business in the State where the Premises are located. Each of Borrower and Operating Lessee has all necessary power and authority to own its properties and to conduct its business as presently conducted or proposed to be conducted and to enter into and perform its obligations under this Loan Agreement and the other Loan Documents to which it is a party, and all other agreements and instruments to be executed by Borrower or Operating Lessee, in connection herewith and therewith. Attached to Borrower’s Certificate is a true and correct organizational chart of Borrower and Operating Lessee as of the Closing Date.

SECTION 4.2. Due Execution. This Loan Agreement and the other Loan Documents to which Borrower is a party have been duly executed and delivered, and all necessary actions have been taken to authorize Borrower to perform its obligations hereunder

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and thereunder. The Loan Documents to which Operating Lessee is a party have been duly executed and delivered, and all necessary actions have been taken to authorize Operating Lessee to perform its obligations thereunder.

SECTION 4.3. Enforceability. This Loan Agreement and the other Loan Documents to which Borrower is a party constitute legal, valid and binding obligations of Borrower, enforceable against it in accordance with their respective terms . The Loan Documents to which Operating Lessee is a party constitute legal, valid and binding obligations of Operating Lessee, enforceable against it in accordance with their respective terms .

SECTION 4.4. No Violation. The consummation of the transactions herein contemplated, the execution and delivery of this Loan Agreement, the other Loan Documents to which Borrower and/or Operating Lessee is a party, and all other agreements and instruments to be executed by Borrower and/or Operating Lessee in connection herewith and therewith, and the performance by Borrower and Operating Lessee of their respective obligations hereunder and thereunder, do not and will not (a) violate any Legal Requirement, (b) result in a breach of any of the terms, conditions or provisions of, or constitute a default under any mortgage, deed of trust, indenture, agreement, permit, franchise, license, note or instrument to which Borrower or Operating Lessee or any Affiliate of Borrower or Operating Lessee is a party or by which it or any of its properties is bound, (c) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the assets of Borrower or Operating Lessee or any Affiliate of Borrower or Operating Lessee (except as contemplated by this Loan Agreement and by the other Loan Documents), or (d) violate any provision of the operating agreements or other organizational documents of Operating Lessee, Borrower or any member, partner or shareholder of Borrower or Operating Lessee. Neither Borrower, Operating Lessee nor any member, partner or shareholder of Borrower or Operating Lessee is in default with respect to any Legal Requirement relating to its formation or organization.

SECTION 4.5. No Litigation. Except as set forth on Schedule 4.5 attached hereto, there are no actions, suits or proceedings at law or in equity or before or instituted by any Governmental Authority (a) pending or, to Borrower’s or Operating Lessee’s knowledge, threatened against or affecting Borrower, Operating Lessee, Guarantor, the Premises, the Collateral or any part thereof (including any condemnation or eminent domain proceeding against the Premises, or any part thereof, that would be reasonably likely to have a Material Adverse Effect), or (b) pending or, to Borrower’s or Operating Lessee’s knowledge, threatened, which affect or might affect the validity or enforceability of any Security Document (or the priority of the lien thereof), or any of the Loan Documents. If any of the matters set forth on Schedule 4.5 attached hereto is determined against Borrower, Operating Lessee or Guarantor, such determinations, taken as a whole, would not have a Material Adverse Effect.

SECTION 4.6. No Default or Event of Default. No Event of Default or, to Borrower’s Knowledge, Default, has occurred and is continuing.

SECTION 4.7. Offsets, Defenses, Etc. Neither Borrower nor Operating Lessee has any offsets, defenses or counterclaims against its obligations under the Loan

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Documents, any and all such offsets, defenses and counterclaims, if any, being waived by Borrower and Operating Lessee.

SECTION 4.8. Consents. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, or other actions with respect to or by, any Governmental Authorities or any party to any Permitted Encumbrance that are required in connection with the valid execution, delivery and performance by each of Borrower and Operating Lessee of the Loan Documents to which it is a party have been obtained and are in full force and effect.

SECTION 4.9. Financial Statements and Other Information. All statements of financial condition and related schedules of Borrower and Operating Lessee and Guarantor heretofore delivered to Agent are true, correct and complete in all material respects, fairly present the financial conditions of the subjects thereof as of the respective dates thereof, and without limiting the foregoing, reflect all direct and contingent liabilities of Borrower and Operating Lessee and Guarantor, and have been prepared in accordance with Applicable Accounting Standards or such other standards as are satisfactory to Agent. Title to all assets listed in such statements and schedules of Borrower, Operating Lessee and Guarantor are held solely in the name of Borrower, Operating Lessee or Guarantor, respectively, and no other Person has an interest therein (other than any interests of any party in the Premises pursuant to the Permitted Encumbrances and Leases entered into in accordance with the Loan Documents and, with respect to equipment, Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with this Loan Agreement and are noted in such statements and schedules as being subject to Equipment Leases). No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof. Neither the aforesaid statements of financial condition and related schedules nor any certificate, statement, document or information furnished to Agent, Agent’s Counsel or to any other Person at the request of Agent by or on behalf of Borrower, Operating Lessee, Guarantor or any Borrower Party Partner in connection with or related to the transactions contemplated hereby, nor any representation nor warranty in this Loan Agreement or any other Loan Document, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading in any material respect.

SECTION 4.10. Full Disclosure. There is no material fact pertaining to Borrower, Operating Lessee, Guarantor, the Premises or the Collateral that Borrower has not disclosed to Agent that would or is reasonably likely to have a Material Adverse Effect.

SECTION 4.11. Accounts. All accounts of Borrower and Operating Lessee or of any other Person held on behalf of or for the benefit of Borrower or Operating Lessee which are required to be established pursuant to this Loan Agreement or any other Loan Document and Accounts which are not held at Agent, including the account number of each Account and the name and address of the financial institution at which each Account is held, are as set forth on Schedule 4.11 attached hereto. Neither Borrower nor Operating Lessee has any other accounts except those held at Agent and those set forth on said schedule.

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SECTION 4.12. Indebtedness. Neither Borrower nor Operating Lessee is currently indebted or in contract for any Indebtedness, and is not otherwise liable in respect of any Indebtedness, other than Permitted Indebtedness, and is not holding out its credit as being available to satisfy the obligations of any other Person (other than Borrower or Operating Lessee).

SECTION 4.13. Insurance Policies. The Insurance Policies required to be maintained pursuant to this Loan Agreement are in full force and effect and reflect that Agent and Lenders are properly endorsed in accordance with Schedule 5.11 hereof. Such Insurance Policies satisfy the requirements set forth in Schedule 5.11 hereof and the premiums for the Insurance Policies have been paid in full.

SECTION 4.14. Availability of Utilities and Access. All utility services and facilities necessary for the current operation, use and occupancy of the Premises are available at the boundaries of the Premises, including water supply, storm and sanitary sewer facilities, gas and electric and telephone facilities. The Premises have direct physical access to and from at least one public road.

SECTION 4.15. No Liens. Except for the Loan Documents and the Leases and Equipment Leases that exist as of the Closing Date or are entered after the Closing Date into in accordance with this Loan Agreement, neither Borrower nor Operating Lessee has made, assumed or been assigned any contract or arrangement of any kind, the performance of which by the other party thereto would give rise to a Lien against all or any portion of the Collateral, other than Liens constituting Permitted Encumbrances, lessors’ liens on equipment under said Equipment Leases and inchoate liens for payments due under contracts which have been or will be paid in accordance with the terms thereof. Other than Permitted Encumbrances, there exists no Lien on any direct or indirect equity or beneficial interest in Borrower, Operating Lessee or Guarantor.

SECTION 4.16. Compliance with Legal Requirements. Except as set forth in the Zoning Report, the Legal Requirements, including zoning ordinances and regulations, permit (a) the existing operation, use and occupancy of the Premises and (b) the Premises to be restored and such operations, uses and occupancy to be continued following a Casualty, without need of any variance, special use permit or similar exception. All Operating Permits for the existing operation, use and occupancy of the Premises, have been obtained and are in full force and effect and all conditions to the continued effectiveness of such permits have been fully satisfied. There are no pending or, to Borrower’s or Operating Lessee’s knowledge, threatened actions, suits or proceedings to revoke, attach, invalidate, rescind or modify the ordinances and regulations currently in effect and to which the Premises are subject or any of the Operating Permits. The Premises and the existing operations, uses and occupancy thereof comply in all material respects with all Legal Requirements, including all applicable zoning ordinances and regulations and building codes.

SECTION 4.17. Certain Agreements.

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(a) The Property Management Agreement and the material Premises Documents are in full force and effect, not having been amended, modified, terminated, assigned or otherwise changed, or the provisions thereof waived, except as disclosed to the Agent on the Closing Date or as permitted under this Loan Agreement. Borrower has delivered to Agent true, correct and complete copies of all unrecorded Permitted Encumbrances, the Property Management, the material Premises Documents and all Material Operating Agreements. No default or failure of performance in any material respect by Borrower or Operating Lessee exists under the Property Management Agreement, any Premises Document or any Permitted Encumbrance. Neither Borrower nor Operating Lessee has received a notice of default under any such agreement. None of the foregoing agreements or any Operating Agreement contains any option to purchase or right of first refusal to purchase the Mortgaged Property or any part thereof. To Borrower’s and Operating Lessee’s knowledge, no default in any material respect exists, and no grounds for termination exists, by Borrower or Operating Lessee or any other party to the Property Management Agreement or any Premises Document, and no event exists which, with the giving of notice or passage of any cure period, or both, would constitute a default thereunder or give rise to any right of any party thereto to terminate same. To Borrower’s and Operating Lessee’s knowledge, there are no offsets, claims or defenses to the enforcement by Borrower or Operating Lessee of any of the foregoing agreements. The Property Management Agreement represents the entire agreement between Operating Lessee and Property Manager with respect to the management of the Premises, and there are no other agreements or representations, written or oral, between Operating Lessee and Property Manager.

(b) The Material Operating Agreements have not been amended, modified, terminated, assigned or otherwise changed, or the provisions thereof waived, except as permitted under this Loan Agreement. The Material Operating Agreements are in full force and effect. No default or failure of performance in any material respect by Borrower or Operating Lessee exists under any Material Operating Agreement. Neither Borrower nor Operating Lessee has received a notice of default under any such agreement. To Borrower’s and Operating Lessee’s knowledge, no default in any material respect exists, and no grounds for termination, by Borrower or Operating Lessee or any other party to any Material Operating Agreement exists and no event exists which, with the giving of notice or passage of any cure period, or both, would constitute a default thereunder or give rise to any right of any party thereto to terminate same. To Borrower’s and Operating Lessee’s knowledge, there are no offsets, claims or defenses to the enforcement by Borrower or Operating Lessee of any of the foregoing agreements.

SECTION 4.18. Security Documents. The provisions of each Security Document are effective to create, in favor of Agent for the benefit of itself and Lenders, a legal, valid and enforceable Lien on or security interest in all of the collateral described therein, and when the appropriate recordings and filings have been effected in public offices, each of the Security Documents will constitute a perfected Lien on and security interest in all right, title, estate and interest in the collateral described therein, prior and superior to all other Liens, except as permitted under the Loan Documents.

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SECTION 4.19. Casualty and Taking. No Casualty has occurred to any portion of the Premises which has not been fully restored. No Taking of any portion of the Premises, or modification, realignment or relocation of any streets or roadways abutting the Premises or denial of access to the Premises from any point of access (public or private), has occurred or, to Borrower’s or Operating Lessee’s knowledge, is threatened or pending.

SECTION 4.20. Brokerage. None of Borrower, Operating Lessee, Guarantor nor any Affiliate thereof has dealt with any brokers or “finders” in connection with the Loan, and no brokerage or “finders” fees or commissions are payable by any of such Persons in connection with the Loan.

SECTION 4.21. Encroachments. Other than as disclosed on the Survey, the Premises do not encroach upon any building line, setback line, side yard line, any Permitted Encumbrance or any other recorded easement or any visible easement or other easement of which Borrower is aware or has reason to believe may exist, except in the case of immaterial encroachments which are permitted pursuant to the Permitted Encumbrances currently in effect, or encroach over any property line of the Land.

SECTION 4.22. Foreign Person. Neither Borrower nor Operating Lessee is a “foreign person” within the meaning of Section 1445 or 7701 of the IRC.

SECTION 4.23. Control Person. Neither Borrower nor Operating Lessee is, and no Person having “control” (as that term is defined in 12 U.S.C. § 375b or in regulations promulgated pursuant thereto) of Borrower or Operating Lessee is, an “executive officer,” “director,” or “person who directly or indirectly or in concert with one or more persons, owns, controls, or has the power to vote more than ten percent (10%) of any class of voting securities” (as those terms are defined in 12 U.S.C. § 375b or in regulations promulgated pursuant thereto) of any Lender, of a bank holding company of which any Lender is a subsidiary, or of any other subsidiary of a bank holding company of which any Lender is a subsidiary.

SECTION 4.24. Government Regulation. Neither Borrower nor Operating Lessee is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940. Neither Borrower nor Operating Lessee is engaged principally, or as one of its important activities, in the business of extending, or arranging for the extension of, credit for the purpose of “purchasing or carrying any margin stock,” within the meaning of Regulation U of the Board of Governors. No portion of the assets of Borrower or Operating Lessee consists of any such margin stock, and no part of the proceeds of the Loan shall be used to purchase or carry any such margin stock within the meaning of said regulation or to extend credit to others for such purpose.

SECTION 4.25. ERISA. None of the assets of Borrower or Operating Lessee constitute or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. § 2510.3-101; and neither Borrower nor Operating Lessee is or will be a “governmental plan” within the meaning of § 3(3) of ERISA. Neither Borrower nor Operating Lessee has any obligation, contingent or otherwise, with respect to any Pension Plan, Multiemployer Plan or other employee benefit plan within the meaning of § 3(3) of ERISA.

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Each employee benefit plan of each of Borrower and Operating Lessee that is intended to qualify under § 401 of the IRC does so qualify, and any trust created thereunder is exempt from tax under the provisions of § 401 of the IRC. Each Pension Plan is in compliance in all material respects with all applicable provisions of ERISA, the IRC and other requirements of applicable law. There has been no, nor is there reasonably expected to occur any, ERISA Event. No Pension Plan has any unfunded pension liability. None of Borrower, Operating Lessee or any ERISA Affiliate would have any Withdrawal Liability as a result of a complete withdrawal as of the date hereof from any Multiemployer Plan.

SECTION 4.26. Labor Relations. Neither Borrower nor Operating Lessee is a party to any collective bargaining agreement with respect to the Premises. To Borrower’s and Operating Lessee’s knowledge, there are no material grievances, disputes or controversies with any union or any other organization of employees at the Premises, including employees of Borrower or Operating Lessee, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization.

SECTION 4.27. Name; Principal Place of Business. As of the Closing Date, the principal place of business and chief executive office of Borrower and Operating Lessee is at their address stated in the first paragraph of this Loan Agreement . Neither Borrower nor Operating Lessee uses any trade name or has done business under any name other than Borrower’s and Operating Lessee’s actual names set forth herein, respectively.

SECTION 4.28. Intellectual Property. As of the date hereof, the name for the Premises used by either Borrower or Operating Lessee in their marketing material is not a registered trademark. Borrower and Operating Lessee shall notify Agent of any trademark used by either Borrower or Operating Lessee in connection with the Premises or owned by Borrower or Operating Lessee (or both). Agent may make any filing, at the sole cost and expense of Borrower Operating Lessee, with the United States Patent and Trademark Office or otherwise in order to obtain and perfect a security interest in trademarks owned by either of Borrower or Operating Lessee (or both). There exists no claim by any Person that contests or questions the right or Borrower or Operating Lessee to use all applicable patents, trademarks, copyrights, technology, know-how and processes necessary for the conduct of the business and the operation of the Premises substantially in the manner as contemplated to be conducted and operated. There are no claims, and to Borrower’s and Operating Lessee’s knowledge, there is no infringement of the rights of any Person, arising from the use of such patents, trademarks, copyrights, technology, know-how and processes by Borrower or Operating Lessee. To Borrower’s and Operating Lessee’s knowledge, there is no infringement by any third party on any rights of Borrower or Operating Lessee in any of its intellectual property. No name or logo used in connection with the Premises or any part thereof or business therein is a registered tradename or trademark, other than tradenames or trademarks registered by Borrower or Operating Lessee.

SECTION 4.29. Flood Zone. Other than as disclosed on the Survey or in any flood hazard certificate delivered to Agent, neither the Premises nor any portion thereof is located within an area that has been designated or identified as an area having special flood hazards by the Secretary of Housing and Urban Development or by such other official as shall

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from time to time be authorized by federal or state law to make such designation pursuant to the National Flood Insurance Act of 1968, as such act may from time to time be amended, or pursuant to any other national, state, county or city program of flood control.

SECTION 4.30. Condition of Property . Except as set forth in the Engineering Report, the Improvements and Personal Property forming a part of the Premises are in good condition and repair in all material respects. Except as set forth in the Engineering Report, there is no patent or, to Borrower’s or Operating Lessee’s knowledge, latent, structural or other significant defect or deficiency in the Improvements or Personal Property.

SECTION 4.31. Taxes. All tax returns required to be filed by Borrower and Operating Lessee in any jurisdiction have been filed and all taxes, assessments, fees, and other governmental charges upon Borrower and Operating Lessee or upon any of their respective assets, income or franchises have been paid that are required to be paid prior to the time that the non-payment of such taxes could give rise to a lien on any asset of Borrower or Operating Lessee, unless such tax, assessment, fee or charge is being contested in accordance with Section 5.8 hereof. To Borrower’s and Operating Lessee’s knowledge, there is no proposed new tax assessment against the Premises or any basis for such assessment which is material. The Land is separately assessed from all other adjacent land for purposes of real estate taxes, and for all purposes may be dealt with as an independent parcel.

SECTION 4.32. Adverse Contracts. Neither Borrower nor Operating Lessee is a party to any contract or agreement, or subject to any charter or other restriction, which materially and adversely affects its business, including the operation, use and marketing of the Premises in accordance with the standards required pursuant to Section 5.2 hereof, property, assets, operations, condition (financial or otherwise) taken as a whole, or its ability to perform its obligations under this Loan Agreement or any of the other Loan Documents.

SECTION 4.33. Adverse Claims. To Borrower’s and Operating Lessee’s knowledge, there are no adverse claims to the title of Borrower or Operating Lessee in and to the Mortgaged Property, the other Collateral, or any rights of Borrower or Operating Lessee appurtenant thereto.

SECTION 4.34. Creditworthiness. Both before and immediately after entering into each of the Loan Documents to which they are a party, Borrower, Operating Lessee and Guarantor are each able to pay its debts and other obligations when due and has a positive net worth.

SECTION 4.35. Patriot Act . None of Borrower, Operating Lessee, Guarantor nor any owner of a direct or indirect interest in Borrower, Operating Lessee or Guarantor, any member or partner of Borrower, Operating Lessee or Guarantor, any member or partner of such member or partner, or any owner of a direct or indirect interest in Borrower, Operating Lessee or Guarantor (or, in the case of Ashford REIT, no owner of a ten percent (10%) or greater direct or indirect interest in Ashford REIT) (a) is listed on any Government Lists, (b) is a Person who has been determined by competent authority to be subject to the prohibitions

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contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other Presidential Executive Orders in respect thereof, (c) has been previously indicted for or convicted of any felony involving any Patriot Act Offense or (d) to Borrower’s or Operating Lessee’s knowledge, is currently under investigation by any governmental authority for any alleged Patriot Act Offense.

SECTION 4.36. Leases. Borrower has delivered to Agent true, correct and complete copies of all Leases. There are no Leases with respect to the Premises other than the Leases delivered to Agent. Except as set forth on Schedule 4.36 : (a) each Lease is in full force and effect; (b) all Rents due and payable under the Leases have been paid and no portion of any Rent has been paid for any period more than thirty (30) days in advance; (c) there is no claim or basis for a claim by the Lessee thereunder for an adjustment to rent; (d) no Lessee has made any claim in writing against Borrower, Operating Lessee or Property Manager which remains outstanding that Borrower, Operating Lessee or Property Manager is in default under its applicable Lease; (e) no material default has occurred by Borrower, Operating Lessee or, to Borrower’s or Operating Lessee’s knowledge, any Lessee under any Lease, and no event which, with the giving of notice or passage of time, or both, would constitute a material default by Operating Lessee or, to Borrower’s or Operating Lessee’s knowledge, any Lessee, has occurred; (f) each Lease is the valid, binding and enforceable obligation of Borrower or Operating Lessee, as applicable; (g) intentionally omitted; (h) all Security Deposits under the Leases are as set forth in the Leases, and Borrower and Operating Lessee is in compliance with all Legal Requirements with respect to all Security Deposits; (i) no use restriction contained in any Lease, Permitted Encumbrance or Premises Document is violated by any use permitted under any other Lease, any Permitted Encumbrance or any Premises Document; (j) no Lease contains any option to purchase or right of first refusal to purchase the Premises or any part thereof; (k) to Borrower’s or Operating Lessee’s knowledge, the Lessees named in the Leases are in occupancy of the premises leased under their Leases; and (l) to Borrower’s or Operating Lessee’s knowledge, no Lessee has (i) consented to the appointment of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property, or for the winding-up or liquidation of its affairs, (ii) admitted in writing its inability to pay its debts generally as they become due, (iii) filed a petition, or otherwise instituted, or consented to the institution against it of, proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors, (iv) made an assignment for the benefit of its creditors or (v) suspended payment of its obligations.

SECTION 4.37. Special Purpose Entity. Each of Borrower and Operating Lessee is a Special Purpose Bankruptcy Remote Entity.

ARTICLE V

GENERAL AND OPERATIONAL COVENANTS

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SECTION 5.1. Financial Statements, Reports and Documents. Borrower and Operating Lessee shall deliver to Agent each of the following:

(a) Annual Financial Statements. As soon as practicable and in any event within one hundred twenty (120) days after the close of each fiscal year of each of Borrower and Operating Lessee, financial statements of Borrower and Operating Lessee for such period and the immediately preceding fiscal year to date, which shall include a detailed balance sheet, statement of operations (income and expenses), statement of cash flow, statement of changes in members’ or partners’ capital or shareholder’s equity, as applicable, contingent liability schedule, such statements to be in detail and presentation acceptable to Agent, prepared in accordance with Applicable Accounting Standards or such other standards as are satisfactory to Agent consistently applied for all periods. Such financial statements shall also be certified by the chief executive, operating or financial officer(s) of Borrower and Operating Lessee as (x) being true, correct and complete, (y) fairly presenting the financial position, condition and operations of Borrower and Operating Lessee, respectively, and (z) having been incorporated into the consolidated financial statements of Ashford REIT.

(b) Quarterly Compliance Certificate. Within forty-five (45) days after the end of each Calendar Quarter, (i) the most recent Smith Travel Research STAR report for the Premises and (ii) a certificate executed by the chief executive, operating or financial officer(s) of Borrower and Operating Lessee (in his or her capacity as such) (i) stating that a review of the activities of Borrower and Operating Lessee and the Premises during the period that is the subject of such financial statements has been made under his or her supervision, (ii) stating that to the best of his or her knowledge and belief after reasonable and due investigation, there exists no Default or Event of Default as of the date of such certificate or, if any such event shall have occurred, specifying the nature and status thereof, (iii) certifying that neither Borrower nor Operating Lessee has received any notice that any other party to the Property Management Agreement, the Franchise Agreement, if any, or any Interest Rate Protection Agreement has challenged or denied the validity or enforceability of any such agreement, any notice of termination or intent to terminate thereunder, or any notice alleging a default by Borrower or Operating Lessee thereunder, or, if any such event shall have occurred, specifying the nature and status thereof, (iv) certifying that Guarantor is in compliance with all of its obligations under the Loan Documents to which it is a party, (v) certifying that there is no litigation, mediation or arbitration pending which, if adversely determined would reasonably be likely to have a Material Adverse Effect or, if any such litigation, mediation, or arbitration is pending, specifying the nature and status thereof, and (vi) setting forth Gross Revenues, Expenses and Net Cash Flow and Borrower’s calculation of the Interest Coverage Ratio and the Debt Yield, in each case as of the end of such Calendar Quarter, all in detail and presentation reasonably acceptable to Agent.

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(d) Monthly Reports.

(i)

As soon as practicable, and in any event within thirty (30) days after the end of each calendar month, (A) an unaudited statement of operations (income and expenses) of Borrower and Operating Lessee for (x) such month (with a comparison to the then-current operating budget for the Premises and to the corresponding month in the immediately prior calendar year), (y) the fiscal year to date (with comparison to the then-current operating budget and the corresponding period in the immediately prior fiscal year) and (z) the trailing twelve (12) months, and (B) an occupancy, average daily rate and revenue per available room report for such month, all such statements and reports to be in detail and presentation reasonably acceptable to Agent, prepared in accordance with Applicable Accounting Standards and certified by the chief executive, operating or financial officer of Borrower and Operating Lessee as being true, correct and complete and fairly presenting in all material respects the financial position of Borrower and Operating Lessee; and

(ii)

As soon as practicable, and in any event within thirty (30) days after the end of each calendar month immediately following a Testing Determination Date as of which a Cash Sweep Condition shall exist, and on the thirtieth (30th) day following the end of each subsequent calendar month until a determination that a Cash Sweep Condition does not exist, a calculation of Net Cash Flow for such calendar month, all in detail and presentation reasonably acceptable to Agent.

(e) Annual Budgets. As soon as available and in any event within thirty (30) days prior to the end of each calendar year, (i) an annual operating budget for the Premises for the following calendar year and (ii) an annual FF&E/Capital Budget for the Premises for the following calendar year. Such FF&E/Capital Budget and amendment thereof shall require Agent’s approval as to form and substance, which approval shall not be unreasonably withheld, conditioned or delayed. In the event that Borrower requests Agent’s approval under this Section 5.1(e) , Agent shall be deemed to have given such approval in the event Agent fails to notify Borrower whether or not it approves such FF&E/Capital Budget or amendment within five (5) Business Days after the following conditions are satisfied: (y) Borrower shall have delivered to Agent a notice requesting Agent’s approval, together with the items required to be delivered in connection therewith in accordance with this Section 5.1(e) and such other information as may be reasonably necessary for Agent to respond to such request (provided such information is requested within ten (10) Business Days of Agent’s receipt of Borrower’s notice), and (z) in the event that Agent shall have failed to respond to Borrower’s notice within ten (10) Business Days after delivery of the notice and other materials set forth in clause (y)

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above, Borrower shall have delivered to Agent another notice which shall contain in boldface type at the beginning of such notice text to the following effect: “THIS IS A SECOND REQUEST MADE PURSUANT TO SECTION 5.1(e) OF THE LOAN AGREEMENT AMONG ASHFORD PIER HOUSE LP, AS BORROWER, ASHFORD TRS PIER HOUSE LLC, AS OPERATING LESSEE, CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, AS AGENT, AND THE LENDERS PARTY THERETO, WITH RESPECT TO APPROVAL OF A PROPOSED FF&E/CAPITAL BUDGET OR AMENDMENT SENT TO YOU ON [DATE]. FAILURE TO RESPOND WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT OF THIS NOTICE SHALL BE DEEMED TO BE APPROVAL OF SAID PROPOSED FF&E/CAPITAL BUDGET OR AMENDMENT.”

(f) Intentionally Omitted.

(g) Notices by Governmental Authorities. Promptly upon receipt of same by Borrower or Operating Lessee, true and complete copies of any official written notice, claim or complaint by any Governmental Authority pertaining to Borrower, Operating Lessee, Property Manager or Guarantor, the Premises, the Collateral, Borrower’s or Operating Lessee’s rights under any Permitted Encumbrance or any license, permit or approval obtained by Borrower or Operating Lessee that would or is reasonably likely to have a Material Adverse Effect, but in any case, any written notice from a public authority concerning any tax or special assessment, any notice of any alleged material violation of any zoning ordinance, restrictive covenant, fire ordinance, building code provision, or other Legal Requirement and any notice of any Taking or other eminent domain action or proceeding affecting or threatened against any portion of the Premises.

(h) Property Management Agreement and Franchise Agreement. Contemporaneous with receipt or giving of same by Borrower or Operating Lessee, a copy of all statements and reports provided to or by Borrower and/or Operating Lessee pursuant to the Property Management Agreement or the Franchise Agreement, if any, and any notice of default or any other material notice or other material written communication given under, pursuant to or in connection with the Property Management Agreement or the Franchise Agreement, if any.

(i) Notification by Borrower. The following notifications:

(i) promptly upon Borrower or Operating Lessee’s learning thereof, any litigation, mediation, arbitration of other proceeding before any Governmental Authority with respect to Borrower, Operating Lessee, the Premises or the Collateral which, if adversely determined would reasonably be likely to have a Material Adverse Effect, or with respect to Guarantor which, if adversely determined, would reasonably be likely to have a Material Adverse Effect on Guarantor, specifying the nature and status thereof, and any material determinations in all such litigation, proceedings, mediations and arbitrations;

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(ii) promptly upon Borrower or Operating Lessee’s learning thereof, any litigation or proceeding before any Governmental Authority regarding any challenge to or appeal of any material Operating Permit or zoning applicable to the Premises, specifying the nature and status thereof, and any material determinations in all such litigation and proceedings;

(iii) promptly upon the occurrence thereof, of any material change in any material fact or circumstance represented or warranted in this Loan Agreement or any of the other Loan Documents, and of any fact or circumstance which is reasonably likely to materially interfere with the operation of the Premises or the ownership of any of the Collateral;

(iv) promptly upon the occurrence thereof, of any acceleration of any Indebtedness of Borrower or Operating Lessee;

(v) within five (5) Business Days after the occurrence thereof, of any name change, change in fiscal year or change in the chief executive office or principal place of business of Borrower or Operating Lessee;

(vi) within five (5) Business Days after the occurrence thereof, a copy of any amendment to the operating agreements or any other organizational document, of Borrower or Operating Lessee, and promptly following Agent’s request, a list or organizational chart of the owners of direct or indirect beneficial and equitable interests in Borrower and Operating Lessee in the form attached to the Borrower’s Certificate;

(vii) promptly upon occurrence thereof, of any breach, default or failure of performance by any party under, or any written notice that a party has challenged or denied the validity or enforceability of any Permitted Encumbrance, any Premises Document, any material Lease, any Material Operating Agreement, the Property Management Agreement or the Franchise Agreement, if any, which would or is reasonably likely to have a Material Adverse Effect;

(viii) within five (5) Business Days after receipt by Borrower, Operating Lessee or Guarantor of written notice of the same from any Person, any material adverse claim against or affecting, and any notice or other instrument received by Borrower, Operating Lessee or Guarantor which would or is reasonably likely to have a Material Adverse Effect;

(ix) promptly, and in any case within five (5) Business Days after the occurrence thereof, any material fire or other Casualty (which notice also shall generally describe the nature and extent of such Casualty and set forth Borrower’s best estimate of the cost of Restoration);

(x) promptly, and in any case within five (5) Business Days after the occurrence thereof, Borrower and Operating Lessee shall notify Agent of any

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Taking or the commencement of any proceedings or negotiations which might result in such a Taking (which notice shall generally describe the nature and extent of such Taking or the nature of such proceedings or negotiations and the nature and extent of the Taking which might result therefrom); and

(xi) (i) within ten (10) days after Borrower, Operating Lessee or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, written notice describing such event; (ii) within ten (10) days after Borrower, Operating Lessee or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under IRC Section 412 has been filed with respect to any Pension Plan or Multiemployer Plan, a written statement of Borrower describing such ERISA Event or waiver request and the action, if any, Borrower, Operating Lessee and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; (iii) within thirty (30) days after Borrower, Operating Lessee or any ERISA Affiliate knows or has reason to know that there has been a material increase in the unfunded pension liability of any Pension Plan, notice of such occurrence; (iv) simultaneously with the date that Borrower, Operating Lessee or any ERISA Affiliate files a notice of intent to terminate any Pension Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, a copy of each notice; and (v) within ten (10) days after Borrower, Operating Lessee or any ERISA Affiliate adopts a new Pension Plan or becomes obligated to contribute to a Multiemployer Plan, written notice describing same.

(j) Notice Regarding Contracts. Promptly following the occurrence thereof, notification of any material changes in or termination or non-renewal and non-replacement of any Material Operating Agreement.

(k) Estoppel Certificates. Within ten (10) Business Days after request therefor from Agent, Borrower and Operating Lessee shall deliver to Agent a certificate executed by Borrower, stating the amount due under the Note and this Loan Agreement and that as of the date of such certificate no Event of Default or, to each of Borrower’s and Operating Lessee’s knowledge, Default has occurred and is continuing and, if any such Default or Event of Default is noted, describing in reasonable detail each such Default or Event of Default and the action, if any, taken or being taken to cure the same, and such other information regarding the Loan, the Premises, Borrower and Operating Lessee as Agent reasonably requests.

(l) Other Information. Promptly upon Agent’s request, such other information concerning the business, properties, or financial condition of Borrower, Operating Lessee and Guarantor, including the performance of their obligations under the Loan Documents, as Agent shall reasonably request.

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SECTION 5.2. Management, Maintenance and Repairs.

(g) The Premises shall at all times be managed directly and exclusively by the Property Manager under the Property Management Agreement. Neither Borrower nor Operating Lessee shall (i) terminate or cancel the Property Management Agreement or consent to the assignment or surrender thereof or enter into any agreement in substitution thereof or (ii) amend, modify or supplement in any material respect, or waive or release any material obligation of the Property Manager under, or waive any material right of Operating Lessee under, the Property Management Agreement, in any case, without Agent’s prior consent, which consent, in the case of the actions described in the foregoing clause (ii) , shall not be unreasonably withheld, conditioned or delayed.

(h) Operating Lessee shall comply in all material respects with all of Operating Lessee’s covenants, obligations, agreements and undertakings under the Property Management Agreement. Borrower and Operating Lessee shall promptly (i) notify Agent, in writing, of any material defaults by Property Manager after Borrower or Operating Lessee becomes aware of the same and (ii) deliver to Agent a copy of all termination notices, default notices, notices claiming any offset rights and all other material notices from Property Manager to Borrower or Operating Lessee or from either of Borrower or Operating Lessee to Property Manager. Operating Lessee shall use commercially reasonable efforts to secure the performance of the obligations of the other parties to the Property Management Agreement and to enforce Operating Lessee’s rights thereunder. Borrower and Operating Lessee shall appear in and defend any action or proceeding arising under, occurring out of, or in any manner connected with, the Property Management Agreement or the obligations, duties, or liabilities of Operating Lessee or Property Manager thereunder. Borrower and Operating Lessee shall pay all costs and expenses of Agent, including reasonable attorneys’ fees, in any action or proceeding in which Agent may appear. In the event the Loan is accelerated following the occurrence of an Event of Default, and also in the event of a foreclosure of the Mortgage, sale by power of sale thereunder or a deed in lieu of foreclosure thereof, Agent shall have the right (i) to terminate or require that Operating Lessee terminate, the Property Management Agreement and (ii) require Operating Lessee upon such termination to engage a replacement property manager acceptable to Agent pursuant to a replacement property management agreement acceptable to Agent.

(i) Borrower and Operating Lessee shall cause the Premises to be at all times open for business to the public (except for temporary closings due to major Casualties or Takings; provided that (i) at all times during such temporary closing Borrower and Operating Lessee shall diligently pursue the Restoration of the Premises in accordance with this Loan Agreement and maintain all insurance required by this Loan Agreement and (ii) no such temporary closing shall be deemed to waive, stay or otherwise limit any other Obligations), operated, maintained and managed in the manner and accordance with the standards required pursuant to the Property Management Agreement and the Permitted Encumbrances, but in no event below Comparable Standards. Subject to the last sentence of Section 5.2(b) hereof, Operating Lessee shall keep in effect at all times any contractual arrangements as may be necessary to meet the standard of operation described in the foregoing sentence or as may be required by Legal Requirements and Operating Permits. In furtherance of the foregoing,

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Borrower and Operating Lessee shall keep the Premises in good repair, working order and condition, so that the value of all or any portion of the Premises will not be diminished in any material respect and shall supply the Premises and such property with all necessary supplies and equipment and promptly and diligently make or cause to be made all needful and proper repairs, renewals and replacements thereto whether interior or exterior, structural or non-structural, ordinary or extraordinary, or foreseen or unforeseen consistent with and in order to maintain the standards set forth above. All such repairs, renewals and replacements shall be at least equal in quality, value and class to that of the improvements which are the subject of such repairs, renewals and replacements. Without limiting the foregoing, neither Borrower nor Operating Lessee shall use or permit to be used any part of the Premises for any dangerous or noxious use or use that impairs the ability to use, operate, maintain and manage the Premises in accordance with this Section 5.2 , or cause or permit to be maintained any nuisance in, at or on the Premises.

(j) Neither Borrower nor Operating Lessee shall commit or permit any waste or deterioration (other than ordinary wear and tear) of or to the Premises or other improvements, structures and equipment thereon. Borrower and Operating Lessee shall promptly, diligently and continuously restore, replace or rebuild or cause to be restored, replaced or rebuilt any part of and improvements, structures and equipment on the Premises damaged or destroyed by any Casualty (including any Casualty for which insurance was not obtained or obtainable) or which may be affected by any Taking, in accordance with the Loan Documents and the Permitted Encumbrances. Borrower and Operating Lessee shall promptly replace, or caused to be replaced, any part of the Premises taken by theft to the extent necessary to comply with the provisions of this Section 5.2(d) .

(k) Borrower and Operating Lessee shall not enter into any franchise agreement for the Premises without the prior written consent of Agent. Notwithstanding the foregoing, Agent shall not unreasonably withhold, delay or condition its consent to any franchise agreement for the Premises with any full service brand owned by Marriott International, Inc., Hilton Hotels & Resorts, Hyatt Hotels Corporation, or Starwood Hotels and Resorts Worldwide (each a “ Qualified Brand ”) on such Qualified Brand’s then current Franchise Disclosure Document (FDD) form of franchise agreement, provided that (i) Borrower and Operating Lessee shall have provided Agent with a financial analysis of the effect of such franchise agreement on Gross Revenues and Expenses, and (ii) franchisor enters into a “comfort letter” in favor of Agent in form and substance reasonably acceptable to Agent (such franchise agreement, as consented to by Agent, the “ Franchise Agreement ”).

(l) Upon the effectiveness of the Franchise Agreement, if applicable, Borrower and Operating Lessee shall (i) comply in all material respects with all of the covenants, obligations, agreements and undertakings under the Franchise Agreement and (iii) use commercially reasonable efforts to secure the performance of the obligations of the franchisor to the Franchise Agreement and to enforce Borrower’s and Operating Lessee’s rights thereunder. Neither Borrower nor Operating Lessee shall (i) terminate or cancel the Franchise Agreement or consent to the assignment or surrender thereof or enter into any agreement in substitution thereof or (ii) amend, modify or supplement in any material respect, or waive or release any material obligation of the franchisor under, or waive any material right of Borrower or Operating Lessee

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under, the Franchise Agreement, in any case, without Agent’s prior consent, which consent, (y) in the case of the actions described in the foregoing clause (ii) , shall not be unreasonably withheld, conditioned or delayed, and (z) in the case of the actions described in the foregoing clause (i) , shall not be unreasonably withheld, conditioned or delayed, provided that (A) Borrower and Operating Lessee shall have provided Agent with a financial analysis of the effect of such termination, cancellation, assignment, surrender or substitution, as applicable, on Gross Revenues and Expenses, and (B) Borrower and Operating Lessee shall have otherwise complied with the requirements of Section 5.2(e) above with respect to any new franchisor (which for the avoidance of doubt shall be a Qualified Brand) taking an assignment of the Franchise Agreement or becoming a substitute franchisor under the Franchise Agreement.

SECTION 5.3. Inspection of Premises and Books and Records.

(g) Borrower and Operating Lessee shall permit Agent and its designated representatives to enter upon and inspect the Premises, or any part thereof, in an emergency and at all other times during normal business hours and upon prior reasonable notice, with free access to inspect or examine the Premises.

(h) Agent shall have no duty to make any inspection nor shall Agent incur any liability or obligation for not making any such inspection or, once having undertaken any such inspection, for making the inspection, not making the same carefully or properly, or for not completing the same; nor shall the fact that such inspection may not have been made by Agent relieve Borrower of any obligations that it may otherwise have under the Loan Documents.

(i) Borrower and Operating Lessee shall at all times keep complete and accurate books, records and accounts of its transactions. At their sole cost and expense, Borrower and Operating Lessee shall permit any representative of Agent, at all times during normal business hours upon prior reasonable notice, to examine and copy the books and records of Borrower and Operating Lessee, and all contracts, statements, invoices, bills, and claims for labor, materials, and services supplied for the construction, reconstruction, maintenance, operation and repair of the Premises.

SECTION 5.4. Compliance with Legal, Insurance and Contractual Requirements.

(a) Subject to the right of Borrower and Operating Lessee to contest as set forth in Section 5.8 hereof, Borrower and Operating Lessee, at their sole cost and expense, shall comply and cause compliance of the Premises and the construction, use, occupancy, possession, operation, management, maintenance and ownership thereof, with all Legal Requirements and all Insurance Requirements in all material respects, whether or not compliance therewith shall require changes in, or interfere with the use and enjoyment of, the Premises or any part thereof. Borrower and Operating Lessee shall preserve and maintain in all material respects all of their respective rights, privileges and Operating Permits necessary to fully operate the Premises in accordance with Section 5.2 hereof. Agent and Lenders shall not have any obligation or responsibility whatsoever for any matter incident to the Premises or the maintenance and operation of the Premises. Borrower and Operating Lessee agree that all consents, approvals,

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orders or authorizations of, or registrations, declarations or filings with, or other actions with respect to or by, any Governmental Authorities required for the operation and maintenance of the Premises and otherwise in connection with the carrying out or performance of any of the transactions required or contemplated hereby or thereby (other than routine construction and occupancy permits which are not appropriate or necessary for the stages of construction in question) shall be obtained when required.

(b) Borrower and Operating Lessee shall comply in all material respects with all of their respective covenants, obligations, agreements and undertakings under the Premises Documents, the Permitted Encumbrances, the Material Operating Agreements and each other material agreement to which Borrower or Operating Lessee is a party, and make all reasonable efforts to secure the performance of the obligations of the other parties thereto and to enforce its rights thereunder. Neither Borrower nor Operating Lessee shall amend, modify or supplement in any material respect, terminate or cancel, consent to the assignment or surrender of, or waive or release any material obligation of any party under, or waive any material right of Borrower or Operating Lessee under, or enter into any agreement in substitution of, any Material Operating Agreement without Agent’s prior consent, unless the same done in the ordinary course of business on commercially reasonable terms or otherwise permitted in the Property Management Agreement to be done by Property Manager without the consent of Operating Lessee. Any consent of Agent required under this Section 5.4(b) shall not be unreasonably withheld, conditioned or delayed.

(c) Borrower and Operating Lessee, at their sole cost and expense, shall comply and cause compliance in all material respects with all rights of way or use, declarations or transfers of air rights, other declarations, zoning lot development agreements, privileges, franchises, licenses, servitudes, easements and other encumbrances affecting or forming a part of the Mortgaged Property or any portion thereof, and all instruments creating or evidencing the same, including the Permitted Encumbrances and the Premises Documents, in each case, to the extent compliance therewith is required of Borrower or Operating Lessee under the terms thereof. Neither Borrower nor Operating Lessee shall take any action which results in a forfeiture or termination of the rights afforded to Borrower or Operating Lessee under any such instruments. Borrower and Operating Lessee shall make all reasonable efforts to secure the performance in all material respects of the obligations of the grantors or other parties thereto and to enforce Borrower’s and Operating Lessee’s rights thereunder. Neither Borrower nor Operating Lessee shall in any material respect, without the prior consent of Agent, modify, amend or supplement or enter into any agreement in substitution for, or waive or release any obligation of any party under, or waive any right of Borrower or Operating Lessee under, any such instruments, which consent shall not be unreasonably withheld, conditioned or delayed so long as no Event of Default exists and none of the foregoing is reasonably likely to have a Material Adverse Effect.

SECTION 5.5. Appraisals. Agent shall be entitled to obtain, at the sole cost and expense of Borrower and Operating Lessee, Appraisals or Appraisal Updates at Agent’s election (x) at any time that an Event of Default has occurred and is continuing, (y) in connection with the foreclosure of the Mortgage or the granting of a deed-in-lieu thereof or the exercise of

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other remedies against Borrower or Operating Lessee after the occurrence and during the continuance of an Event of Default, and (z) at any other time not more than once in any twenty-four (24) month period, or more frequently if required for regulatory purposes applicable to Agent or any Lender; provided , however , in the event that an Appraisal Update in lieu of an Appraisal would be sufficient for regulatory purposes, Agent and Lenders agree that an Appraisal Update shall be sufficient for purposes of clause (z) above. At any time on or after the first anniversary of the effective date of the then most recent Appraisal or Appraisal Update, but in no event more than once in any twelve (12) month period, Borrower shall be entitled to require Agent to obtain, at the sole cost and expense of Borrower, an Appraisal or Appraisal Update for purposes of determining the LIBOR Rate Margin or the Amortization Payment Amount. Borrower and Operating Lessee shall cooperate with Agent and any appraiser and their agents and employees in connection with Appraisals and Appraisal Updates.

SECTION 5.6. Payment of Impositions. Subject to the right of Borrower and Operating Lessee to contest in accordance with Section 5.8 hereof, Borrower and Operating Lessee shall pay or cause to be paid all Impositions on or before the due date thereof and in any event before any fine, penalty, interest or cost may be added for non-payment. Borrower and Operating Lessee shall promptly deliver to Agent after payment of any Imposition and at other times, upon request, copies of official receipts or other evidence satisfactory to Agent evidencing the payment of the Impositions. Neither Borrower nor Operating Lessee shall claim or demand or be entitled to any credit or credits on account of the Obligations for any Imposition or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Mortgaged Property, the Collateral or any part thereof, by reason of the Mortgage or the Obligations.

SECTION 5.7. Liens and Encumbrances; Ownership of Collateral. Borrower shall at all times be the absolute and sole owner of, and, subject to the Permitted Encumbrances and Leases and Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with the Loan Documents, have good, legal and beneficial title to, a fee interest in Land and Improvements (or, as to the portion of the Premises demised pursuant to the Submerged Land Lease, the leasehold interest in such portion of the Premises so demised). Operating Lessee shall at all times to be the absolute and sole owner of, and, subject to the Permitted Encumbrances and Leases and Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with the Loan Documents, have good, legal and beneficial title to, the leasehold estate in the Land and Improvements created by the Operating Lease. Borrower and/or Operating Lessee shall at all times be the sole and absolute owner(s) of and have legal and beneficial title to the other Collateral, free and clear of any Lien except the Loan Documents, Permitted Encumbrances and Leases and Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with the Loan Documents (except that Borrower shall at all times be the sole and absolute owner of and have legal and beneficial title to all Interest Rate Protection Agreements, free and clear of any Lien except the Permitted Encumbrances and the Loan Documents). In furtherance of the foregoing, (a) neither Borrower nor Operating Lessee shall in any material respect make, grant, modify or terminate any rights of way or use, declarations, transfers of air rights, other declarations, zoning lot development agreements, privileges,

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franchises, licenses, servitudes, easements and other encumbrances over, under or on the Land or Improvements or any portion thereof, without the prior consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed so long as no Event of Default exists and none of the foregoing is reasonably likely to have a Material Adverse Effect and (b) neither Borrower nor Operating Lessee shall directly or indirectly create or permit or suffer to be created any Lien on the interest of Borrower or Operating Lessee in the Collateral or any part thereof, other than the Loan Documents, Permitted Encumbrances and Leases and Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with the Loan Documents. Notwithstanding the foregoing, with respect to any mechanic’s lien or other Lien on the Collateral, other than Liens voluntarily created by Borrower, Operating Lessee or any of their Affiliates, Borrower and Operating Lessee shall have thirty (30) days after either of them first receives notice of such Lien to discharge or bond over such Lien. Neither Borrower nor Operating Lessee shall directly or indirectly suffer or permit, and shall promptly discharge or cause to be discharged, any Lien on any direct or indirect equity or beneficial interest in Borrower, Operating Lessee or any Person directly or indirectly holding an equity or beneficial interest in Borrower or Operating Lessee other than Permitted Transfers.

SECTION 5.8. Permitted Contests. After prior written notice to Agent and provided no Default or Event of Default shall then exist, Borrower and Operating Lessee, at their sole cost and expense, may contest, by appropriate legal proceedings conducted in good faith and with due diligence, the amount or validity or application, in whole or in part, of any Imposition, mechanic’s or materialman’s Lien, Legal Requirement or Insurance Requirement and defer the payment thereof or compliance therewith, subject, however, to the following conditions:

(w) In the case of an unpaid Imposition or mechanic’s or materialman’s Lien, such proceedings shall suspend the collection thereof from Borrower, Operating Lessee, Agent, Lenders and the Mortgaged Property and other Collateral;

(x) neither the Mortgaged Property, the other Collateral, any Rents nor any part thereof or interest therein, in the judgment of Agent, would be in any danger of being sold, forfeited, terminated, canceled or lost in any respect;

(y) in the case of a Legal Requirement, Borrower and Operating Lessee would not be in danger of criminal liability for failure to comply therewith and neither Agent nor any Lender would be in danger of any civil or criminal liability for failure to comply therewith;

(z) Borrower and Operating Lessee shall have furnished such security, bond or escrow if any, as may be required in the proceedings or as may be requested by Agent to ensure the payment of any Imposition or Lien or the compliance with any Legal Requirement or Insurance Requirement, as the case may be, together with any interest or penalties which may become due in connection therewith;

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(aa) the non-payment of the whole or any part of any tax, assessment or charge during the pendency of any such action will not result in the delivery of a tax deed to the Mortgaged Property or any part thereof, because of such non-payment;

(bb) the payment of any sums required to be paid under this Loan Agreement and the other Loan Documents (other than any unpaid Imposition at the time being contested in accordance with this Section 5.8 ) shall not be interfered with or otherwise affected;

(cc) in the case of any Insurance Requirement, the failure of Borrower or Operating Lessee to comply therewith shall not affect the validity or effectiveness of any insurance required to be maintained by Borrower under Section 5.11 hereof; and

(dd) Borrower and Operating Lessee comply with any and all conditions or requirements set forth in any other agreement to which Borrower or Operating Lessee is a party or pursuant to which the Premises is bound with respect to such contest;

provided, that, the conditions set forth in clauses (a) , (c) , (d) , (e) and (g) shall not be conditions to a permitted contest pursuant to this Section 5.8 if Borrower or Operating Lessee pays and otherwise complies with such Imposition, Legal Requirement or Insurance Requirement.

SECTION 5.9. Alterations. Borrower and Operating Lessee shall cause all alterations of the Premises to be done in a good and workmanlike manner and shall be completed in accordance with all Legal Requirements and free and clear of Liens or claims for materials supplied or for labor or services performed in connection with such repairs and alterations or otherwise, subject to the rights of Borrower and Operating Lessee pursuant to Section 5.8 hereof. Prior to Borrower’s, Operating Lessee’s or Property Manager’s commencing any Significant Alteration, all of the following requirements and conditions shall be satisfied:

(a) Agent shall have determined that (x) Borrower and Operating Lessee have the financial resources to complete the Significant Alteration on a timely and lien-free basis and (y) the Significant Alteration can be completed at least six (6) months prior to the then Maturity Date;

(b) If requested by Agent, Agent shall have received architectural or engineering plans and specifications for the Significant Alteration and an estimate of the costs and expenses of such Significant Alteration, all of which shall be approved by Agent, which approval shall not be unreasonably withheld, conditioned or delayed;

(c) If requested by Agent, Agent shall have received copies of the agreements pursuant to which the Significant Alteration shall be done; and

(d) Agent shall have received such other information and documentation as Agent may reasonably request regarding the Significant Alteration and the cost thereof.

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SECTION 5.10. Leases.

(a) Neither Borrower nor Operating Lessee shall enter into, amend, supplement or modify in any material respect, consent to the assignment or surrender of, or grant a waiver of any material provision or right of Borrower or Operating Lessee under, any Material Lease without Agent’s prior consent, which consent shall not be unreasonably withheld, conditioned or delayed so long as no Event of Default exists.

(b) Provided that no Event of Default is continuing, Borrower and Operating Lessee may, without the approval of Agent, enter into any Lease which is not a Material Lease provided that such Lease is entered into in the ordinary course of Borrower’s and Operating Lessee’s business and when entered into (i) provides for net effective rental rates comparable to existing local market rates, (ii) provides for automatic self-operative subordination to the Mortgage and, at Agent’s option, (x) attornment to Agent and (y) the unilateral right by Agent, at the option of Agent, to subordinate the Lien of the Mortgage to the Lease, and (iii) does not contain any option to purchase, any right of first refusal to purchase, any requirement for a non-disturbance or recognition agreement, or any other provision which could reasonably be expected to cause a Material Adverse Effect.

(c) Provided that no Event of Default is continuing, Borrower and Operating Lessee may, without the approval of Agent, amend, supplement, modify, terminate, consent to the assignment or waiver of and grant any waivers under any Lease which is not a Material Lease provided that after giving effect to any amendment, supplement, modification or assignment consented to by Borrower or Operating Lessee thereof or waiver thereunder, such Lease continues to (i) provide for net effective rental rates comparable to existing local market rates, (ii) provide for automatic self-operative subordination to the Mortgage and, at Agent’s option, (x) attornment to Agent and (y) the unilateral right by Agent, at the option of Agent, to subordinate the Lien of the Mortgage to the Lease, and (iii) not contain any option to purchase, any right of first refusal to purchase, any requirement for a non-disturbance or recognition agreement, or any other provision which could reasonably be expected to cause a Material Adverse Effect; provided that clause (ii) above shall not apply to the Lease with Operation Kidd, LLC (assignee to Island Dogs, LLC) existing on the date of this Loan Agreement.

(d) Without limiting Section 5.10(a) hereof, Borrower and Operating Lessee shall deliver to Agent a copy of any Material Lease, and any amendment, modification or supplement thereof within five (5) Business Days after the execution and delivery thereof by Borrower or Operating Lessee.

(e) Borrower and Operating Lessee shall faithfully keep and perform in all material respects their respective obligations under the Leases and shall not permit any Lessee to prepay Rents pursuant to the terms of any Lease other than the usual prepayment of Rent as would result from the acceptance on the first day of each month of the Rent for the ensuing month, according to the terms of any Leases. Borrower and Operating Lessee shall promptly (i) notify Agent, in writing, of any material defaults by any Lessee under or Lease guarantor of each Material Lease after Borrower or Operating Lessee becomes aware of the same and (ii) deliver to Agent a copy of all termination notices, default notices, notices claiming any offset

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rights and all other material notices from any Lessee under or Lease guarantor of each Material Lease to Borrower or Operating Lessee or from Borrower or Operating Lessee to any Lessee under or Lease guarantor of each Material Lease.

(f) Borrower and Operating Lessee shall furnish to Agent, within ten (10) days after a request by Agent to do so, true copies of each Lease and any Lease guaranty thereof or amendments and supplements thereto not previously furnished to Agent and any other information with respect to Borrower’s and Operating Lessee’s leasing activities and policies for the Premises as Agent shall reasonably request.

(g) Borrower and Operating Lessee shall appear in and defend any action or proceeding arising under, occurring out of, or in any manner connected with, any Leases and Lease guaranties or the obligations, duties, or liabilities of Borrower or Operating Lessee or any Lessee or any Lease guarantor thereunder. Borrower and Operating Lessee shall pay all costs and expenses of Agent, including reasonable attorneys’ fees, in any action or proceeding in which Agent may appear.

(h) Borrower and Operating Lessee shall use commercially reasonable efforts to enforce or secure the performance in all material respects of the obligations of the Lessees under and Lease guarantors of Material Leases. Neither Borrower nor Operating Lessee shall waive, discount, set-off, compromise, or in any manner release or discharge any Lessee under or Lease guarantor of any Material Lease of and from any material obligations, covenants, conditions, and agreements by said Lessee and Lease guarantor to be kept, observed, and performed, in the manner and at the place and time specified in the applicable Material Lease and guaranty thereof .

(i) Borrower and Operating Lessee shall not, and shall not allow any Person on behalf of Borrower or Operating Lessee to, enter into any agreement with any Person to pay lease commissions with regard to any Lease which agreement is not expressly made subordinate to Agent’s rights, interests and claims under the Loan Documents.

(j) All Leases executed after the Closing Date shall be made expressly subject and subordinate to the Mortgage and the terms and provisions thereof and shall contain provisions obligating the Lessees thereunder to attorn to Agent or any purchaser therefrom upon its written demand in the event Agent or such purchaser succeeds to the interest of Borrower or Operating Lessee under such Leases. Each Lease guaranty, if any, shall provide that it shall remain in full force and effect, and that guarantor thereunder shall perform for the benefit of Agent or such purchaser, upon attornment by the Lessee.

SECTION 5.11. Required Insurance.

(c) Required Coverage. In addition to any insurance required to be maintained by Borrower and Operating Lessee pursuant to the Property Management Agreement, the Premises Documents, the Leases and all other agreements to which Borrower or Operating Lessee is a party or the Premises is subject, Borrower and Operating Lessee shall maintain, or cause to be maintained, the types of insurance set forth in Schedule 5.11 attached hereto

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complying with the requirements set forth in said Schedule 5.11 . In clarification of the foregoing, in the event a Casualty occurs due to any event that is required to be insured hereunder (e.g., a flood or hurricane), Borrower and Operating Lessee shall continue to maintain or cause to be maintained at all times the insurance coverage required with respect to such event, including during the occurrence of an on-going Casualty, settlement of insurance claims after the Casualty and during the course of any Restoration of the Premises. Borrower and Operating Lessee shall perform or cause to be performed the obligations set forth in said Schedule 5.11 as and when required therein, and in addition to their other rights and remedies set forth in the Loan Documents, at law or in equity, Agent and Lenders shall have the rights and remedies set forth therein. Neither Borrower nor Operating Lessee shall name any Person other than Agent as “First Mortgagee” or “First Lender Loss Payee” on the property insurance set forth in Schedule 5.11 , or give any Person other than Agent the right to make a claim for, settle or receive insurance proceeds pursuant to the insurance policies of Borrower or Operating Lessee, unless such insurance is a blanket or group policy, in which case, neither Borrower nor Operating Lessee shall name any Person other than Agent as “First Mortgagee” or “First Lender Loss Payee” with respect to the Premises on such insurance, or give any Person other than Agent the right to make a claim for, settle or receive insurance proceeds on account of the Premises or otherwise with respect to Borrower or Operating Lessee pursuant to such policies.

(d) Agent’s Right to Procure Insurance. Notwithstanding anything to the contrary contained herein, if at any time Agent is not in receipt of written evidence that all insurance required hereunder is maintained in full force and effect, Agent shall have the right (but not the obligation) to take such action as Agent deems necessary to protect its interests in the Premises, including the obtaining of such insurance coverages as are required hereunder, and all expenses incurred by Agent in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower and Operating Lessee promptly after demand and shall be secured by the Loan Documents.

SECTION 5.12. Damage or Destruction.

(d) Borrower and Operating Lessee hereby irrevocably assign, transfer and set over to Agent all of their rights to all business interruption/rent loss, property, terrorism and other insurance proceeds, awards and payments payable with respect to the Premises on account of a Casualty. Subject to Section 5.12(b) hereof, (i) Agent shall be entitled to collect and receive all insurance proceeds payable with respect to the Premises on account of a Casualty and until disbursed such proceeds shall constitute additional security for the Obligations, (ii) Borrower and Operating Lessee hereby irrevocably authorize and empower Agent, in the name of Borrower or Operating Lessee or otherwise, to file for and prosecute in its own name what would otherwise be Borrower’s or Operating Lessee’s claim for any such insurance proceeds and to collect such proceeds and (iii) Agent may participate in all proceedings and negotiations in connection with such proceeds on behalf of Borrower and Operating Lessee or otherwise and Borrower and Operating Lessee shall deliver or cause to be delivered to Agent all instruments requested by Agent to permit such participation; provided , however , that Agent shall be under no obligation to question or maximize the amount of the proceeds or obtain any particular amount of proceeds. Although it is hereby expressly agreed that the same shall not be necessary, and in any event,

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Borrower and Operating Lessee shall, upon demand of Agent, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such proceeds to Agent, free and clear of any encumbrances of any kind or nature whatsoever. Agent may be represented by counsel satisfactory to it. Borrower and Operating Lessee shall pay promptly after demand all reasonable costs and expenses (including reasonable attorneys’ fees and disbursements and any appraiser or other consultant) incurred by Agent in connection with any Casualty and seeking and obtaining any insurance proceeds on account thereof.

(e) Notwithstanding Section 5.12(a) hereof, so long as no Default or Event of Default shall have occurred and shall then be continuing and provided Borrower and Operating Lessee promptly file all claims and diligently prosecute same, Borrower and Operating Lessee shall have the right to file, adjust, settle and prosecute any claim for such insurance proceeds; provided , however , that neither Borrower nor Operating Lessee shall agree to any adjustment or settlement of any such claim payable with respect to a Casualty the insurance proceeds with respect to which are or are reasonably expected to be greater than $1,500,000 (the “ Casualty Proceeds Disbursement Threshold ”) without Agent’s prior consent. Borrower and Operating Lessee shall promptly after demand pay to Agent all reasonable costs and expenses (including the fee of any insurance consultant or adjuster and reasonable attorneys’ fees and disbursements) incurred by Agent in connection with a Casualty and seeking and obtaining any insurance proceeds, award or payment with respect thereto. Net Proceeds held by Agent, together with any interest earned thereon, shall constitute additional security for the payment of the Obligations (a security interest therein being granted hereby), until disbursed in accordance with this Section 5.12 or Section 5.14 hereof, as the case may be. Notwithstanding the foregoing, or anything else herein, to the contrary, all proceeds of business interruption/rent loss insurance may be collected by and shall be paid to Agent and applied in accordance with Section 5.12(g) hereof.

(f) Borrower and Operating Lessee shall use all insurance proceeds actually received by either of them for Restoration. Borrower and Operating Lessee shall, at their sole cost and expense, promptly commence and diligently and continuously perform to completion the Restoration in a good and workmanlike manner and in compliance with all Legal Requirements and the requirements of the Permitted Encumbrances, the Property Management Agreement and the Leases, whether or not Borrower and Operating Lessee shall have satisfied the Release Conditions in order to cause the Net Proceeds to be made available for such Restoration and whether or not such insurance proceeds on account of the Casualty shall be sufficient for such purpose.

(g) Subject to the last sentence of Section 5.12(b) hereof, in the case of any Casualty with respect to which the insurance proceeds payable are less than the Casualty Proceeds Disbursement Threshold, the Net Proceeds shall be payable directly to Borrower (or if paid to Agent, Agent shall disburse same to Borrower) for Restoration, and in the case of any Casualty with respect to which the insurance proceeds payable are equal to or greater than the Casualty Proceeds Disbursement Threshold, the Net Proceeds shall be held by Agent, if Agent so elects, as a part of the Collateral. In such event, Agent shall make the Net Proceeds available to Borrower for the Restoration of the Premises from time to time as the Restoration progresses,

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subject to compliance by Borrower with Section 5.2(c) hereof and satisfaction of the following terms and conditions for each disbursement (each a “ Release Condition ” and collectively, the “ Release Conditions ”):


(i)	No First Tier Default or Event of Default shall have occurred and be continuing;


(ii)	Agent shall have been provided an Appraisal certifying that upon completion of the Restoration, the outstanding principal balance of the Loan shall not exceed sixty-five percent (65%) of the Appraised Value;


(iii)	Borrower and Operating Lessee shall have demonstrated to the reasonable satisfaction of Agent that the Restoration can be completed at least six (6) months prior to the then-current Maturity Date, or such earlier time as may be required by applicable Legal Requirements;

(iv)

To the extent, in Agent’s reasonable judgment, the Net Proceeds are insufficient to pay the costs of the Restoration, Borrower and Operating Lessee shall have, if requested by Agent, deposited with Agent sums in an amount at least equal to the excess, if any, of Agent’s reasonable estimate of the costs of the Restoration over the amount of Net Proceeds received by Agent with respect to such Casualty, which additional sums shall be disbursed by Agent prior to any disbursements of insurance proceeds;

(v)

Borrower and Operating Lessee shall have demonstrated to the reasonable satisfaction of Agent that sufficient funds are available to them through the rent and/or business interruption insurance deposited with Agent pursuant to Section 5.12(g) hereof and/or cash deposited with Agent to be disbursed in accordance with Section 5.12(g) hereof, to pay all debt service with respect to the Loan and all operating expenses with respect to the Premises during the period reasonably estimated by Agent as necessary for the completion of the Restoration and the extended indemnity period referred to in item (1d) of Addendum A to Schedule 5.11 attached hereto;


(vi)	intentionally omitted;


(vii)	Agent shall have received architectural and/or engineering plans and specifications for the Restoration and an estimate of the costs and expenses of the Restoration, all of which shall be in form and substance reasonably acceptable to Agent;

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(viii)	Prior to any disbursement by Agent, the following information and documentation shall have been obtained by Borrower and Operating Lessee, at their expense, and submitted to Agent, which information and documentation shall be in form and substance satisfactory to Agent:


(A)	A request for disbursement signed by Borrower or Operating Lessee, accompanied by billing statements, vouchers or invoices, which request for disbursement shall expressly warrant that the work with respect to which the advance is requested has been performed in all material respects in accordance with the approved plans and specifications for the Restoration;


(B)	Proof that all invoices for labor and materials previously submitted by Borrower and Operating Lessee and approved and reimbursed by Agent have been paid, except for those the subject of the current request for disbursement;


(C)	Lien waivers for all payees under previous requests for disbursements;

(D)

A report from Borrower or Operating Lessee’s architect or if Agent shall elect, such consultant as Agent shall retain, which shall specify the percentage of completion of the Restoration, shall provide detailed comments on specific work performed since the date of the last such report, and, if required by Agent, an estimate of the cost to complete the Restoration after taking into account the work then completed;


(E)	At the request of Agent, an endorsement of the Title Insurance Policy, which endorsement shall show no liens of record or additional encumbrances not acceptable to Agent;


(F)	Copies of the architect, trade contract and all other agreements pursuant to which the Restoration shall be done, and any such agreement which requires payments of more than $100,000 in the aggregate shall be reasonably satisfactory to Agent as to the party performing the construction obligations thereunder;


(G)	An assignment to Agent of all such agreements, together with the written consent to such assignments by all parties to such contracts and an agreement to continue performance thereunder at Agent’s request; and

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(H)	Such other information and documentation as Agent may reasonably request regarding the Improvements and the Restoration and the cost thereof.

Notwithstanding the foregoing, if Agent does not elect to hold the Net Proceeds, Borrower shall not disburse any Net Proceeds other than in accordance with the conditions of this Section 5.12(d) and Sections 5.12(e) and 5.12(f) hereof.

If a First Tier Default occurs, or one or more of the Release Conditions set forth in subsection (viii) of Section 5.12(d) hereof are not satisfied, Agent shall, with respect to the applicable disbursement, continue to hold the Net Proceeds until those conditions are satisfied or, if applicable, such First Tier Default ceases to exist, subject to the terms of Section 5.12(e) hereof.

(h) If one or more of the Release Conditions set forth in subsection (ii) through (vii) of Section 5.12(d) hereof are not satisfied or becomes unsatisfied within ninety (90) days from and after the date of the Casualty, then all Net Proceeds shall, at the option of Agent, be applied in accordance with Section 5.14 hereof. If an Event of Default occurs and is continuing, all Net Proceeds shall also be applied in accordance with Section 5.14 hereof.

(i) All reasonable costs and expenses incurred by Agent in connection with making the Net Proceeds available for the Restoration (including reasonable attorneys’ fees and disbursements and reasonable fees and actual out-of-pocket expenses of Agent’s construction consultants and inspectors) shall be paid by Borrower and Operating Lessee. Any Net Proceeds remaining after the Restoration and the payment in full of all costs incurred in connection with the Restoration will be distributed by Agent to Borrower provided no Event of Default shall have occurred and be continuing.

(j) Business interruption/rent loss insurance proceeds of Borrower and Operating Lessee shall be deposited into an interest-bearing account or subaccount of Agent as further security for the Obligations (a security interest therein being granted hereby). Provided no First Tier Default or Event of Default shall have occurred and be continuing, Agent shall use such proceeds to pay of Interest, principal due and payable under Section 2.4 hereof and other sums that become due and payable under the Loan Documents as and when due and after payment or reservation of such sums for any calendar month, at the written request or Borrower or Operating Lessee from time to time on a monthly basis, Agent shall disburse such proceeds to Borrower and Operating Lessee to pay for reasonable and necessary Expenses of the Premises incurred in the ordinary course of the ownership, maintenance and operation of the Premises for such calendar month in accordance with the applicable operating budget approved by Agent and provided that the payment of any such Expense is not prohibited by the terms hereof. Borrower and Operating Lessee hereby grant to Agent a security interest in all of their rights in and to such account and all sums on deposit therein as additional security for the Obligations. Upon the occurrence and during the continuation of an Event of Default, Agent shall have the rights and remedies with respect to such account specified in this Loan Agreement and in any other Loan

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Document. The credit balance in such account or subaccount may be commingled with the general funds of Agent. Borrower and Operating Lessee shall pay all fees and costs with respect to such account. Neither Agent nor Lenders shall be liable for any loss of interest on or any penalty or charge assessed against the funds in, payable on, or credited to such account as a result of the exercise by Agent of any of its rights, remedies or obligations hereunder or under any other Loan Document. Any interest earned on the balance of such account shall be deposited into such account and be applied with the balance of such account in accordance with this Section 5.12(g) . Agent shall have sole control over such account. Any business interruption/rent loss insurance proceeds remaining after completion of the Restoration shall be distributed to Borrower provided no Event of Default shall have occurred and be continuing.

SECTION 5.13. Taking of the Mortgaged Property .

(d) Borrower and Operating Lessee hereby irrevocably assign, transfer and set over to Agent all of their rights in and to all awards or compensation payable on account of a Taking. Agent shall be entitled to collect and receive all awards or compensation payable on account of a Taking. Borrower and Operating Lessee irrevocably authorize and empower Agent, in the name of Borrower or Operating Lessee or otherwise, to file and prosecute in its own name what would otherwise be Borrower’s or Operating Lessee’s claim for such awards or compensation and to collect such awards or compensation. Agent may participate in any and all hearings, trials, appeals, proceedings and negotiations in connection with a Taking and awards and compensation on behalf of Borrower and Operating Lessee or otherwise and Borrower and Operating Lessee shall deliver or cause to be delivered to Agent all instruments requested by Agent to permit such participation; provided , however , that Agent shall be under no obligation to question or maximize the amount of the award or compensation or obtain any particular amount of award or compensation. Although it is hereby expressly agreed that the same shall not be necessary, and in any event, Borrower and Operating Lessee shall, upon demand of Agent, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or compensation to Agent, free and clear of any encumbrances of any kind or nature whatsoever. Agent may be represented by counsel satisfactory to it. Borrower and Operating Lessee shall pay promptly after demand all reasonable costs and expenses (including fees and disbursements of attorneys, appraisers and other consultants) incurred by Agent in connection with any Taking and seeking and obtaining any award or payment on account thereof.

(e) Borrower and Operating Lessee shall use all awards and other compensation actually received by either of them for Restoration. Borrower and Operating Lessee shall, at their sole cost and expense, promptly commence and diligently and continuously perform to completion the Restoration in a good and workmanlike manner and in compliance in all material respects with all Legal Requirements and the requirements of the Permitted Encumbrances, the Property Management Agreement and the Leases, whether or not Borrower and Operating Lessee shall have satisfied the Release Conditions in order to cause the Net Restoration Award to be made available for such Restoration and whether or not such awards or compensation, if any, on account of the Taking shall be sufficient for such purpose.

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(f) All Net Restoration Awards shall be held by Agent at its election. All Net Restoration Awards shall be applied as follows:

(vi) If the Release Conditions are satisfied, and the Taking is not a Material Taking, all Net Restoration Awards shall be applied to pay the cost of Restoration, such application to be effected in the same manner as provided in Section 5.12(d) hereof with respect to Net Proceeds and the balance, if any, of such Net Restoration Awards shall be paid over or assigned to Borrower following completion of the Restoration and payment of all costs of same provided no Event of Default shall have occurred and be continuing.

(vii) If the Taking is a Material Taking under clause (b) of the term “Material Taking” in Section 1.1 hereof, or one or more of the Release Conditions set forth in subsection (ii) through (vii) of Section 5.12(d) hereof are not satisfied or becomes unsatisfied within ninety (90) days from and after the date of the Taking, then all Net Restoration Awards, at Agent’s option, shall be applied in accordance with Section 5.14 hereof. If an Event of Default occurs, all Net Restoration Awards shall also be applied in accordance with Section 5.14 hereof.

(viii) In the case of a Taking for temporary use, any Net Restoration Awards shall be deposited with Agent and disbursed in accordance with Section 5.12(g) hereof for so long as such temporary Taking continues.

(g) All reasonable costs and expenses incurred by Agent in connection with making the Net Restoration Awards available for the Restoration (including reasonable attorneys’ fees and disbursements and reasonable fees and actual out-of-pocket expenses of Agent’s construction consultants and inspectors) shall be paid by Borrower and Operating Lessee.

SECTION 5.14. Application of Proceeds of Casualty or Taking to Loan; Loan Repayment. Upon a Casualty, if the disposition of the Net Proceeds is governed by Section 5.12(e) hereof or upon a Taking, if the disposition of the Net Restoration Awards is governed by Section 5.13(c)(ii) hereof, at the option of Agent, the Loan shall be immediately due and payable. Regardless of whether Agent shall so elect to accelerate the maturity of the Loan as aforesaid, Agent shall have the option to (a) make available the Net Proceeds or the Net Restoration Awards, as the case may be, to Borrower and Operating Lessee for Restoration in the manner provided in Section 5.12(d) hereof or (b) apply the Net Proceeds and/or the Net Restoration Awards to the Obligations, in such order and manner as Agent determines, as the case may be. The prepayment fee set forth in Section 2.4(d) hereof shall not apply to the payments required pursuant to this Section 5.14 .

SECTION 5.15. Costs and Expenses. Without limiting any other provision of this Loan Agreement or of any other Loan Document, and notwithstanding any contrary provision in Article VII hereof, Borrower and Operating Lessee shall pay within ten (10) days after written demand by Agent, to or for the account of Agent as the case may be, Agent’s Counsel Fees and all other reasonable out-of-pocket costs and expenses incurred by or on behalf of Agent and/or Lenders in connection with the closing or initial syndication ( i . e ., any syndications within one hundred twenty (120) after the Closing Date) of the Loan (provided such initial syndication costs shall not exceed $20,000.00), any prepayments of the Loan, consultants

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in connection with administering the Loan after the Closing (provided such costs of consultants under this Section 5.15 shall not exceed $7,500.00 during any calendar year), Agent’s responses to requests for consents and waivers under the Loan Documents, all payments from any accounts, any modification, amendment or restructuring of the Loan or the Loan Documents (regardless if such modification, amendment or restructuring closes but excluding any modification, amendment or restructuring in connection with any loan assignment, participation, securitization or syndication by any Lender unless requested by Borrower, Operating Lease or Guarantor), the enforcement of Agent’s and Lenders’ rights and remedies under the Loan Documents, Borrower, Operating Lessee, Guarantor or the Collateral or otherwise at law or equity, and otherwise with respect to any and all other aspects of the transactions contemplated herein or in any other Loan Document, including the following, whether currently outstanding or which may arise at any time during the term of the Loan:

(a) all taxes and recording expenses, including all filing fees and mortgage recording and deed transfer taxes, with respect to the Security Documents, and any other documents modifying, extending or consolidating the Security Documents;

(b) in the event the Mortgaged Property or other Collateral, or any part thereof, shall be advertised for foreclosure sale and not sold, all costs in connection therewith, including attorneys’ fees and disbursements, advertising costs and trustees’ commissions;

(d) all survey, investigation, insurance and, subject to the provisions hereof, appraisal, fees and expenses and all costs of preparing environmental, engineering, probable maximum loss/seismic and insurance reports concerning the Premises.

SECTION 5.16. Transfers.

(e) No Transfer shall be made without Agent’s prior consent except for Permitted Transfers.

(f) Neither Borrower nor Operating Lessee shall assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of its interest or rights in the Loan or the Loan Documents.

(g) At all times, Guarantor shall have control (as the term “control” is defined in the definition of Affiliate in this Loan Agreement) of Borrower and Operating Lessee and, without limiting the foregoing, shall have day-to-day management and control over the activities and operations of Borrower and Operating Lessee.

(h) Notwithstanding Section 5.16(a) hereof, no Permitted Equity Transfer shall be permitted if it would result in the Loan, or the exercise of any of Agent’s, or Lenders’ rights in connection therewith, constituting a prohibited transaction under ERISA or the IRC (unless Borrower furnishes to Agent a legal opinion reasonably satisfactory to Agent that the

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transaction is exempt from the prohibited transaction provisions of ERISA and the IRC) or otherwise result in Agent or any Lender being deemed in violation of any applicable provision of ERISA. Borrower and Operating Lessee agree to indemnify and hold Agent and Lenders free and harmless from and against all losses, costs (including reasonable attorneys’ fees and expenses), taxes, damages (including consequential damages) and expenses Agent or any Lender may suffer by reason of the investigation, defense and settlement of claims and in obtaining any prohibited transaction exemption under ERISA necessary or desirable in Agent’s sole judgment or by reason of a breach of the foregoing prohibitions.

(i) If any Permitted Transfer results in any single Person (or members of the family (as defined in Section 267(c)(4) of the IRC) of any single Person collectively) owning ten percent (10%) or more of the beneficial interest in Borrower or Operating Lessee, directly or indirectly, Borrower shall, promptly after the Transfer, notify Agent of the identity of the transferee and provide to Agent such information as it may reasonably request to satisfy the requirements of the Patriot Act or other Legal Requirements relating to money-laundering or terrorism with respect to the Transfer.

SECTION 5.17. Defense of Title. Borrower and Operating Lessee shall do all things necessary or proper to defend title to the Mortgaged Property and the other Collateral, subject to the Permitted Encumbrances and Leases and Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with the Loan Documents, but Agent shall have the right, at any time, to intervene in any suit affecting such title and to employ independent counsel in connection with any such suit to which it may be a party by intervention or otherwise; and upon demand, Borrower and Operating Lessee shall pay Agent all reasonable out-of-pocket expenses paid or incurred by Agent in respect of any such suit affecting title to any such property or affecting Agent’s lien or rights hereunder, including Agent’s Counsel Fees. Borrower and Operating Lessee hereby indemnify and hold harmless Agent from and against any and all costs and expenses, including any and all cost, loss, damage or liability which Agent may suffer or incur by reason of the failure of the title to all or any part of the Premises or security interest in the Collateral or by reason of the failure or liability of Borrower or Operating Lessee, for any reason, to convey or grant a security interest in the rights, titles and interests which the Mortgage or other Security Document purports to mortgage, assign, pledge or grant a security interest in, and all amounts at any time so payable by Borrower and Operating Lessee shall be secured by the Security Documents.

SECTION 5.18. Recordation and Certain Taxes. Borrower and Operating Lessee shall, at their sole cost and expense, at all times cause the Mortgage, Financing Statements and any other Security Document to be recorded, registered or filed in the public records, and any amendments or supplements hereto and thereto, and, if requested by Agent, any instruments of assignment hereof or thereof, to be recorded, registered and filed, as applicable, and to be kept recorded, registered and filed, in such manner and in such places, shall pay all recording, registration and filing fees and taxes and other charges, including any recording, transfer or intangible personal property tax or similar imposition, with respect thereto, and shall comply with all Legal Requirements in order fully and effectively to establish, preserve, perfect and protect the lien of the Security Documents subject only to Permitted Encumbrances, any

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Lease set forth in Schedule 4.36 hereof noted as not being subordinate by its terms to the Mortgage and Equipment Leases that exist as of the Closing Date or are entered into after the Closing Date in accordance with this Loan Agreement. Borrower and Operating Lessee hereby authorize Agent to file financing and continuation statements with respect to the Collateral.

SECTION 5.19. Name, Fiscal Year and Accounting Method. Neither Borrower nor Operating Lessee shall change its fiscal year or, except as may be approved by Agent, its method of accounting or its name.

SECTION 5.20. Consolidation, Merger, Conveyance, Transfer or Lease. Without the prior consent of Agent, neither Borrower nor Operating Lessee shall consolidate with or merge into any other Person or convey, transfer or lease its properties or assets substantially as an entirety to any Person.

SECTION 5.21. Organization Restrictions. Each of Borrower and Operating Lessee shall at all times be a Special Purpose Bankruptcy Remote Entity. Without limiting the foregoing, neither Borrower nor Operating Lessee shall engage in any business other than that related to the acquisition, ownership, construction, management, development, financing, leasing, sale, maintenance, marketing and operation of the Premises in accordance with the terms of the Loan Documents. Neither Borrower nor Operating Lessee shall, directly or indirectly make or permit any material amendment or modification to its operating agreement or other organizational document of Borrower or Operating Lessee, and such documents shall not be terminated or cancelled, without the prior consent of Agent. Neither Borrower nor Operating Lessee shall directly or indirectly take or permit any action which could result in Borrower or Operating Lessee not being a Special Purpose Bankruptcy Remote Entity. Without limiting Section 5.16 hereof, neither Borrower nor Operating Lessee shall permit any Person to become a member of Borrower or Operating Lessee after the Closing Date.

SECTION 5.22. Changes in Zoning. Neither Borrower nor Operating Lessee shall request or seek to obtain any change to, or consent to any request for or change in, any Legal Requirement, restrictive covenant or other restriction applicable to the Premises or any portion thereof or any other law, ordinance, rule, regulation, restrictive covenant or restriction affecting the zoning, development or use of the Premises or any portion thereof, or any variance or special exception therefrom, without the prior consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed.

SECTION 5.23. Limitation on Indebtedness. Borrower and Operating Lessee shall not, and shall not permit any Person on their behalf to, incur, create, contract for, waive, assume, have outstanding, guarantee or otherwise become liable with respect to Indebtedness other than Permitted Indebtedness.

SECTION 5.24. Distributions, Dividends and Affiliate Payments; Management Fees. Neither Borrower nor Operating Lessee shall make any payments, dividends or distributions to any direct or indirect owner of or Affiliate of Borrower, Operating Lessee (excluding payments, dividends, distributions and other disbursements made by Borrower or Operating Lessee to the other), including on account of any Indebtedness, investment, services

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rendered or goods supplied at any time that (a) a Default or Event of Default shall have occurred and be continuing or (b) any Cash Sweep Condition shall exist or be deemed to exist. No dividend or distribution shall be made more than one (1) time in any calendar month and dividends or distributions made in any fiscal year of Borrower shall not exceed in aggregate the amount of Net Cash Flow during such fiscal year.

SECTION 5.25. ERISA. Neither Borrower nor Operating Lessee shall at any time have any employees or engage in any transaction which would cause any obligation or action taken or to be taken hereunder by Borrower or Operating Lessee to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA. Borrower and Operating Lessee (i) shall make all required contributions to any Pension Plan or Multiemployer Plan, and (ii) shall not, and shall not permit any ERISA Affiliate to, cause or permit to occur an event that could result in the imposition of a Lien under IRC Section 412 or Section 302 or 4068 of ERISA, or any ERISA Event that could reasonably be expected to, alone or in the aggregate with all other ERISA Events, result in a material liability.

SECTION 5.26. Maintenance of Existence. Each of Borrower and Operating Lessee shall (a) qualify to do business in and remain in good standing under the laws of its jurisdiction of organization, and, to the extent required for the ownership, management and operation of its assets, any other jurisdiction, (b) take all action to maintain all rights, privileges and franchises necessary or desirable for the conduct of its business in its jurisdiction of organization and, to the extent required for the ownership, management and operation of its assets, any other jurisdiction, and, with respect to Borrower and Operating Lessee, the State where the Premises are located, and (d) comply in all material respects with all Legal Requirements with respect to the foregoing. Borrower and Operating Lessee shall qualify to do business in and remain in good standing under the laws of the State where the Premises are located.

SECTION 5.27. Subsidiaries and Joint Ventures. Neither Borrower nor Operating Lessee shall acquire any stock or assets of, or form a partnership, joint venture or other similar arrangement with, any Person, without Agent’s prior consent.

SECTION 5.28. Loans to Members, Etc. Neither Borrower nor Operating Lessee shall make any loan or advance to any of their direct or indirect beneficial owners, employees or Affiliates, except for Borrower’s or Operating Lessee’s employees’ business travel, Borrower’s or Operating Lessee’s employees’ out-of-pocket incidental personal business expenses incurred and similar advances in the ordinary course of Borrower’s or Operating Lessee’s business.

SECTION 5.29. Transactions with Affiliates. Neither Borrower nor Operating Lessee shall enter into, or be a party to, any transaction with any Affiliates of either Borrower or Operating Lessee except contracts for the providing of goods and services in the ordinary course of Borrower’s or Operating Lessee’s business and upon fair and reasonable terms which are fully disclosed to Agent and are no more onerous to it than it would obtain in a comparable arm’s length transaction with a Person not its Affiliate. Agent hereby approves the

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Property Management Agreement in effect as of the Closing Date and the Property Manager named thereunder.

SECTION 5.30. Adverse Contracts. Neither Borrower nor Operating Lessee shall enter into any contract or agreement which would materially and adversely affect its business, property, assets, operations, condition (financial or otherwise) taken as a whole, or its ability to perform its obligations under this Loan Agreement or any of the other Loan Documents.

SECTION 5.31. Utilities. Borrower and Operating Lessee shall pay, or cause to be paid, all charges for all utility services at any time rendered to, or the payment of which is the obligation of, Borrower or Operating Lessee in connection with, the Premises, and will do all other things required for the maintenance and continuance of utility services necessary for the operation, use and occupancy of the Premises for its intended purposes in accordance with this Loan Agreement, and ensure that they are available at the boundaries of the Premises.

SECTION 5.32. Margin Stock. Borrower shall not use any of the proceeds of the Loan for the purpose of purchasing or carrying “margin stock” within the meaning of Regulation T, U or X issued by the Board of Governors of the Federal Reserve System, as at any time amended, and Borrower agrees to execute all instruments necessary to comply with all the requirements of Regulation U of the Federal Reserve System, as at any time amended.

SECTION 5.33. Patriot Act Compliance . Borrower and Operating Lessee shall comply with the Patriot Act and all applicable requirements of governmental authorities having jurisdiction over Borrower and Operating Lessee and the Premises, including those relating to money laundering and terrorism. Agent shall have the right to audit Borrower’s and Operating Lessee’s compliance with the Patriot Act and all applicable requirements of governmental authorities having jurisdiction over Borrower and Operating Lessee and the Premises, including those relating to money laundering and terrorism. In the event that either Borrower or Operating Lessee fails to comply with the Patriot Act or any such requirements of governmental authorities, then Agent may, at its option, cause Borrower and Operating Lessee to comply therewith and any and all costs and expenses incurred by Agent in connection therewith shall be secured by the Loan Documents and shall be payable on demand and shall accrue interest at the Default Rate from the date paid or incurred by Agent until paid to Agent.

SECTION 5.34. Operating Lease . Each of Borrower and Operating Lessee shall perform and observe as and when required thereunder all of the material covenants required to be performed and observed by it under the Operating Lease, promptly notify Agent of any default (beyond any applicable notice, grace or cure period) under the Operating Lease and promptly deliver to Agent (without duplication) a copy of any notice of a material default or other material notice under any Operating Lease delivered to or from Borrower or Operating Lessee . If at any time, (a) Operating Lessee shall become insolvent or a debtor in a bankruptcy proceeding or (b) Agent or its designee has taken title to the Premises by foreclosure or deed in lieu of foreclosure, has become a mortgagee-in-possession, has appointed a receiver with respect to the Premises or has otherwise taken title to the Premises, Agent shall have the absolute right to (and Borrower and Operating Lessee shall reasonably cooperate and not in any way hinder, delay

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or otherwise interfere with Agent’s right to), immediately terminate the Operating Lease under and in accordance with the terms of the Mortgage. Neither Borrower nor Operating Lessee shall, without the prior written consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed, (i) surrender, terminate or cancel the Operating Lease or otherwise replace the Operating Lessee or enter into any other operating lease with respect to the Premises, (provided, however, at the end of the term of the Operating Lease, Borrower and Operating Lessee may renew the Operating Lease or enter into a replacement Operating Lease at a fair market rent required pursuant to the IRC and otherwise on substantially the same terms as the expiring Operating Lease (but Agent shall have the right to approve material changes thereto) provided that with respect to any replacement Operating Lease, Borrower and Operating Lessee execute and deliver to Agent a joinder to the Mortgage on the form of the joinder set forth therein pursuant to which Operating Lessee shall subordinate the Operating Lease to the Loan Documents and grant a lien and security interest to Agent in the Collateral, (ii) reduce or consent to the reduction of the term of the Operating Lease or (iii) otherwise amend or modify the Operating Lease in any material respect.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.1. Events of Default. The following shall each constitute an “ Event of Default ” hereunder:

(a) the failure of Borrower (i) to pay when due (x) the principal of and accrued, unpaid interest on the Note upon maturity, whether upon the Maturity Date or earlier following acceleration, (y) any payment required pursuant to Section 2.4(b) or 2.14 hereof or (z) any Interest or Additional Interest, or (ii) to pay within five (5) days after same is due any payment on account of any fees when due under the Loan Fee Letter;

(b) the failure of Borrower or Operating Lessee (i) to deposit when due any amount pursuant to Section 2.15 hereof provided that so long as Borrower makes the required deposit when due based on the Gross Revenue of the applicable calendar month set forth in the financial statement for such calendar month pursuant to Section 5.1(d) hereof, if such deposit is subsequently determined to be less than the true amount required to be deposited pursuant to Section 2.15 , then the failure to deposit the correct amount shall not be an Event of Default hereunder provided that the additional amount required to be deposited is deposited by Borrower within five (5) Business Days after written notice from Agent as to the required additional amount or (ii) to pay when due any other monetary Obligations, excluding those referred to in clause (a) of this Section 6.1 , on or before the due date therefor and such failure described in this subclause (ii) continues for five (5) Business Days after written notice from Agent of the non-payment thereof;

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(c) Borrower or Operating Lessee shall fail in the due performance or observance of any covenant, agreement or term binding upon Borrower or Operating Lessee contained in this Loan Agreement or any other Loan Document, other than those covenants, agreements or terms which failure to perform would constitute another Event of Default referred to in this Section 6.1 , and such failure shall continue unremedied for more than thirty (30) days after written notice thereof shall have been given to Borrower by Agent; provided , however , that if such failure is of a nature such that it cannot be cured by the payment of money and if such failure requires work to be performed, acts to be done or conditions to be removed which cannot by their nature, with due diligence, be performed, done or removed, as the case may be, within such thirty (30) day period and Borrower or Operating Lessee shall have commenced to cure such failure within such thirty (30) day period, such period shall be deemed extended for so long as shall be required by Borrower or Operating Lessee in the exercise of due diligence to cure such failure, but in no event shall such thirty (30) day period be so extended to be a period in excess of ninety (90) days;

(d) any “Event of Default” or any other default shall occur, and shall continue beyond the applicable notice and/or grace period, if any, provided for therein, under any of the Loan Documents (other than this Loan Agreement, such a default being the subject of other provisions of this Section 6.1 );

(e) any warranty, representation or certification made by or on behalf of Borrower, Operating Lessee or Guarantor in or pursuant to this Loan Agreement or any other Loan Document or any document, instrument or certificate heretofore or hereafter executed or delivered in connection herewith or therewith shall prove to have been incorrect or misleading in any material respect when made or deemed to have been made, provided the (i) foregoing shall not constitute an Event of Default if the breach of such representation, warranty or certification is not an intentional misrepresentation and is susceptible to cure by remedying the underlying condition giving rise to such breach (as opposed to cure by merely giving notice of circumstances) and such breach is cured to the reasonable satisfaction of Agent within thirty (30) days after notice from Agent to Borrower that the applicable certification, representation or warranty was incorrect or misleading and (ii) an Event of Default will not occur to the extent that, with respect to Section 4.10 , 4.14 , 4.17(b) , 4.18 , 4.21 , 4.26 , 4.28 , 4.32 , 4.33 or 4.36 hereof, the true state of facts underlying such incorrect or misleading warranty, representation or certification does not, and is not reasonably likely to, have a Material Adverse Effect;

(f) termination of the Property Management Agreement or the Franchise Agreement, resulting from a default by Borrower or Operating Lessee which continues beyond any applicable notice and/or grace period provided for therein;

(g) any Premises Document, any Permitted Encumbrance, the Franchise Agreement, if any, or the Property Management Agreement is amended, modified or terminated without the prior consent or prior approval of Agent, to the extent such consent or approval is required pursuant to this Loan Agreement;

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(h) any breach or default by Borrower shall occur and shall continue, beyond any applicable notice and/or grace period provided for therein, under any Interest Rate Protection Agreement, or the occurrence of any other act or omission by Borrower that would permit the other party thereto to terminate same;

(i) Borrower, Operating Lessee or Guarantor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any such proceeding or petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Borrower, Operating Lessee or Guarantor or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Borrower, Operating Lessee or Guarantor or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Borrower, Operating Lessee or Guarantor or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for ninety (90) days or an order or decree approving or ordering any of the foregoing shall be entered;

(k) Borrower or Operating Lessee shall fail in the due performance and observance of any of its covenants contained in Sections 2.6 , 2.16 , 5.6 (subject to Borrower’s and Operating Lessee’s rights to contest pursuant to Section 5.8 hereof), 5.7 (subject to Borrower’s and Operating Lessee’s rights to contest pursuant to Section 5.8 hereof), 5.10(a) , 5.11 , 5.16 , 5.20 , 5.21 , 5.23 , 5.24 , 5.26 or 5.33 hereof;

(l) Borrower or Operating Lessee shall fail in the due performance and observance of any of its covenants contained in Section 5.1 hereof, and such failure shall continue unremedied for more than ten (10) Business Days after written notice thereof shall have been given to Borrower by Agent;

(m) any of the Liens created (or purported to be created) pursuant to the Loan Documents shall for any reason cease to be in full force and effect, or be declared null and void or unenforceable in whole or in part;

(n) the Liens created (or purported to be created) by the Mortgage or any other Loan Documents should cease to be first priority Liens subject only to the Permitted Encumbrances;

(o) Intentionally Omitted;

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(p) there shall have been rendered against Borrower or Operating Lessee a final non-appealable judgment(s) for the payment of money not covered by insurance in excess of $500,000, individually or in the aggregate, and in each case any such judgment(s) shall have continued unsatisfied or unbonded for a period of thirty (30) days after the entry of such judgment(s);

(q) there shall have been rendered against Guarantor, a final unappealable judgment(s) for the payment of money in excess of $10,000,000 in the aggregate, and in each case any such judgment(s) shall have continued unsatisfied for a period of sixty (60) days after the entry of such judgment(s); or

(r) (i) Borrower, Operating Lessee or Guarantor shall have incurred any liability, or an event or action shall have occurred that could reasonably be expected to cause Borrower, Operating Lessee or Guarantor to incur any liability, (x) with respect to any Pension Plan, including any liability under Section 412 of the IRC or Title IV of ERISA, or (y) on account of a partial or complete withdrawal (as such terms are defined in Section 4203 and 4205 of ERISA, respectively) from, unpaid contributions to, or the reorganization, termination or insolvency of, any Multiemployer Plan, or (ii) Borrower, Operating Lessee or Guarantor shall have engaged in any transaction in connection with which Borrower, Operating Lessee or Guarantor could be subject to either a material civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a material tax imposed under the provisions of Section 4975 of the IRC, and in each case in subclauses (i) and (ii) of this clause (r) , such event or condition, together with all other such events or conditions under this clause (r) , if any, would or is reasonably likely to have a Material Adverse Effect.

SECTION 6.2. Acceleration of Loan. In addition to any other rights and remedies which Agent and Lenders may have under this Loan Agreement and the other Loan Documents or pursuant to law or equity, and without limitation thereof, upon and at any time during the occurrence of any Event of Default, Agent may, by notice to Borrower, declare the indebtedness evidenced by the Note, together with all other sums payable thereunder and under the other Loan Documents, immediately due and payable (except with respect to any event of the nature described in Section 6.1(i) or (j) hereof, with respect to which such indebtedness and other sums shall automatically become due and payable upon the occurrence of any such event) and may exercise Agent’s rights and remedies pursuant to any one or more of the Security Documents, the other Loan Documents or as may be available at law or equity.

SECTION 6.3. Agent’s Right to Operate; Sums Advanced.

(d) Agent’s Right to Operate. In addition to any other rights and remedies which Agent may have under this Loan Agreement and the other Loan Documents or pursuant to law or equity, and without limitation thereof, after the occurrence and during the continuance of any Event of Default, (i) Agent may, subject to Legal Requirements, enter upon and into possession of the Premises, and any other Collateral and alter, improve, maintain, replace, restore, repair, operate, use or lease of all or any portion of the Premises as Agent may from time to time deem appropriate, all at the sole risk, cost and expense of Borrower, and (ii) Agent shall

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have the right and power (but shall not be obligated) to assume all or any portion of the obligations of Borrower and/or Operating Lessee under any or all agreements as Agent may elect and to take over and use all or any part or parts of the labor, materials, supplies and equipment contracted for by or on behalf of Borrower and/or Operating Lessee, whether or not previously incorporated into the Premises.

(e) Sums Advanced. Borrower and Operating Lessee shall be liable to Agent for all sums paid or incurred in connection with any alteration, improvement, maintenance, replacement, restoration or repair under taken by Agent whether the same shall be paid or incurred pursuant to the provisions of this Section 6.3 or otherwise, and all other payments made or liabilities incurred by Agent under this Loan Agreement of any kind whatsoever, all of which shall be paid by Borrower and Operating Lessee to Agent upon demand with interest at the Default Rate from the time incurred by Agent to the date of payment to Agent, and all of the foregoing sums, including such interest at the Default Rate, shall be deemed and shall constitute disbursements of Loan proceeds under this Loan Agreement and be evidenced by the Note and secured by the Security Documents.

SECTION 6.4. Assignment of Funds. Upon the occurrence and continuance of any Event of Default, the rights, powers and privileges provided in Sections 6.3 and 6.4 hereof and all other remedies available to Agent under this Loan Agreement or the other Loan Documents or by statute or by rule of law or equity may be exercised by Agent at any time and from time to time whether or not the Obligations shall be due and payable, and whether or not Agent shall have instituted any foreclosure or other action for the enforcement of any of the Security Documents, the Note or the other Loan Documents. Borrower and Operating Lessee hereby assign and quitclaim to Agent all of their right, title and interest to all sums held in the Accounts and to the extent not held in an account, all sums held by Agent for the account of Borrower or Operating Lessee and any other security delivered by Borrower or Operating Lessee as additional security (a security interest in all of the foregoing being granted hereby to Agent) for the Loan and the performance of the Obligations, all of which security may be utilized by Agent for the purposes set forth in Section 6.3 hereof or the other Loan Documents or applied against the Obligations in such order and manner as Agent shall determine.

SECTION 6.5. Accounts. Notwithstanding anything to the contrary contained herein, but subject to the last sentence of this Section 6.5 , after the occurrence and during the continuance of an Event of Default, the rights of Borrower, Operating Lessee and each and every other Person (excluding Agent) with respect to Accounts, upon notice to Borrower and Operating Lessee, shall immediately terminate, and no such Person except Agent shall make any further withdrawal therefrom. Thereafter, Agent may from time to time designate such signatories with respect to the Accounts as Agent may desire, and may make or authorize withdrawals from the Accounts to pay the Obligations in whole or in part and/or pay operating expenses and capital expenditures with respect to the Premises, including the leasing, sale and marketing thereof, and/or any other expenses, all as Agent may deem necessary or appropriate and in such order as Agent may elect. After the occurrence and during the continuance of an Event of Default, Agent may notify the financial institutions in which any Account is held that Borrower, Operating Lessee and any other Person no longer has a right to instruct such financial

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institution with respect to matters relating to the withdrawal, operation or administration of, or investment or application of funds on deposit in such Account. Without limiting the foregoing, Agent shall have the right to cause the withdrawal of all funds on deposit in any Account and the deposit of such funds in an account established with Agent at any time following receipt by the financial institution in which such Account is held of a notice from Agent pursuant to the account control agreement, if any, with respect to such Account, and Borrower and Operating Lessee hereby authorize and direct such financial institutions to make payment directly to Agent of the funds in or credited to such accounts, or such part thereof as Agent may request. Such financial institution shall have the absolute right to rely upon such notice without inquiring as to the accuracy of the matters referred to in such notice and the depositories shall be fully protected by Borrower and Operating Lessee in relying upon such written notice from Agent. In the event that Agent delivers such a notice, Agent shall thereafter have the exclusive right to so instruct such financial institution. Nothing in this Section 6.5 shall be construed so as to limit or impair Agent’s absolute right to have a receiver appointed following an Event of Default. Notwithstanding anything contained in this Loan Agreement to the contrary, and irrespective of the existence of an Event of Default, so long as the Property Management Agreement is in full force and effect, Agent shall take none of the foregoing actions with respect to the Operating Accounts, and Property Manager shall be permitted to apply Gross Revenues toward operating expenses, cost reimbursements, working capital and other amounts due Property Manager under the Property Management Agreement in accordance with the terms of the Property Management Agreement and the Property Manager Subordination Agreement.

SECTION 6.6. No Liability of Agent or Lenders. Whether or not Agent elects to employ any or all of the remedies pursuant to the Loan Documents or otherwise available to it at law or equity upon the occurrence of a Default or an Event of Default, neither Agent nor Lenders shall be liable with respect to any other rights or obligations of Borrower, Operating Lessee or their Affiliates, including the rights and obligations of Borrower and Operating Lessee in, to or under any Permitted Encumbrance, any Premises Document, any Lease, Operating Agreement or the Property Management Agreement, or to protect the Premises or the Collateral, or for payment of any expense incurred in connection with the exercise of any remedy available to Agent or for the performance or non-performance of any other obligation of Borrower or Operating Lessee. It is expressly understood that Agent and Lenders assume no liability or responsibility for (i) performance of any obligations or duties of Borrower or Operating Lessee hereunder or under any other Loan Document, any Permitted Encumbrance, any Premises Document, any Lease, Operating Agreement or the Property Management Agreement, (ii) compliance with any Legal Requirements or (iii) any other matters pertaining to control over the management and affairs of Borrower or Operating Lessee or the use, operation, management or ownership of the Premises or the Collateral, nor by any such action shall Agent or any Lender be deemed to create a partnership or joint venture with Borrower or Operating Lessee.

SECTION 6.7. Right of Offset. Borrower and Operating Lessee hereby grant to Agent and Lenders a right of offset, exercisable at any time during the continuance of an Event of Default, to secure the repayment of the Obligations, upon any and all monies, securities or other property of each of Borrower and Operating Lessee, and the proceeds therefrom, now or

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hereafter held or received by or in transit to Agent and any Lender, from or for the account of Borrower and Operating Lessee, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special) and credits of Borrower and Operating Lessee (including each Account), and any and all claims of Borrower and Operating Lessee against Agent or any Lender at any time existing. At any time during the continuance of an Event of Default or following the maturity (whether by acceleration or otherwise) of the Loan, Agent and each Lender is hereby authorized from time to time, without notice to Borrower or Operating Lessee, to offset, appropriate, apply and enforce said liens against any and all sums hereinabove referred to against the Loan and the remaining Obligations. Agent and Lenders shall not be liable for any loss of interest on or any penalty or charge assessed against funds in, payable on, or credited to any Account as a result of the exercise by Agent of any of its rights, remedies or obligations under any of the Loan Documents.

SECTION 6.8. Termination of Loan Agreement. The obligations of the parties hereunder, excluding those which expressly survive the termination hereof or repayment of the Loan, shall terminate only upon indefeasible repayment in full of the outstanding principal amount of the Loan, together with all interest and other indebtedness due and payable in connection therewith, and all other outstanding Obligations. If the Obligations have been repaid and thereafter such all or any portion of such payment is rescinded or must otherwise be returned or paid over by Agent or any Lender, whether required pursuant to any bankruptcy or insolvency law or otherwise, the Obligations and the obligations of each party under the Loan Documents, shall continue.

SECTION 6.9. Right to Perform. If Borrower or Operating Lessee fails to perform or observe in any material respect any material term of any Premises Documents, any Permitted Encumbrance, any Lease, the Property Management Agreement, any Material Operating Agreement or any Interest Rate Protection Agreement to be performed or observed by it thereunder, then, without waiving or releasing any Borrower or Operating Lessee from any of its obligations hereunder or under the other Loan Documents, Agent shall have the right, but shall be under no obligation, to pay any sum and to take any action (including entry upon the Mortgaged Property) to cause such performance or observance on behalf of Borrower or Operating Lessee, so that the rights of Borrower and Operating Lessee are unimpaired and free from default, even if the existence or the nature of a Borrower or Operating Lessee default is being questioned or denied by Borrower, Operating Lessee or any other Person. Agent shall be subrogated to the rights of the parties to such agreements with respect to any such sums paid by Agent. Borrower shall pay to Agent immediately and without demand, all such sums so paid or expended by Agent, together with interest thereon from the day of such payment at the Default Rate, and the same shall be secured by the Loan Documents. If Agent receives a notice of a default, such notice shall constitute full protection to Agent and Lenders for any action taken or omitted by Agent, in good faith, in reliance thereon.

ARTICLE VII

ASSIGNMENTS AND PARTICIPATIONS

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SECTION 7.1. Assignment and Participations. Agent and Lenders shall have the right, subject to this Section 7.1 and at their sole cost and expense except as otherwise expressly set forth in Section 5.15 hereof, to assign, sell, negotiate, pledge or hypothecate all or any portion of their rights and obligations hereunder. No Lender shall assign, sell, negotiate, pledge, hypothecate or otherwise transfer all or any portion of its rights in and to the Loan to any other Person (an “ Assignee ”) without Agent’s prior consent, (a) other than in compliance with Section 7.5 hereof; (b) unless such transaction shall be an assignment of a constant (and not varying), ratable percentage of such Lender’s interest in the Loan; (c) unless such transaction shall be an assignment of at least $5,000,000 of the Loan (or such other amount approved by Agent); and (d) unless, after giving effect to such assignment, the assignor retains not less than $10,000,000 of the Loan (or such other amount approved by Agent) unless such transaction encompasses all of such Lender’s rights in and to the Loan, in which case such Lender shall have assigned all of its rights in and to the Loan; provided , however , any Lender shall have the right at any time without the consent of or notice to Agent, any other Lender or other Person to grant a security interest in all or any portion of such Lender’s interest in the Note or the Loan to any Federal Reserve Bank or the central reserve bank or similar authority of any other country to secure any obligation of such Lender to such bank or similar authority (a “ Central Bank Pledge ”). Effective on any such assignment and assumption by the assignee and on compliance with Section 7.5 hereof, the assigning Lender shall have no further liability hereunder with respect to the interest of such Lender that was the subject of such transfer and such Assignee shall be a Lender with respect to such interest. Except for a Central Bank Pledge, a Lender making any such assignment shall notify Borrower of same, specifying the Assignee thereof and the amount of the assignment. Notwithstanding the foregoing, in no event shall any assignment or participation of an interest in the Loan be made to Borrower, Guarantor or any of their respective Affiliates. Any assignment, transfer, sale, negotiation, pledge or hypothecation of all or any portion of any Lender’s rights in and to the Loan in contravention of this Section 7.1 shall be void ab initio .

SECTION 7.2. Participation. Lenders may assign, sell or otherwise transfer, at their sole cost and expense except as otherwise expressly set forth in Section 5.15 hereof, a participation in and to all or any portion of its rights and obligations in and to the Loan, this Loan Agreement or the other Loan Documents to any other Person (a “ Participant ”), provided that no participation may be granted to Borrower, Operating Lessee, Guarantor or any Affiliate of the foregoing or any Person that owns any direct or indirect interest in the foregoing. No such participation shall (i) require the consent of any Lender, Borrower, Operating Lessee, Agent or any other Person or (ii) release a Lender from any of its obligations under the Loan Documents. Agent and the other Lenders shall continue to deal solely with the Lender making such participation and shall have no obligation to send notices or payments to or otherwise deal directly with any participants, and no participant shall have any rights (voting or otherwise) or claims against or with respect to Agent or other Lenders. Each such participation shall be subject to Article VIII hereof, including Section 8.14 hereof. Each Lender agrees to provide Agent prompt notice of all participations sold by such Lender together with a copy of the documentation governing such participations.

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SECTION 7.3. Availability of Records. Borrower and Operating Lessee acknowledge and agree that Agent and each Lender may provide (at Agent’s or such Lender’s sole cost and expense except as otherwise expressly set forth in Section 5.15 hereof) to any actual or proposed Assignee or Participant originals or copies of this Loan Agreement, any other Loan Documents and any other documents, instruments, certificates, opinions, insurance policies, financial statements and other information, letters of credit, reports, requisitions and other materials and information at any time submitted by or on behalf of Borrower, Operating Lessee , Guarantor or other Persons and/or received by Agent or any Lender in connection with the Loan.

SECTION 7.4. Borrower’s Facilitation of Transfer. (a) In order to facilitate permitted assignments and other transfers to Assignees and sales to Participants, Borrower and Operating Lessee shall execute and deliver to Agent and shall cause Guarantor to execute and deliver to Agent such further documents, instruments or agreements as Agent or any Lender may reasonably require, including one or more substitute promissory notes evidencing the Commitment of each Lender, provided that such documents, instruments or agreements do not (a) increase the obligations or liabilities of any such Person hereunder or under the other Loan Documents in excess of the obligations or liabilities intended to be provided herein or in the other Loan Documents or (b) decrease such Person’s rights hereunder or under the other Loan Documents to less than what they were prior to the execution of such documents, instruments or agreements. In addition, Borrower and Operating Lessee agree to reasonably cooperate with Agent and Lenders, including providing such information and documentation regarding Borrower, Operating Lessee, Guarantor and any other Person as Agent or any Lender or any potential Assignee or Participant may reasonably request and to meet with potential Assignees and Participants upon reasonable notice.

(d) Borrower shall not be required to incur any cost or expense in connection with its obligations under this Section 7.4 unless reimbursed by Agent or the requesting Lender, except as otherwise expressly provided herein and except that Borrower shall be responsible for its own legal fees in connection with the issuance of any substitute notes.

SECTION 7.5. Notice; Registration Requirement. No assignment, sale, negotiation, pledge, hypothecation or other transfer of any part of any Lender’s interest in and to the Loan shall be effective or permitted under this Article VII until (a) an assignment and acceptance agreement in the form attached hereto as Schedule 7.5 (an “ Assignment and Acceptance ”) with such changes thereto as are reasonably acceptable to Agent with respect to such assignment, sale, negotiation, pledge, hypothecation or other transfer shall have been delivered to Agent, (b) Agent shall have registered such Assignee’s name and address in the Register which Agent maintains for the recordation of the names, addresses and interests of Lenders, (c) the parties to such transfer, assignment or purchase shall have paid to Agent a processing and registration fee of $3,500 and (d) such Assignee shall have delivered to Agent at least two (2) duplicate completed and signed originals of United States Internal Revenue Service Form W-8 BEN or W-8 ECI, W-9 or any others form(s) that may be required by the United States Internal Revenue Service certifying in each case that such Assignee is entitled to receive payments hereunder and under the other Loan Documents without deduction or withholding of

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any United States federal income taxes, or such other documents as are necessary to indicate that all such payments are exempt from or subject to such taxes at a rate reduced by an applicable tax treaty, and, upon request from Agent two (2) signed copies of any other documents to be delivered to Borrower pursuant to the Loan Agreement. Each such Lender shall also deliver to the Agent two (2) additional copies of such form(s) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Agent. If any Governmental Authority asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), then such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent hereunder together with all costs and expenses (including reasonable attorneys’ fees). The indemnification obligation of the Lenders under this Section 7.5 shall survive the payment of the Loan, foreclosure or other possession of the Collateral, sale of the Collateral and the resignation or replacement of the Agent. The entries in the Register shall be conclusive, absent manifest error. This Section 7.5 shall not apply to any Central Bank Pledge.

SECTION 7.6. Registry.

(b) Borrower hereby designates Agent to serve as Borrower’s agent, solely for purposes of this Section 7.6 , to maintain a register (the “ Register ”) on which Agent will record the Commitments from time to time of each Lender and each repayment with respect to the principal amount of the Loan of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect Borrower’s obligations in respect of the Loan. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any disbursement made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by Agent with respect to ownership of such Commitments and prior to such recordation all amounts owing to the transferor with respect to such Commitments shall remain owing to the transferor. The registration of a transfer of all or part of any Commitment shall be recorded by Agent on the Register only upon the acceptance by Agent of a properly executed and delivered Assignment and Acceptance by the assignor and assignee. At the assigning Lender’s option, concurrently with the delivery of an Assignment and Acceptance pursuant to which an interest of such Lender in the Loan was assigned to such Assignee, the assigning Lender shall surrender its Note evidencing the portion of the Loan corresponding to the interest so transferred and Borrower shall deliver to Agent one or more new promissory notes in the same aggregate principal amount issued to the assigning Lender and/or the Assignee.

(c) Any Lender that sells or otherwise transfers a participation shall (acting for this purpose but for no other purpose, as a non-fiduciary agent of Borrower) maintain a register (the “ Participant Register ”) on which such Lender will record the participation amount

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from time to time of each Participant and each repayment with respect to the principal amount of the Loan of each Participant; provided , that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in the Loan) to any Person except to the extent that such disclosure is necessary to establish that the obligations under the Loan Documents are in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.

SECTION 7.7. Interest Rate Protection Agreement. Each Lender that is a party to any Interest Rate Protection Agreement acknowledges that the interest of Borrower in and to such Interest Rate Protection Agreement will be pledged and collaterally assigned to Agent pursuant to the Loan Documents, and hereby consents without any restrictions to such pledge and collateral assignment. All payments, if any, due under such Interest Rate Protection Agreement shall be paid directly to Agent and all other rights of Borrower shall, upon the occurrence and during the continuance of an Event of Default, be exercisable by Agent. Each Lender that is a party to any Interest Rate Protection Agreement shall execute and deliver to Agent, and cause any Affiliate of such Lender that is a party to any Interest Rate Protection Agreement to execute and deliver to Agent, upon entering into such agreement the Interest Rate Protection Agreement Consent in order to confirm the foregoing.

SECTION 7.8. Disclosure by Agent or Lender. Without limiting Section 7.3 hereof, Borrower and Operating Lessee consent to the issuance by Agent and Lenders of press releases, advertisements and other promotional materials in connection with the marketing activities of Agent and Lenders, including the disclosure that the Person acting as the administrative agent for the Lenders is the Agent for the Loan, the amount of the Loan and the name, location and use of the Premises.

ARTICLE VIII

AGENT AND LENDERS

SECTION 8.1. Scope of Article VIII. This Article VIII shall be binding on Agent and Lenders, but shall not be binding on or enforceable by Borrower or Operating Lessee unless otherwise expressly provided herein. As among Agent and Lenders, the provisions of this Article VIII may be amended, waived or otherwise modified by Agent and Lenders without the consent of Borrower or Operating Lessee and without the need for Borrower or Operating Lessee to be party to any of the same. Without limiting the foregoing, nothing contained in this Article VIII or any amendments, waivers or modifications thereof by Agent and Lenders, shall limit or modify the rights and obligations of, and restrictions applicable to, Borrower, Operating Lessee, Agent or Lenders set forth in any other provision of this Loan Agreement or in the other Loan Documents, except as among Agent and Lenders.

SECTION 8.2. Agent.

(a) Appointment. Each Lender hereby irrevocably designates and appoints Agent as the agent of such Lender with respect to the Loan and to act as “Agent” under the Loan

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Documents. Each Lender hereby irrevocably authorizes Agent, as its agent, to take such action and to exercise such powers on such Lender’s behalf as may be taken by Agent under any Loan Document, including as a payee, mortgagee, assignee or beneficiary or otherwise, together with such other powers as are reasonably incidental thereto. Nothing contained in this Loan Agreement, any Assignment and Acceptance or in any other Loan Document is intended to create or shall be construed as imposing on Agent any obligations except as expressly set forth in this Loan Agreement or in any other Loan Document. Agent shall not have any fiduciary or trustee relationship with Lenders .

(c) Reliance by Agent. Agent is entitled to rely upon (and shall be protected in relying upon) any written or oral statement and notices or any other certification or documents believed by Agent to be genuine and correct and to have been signed or made by the proper Person and, with respect to all of its duties under the Loan Documents, upon advice of counsel (including counsel for Borrower, Operating Lessee and Guarantor), independent public accountants, engineers, architects and other experts selected by Agent and shall not be liable for any action taken or omitted to be taken by Agent in good faith in accordance with the advice of such counsel, independent public accountants, engineers, architects and other experts.

(d) Delegation of Duties. Agent may execute any of its duties under this Loan Agreement and any duties as Agent or as a party, payee, mortgagee, assignee or beneficiary under any Loan Document, by or through agents, affiliates or attorneys-in-fact. Agent shall not be responsible for the negligence or misconduct of any agents, affiliates or attorneys-in-fact selected by Agent with reasonable care and prudence.

(e) Agent in its Capacity as a Lender. If the Person acting as Agent is also a Lender, then with respect to the ownership interest of such Person as a Lender, such Person in its capacity as Lender shall have the rights and powers of a Lender under this Loan Agreement and the other Loan Documents as set forth herein and therein and may exercise or refrain from exercising the same as though it were not Agent, and the term “Lender” and “Lenders” shall include such Person in its individual capacity as a Lender for so long as such Person is a Lender.

(f) Relationship with Borrower. Each Lender acknowledges that, with respect to the Loan and the Loan Documents, Agent shall have the sole and exclusive authority

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to deal and communicate with Borrower, Operating Lessee , Guarantor and any other Person on behalf of Lenders and each Lender acknowledges that any notices or demands from such Lender to Borrower, Operating Lessee, Guarantor or such Person must be promptly forwarded to Agent for delivery. Each Lender agrees that it will not take any legal action, nor institute any actions or proceedings, against Borrower, Operating Lessee, Guarantor or any other Person with respect to any of the Obligations, without the prior consent of Agent, which consent may be withheld by Agent in its discretion.

SECTION 8.3. Distributions. Each Lender shall be entitled to receive, and Agent shall transfer to each Lender, each Lender’s Pro Rata Share of all payments received by Agent pursuant to the Loan Documents on account of principal, interest and other sums. However, no Lender shall in any case be entitled to receive (a) any sums payable to Agent or any other Lender on account of any Additional Interest, (b) any sums payable pursuant to the Loan Fee Letter, and (c) any sums payable to Agent in its capacity as Agent, including any sums payable on account of expenses incurred by Agent which Borrower, Operating Lessee or Guarantor is obligated to reimburse Agent pursuant to the Loan Documents, to the extent that Lenders have not made a payment on account thereof pursuant to Section 8.9 hereof (the sums referred to in clauses (a) through (c) are hereinafter referred to as, “ Excluded Sums ”). Agent and Lenders agree that in the event that sums received by Agent pursuant to the Loan Documents are insufficient to pay all amounts then due and owing to Agent and Lenders pursuant to the Loan Documents, and in all cases following the occurrence and during the continuance of a Default in the payment of any sums due under the Loan Documents or an Event of Default, all payments received by Agent pursuant to the Loan Documents shall be distributed in the following order of priority:

(e) to Agent, any unpaid or unreimbursed fees, costs and expenses which are the obligation of Borrower, Operating Lessee or Guarantor pursuant to the Loan Documents to pay to Agent, until all of the foregoing are paid; then

(f) unless same are paid under clause (a) above, to Agent, any unpaid or unreimbursed advances, fees, costs and expenses of Agent that have not been paid by Lenders pursuant to Section 8.9 hereof, until all of the foregoing are paid;

(g) pro rata to the Lenders on the basis of their respective Pro Rata Shares an amount equal to all payments made by them to Agent pursuant to Section 8.9 hereof, until all of the foregoing are paid; then

(h) to Agent and each applicable Lender, an amount equal to any Additional Interest payable to such Person until all such Additional Interest is paid. In the event such sum after application in accordance with the preceding clauses (a) and (b) is insufficient to pay the entire amount then due pursuant to this clause (d), then such amount shall be divided pro rata among Agent and each such applicable Lender in accordance with its share of the total amount of all such Additional Interest that is payable; then

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(i) pro rata to the Lenders on the basis of their respective Pro Rata Shares an amount equal to the accrued and unpaid Interest, until all such Interest is paid; then

(j) to each Lender for application to the outstanding principal amount of the Loan, an amount equal to the product of (i) any amount remaining after application in accordance with the preceding clauses (a) through (e) times (ii) a fraction, the numerator of which is the sum of such Lender’s Pro Rata Share of the outstanding principal balance of the Loan, and the denominator of which is the sum of the outstanding principal balance of the Loan.

SECTION 8.4. Authority, No Reliance; Binding Effect. Each Lender (a) represents and warrants that it is legally authorized to enter into this Loan Agreement, (b) agrees that neither Agent nor any Lender shall be responsible to one another for the due execution, legality, validity, enforceability, genuineness, sufficiency or collectibility of any of the Loan Documents or any other instrument or document furnished pursuant thereto or in connection with the Obligations, (c) confirms and agrees that neither Agent nor any Lender has made or will be deemed to have made any warranty or representation to another or shall be responsible to another for any statements, warranties or representations (written or otherwise) made in or in connection with the Loan or the Loan Documents or for the financial condition of Borrower or any other Person or for the title or the value of any portion of the Mortgaged Property or other Collateral and (d) agrees that it will be bound by the provisions of this Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of this Loan Agreement are required to be performed by it as a Lender. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Loan Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Loan Agreement.

SECTION 8.5. Loan.

(d) Amendments and Modifications; Exercise of Rights and Remedies. Subject to Section 8.5(b) hereof, Agent reserves the right, in its discretion, in each instance without prior notice to Lenders, (i) to exercise or refrain from exercising any powers or rights which Agent or Lenders may have under or with respect to the Note, this Loan Agreement or any other Loan Document, (ii) to enforce or forbear from enforcing the Loan Documents, (iii) to grant or withhold consents, approvals or waivers and to make any other determinations in connection with the Loan and the Loan Documents, (iv) to amend or modify the Loan Documents, (v) to acquire additional security or release any security given with respect to the Loan, (vi) to collect all sums due under the Loan Documents, (vii) to declare the Loan due and payable when permitted to do so pursuant to the terms of the Loan Documents, (viii) to enforce the Loan Documents, (ix) to take possession of, foreclose or accept a deed and/or assignment of the Collateral or any portion thereof in lieu of foreclosure, (x) to sell, dispose of or otherwise

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deal with the ownership and operation of the Collateral, (xi) to bid at foreclosure of the Mortgage such amount as Agent shall determine in its discretion, and (xii) to exercise or determine not to exercise all powers which are incidental to any of the foregoing.

(e) Restrictions of Power of Agent. Notwithstanding anything to the contrary contained in Section 8.5(a) hereof or elsewhere in this Loan Agreement, Agent shall not without the prior written consent of all Lenders, agree to any amendment, modification, termination, or waiver of any provision of this Loan Agreement or the other Loan Documents which would (i) extend the time for any payments of interest or principal, including the Maturity Date, (ii) reduce the amount of any payment of principal, (iii) reduce the rate of interest payable pursuant to this Loan Agreement, (iv) increase the maximum principal amount of the Loan in excess of the Loan Amount, (v) release any material portion of the Collateral granted under the Loan Documents except as required pursuant to the terms of the Loan Documents, by law or upon repayment of the Obligations in full, (vi) release Borrower, Operating Lessee or any guarantor of the Loan from any of their material obligations with respect to the Loan except as required pursuant to the terms of the Loan Documents, by law or upon repayment of the Obligations in full, (vii) alter the definition of “Requisite Lenders” provided herein or otherwise modify the number or percentage of the Lenders required to make any determination or give any consent hereunder, or (viii) amend Article VII hereof or this Article VIII . Additionally, notwithstanding anything to the contrary contained in Section 8.5(a) hereof or elsewhere in this Loan Agreement, Agent shall not increase the amount of any Lender’s Commitment without the prior consent of such Lender.

(c) Deemed Consent. In the event that Agent requests a Lender’s consent pursuant to Section 8.5(b) hereof and Agent does not receive the Lender’s written response within ten (10) Business Days of the request therefor, or such shorter period that Agent in the exercise of its reasonable business judgment determines is necessary under the circumstances, such Lender shall be deemed to have consented to the action or determination proposed in such request. All such requests for consent from Agent to Lenders shall (i) be given in the form of a written notice to each Lender, (ii) be accompanied by a description of the matter or item as to which such consent is requested, or shall advise each Lender where such matter or item may be inspected, or shall otherwise describe the matter or issue to be resolved, and (iii) shall include Agent’s proposal in respect thereof.

(d) Instructions from Lenders. Agent may at any time request instructions from Lenders with respect to any actions, consents, waivers or approvals which, by the terms of any of the Loan Documents, Agent is permitted or required to take or to grant, and Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval, consent or waiver and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval, consent or waiver under any of the Loan Documents until Agent shall have received such instructions.

SECTION 8.6. Equitable Adjustments. If a Lender shall obtain any payment (whether voluntary, involuntary or otherwise) on account of such Lender’s interest in the Loan in excess of such Lender’s Pro Rata Share to which such Lender is entitled (other than

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payments on account of Excluded Sums payable to such Lender) or payment on account of Excluded Sums payable to another Person, such Lender shall forthwith pay over to Agent an amount sufficient to enable Agent to cause such excess payment to be shared ratably with the other Lenders or, in the case of Excluded Sums payable to another Person, such Excluded Sums.

SECTION 8.7. Other Transactions. Agent and each Lender and their respective Affiliates and subsidiaries may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, Borrower, Operating Lessee, Guarantor, and any Affiliates and subsidiaries thereof and any Person who may do business with or own interests in or securities of the foregoing without any duty to account therefor to each other. In the event that Agent or a Lender shall enter into an Interest Rate Protection Agreement, Agent or such Lender, as the case may be, shall be free to exercise its rights and remedies pursuant to the terms of the applicable Interest Rate Protection Agreement as if Agent or Lender, as the case may be, was not Agent or a Lender hereunder.

SECTION 8.8. Obligations Absolute. Each Lender acknowledges and agrees that its obligations hereunder are absolute and unconditional and shall not be affected by any circumstance whatsoever, including any breach by Agent or a Lender of their obligations under this Loan Agreement or any other Loan Document, any lack of validity or enforceability of the Note, this Loan Agreement or any other Loan Document, the occurrence and continuance of any Default or Event of Default or the failure to satisfy any term or condition of the Note, this Loan Agreement or any other Loan Document. Without limiting the generality of the immediately preceding sentence, each Lender agrees that any payment required to be made by it shall be made without any offset, abatement, withholding or reduction whatsoever and a breach by Agent or any Lender of any of their obligations pursuant to this Loan Agreement or any other Loan Document shall not limit or otherwise affect a Lender’s obligations pursuant to this Loan Agreement.

SECTION 8.9. Indemnification.

(k) Generally. Lenders hereby agree to indemnify Agent (to the extent Agent is not otherwise reimbursed hereunder or under the Loan Documents by Borrower), on demand, in proportion to their Pro Rata Shares, for and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable fees and disbursements of counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising hereunder or out of any of the Loan Documents, any action taken or omitted by Agent hereunder or thereunder, the Premises or the Collateral, including any matter required to be indemnified by Borrower and Operating Lessee pursuant to Section 9.1 hereof; provided , however , that Lenders shall not be liable for any of such claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from Agent’s willful misconduct or gross negligence. A certificate of Agent as to the amount for which Lenders are required to reimburse Agent pursuant to this Section 8.9 shall be prima facie evidence as to such amount. Lenders’ obligations under this Section 8.9 shall survive the termination of this Loan Agreement and the Loan Documents. Without limiting the

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(l) Indemnification Regarding Certain Actions. Unless indemnified to Agent’s satisfaction against any claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable fees and disbursements of counsel), Agent may not be compelled to do any act under this Loan Agreement or any other Loan Document or to take any action toward the execution or enforcement of the powers hereby or thereby created or to prosecute or defend any suit with respect to this Loan Agreement or any other Loan Document. In no event, however, shall Agent be required to take any action that Agent determines would be in violation of any applicable regulatory requirements, or could incur for Agent criminal or onerous civil liability.

SECTION 8.10. Taxes. All taxes due and payable on any payments to be made to any Lender with respect to the Obligations or under the Loan Documents shall be such Lender’s sole responsibility. All payments payable by Agent to any Lender hereunder or otherwise with respect to the Obligations shall be made without deduction for any taxes, charges, levies or withholdings, except to the extent, if any, that such amounts are required to be withheld by Agent under applicable law or the terms of the Loan Documents or this Loan Agreement. If any Lender is organized or is existing under the laws of a jurisdiction outside the United States, such Lender shall provide to Agent upon the execution of this Loan Agreement, or execution of any Assignment and Acceptance pursuant to which it becomes a Lender hereunder, and from time to time thereafter, at least two (2) duplicate completed and signed copies of any form(s) that may be required by the United States Internal Revenue Service in order to certify such Lender’s exemption from United States withholding taxes with respect to payments to be made to such Lender with respect to the Obligations or under the Loan Documents or such other documents as are necessary to indicate that all such payments are exempt from or subject to such taxes at a rate reduced by an applicable tax treaty.

SECTION 8.11. Return of Payments. If Agent has received or applied any payment with respect to the Loan and has paid to any Lender any portion of such payment, and thereafter such payment or application is rescinded or must otherwise be returned or paid over by Agent, whether required pursuant to any bankruptcy or insolvency law, the Loan Documents, or otherwise, such Lender shall, at Agent’s request, promptly return its share of such payment or application to Agent. In addition, such Lender shall simultaneously remit its Pro Rata Share of any interest or other amounts required to be paid by Agent with respect to such payment or application. If any Lender fails to remit such payment to Agent prior to 10:00 a.m. (New York City time) on the second (2nd) Business Day following Agent’s request for such funds, the payment owed to Agent shall earn interest at the Base Rate for each day from the date of Agent’s request until its payment to Agent.

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SECTION 8.12. No Partnership. This Loan Agreement, the Assignment and Acceptances and the other Loan Documents do not create a partnership or joint venture among Agent and/or Lenders.

SECTION 8.13. Resignation and Removal of Agent; Successor Agent.

(j) Resignation. Agent may resign, without the consent of either Borrower, Operating Lessee or any Lender, from the performance of all its functions and duties hereunder at any time by giving at least fifteen (15) Business Days’ prior written notice to Borrower and Operating Lessee and Lenders, unless applicable law requires a shorter notice period or that there be no notice period, in which instance such applicable law shall control. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to Section 8.13(c) or, if applicable, the appointment by Agent of a successor Agent pursuant to Section 8.13(d) hereof.

(k) Removal of Agent. In the event of the occurrence of any material gross negligence or willful misconduct of Agent, if all of the Lenders (other than a Lender that is then acting as Agent) agree, then Agent may be removed as the agent; provided , however , that no such removal of Agent shall in any way affect the rights of Agent in its individual capacity as a Lender.

(l) Appointment of Successor Agent by Requisite Lenders. Upon any resignation or removal of Agent, the Requisite Lenders (including in the determination of the Requisite Lenders, the Pro Rata Share of such Lender that is also the resigning or removed Agent) shall appoint a successor Agent (who shall also be a Lender).

(m) Appointment by Resigning Agent. If, upon the resignation of Agent, a successor Agent shall not have been appointed within the fifteen (15) Business Days or shorter period provided in Section 8.13(a) hereof, the resigning Agent shall then appoint a successor Agent (who also shall be a Lender), which successor shall serve as Agent until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above.

(n) Rights of the Successor and Retiring Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, or, if applicable, the appointment of a successor Agent by Agent pursuant to Section 8.13(d) hereof, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent arising from and after the date of such acceptance and appointment, and the retiring Agent shall be discharged from the duties and obligations of Agent arising from and after such date. After the resignation or removal of Agent as provided herein, the provisions of this Loan Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Loan Agreement.

SECTION 8.14. Defaults by any Lender.

(a) Consequences of Default. If for any reason any Lender shall be in default of any of its monetary obligations or in default in any material respect of any of its non-

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monetary obligations pursuant to this Loan Agreement or any other Loan Document (a “ Defaulting Lender ”), then, in addition to the rights and remedies that may be available to Agent and any other Lender under this Loan Agreement, at law and in equity, such Defaulting Lender’s right to participate as a Lender in decisions under this Loan Agreement, including any rights to approve or direct any determination, action or inaction of Agent where the approval or direction of Lenders is required or permitted hereby, and such Defaulting Lender’s right to assign, transfer, sell all or any portion of its rights in and to the Loan or a participation therein pursuant to Article VII hereof, shall be suspended during the pendency of such failure or refusal.

(b) Remedies. If for any reason the Defaulting Lender fails to make timely payment of any amount required to be paid by such Defaulting Lender to or for the benefit of Agent or any other Lender hereunder, then, in addition to other rights and remedies which Agent or such other Lender may have hereunder or otherwise, Agent or any Lender shall be entitled, but not obligated (i) to advance funds on behalf of any Defaulting Lender, (ii) to the extent not paid by Borrower, to collect interest from the Defaulting Lender at the Base Rate until the date on which the payment is made, (iii) to withhold or set off or in the case of a Lender, to cause Agent to withhold or setoff, and to apply to the payment of the defaulted amount and any related interest, any amounts to be paid to the Defaulting Lender under this Loan Agreement, (iv) to bring an action or suit against the Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest and (v) to purchase the Defaulting Lender’s interest in the Loan in the manner set forth in this Section 8.14 . Upon the Defaulting Lender’s failure to make payments as set forth herein and so long as such failure remains uncured (and it is agreed an advance of funds by any other Lender pursuant to clause (i) above shall not be considered a cure of the Defaulting Lender’s default), the Defaulting Lender shall not be entitled to receive its share of any payments made by Borrower or any other Person (or amounts owed by Borrower or any other Person ) after such date pursuant to the Loan Documents. If Agent receives any payment with respect to the Obligations from Borrower or any other Person as to which a Defaulting Lender would otherwise have been entitled, then such Defaulting Lender’s share of such payment shall be credited toward the amount owed hereunder by such Defaulting Lender on a dollar for dollar basis.

(c) Purchase of Defaulting Lender’s Interest After Default. In the event of a default by a Lender as referred to in Section 8.14(a) hereof, each Lender which is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire such Defaulting Lender’s interest in the Loan. If more than one Lender exercises such right, each such Lender which is not a Defaulting Lender shall have the right to acquire (in accordance with such acquiring Lender’s Pro Rata Share or upon agreement of the Lenders that desire to so purchase the Defaulting Lender’s interest, any other proportion) the Defaulting Lender’s interest in the Loan. Such right to purchase shall be exercised by written notice from the applicable Lender(s) electing to exercise such right to the Defaulting Lender (an “ Exercise Notice ”), copies of which shall also be sent concurrently to each other Lender. The Exercise Notice shall specify (i) the purchase price for the interest of the Defaulting Lender, determined in accordance with Section 8.15 hereof and (ii) the date on which such purchase is to occur, which shall be any Business Day which is not less than fifteen (15) days after the date on which the Exercise Notice is given, provided that if such Defaulting Lender shall have cured its default in full (including

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with the payment of any interest and other amounts due in connection therewith) to the satisfaction of Agent within said fifteen (15) day period, then the Exercise Notice shall be of no further effect and the non-defaulting Lender(s) shall no longer have a right to purchase such Defaulting Lender’s interest. Upon any such purchase of a Defaulting Lender’s interest and as of the date of such purchase (the “ Purchase Date ”), the Defaulting Lender’s interest in the Loan, and its rights hereunder as a Lender arising from and after the Purchase Date (but not its rights and liabilities with respect thereto or under this Loan Agreement or the other Loan Documents for obligations, indemnities and other matters arising or matters occurring before the Purchase Date) shall terminate on the Purchase Date, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest. Without in any manner limiting the remedies of Agent or any other Lender, the obligation of a Defaulting Lender to sell and assign its interest in the Loan under this Section 8.14 shall be specifically enforceable by Agent and/or any other Lender by an action brought in any court of competent jurisdiction for such purpose, it being acknowledged and agreed that, in light of the disruption in the administration of the Loan and the other terms of the Loan Documents that a Defaulting Lender may cause, damages and other remedies at law are not adequate.

SECTION 8.15. Purchase Price; Payment for Defaulting Lender’s Pro Rata Share. The purchase price for the interest of a Defaulting Lender in the Loan (the “ Purchase Price ”) shall be equal to the sum of all of the Defaulting Lender’s advances under the Loan Documents outstanding as of the Purchase Date, less the costs and expenses incurred by Agent and any non-defaulting Lender directly as a result of the Defaulting Lender’s default hereunder, including interest accrued on such unpaid amounts (at the Base Rate), court costs and including reasonable attorneys’ fees and disbursements, and fees for accountants and other similar advisors (provided that such costs and expenses are paid by the Lenders acquiring the interest of such Defaulting Lender to Agent and the Lenders incurring same).

SECTION 8.16. Election of Interest Rate; Distribution of Funds to Lenders. Agent shall promptly notify each Lender upon its receipt of notice from Borrower pursuant to Section 2.3(c) hereof electing to convert to an Applicable Interest Rate. All sums received by Agent pursuant to the Loan Documents on account of principal, Interest or other sums payable to all Lenders in accordance with their Pro Rata Shares, after application, at Agent’s option, of such sums to any amounts due and payable to Agent from Borrower or Lenders under any Loan Document, which are received by 11:00 a.m. (New York City time) shall be paid to Lenders on the date of receipt; such sums received by Agent after 11:00 a.m. (New York City time) shall be paid to Lenders on or before the next succeeding Business Day. All sums received by Agent pursuant to the Loan Documents on account of other sums payable to any specific Lenders, including Additional Interest and Excluded Sums, after application, at Agent’s option, of such sums to any amounts due and payable to Agent from Borrower (in each case, prorated among the Lenders in accordance with their Pro Rata Shares) or such specific Lenders hereunder, which are received by 11:00 a.m. (New York City time) shall be paid to the applicable Lenders to which such amounts are due on or before the next succeeding Business Day; such sums received by Agent after 11:00 a.m. (New York City time) shall be paid to the applicable Lenders to which such amounts are due on or before the second succeeding Business Day.

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ARTICLE IX

GENERAL CONDITIONS

SECTION 9.1. Indemnity.

(g) Borrower and Operating Lessee hereby indemnify and agree to defend, protect and hold harmless Agent and Lenders and their respective affiliates, participants, directors, officers, agents and employees (each, an “ Indemnified Party ”) from and against any and all losses, liabilities, obligations, charges, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’ fees and disbursements) of any kind or nature (except to the extent of any claim arising solely from the gross negligence or willful misconduct of such Indemnified Party), suffered or incurred by an Indemnified Party in connection with this Loan Agreement, any of the other Loan Documents, the consummation of the transactions contemplated herein or therein, the use, operation or occupancy of the Premises or any Mortgaged Property, any Permitted Encumbrance, any Premises Document, any Lease, the Property Management Agreement, any Operating Agreement or any Interest Rate Protection Agreement, including the following:


(i)	any accident, injury to or death of Persons or loss of or damage to property occurring on or about the Premises or any part thereof, or the adjoining sidewalks, curbs, vaults and vault space, if any, and streets and ways (to the extent not covered by applicable Insurance Policies);

(ii)

any design, construction, operation, use, nonuse or condition of the Premises or any part thereof, or the adjoining sidewalks, curbs, vaults and vault space, if any, and streets and ways, including claims or penalties arising from violation of any Legal Requirement or Insurance Requirement, as well as any claim based on any patent or latent defect, whether or not discoverable by Agent or any Lender (to the extent not covered by applicable Insurance Policies);


(iii)	Intentionally omitted;


(iv)	any negligence or tortious act or omission on the part of Borrower or Operating Lessee or any of its agents, contractors, servants, employees, Lessees, lessees, sublessees, licensees, guests or invitees;


(v)	any other relationship that has arisen or may arise between or among Agent, Lenders, Borrower, Operating Lessee, Guarantor, or any Borrower Party Partner, any third party with respect to the Premises or the Mortgaged Property or any of the foregoing, as a

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result of the execution and delivery of the Note, this Loan Agreement or the other Loan Documents, or any other action contemplated hereby, thereby or by any other document executed in connection with the Loan;


(vi)	any claim, action or other proceeding brought by or on behalf of any Person against Agent or any Lender as the holder of, or by reason of its interest in, any sum deposited or paid hereunder or in connection herewith, any insurance proceeds, any condemnation awards or other amounts applied to the Obligations;


(vii)	any investigation, defense or settlement of claims or in obtaining any prohibited transaction exemption under ERISA necessary or desirable in Agent’s sole judgment or by reason of a breach of Section 5.16(d) hereof; and


(viii)	any circumstance resulting in the impairment of the Liens of the Mortgage and/or the other Security Documents, including as a result of non-compliance with any applicable lien law.

(h) If any action or proceeding shall be commenced or taken (including an action to foreclose the Mortgage, collect the Obligations or enforce Agent’s rights under this Loan Agreement, the Note or the other Loan Documents) by Agent or any other Person, in which action or proceeding Agent or any Lender is involved or is made a party by reason of the execution and/or delivery of the Note, this Loan Agreement, or any other Loan Documents or in which it becomes necessary to enforce, defend or uphold the lien on the Mortgaged Property pursuant to the Mortgage, this Loan Agreement or the other Loan Documents or the Agent’s and Lenders’ rights under the Note or any other Loan Documents, all sums paid by Agent for the expense of any such action or litigation shall be paid by Borrower and Operating Lessee to Agent ten (10) Business Days after demand. In the event the Mortgaged Property, or any part thereof, shall be advertised for foreclosure sale and not sold, Borrower shall pay all costs in connection therewith, including reasonable attorneys’ fees and disbursements and advertising costs.

(i) Borrower and Operating Lessee hereby indemnify and agree to defend and hold harmless the Indemnified Parties from and against any and all liabilities, claims, charges, losses and expenses (including reasonable attorneys’ fees and disbursements) or damages of any kind or nature which may arise as a result of any claim by any broker, “finder” or advisor with Borrower or Operating Lessee or any Affiliate of Borrower or Operating Lessee has dealt or is alleged to have dealt.

(j) Borrower and Operating Lessee hereby indemnify and agree to defend and hold harmless Agent and each Lender from and against any and all liability with respect to any mortgage/deed recording, transfer or intangible personal property tax or similar imposition now or hereafter in effect, to the extent that the same may be payable by Agent or any Lender with respect to this Loan Agreement, any Note or any other Loan Document.

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(k) Within ten (10) Business Days of written demand by any Indemnified Party, Borrower and Operating Lessee shall commence to defend, and shall thereafter diligently pursue defense of, any investigation, action or proceeding in connection with any claim or liability, or alleged claim or liability, that would, if determined adversely to such Indemnified Party, be covered by the indemnification provisions contained in this Section, such defense to be at the sole cost and expense of Borrower and Operating Lessee and by counsel selected by Borrower and Operating Lessee and approved by such Indemnified Party, which counsel may, without limiting the rights of an Indemnified Party pursuant to the next succeeding sentence, also represent Borrower and Operating Lessee in such investigation, action or proceeding. In the alternative, an Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the expense of Borrower.

(l) The provisions of this Section 9.1 shall survive the repayment of the Loan.

SECTION 9.2. No Waivers. No failure or delay on the part of Agent or Lenders in exercising any right, power or remedy hereunder or under or in connection with this Loan Agreement or the other Loan Documents or to insist upon the strict performance of any term of this Loan Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy under or in connection with this Loan Agreement or any other Loan Document.

SECTION 9.3. Submission of Evidence. Any condition of this Loan Agreement which requires the submission of evidence of the existence or non-existence of a specified fact or facts implies as a condition the existence or non-existence, as the case may be, of such fact or facts and Agent shall, at all times, be free to independently establish to its satisfaction such existence or non-existence.

SECTION 9.4. Agent and Lenders Sole Beneficiaries. No Person other than Agent and Lenders shall have standing to require satisfaction of any terms, provisions, covenants and other conditions applicable to Borrower, Operating Lessee and Guarantor in the Loan Documents in accordance with their terms or be entitled to require any particular application of any Collateral. No Person other than Agent and Lenders shall be deemed to be beneficiary of the terms, provisions, covenants and other conditions applicable to Borrower, Operating Lessee and Guarantor of this Loan Agreement and the other Loan Documents, any or all of which may be freely waived, in whole or in part, by Agent at any time if Agent deems it advisable or desirable to do so.

SECTION 9.5. Entire Agreement. This Loan Agreement and the other Loan Documents embody the entire agreement and understanding between Borrower, Operating Lessee, Agent and Lenders with respect to the Loan and supersede and cancel all prior loan applications, expressions of interest, commitments, agreements and understandings, whether oral or written, relating to the subject matter hereof, except as specifically agreed in writing to the contrary.

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SECTION 9.6. Assignment. Neither Borrower nor Operating Lessee may assign, transfer or otherwise convey this Loan Agreement or any other Loan Document, in whole or in part, nor all or any portion of the Loan made hereunder nor any interest therein.

SECTION 9.7. Further Assurances; Filing of Financing Statements. Borrower and Operating Lessee shall promptly make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, instruments, additional agreements, undertakings, conveyances, deeds of trust, mortgages, transfers, assignments, financing statements or other assurances, and take all such other action, as Agent may, from time to time, deem necessary or proper in connection with this Loan Agreement or any of the other Loan Documents, the obligations of Borrower and Operating Lessee hereunder or thereunder, or for better assuring and confirming unto Agent and Lenders the full benefits and rights granted or purported to be granted by this Loan Agreement or the other Loan Documents. Borrower and Operating Lessee hereby agree that, without notice to or the consent of Borrower or Operating Lessee, Agent may file with the appropriate public officials such financing statements or similar documents as are or may become necessary to perfect and continue the perfection of the security interest granted by any Security Document.

SECTION 9.8. Cumulative Remedies. The remedies in this Loan Agreement and the other Loan Documents herein are cumulative and not exclusive of any remedies available at law or equity or in any other agreement, document or instrument.

SECTION 9.9. Amendments, Consents, Waivers, Approvals, Etc. Except as set forth in Section 8.1 hereof, no amendment, modification, termination, or waiver of any provision of this Loan Agreement or the other Loan Documents shall be effective unless in writing and signed by Borrower, Operating Lessee and Agent. With respect to any matter for which Agent’s consent or approval is required hereunder or under the other Loan Documents, no such consent or approval by Agent hereunder shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Borrower and Operating Lessee may rely upon each amendment, modification, termination, waiver, consent and approval signed by Agent as having been consented to by such Lenders whose consent may be required pursuant to Article VIII hereof or otherwise for such amendment, modification, termination, waiver, consent or approval, without any further inquiry. No notice to or demand on Borrower or Operating Lessee in any case shall entitle Borrower or Operating Lessee to any other or further notice or demand in similar or other circumstances. No failure or delay of Agent in exercising any power or right hereunder or to demand payment for any sums due pursuant to this Loan Agreement or any other Loan Document, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other further exercise thereof or the exercise of any other right or power.

SECTION 9.10. Notices. Except as may be otherwise expressly provided herein, all notices, certificates, demands, requests, approvals, consents, waivers and other communications provided for herein shall be in writing and (a) mailed (registered or certified

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mail, return receipt requested, and postage prepaid), (b) hand-delivered, with signed receipt or (c) sent by nationally-recognized overnight courier as follows:

If to Borrower or Operating Lessee, to it at:

14185 Dallas Parkway, Suite 1100

Dallas, Texas 75254

Attention: David A. Brooks

with a copy to:

Andrews Kurth LLP

1717 Main Street, Suite 3700

Dallas, Texas 75201

Attention: Brigitte Kimichik, Esq.

If to Agent, to it at:

1301 Avenue of the Americas
New York, New York 10019

Attention: Alexander Larrinaga

with a copy to:

1301 Avenue of the Americas
New York, New York 10019

Attention: Real Estate and Lodging Group – David Bowers

and to:

Kaye Scholer LLP
250 West 55th Street
New York, New York 10019-9710

Attention: Warren J. Bernstein, Esq.

If to CA-CIB, in its capacity as a Lender, to it at:

1301 Avenue of the Americas
New York, New York 10019

Attention: Real Estate and Lodging Group – David Bowers

with a copy to:

1301 Avenue of the Americas
New York, New York 10019

Attention: Alexander Larrinaga

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and to:

Kaye Scholer LLP
250 West 55th Street
New York, New York 10019-9710

Attention: Warren J. Bernstein, Esq.

or to such other address with respect to any, as such party shall notify the other parties in writing. All such notices, certificates, demands, requests, approvals, waivers and other communications given pursuant to this Section 9.10 shall be effective when received (or delivery is refused) at the address specified as aforesaid.

SECTION 9.11. Limitation on Liability.

(b) Subject to the qualifications below, the Loan shall be non-recourse to Borrower and Operating Lessee and neither Agent nor Lenders shall enforce the liability and obligation of Borrower or Operating Lessee to perform and observe the obligations contained in the Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower or Operating Lessee, except that Agent may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Agent and Lenders to enforce and realize upon their interest and rights under the Loan Documents, or in the Mortgaged Property, the Rents or any other Collateral; provided , however , that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower or Operating Lessee only to the extent of Borrower’s and Operating Lessee’s interest in the Mortgaged Property, in the Rents and in any other Collateral, and neither Agent nor Lenders shall sue for, seek or demand any deficiency judgment against Borrower or Operating Lessee in any such action or proceeding under or by reason of or under or in connection with any Loan Document. The provisions of this Section 9.11 shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by any Loan Document; (ii) impair the right of Agent to name Borrower or Operating Lessee as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (iii) affect the validity or enforceability of any of the Loan Documents or any guaranty made in connection with the Loan or any of the rights and remedies of Lenders thereunder; (iv) impair the right of Agent to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Leases and Rents; (vi) constitute a prohibition against Agent to commence any other appropriate action or proceeding in order for Agent to fully realize the security granted by the Mortgage or to exercise its remedies against the Mortgaged Property; or (vii) constitute a waiver of the right of Agent to enforce the liability and obligation of Borrower or Operating Lessee, by money judgment or otherwise, (y) to the extent of any loss, damage, cost, expense, liability, claim or other obligation incurred by Agent or Lenders (including reasonable attorneys’ fees and costs reasonably incurred) arising out of or in connection with any Recourse Liability Event or (z) arising under the Environmental Indemnity. Notwithstanding anything to the contrary in this Loan Agreement or any of the Loan Documents, (A) neither Agent nor Lenders shall be deemed to have waived any right that Agent or Lenders may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the

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Obligations or to require that all Collateral shall continue to secure all of the Obligations in accordance with the Loan Documents, and (B) Agent and Lenders’ agreement not to pursue personal liability of Borrower and Operating Lessee as set forth above SHALL BECOME NULL AND VOID and shall be of no further force and effect, and the Obligations shall be fully recourse to Borrower and Operating Lessee in the event that one or more Full Recourse Events shall occur. Notwithstanding anything contained in this Loan Agreement or in any of the other Loan Documents to the contrary, Borrower and Guarantor shall have no recourse liability to the extent arising solely as a result of (i) the exercise of remedies or foreclosure by Agent or Lenders or any deed or assignment in lieu thereof, or (ii) any action or omission of Agent, Lenders, their respective agents or receiver from and after a foreclosure, deed-in-lieu of foreclosure or appointment of a receiver on all or any portion of the Premises (or any purchaser at foreclosure or any transferee of Agent or Lenders or such purchaser).

(c) Notwithstanding anything to the contrary contained in this Loan Agreement, in the Note, the Mortgage or in the other Loan Documents, no recourse shall be had for the payment of the principal, Interest, Additional Interest or other obligations or amounts owed hereunder or under the Note or the other Loan Documents, or for any claim based on this Loan Agreement, the Note or any other Loan Document, against any member, partner or shareholder of Borrower or Operating Lessee or any of their assets, or against any principal, partner, member, shareholder, officer, director, agent or employee of Borrower or Operating Lessee or any member, partner or shareholder of Borrower or Operating Lessee; provided , however , that:

(vi) nothing contained in this Loan Agreement (including the provisions of this Section 9.11 ), the Note or the other Loan Documents shall constitute a waiver of any obligation of Borrower herein, under the Note or the other Loan Documents to which it is a party, any obligation of Operating Lessee herein or in any other Loan Documents to which it is a party, or any obligation of Guarantor under the Loan Documents to which it is a party; and

(vii) nothing contained in this Loan Agreement (including the provisions of this Section 9.11 ), the Note or the other Loan Documents shall constitute a limitation of liability of Guarantor or any of its respective assets with respect to the Recourse Liability Agreement, the Environmental Indemnity or any other guaranty, indemnity or other Loan Document given by it or to which it is a party.

SECTION 9.12. Binding Effect. This Loan Agreement shall be binding upon and inure to the benefit of Agent, Lenders, Borrower and Operating Lessee and their respective successors and assigns (excluding any successors and assigns not permitted hereunder).

SECTION 9.13. Severability of Provisions. Any provision of this Loan Agreement which is prohibited or unenforceable in the State of New York or in any other jurisdiction in the United States shall be, as to the State of New York or such other jurisdiction in the United States, ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

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SECTION 9.14. Governing Law and Consent to Jurisdiction. This Loan Agreement shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Borrower, Operating Lessee, Agent and Lenders irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Loan Agreement, the Note or the other Loan Documents may be brought in the Courts of the United States of America located in the Southern District of New York or in a state court of record in New York County, New York, (b) consent to the jurisdiction of each such court in any such suit, action or proceeding and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Borrower and Operating Lessee irrevocably consent to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Borrower and Operating Lessee at their addresses provided in Section 9.10 hereof. Nothing in this Section 9.14 however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against Borrower or Operating Lessee or their respective property in the courts of any other jurisdictions.

SECTION 9.15. Waiver of Jury Trial. Borrower, Operating Lessee, Agent and Lenders each hereby expressly and unconditionally waives any and every right either party may have to a trial by jury, in any suit, action or proceeding brought under or with respect to this Loan Agreement, the Note or the other Loan Documents.

SECTION 9.16. No Joint Venture. Neither Borrower nor Operating Lessee is or shall be deemed to be a joint venturer, partner, tenant in common or joint tenant with, or an agent of, Agent or Lenders for any purpose. Neither Agent nor Lenders shall be deemed to be in privity of contract with any Person providing services or materials with respect to the construction, operation, management, marketing, use, operation, repair, restoration, improvement or alteration of the Premises or any part thereof unless and until and except to the extent that Agent shall affirmatively act to establish any such privity pursuant to Article VI hereof, or in the exercise of Agent’s and Lenders’ remedies pursuant to the Mortgage, the Assignments of Agreements or any other Loan Document.

SECTION 9.17. Determinations and Consents of Agent. Unless expressly provided to the contrary in any particular instance, any determination, election or judgment made or any consent or waiver given by Agent pursuant to this Loan Agreement or any other Loan Document shall be made or given, as the case may be, in Agent’s sole and absolute discretion, whether or not the applicable provision of this Loan Agreement or such other Loan Document expressly so provides. In making any such determination, election or judgment or in providing or deciding not to provide any such consent or waiver, Agent shall be entitled to rely, to the extent Agent so elects, in whole or in part on the advice of counsel (including counsel for Borrower, Operating Lessee or Guarantor), independent public accountants, engineers, architects and other experts selected by Agent.

SECTION 9.18. Reliance by Agent on Action on Behalf of Borrower. Agent shall be entitled to rely on any notice, communication or other action taken by any Person

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purporting to sign as the officer or other authorized agent, signatory, representative or agent of Borrower, Operating Lessee, Guarantor or any member, partner or shareholder of Borrower or Operating Lessee purporting to be taken on behalf of such Person (or on behalf of any member, partner or shareholder of Borrower or Operating Lessee on behalf of Borrower or Operating Lessee) as being conclusive evidence of such Person’s right to take such action and, in doing so, bind such Person to the action taken.

SECTION 9.19. Headings, Etc. The headings and captions of various sections of this Loan Agreement have been inserted for convenience only and are not to be construed as defining, modifying, limiting or amplifying, in any way, the scope or intent of the provisions hereof.

SECTION 9.20. Incorporation by Reference. The Note and the other Loan Documents shall be subject to all the terms, covenants, conditions, obligations, stipulations and agreements contained in this Loan Agreement to the same extent and effect as if fully set forth in and made a part of the Note and the other Loan Documents. In the event of a conflict between any of the Loan Documents and the provisions of this Loan Agreement, this Loan Agreement shall control.

SECTION 9.21. Counterparts. This Loan Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Loan Agreement to produce or account for more than one such counterpart.

SECTION 9.22. Attorneys’ Fees. Any provisions of this Loan Agreement or any other Loan Document that require payment to Agent or Lenders of legal fees or expenses incurred by any of them shall be construed as including any and all such fees and expenses incurred in connection with litigation, mediation, arbitration, other alternative dispute processes, administration proceedings and bankruptcy proceedings, and any appeals from any of the foregoing.

SECTION 9.23. Employer Identification Number Etc. Borrower and Operating Lessee acknowledges that in order for Agent and Lenders to comply with the requirements under the Patriot Act, Borrower and Operating Lessee must provide to Agent certain information or supporting documentation (collectively “ Documentation ”) at the time of execution of this Loan Agreement. Thereafter, Borrower and Operating Lessee shall, and shall cause each of their respective Affiliates to, provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by Agent or any Lender in order to assist Agent and Lenders in maintaining compliance with the Patriot Act. Agent and Lenders may be required by the Patriot Act to verify and record any Documentation provided by Borrower and Operating Lessee to validate their identity. Documentation that may be requested from Borrower and/or Operating Lessee may include, but is not limited to, a Federal Employer Identification Number (FEIN), a Certificate of Good Standing to validate their corporate, partnership or limited liability company existence, a Certificate of Incumbency to authenticate the management of Borrower and Operating Lessee, and other government issued certified documents to validate Borrower’s and Operating Lessee’s authorization to conduct business.

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SECTION 9.24. Joint and Several Liability. Each of Borrower and Operating Lessee shall be jointly and severally liable for the payment and performance of those Obligations that are set forth herein and in the other Loan Documents as being the obligations of both or each of them. Without limiting the foregoing, Operating Lessee shall have no obligation to pay the principal amount of the Loan, any Interest or any Additional Interest, although Agent and Lenders shall have recourse to the assets of Operating Lessee that are part of the Collateral if Borrower fails to pay same in accordance with the Loan Documents. The Obligations shall remain in full force without regard to, and shall not be impaired by any of the following, any of which may be effected or dealt with by Agent in such manner, upon such terms and at such times as Agent deems advisable without the consent of, or notice to, Borrower or Operating Lessee, nor shall any of the following give Borrower or Operating Lessee any recourse or right of action against Agent or any Lender: (a) any exercise or non-exercise by Agent or any Lender of any right or privilege against the other; (b) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the other; or (c) any release, waiver or discharge of the other from liability under any of the Loan Documents or any grant to Agent or any Lender of a security interest, lien or encumbrance in any property of the other to secure the Obligations. Each of Borrower and Operating Lessee unconditionally waives, to the fullest extent permitted by law: (w) any right to require Agent or any Lender to exhaust any collateral given to secure the Obligations by, or to pursue any remedy against, the other or any of its assets; (x) any defense arising by reason of any invalidity or unenforceability of any of the Loan Documents against the other or any disability of the other; (y) any right of subrogation or claim for reimbursement that Borrower or Operating Lessee may have against the other in connection with any payments made to Agent or any Lender until such time as all indebtedness owed by such other Borrower to Agent and Lenders has been indefeasibly paid in full and all other Obligations performed and (z) any and all rights and defenses arising out of an election of remedies by Agent or any Lender.

SECTION 9.25. Waiver of Consequential Damages Etc.. Each of Borrower and Operating Lessee hereby unconditionally and irrevocably waives, to the maximum extent not prohibited by applicable law, any rights it may have to claim or recover against Agent or Lenders in any legal action or proceeding any special, exemplary, punitive or consequential damages.

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IN WITNESS WHEREOF , the parties hereto have caused this Loan Agreement to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.

BORROWER:

ASHFORD PIER HOUSE LP

By: Ashford Pier House GP LLC, its general partner

By: /s/ David A. Brooks

Name: David A. Brooks

Title: President

OPERATING LESSEE:

ASHFORD TRS PIER HOUSE LLC

By: /s/ Deric S. Eubanks

Name: Deric S. Eubanks

Title: President

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AGENT:

CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK

By: /s/ Alex Larrinaga

Name:Alex Larrinaga

Title:Director

By: /s/ Robert Colvin

Name:Robert Colvin

Title:Managing Director

LENDERS:

CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK

By: /s/ David Bowers

Name:David Bowers

Title:Managing Director

By: /s/ Jason Chrein

Name:Jason Chrein

Title:Managing Director

62528184

EXHIBIT 10.34

RECOURSE LIABILITY AGREEMENT

This RECOURSE LIABILITY AGREEMENT (this “ Agreement ”), is made as of March 9, 2015 by ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited partnership (“ Guarantor ”), ASHFORD TRS PIER HOUSE LLC , a Delaware limited liability company (“ Operating Lessee ”), ASHFORD PIER HOUSE LP , a Delaware limited partnership (“ Borrower ”; Borrower, Operating Lessee and Guarantor are each individually a “ Recourse Liability Party ” and collectively, “ Recourse Liability Parties ”), to and for the benefit of CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK , a banking corporation organized under the laws of the Republic of France, having an office at 1301 Avenue of the Americas, New York, New York 10019, as agent (in such capacity, “ Agent ”) for Lenders as more particularly set forth in the Loan Agreement (as hereinafter defined). All capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

W I T N E S S E T H :

WHEREAS , Recourse Liability Parties have requested that Lenders make, and Agent administer, a loan in the original principal amount of $70,000,000 to Borrower (the “ Loan ”) pursuant to that certain Loan Agreement (the “ Loan Agreement ”) dated as of the date hereof among Borrower, Operating Lessee, Agent and Lenders, which Loan is evidenced by that certain Amended and Restated Renewal Promissory Note (the “ Note ”) dated as of the date hereof in the principal amount of $70,000,000 by Borrower in favor of Agent, and secured by, among other things, that certain Amended and Restated Fee and Leasehold Mortgage, Security Agreement, Financing Statement, Fixture Filing, and Assignment of Rents dated as of the date hereof by Borrower in favor of Agent and joined by Operating Lessee (the “ Mortgage ”) encumbering, inter alia , certain real property and improvements located in Monroe County, Florida (the “ Premises ”, as such defined term is more particularly described in the Loan Agreement);

WHEREAS , Guarantor and Operating Lessee are Affiliates of Borrower and will obtain substantial benefits from Lenders making, and Agent administering, the Loan; and

WHEREAS , to induce Lenders to make, and Agent to administer, the Loan, Recourse Liability Parties have agreed to indemnify and compensate Agent and Lenders as hereinafter set forth.

Section 1. Recourse Liability Events. Recourse Liability Parties hereby irrevocably, unconditionally, absolutely, jointly and severally agree to indemnify and hold harmless Agent and Lenders from and against any and all loss, cost, damage, liability or expense, including reasonable attorney’s fees and disbursements, suffered or incurred by Agent or Lenders by reason of the occurrence of any of the Recourse Liability Events.

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Section 2. Full Recourse Events . Guarantor hereby irrevocably, unconditionally, absolutely agrees that it shall, upon the occurrence of any Full Recourse Event, assume and be responsible for the prompt and complete observance, fulfillment and performance of all of the Obligations of Borrower and Operating Lessee under the Loan Documents, including the making of all payments of all principal, Interest, Additional Interest and other sums evidenced by the Note (so that it shall become jointly and severally liable for such Obligations with Borrower and Operating Lessee). Such assumption and responsibility shall occur automatically upon the occurrence of any Full Recourse Event without further action on the part of any Person.

Section 3. Termination . The obligations of Recourse Liability Parties under this Agreement shall terminate upon the actual and irrevocable receipt by Agent of payment in full of all of the Obligations.

Section 4. Application of Amounts Realized. In the event Agent has caused a foreclosure sale or has otherwise caused a transfer of the Premises, Agent shall not be required to apply any net proceeds of any such sale on account of any sums which are the subject of any obligation of Recourse Liability Parties pursuant to this Agreement unless such net proceeds shall be in excess of the amount which would satisfy in full all of the Obligations (other than obligations of Recourse Liability Parties arising pursuant to this Agreement), in which case Agent shall apply such excess, if any, on account of any sums which are the obligation of Recourse Liability Parties pursuant to this Agreement.

Section 5. Default Rate . Any amount payable by any Recourse Liability Party that is not paid by Recourse Liability Parties within five (5) Business Days after written demand therefor from Agent shall bear interest from the date of such demand at the Default Rate.

Section 6. Representations and Warranties . Each Recourse Liability Party represents and warrants with respect to each such Recourse Liability Party only to Agent and Lenders (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Agreement) that:

(a) Such Recourse Liability Party that is not an individual is a corporation or limited partnership or limited liability company (as recited in the preamble to this Agreement) duly formed, validly existing and in good standing pursuant to the laws of its state of formation (which state of formation is as recited in the preamble to this Agreement), and is qualified to do business in each other jurisdiction where such qualification is necessary to carry out its business.

(b) Such Recourse Liability Party has the power and requisite authority and is duly authorized to execute and deliver this Agreement and perform its obligations under this Agreement and the other Loan Documents to which it is a party.

(c) This Agreement constitutes the legal, valid and binding obligation of such Recourse Liability Party, enforceable against such Recourse Liability Party in accordance with its terms.

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(d) Neither the execution and delivery of this Agreement, nor consummation of any of the transactions herein contemplated nor compliance with the terms and provisions hereof, will contravene any provision of law, statute, rule or regulation to which such Recourse Liability Party is subject or any judgment, decree, license, order or permit applicable to such Recourse Liability Party, or will conflict or be inconsistent with, or will result in any breach of any of the terms of the covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of a Lien (except liens in favor of Agent or Lenders) upon any of the property or assets of such Recourse Liability Party pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which such Recourse Liability Party is a party or by which such Recourse Liability Party may be bound, or to which such Recourse Liability Party may be subject, or violate any provision of any organizational document of such Recourse Liability Party.

(e) All consents, approvals, authorizations or orders of any Person, court or Governmental Authority or any third party that are required in connection with the execution and delivery by such Recourse Liability Party of this Agreement or to consummate the transactions contemplated hereby have been obtained and are in full force and effect. Such Recourse Liability Party is not in default with respect to any law, statute, rule, regulation, judgment, license, permit, order, writ injunction or decree of any court or Governmental Authority applicable to such Recourse Liability Party.

(f) There are no actions, suits or proceedings at law or at equity, pending or, to such Recourse Liability Party’s knowledge, threatened against or affecting such Recourse Liability Party which involve or might involve the validity or enforceability of this Agreement or which is reasonably likely to materially adversely affect the financial condition of such Recourse Liability Party or the ability of such Recourse Liability Party to perform any of its respective obligations under this Agreement.

(g) All statements of financial condition and related schedules and all certificates, statements, documents or other information of or relating to such Recourse Liability Party heretofore delivered to Agent or its agents or counsel (i) are true, correct and complete in all material respects, (ii) do not contain any misleading information or any untrue statements of a material fact, (iii) do not omit to state a material fact and (iv) in the case of all statements of financial condition and related schedules, fairly present the financial condition of the subjects thereof as of the respective dates thereof. No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof. No representation or warranty made by such Recourse Liability Party in this Agreement or any other Loan Document contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading in any material respect.

Section 7. Liability Not Limited . Recourse Liability Parties’ liability hereunder shall not be subject to, limited by or affected in any way by any nonrecourse provisions or provisions limiting liability contained in the Loan Agreement, the Note, the Mortgage or any other Loan Document. Recourse Liability Parties agree that the indemnities made in Sections 1 and 2 hereof and given in this Agreement are separate and distinct from, independent of and in addition to

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Borrower’s undertakings under the Note, the Mortgage and the other Loan Documents. Recourse Liability Parties agree that a separate action may be brought to enforce the provisions of this Agreement which shall in no way be deemed to be an action on the Note, the Loan Agreement or any other Loan Document. Recourse Liability Parties hereby waive the defenses of laches and any applicable statute of limitations.

Section 8. Unconditional Character of Obligations .

(a) Obligations . The obligations of Recourse Liability Parties hereunder shall be absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgage or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against Borrower or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrower, any other Recourse Liability Party or any other Person under any Loan Document, or any setoff, counterclaim, recoupment, limitation or termination, and irrespective of any other circumstances which might otherwise limit recourse against any Recourse Liability Party by Agent or constitute a legal or equitable discharge or defense of a guarantor or surety. Agent may enforce the obligations of Recourse Liability Parties hereunder by a proceeding at law, in equity or otherwise, independent of any foreclosure or similar proceeding or any deficiency action against Borrower or any other Person at any time, and either before or after an action against the Collateral or any part thereof, Borrower or any other Person. Recourse Liability Parties waive diligence, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgage or any other Loan Documents against Borrower or any other Person, any right to require a proceeding first against Borrower or any other Person, or to proceed Recourse Liability Parties in any particular order, or to exhaust any security (including the Collateral) for the performance of the obligations of Borrower or any other Person, or to cause a marshalling of Borrower’s assets, and any protest, presentment, notice of default or other notice or demand whatsoever.

(b) Agreement and Collateral . Without limiting the generality of the provisions of Section 8(a) hereof and except as otherwise limited by applicable law, the obligations of Recourse Liability Parties under this Agreement, and the rights of Agent to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following:

(i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Borrower, any other Recourse Liability Party or any other Person or the Collateral or any part thereof, including any automatic stay granted pursuant to any provision of a bankruptcy or similar law;

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(iv) the conveyance to Agent, any Lender, any Affiliate of Agent or any Lender or Agent’s or any Lender’s nominee of the Collateral or any interest therein by a deed in lieu of foreclosure;

(v) the release of Borrower, any other Recourse Liability Party or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise;

(vi) the release in whole or in part of the Collateral;

(viii) any recovery from any Recourse Liability Party or any other obligor of any of the Obligations, which recovery is obtained under this Agreement or any other guaranty or indemnity executed in connection with the Loan; or

(ix) any accuracy or inaccuracy of any representations or warranties made by Borrower, any other Recourse Liability Party or any other Person in any of the Loan Documents.

(c) Waiver . Recourse Liability Parties hereby expressly and irrevocably waive all defenses in an action brought by Agent to enforce this Agreement based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise.

(d) Agent’s and Lenders’ Ability to Act . Agent and Lenders may deal with Borrower, Affiliates of Borrower and the Collateral in the same manner and as freely as if this Agreement did not exist and shall be entitled, among other things, to grant Borrower or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Agent, at any time and from time to time, without terminating, affecting or impairing the validity of this Agreement or the obligations of Recourse Liability Parties hereunder.

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(f) Agent’s Remedies . Agent may proceed to protect and enforce any or all of its rights under this Agreement by suit in equity or action at law against any Recourse Liability Party, whether for the specific performance of any covenants or agreements contained in this Agreement or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Recourse Liability Parties. All rights, remedies, powers and privileges conferred by the other Loan Documents are cumulative of all other rights, remedies, powers and privileges herein or by law or in equity provided, or provided in any other Loan Document, and shall not be deemed to deprive Agent of any such other legal or equitable rights, remedies, powers and privileges to enforce the conditions, covenants and terms of this Agreement or the other Loan Documents by judicial proceedings or otherwise, and the employment of any rights, remedies, powers and privileges hereunder or otherwise, shall not prevent the concurrent or subsequent employment of any other appropriate rights, remedies, powers and privileges.

(g) Actions. At the option of Agent, Recourse Liability Parties may be joined in any action or proceeding commenced by Agent against Borrower in connection with or based upon the Note, the Loan Agreement, the Mortgage or any other Loan Documents and recovery may be had against Recourse Liability Parties in such action or proceeding or in any independent action or proceeding against Recourse Liability Parties to the extent of Recourse Liability Parties’ liability hereunder, without any requirement that Agent first assert, prosecute or exhaust any remedy or claim against Borrower or any other Person, or any security for the obligations of Borrower or any other Person. Any demand by Agent for payments, or performance of the obligations under, this Agreement upon Recourse Liability Parties shall not be and shall not be construed to be a release or waiver by Agent of any other obligor with respect to such payment or obligation.

(h) Continuance or Reinstatement of Agreement Notwithstanding anything to the contrary contained in this Agreement, Recourse Liability Parties agree that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by any Recourse Liability Party to Agent or any Lender and such payment is rescinded or must otherwise be returned by Agent or such Lender upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Recourse Liability Party, all as though such payment had not been made. Agent may, but shall not be required to, litigate or otherwise dispute such rescission or its obligation to make such repayments.

(i) Payments to Recourse Liability Party; Subrogation . In the event that any Recourse Liability Party shall advance or become obligated to pay any sums under this Agreement, or in the event that for any reason whatsoever Borrower or any subsequent owner of the Collateral or any part thereof is now, or shall hereafter become, indebted to any Recourse Liability Party, Recourse Liability Parties agree that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to lien, the time of payment and in all other respects to all Obligations, including principal and interest and other amounts, at any time owed to Agent and/or Lenders under the Loan Documents, and (ii) Recourse Liability Parties shall not be entitled to enforce or receive payment thereof until the actual and irrevocable receipt by Agent of payment in full of all Obligations. Nothing herein contained is intended or shall be construed to

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give any Recourse Liability Party any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Agent or any Lender in or to the Collateral, notwithstanding any payments made by any Recourse Liability Party under this Agreement, all such rights of subrogation and participation, if any, being hereby expressly postponed until the actual and irrevocable receipt by Agent of payment in full of all Obligations. If any amount shall be paid to any Recourse Liability Party by reason of the payment of sums by any Recourse Liability Party under this Agreement at any time when any such sums due and owing to Agent and/or Lenders shall not have been fully paid, such amount shall be paid by such Recourse Liability Party to Agent for credit and application against such sums due and owing to Agent and/or Lenders.

(j) Effect of Foreclosure, Exercise of Remedies . Recourse Liability Parties’ obligations hereunder shall continue notwithstanding a foreclosure, deed in lieu of foreclosure or similar proceeding or transaction involving the Premises or any part thereof or other exercise by Agent of the other remedies under the Loan Documents, at law or in equity; provided , however , Recourse Liability Parties’ liability under this Agreement shall be limited to claims arising as a result of actions first occurring prior to such foreclosure, deed in lieu of foreclosure or similar proceeding or transaction unless caused by the acts of any Recourse Liability Party or Affiliate thereof.

Section 9. Transfers . Guarantor shall not make (or permit to be made) any Transfer with respect to (i) any direct or indirect ownership interest in Borrower or Operating Lessee or (ii) the direct or indirect ownership interest of any Person in Guarantor, except in each case for a Permitted Transfer in accordance with the Loan Agreement.

Section 10. Rights of Agent . Unless expressly provided to the contrary in any particular instance, with respect to any and all rights of Agent to (a) give or withhold any consent, approval or other authorization requested by any Recourse Liability Party with respect to this Agreement, (b) make any election or exercise any option granted herein, (c) make any decision, judgment or determination with respect hereto, (d) modify or amend this Agreement or waive any obligation of any Recourse Liability Party hereunder or grant any extension of time for performance of the same or (e) take or omit to take any other action of any kind whatsoever, Agent shall, to the maximum extent permitted by law, have the right, and Recourse Liability Parties expressly acknowledge Agent’s right, in each instance, to make or give the same or take such action or to omit to take such action, as the case may be, in its sole and absolute discretion.

Section 11. Further Assurances . Recourse Liability Parties shall, within five (5) Business Days after written request, make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings or other assurances, and take all such other action, as Agent may, from time to time, deem reasonably necessary in order to give effect to the rights and benefits conferred on Agent and Lenders pursuant to this Agreement.

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to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No waiver of any provision of this Agreement or in any of the other Loan Documents or consent to any departure by any Recourse Liability Party or any other Person therefrom shall in any event be effective unless signed in writing by Agent, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Consents, approvals and waivers granted by Agent for any matters covered under this Agreement or any Loan Document shall not be effective unless signed in writing by Agent, and such consents, approvals and waivers shall be narrowly construed to cover only the parties and facts identified in any such consent, approval or waiver. No notice or demand on any Recourse Liability Party or any other Person in any case shall entitle such Recourse Liability Party or such Person to any other or further notice or demand in similar or other circumstances. Unless expressly provided to the contrary, any consents, approvals or waivers of Agent or Lenders pursuant to this Agreement or any other Loan Documents shall be granted or withheld in Agent’s or Lenders’ sole discretion, as the case may be. No amendment, modification or termination of any provision of this Agreement shall be effective unless in writing and signed by Recourse Liability Parties and Agent.

Section 13. Binding Effect . This Agreement shall be binding upon Recourse Liability Parties and their respective heirs, legatees, personal representatives, successors and assigns, and shall inure to the benefit of and shall be enforceable by Agent, Lenders and their respective successors and assigns.

Section 15. Notices . Any notice, demand, request, consent, approval or other communication, which any party hereto may be required or may desire to give hereunder, shall be made in accordance with Section 9.10 of the Loan Agreement to the party to whom notice is being given, in any of the foregoing cases, at the address set forth below:


Agent :	Crédit Agricole Corporate and Investment Bank 1301 Avenue of the Americas New York, New York 10019 Attention: Alexander Larrinaga

with a copy to:

Crédit Agricole Corporate and Investment Bank
1301 Avenue of the Americas
New York, New York 10019
Attention: Real Estate and Lodging Group- David Bowers

and to:

Kaye Scholer LLP
250 West 55th Street

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New York, New York 10019-9710
Attention: Warren J. Bernstein, Esq.


Recourse Liability Parties :	The applicable Recourse Liability Party 14185 Dallas Parkway, Suite 1100

Dallas, Texas 75254

Attention: David A. Brooks

with a copy to:

Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: Brigitte Kimichik, Esq.

Notwithstanding any provision contained herein or in any of the other Loan Documents to the contrary, in the event that Agent shall fail to give any notice to any Recourse Liability Party under this Agreement, the sole and exclusive remedy for such failure shall be to seek appropriate equitable relief to enforce this Agreement to give such notice and to have any action of such Recourse Liability Party postponed or revoked and any proceedings in connection therewith delayed or terminated pending the giving of such notice by Agent, and no Recourse Liability Party shall have any right to damages (whether actual or consequential) or any other type of relief against Agent not specifically provided for herein, all of which damages or other relief are hereby expressly waived. The foregoing is not intended and shall not be deemed under any circumstances to require Agent to give notice of any type or nature to Recourse Liability Parties except as expressly required hereby.

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Section 17. Captions . The captions, headings and arrangements used in this Agreement are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions hereof.

Section 18. Governing Law; Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by Jury . This Agreement shall be governed by, and construed in accordance with, the substantive and procedural laws of the State of New York. Recourse Liability Parties irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Agreement, the Note or the other Loan Documents may be brought in (i) the courts of the United States of America located in the Southern District of New York or the District where the Premises are located or (ii) in the state courts of the State and County of New York or the state courts of the State and County where the Premises are located, (b) consent to the jurisdiction of each such court in any such suit, action or proceeding and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Each Recourse Liability Party irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to such Recourse Liability Party at its address provided in Section 15 hereof, as the same may be changed pursuant to Section 15 hereof. Nothing in this Section 18 , however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against any Recourse Liability Party or its property in the courts of any other jurisdiction. EACH RECOURSE LIABILITY PARTY HEREBY WAIVES, AND AGENT, BY ACCEPTANCE OF THIS AGREEMENT HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT, WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 19. Definitional Provisions. For purposes of this Agreement, (a) defined terms used in the singular shall import the plural and vice-versa; (b) the words “hereof,” “herein,” “hereunder” and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (c) the words “include” and “including” wherever used in this Agreement shall be deemed to be followed by the words “without limitation” and (d) all of the Loan Documents and other documents, instruments and agreements referred to in this Agreement shall be deemed to mean such Loan Documents or other documents, instruments or agreements, as applicable, as they may from time to time be amended, supplemented, restated, consolidated, severed, split, extended, substituted for, partially released, replaced, increased, waived, cross-collateralized, renewed or otherwise modified in accordance with the terms of the Loan Documents.

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Section 21. Joint and Several Obligations . The obligations of Recourse Liability Parties under this Agreement shall be joint and several.

[Signatures follow]

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IN WITNESS WHEREOF , Recourse Liability Parties have executed this instrument the day and year first above written.

BORROWER:

ASHFORD PIER HOUSE LP,
a Delaware limited partnership

By: Ashford Pier House GP LLC, a Delaware limited liability company, its general partner

By: /s/ David A. Brooks
Name: David A. Brooks
Title: President and Secretary

OPERATING LESSEE:

ASHFORD TRS PIER HOUSE LLC , a
Delaware limited liability company

By: /s/ Deric S. Eubanks
Name: Deric Eubanks
Title: President

GUARANTOR:

ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP, a Delaware limited partnership

By: Ashford Prime OP General Partner LLC,

General Partner

By: /s/ David A. Brooks

Name: David A. Brooks
Title: Vice President

62526569

EXHIBIT 10.35

ENVIRONMENTAL INDEMNITY

This ENVIRONMENTAL INDEMNITY (this “ Indemnity ”) is made as of March 9, 2015 by ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited partnership (“ Guarantor ”), ASHFORD TRS PIER HOUSE LLC , a Delaware limited liability company (“ Operating Lessee ”), and ASHFORD PIER HOUSE LP , a Delaware limited partnership (“ Borrower ”; Borrower, Operating Lessee and Guarantor are each individually an “ Indemnitor ” and collectively, “ Indemnitors ”), to and for the benefit of CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK , a banking corporation organized under the laws of the Republic of France, having an office at 1301 Avenue of the Americas, New York, New York 10019, as agent (in such capacity, “ Agent ”) for Lenders as more particularly set forth in the Loan Agreement (as hereinafter defined). All capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

W I T N E S S E T H:

WHEREAS, Indemnitors have requested that Lenders make, and Agent administer, a loan in the original principal amount of $70,000,000 to Borrower (the “ Loan ”) pursuant to that certain Loan Agreement (the “ Loan Agreement ”) dated as of the date hereof among Borrower, Operating Lessee, Agent and Lenders, which Loan is evidenced by that certain Amended and Restated Renewal Promissory Note (the “ Note ”) dated as of the date hereof in the principal amount of $70,000,000 by Borrower to Agent, and secured by, among other things, that certain Amended and Restated Fee and Leasehold Mortgage, Security Agreement, Financing Statement, Fixture Filing, and Assignment of Rents dated as of the date hereof by Borrower in favor of Agent and joined by Operating Lessee (the “ Mortgage ”) encumbering, inter alia , certain real property and improvements located in Monroe County, Florida (the “ Premises ”, as such defined term is more particularly described in the Loan Agreement);

WHEREAS, as a result of Lenders making, and Agent administering, the Loan, Agent and/or Lenders may hereafter incur or suffer certain Environmental Losses (as hereinafter defined);

WHEREAS, Guarantor and Operating Lessee are Affiliates of Borrower and will obtain substantial benefits from Lenders making, and Agent administering, the Loan; and

WHEREAS, to induce Lenders to make, and Agent to administer, the Loan, Indemnitors have agreed to execute and deliver this Indemnity and to indemnify Agent and Lenders for such Environmental Losses as hereinafter set forth.

NOW, THEREFORE, for and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by all parties, Indemnitors hereby agree as follows:

Section 1. Definitions . The following terms used in this Indemnity shall have the meanings indicated:

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“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601, et seq.), as heretofore or hereafter amended from time to time.

“ Environmental Laws ” collectively means and includes all present and future laws and any and all amendments (whether common law, statute, rule, order, decree, regulation, ordinance, resolution, code or otherwise), permits, and other requirements or guidelines of governmental authorities, whether federal, state or local, applicable to the Premises, Borrower or Operating Lessee and relating to the environment and environmental conditions or to any Hazardous Substance or Hazardous Substance Activity (including CERCLA, the Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq., the Clean Water Act, 33 U.S.C. § 1251, et seq., the Clean Air Act, 42 U.S.C. § 7401, et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601-2629, the Safe Drinking Water Act, 42 U.S.C. § 300f‑300j, the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. § 11001, et seq., and any so-called “Super Fund” or “Super Lien” law, environmental laws administered by the Environmental Protection Agency, any similar state and local laws and regulations, all amendments thereto and all regulations, orders, decisions, and decrees now or hereafter promulgated thereunder).

“ Environmental Losses ” means Losses suffered or incurred by any Indemnified Party arising out of or as a result of: (i) the occurrence of any Hazardous Substance Activity; (ii) any violation of any applicable Environmental Laws; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental agency in connection with any Hazardous Substance Activity; (iv) any breach by any Indemnitor of any of the representations, warranties, covenants or obligations under this Indemnity, or (v) any claim, demand or cause of action, or any action or other proceeding brought or asserted by any party, whether meritorious or not, against any Indemnified Party, regardless of when such claim, demand, or cause of action or other proceeding is brought or asserted, which directly or indirectly relates to, arises from or is based on any of the matters described in clause (i) , (ii) , (iii) or (iv) above or any allegation of any such matters. Notwithstanding the foregoing, “Environmental Losses” shall not include any Losses arising solely from any Hazardous Substances that are first present, used and stored at, on or under the Premises after the Premises have been transferred to an Indemnified Party or any third party purchaser by foreclosure, deed in lieu of foreclosure or similar transaction or a receiver takes possession of the Premises.

“ Hazardous Substance ” means, at any time, (i) asbestos and any asbestos containing material, (ii) any substance that is then defined or listed in, or otherwise classified pursuant to, any Environmental Laws or any applicable laws or regulations as a “hazardous substance”, “hazardous material”, “hazardous waste”, “infectious waste”, “toxic substance”, “toxic pollutant” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or “EP toxicity”, (iii) any petroleum and drilling fluids, produced waters, and other wastes associated with the exploration, development, processing or production of crude oil, natural gas, or geothermal

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resources and (iv) petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter, medical waste, mold and mildew.

“ Hazardous Substance Activity ” means any actual or alleged use, packaging, labeling, treatment, leaching, presence, possession, spill, cleanup, storage, holding, existence, release, emission, discharge, generation, processing, refining, abatement, removal, disposition, handling, transferring or transportation of any Hazardous Substance from, in, under, above, into or on the Premises or any other Collateral, or any property surrounding the Premises, or otherwise being in the possession of Borrower or Operating Lessee, whether or not known to Indemnitor, whether foreseeable or unforeseeable, and regardless of the source or time of occurrence of such actual or alleged use, packaging, labeling, treatment, leaching, presence, possession, spill, cleanup, storage, holding, existence, release, emission, discharge, generation, processing, refining, abatement, removal, disposition, handling, transferring or transportation.

“ Indemnified Parties ” means, collectively, Agent, each Lender, each of their participants, any successor to any interest of Agent or Lenders in or to the Premises (including any Affiliate, nominee or designee of Agent or Lenders that acquires all or part of the Premises by any sale, assignment, foreclosure or other exercise of remedies under the Mortgage or other Loan Documents or by conveyance in lieu thereof) and any officers, directors, shareholders, agents and/or employees of any of the foregoing (together with their successors and assigns), excluding , any successor to any interest of Agent or Lenders in or to the Premises that acquires all or part of the Premises by any sale, assignment, foreclosure or other exercise of remedies under the Mortgage or other Loan Documents or by conveyance in lieu thereof that is not Agent, any Lender, any of their participants or an Affiliate, nominee or designee of Agent or Lenders.

“ Indemnitor ” and “ Indemnitors ” have the meaning set forth in the first paragraph of this Indemnity.

“ Losses ” means any and all losses, liabilities, obligations, damages, demands, claims, actions, judgments, causes of action, assessments, penalties, fines, fees, settlements, costs and expenses of any and every kind, known or unknown, fixed or contingent, whether indirectly or directly incurred by or asserted against any Indemnified Party, including (a) all costs and expenses incurred in evaluating and defending against actual or threatened claims, actions, proceedings or notices of violation, (b) all amounts paid or contributed for Remedial Actions arising in connection with an actual or threatened claim, action or proceeding or notice of violation, (c) the reasonable fees and disbursements of legal counsel, environmental experts, consultants and accountants in connection with any of the foregoing and (d) any economic diminution in the value of the Premises as a result of Hazardous Substance Activity.

“ Permitted Materials ” means the storage, handling and disposal of de minimis amounts of Hazardous Substances performed in the ordinary course of business of operating the Premises and in strict compliance with all Environmental Laws.

“ Remedial Actions ” means all investigation, monitoring, testing, remediation, response action, removal, containment, restoration, permit acquisition and disposal of or with respect

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to any Hazardous Substances as required by Environmental Laws or as otherwise required by the second sentence of Section 4 hereof.

Section 2. Indemnification . (i) Indemnitors hereby irrevocably, unconditionally and absolutely, agree to indemnify and keep indemnified each Indemnified Party and to defend, hold and save each Indemnified Party harmless from and against, any and all Environmental Losses.

(b) Within five (5) Business Days of demand by any Indemnified Party, Indemnitors shall commence to defend, and shall thereafter diligently pursue defense of, any investigation, action or proceeding in connection with any claim or liability, or alleged claim or liability, that would, if determined adversely to such Indemnified Party, be covered by the indemnification provisions contained herein, such defense to be at the sole cost and expense of Indemnitors and by counsel selected by Indemnitors and approved by Agent, which counsel may, without limiting the rights of an Indemnified Party pursuant to the next succeeding sentence of this Section 2(b) , also represent Indemnitors in such investigation, action or proceeding. In the alternative, an Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the expense of Indemnitor. Nothing contained herein shall be construed as requiring any Indemnified Party to expend funds or incur costs to defend any claim in connection with the matters contained herein.

(c) The obligations of Indemnitors hereunder shall specifically include the obligation to expend their own funds, to incur costs in its own name and to perform all actions (including, completing Remedial Actions in a timely manner) as required by Environmental Laws or as otherwise required by the second sentence of Section 4 hereof. to protect the Indemnified Parties from the necessity of expending their own funds, incurring costs or performing any actions in connection with the matters contained herein.

(d) Without limiting any other provision of this Indemnity, the obligations of Indemnitors hereunder shall apply to all Environmental Losses that arise out of or are attributable to, whether directly or indirectly, in whole or in part, any claim or allegation against an Indemnified Party relating to any act or omission of such Indemnified Party in respect of the Loan or the Premises, or in connection with any exercise of such Indemnified Party’s rights under any of the Loan Documents, unless the same shall result solely from any Indemnified Party’s acts constituting gross negligence or willful misconduct, in which case such acts or omissions and any loss or damage resulting therefrom shall not be covered by this Indemnity. The rights and remedies of the Indemnified Parties under this Indemnity shall be in addition to any other rights and remedies of such Indemnified Parties under any guaranty or any other document or instrument now or hereafter executed in connection with the Loan or at law or in equity.

Section 3. Representations and Warranties . Each Indemnitor represents and warrants, with respect to each such Indemnitor only as to clauses (a) through (g) below, to Agent and Lenders (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Indemnity) that:

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(a) Such Indemnitor (if not an individual) is a corporation, partnership, limited liability company, trust or other entity (as recited in the preamble to this Indemnity) duly formed, validly existing and in good standing pursuant to the laws of its state of formation (which state of formation is as recited in the preamble to this Indemnity), and is qualified to do business in each other jurisdiction where such qualification is necessary to carry on its business.

(b) Such Indemnitor has the power and requisite authority and is duly authorized to execute and deliver this Indemnity and perform its obligations under this Indemnity and the other Loan Documents to which it is a party.

(c) This Indemnity constitutes the legal, valid and binding obligation of such Indemnitor, enforceable against such Indemnitor in accordance with its terms.

(d) Neither the execution and delivery of this Indemnity, nor consummation of any of the transactions herein contemplated nor compliance with the terms and provisions hereof, will contravene any provision of law, statute, rule or regulation to which such Indemnitor is subject or any judgment, decree, license, order or permit applicable to such Indemnitor, or will conflict or be inconsistent with, or will result in any breach of any of the terms of the covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of a Lien (except liens in favor of Agent or Lenders) upon any of the property or assets of such Indemnitor pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which such Indemnitor is a party or by which such Indemnitor may be bound, or to which such Indemnitor may be subject, or violate any provision of any organizational document of such Indemnitor.

(e) All consents, approvals, authorizations or orders of any Person, court or Governmental Authority or any third party that are required in connection with the execution and delivery by such Indemnitor of this Indemnity or to consummate the transactions contemplated hereby have been obtained and are in full force and effect. Such Indemnitor is not in default with respect to any law, statute, rule, regulation, judgment, license, permit, order, writ, injunction or decree of any court or Governmental Authority applicable to such Indemnitor.

(f) There are no actions, suits or proceedings at law or at equity, pending or, to such Indemnitor’s knowledge, threatened against or affecting such Indemnitor which involve or might involve the validity or enforceability of this Indemnity or which might materially adversely affect the financial condition of such Indemnitor or the ability of such Indemnitor to perform any of its respective obligations under this Indemnity.

(g) All statements of financial condition and related schedules and all certificates, statements, documents or other information of or relating to such Indemnitor heretofore delivered to Agent or its agents or counsel (i) are true, correct and complete in all material respects, (ii) do not contain any misleading information or any untrue statements of a material fact, (iii) do not omit to state a material fact and (iv) in the case of all statements of financial condition and related schedules, fairly present the financial condition of the subjects thereof as of the respective dates thereof. No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof. No representation or warranty made by such Indemnitor in this Indemnity or any

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other Loan Document contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading in any material respect.

(h) Except as disclosed in the Environmental Report, the Premises are not now used, nor, to such Indemnitor’s knowledge, have the Premises ever been used by any previous owner, tenant, occupant or user of the Premises, to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process or in any manner deal with Hazardous Substances (except for Permitted Materials and otherwise in compliance with Environmental Laws), and no Hazardous Substances are installed, placed, handled or in any manner dealt with on the Premises except for Permitted Materials and otherwise in compliance with Environmental Laws.

(i) Except as disclosed in the Environmental Report, neither such Indemnitor nor, to such Indemnitor’s knowledge, any previous owner, tenant, occupant or user of the Premises, has received any notice, order or request from any Governmental Authority or third party concerning the presence or suspected presence of any Hazardous Substances on, under, in or about the Premises or the presence or suspected presence of any Hazardous Substances on, under, in or about any real property adjoining the Premises other than, in each case, for Permitted Materials and otherwise in compliance with Environmental Laws.

(j) The Premises and its actual and intended uses, including all permitted uses under all Leases, comply with all Environmental Laws, and all permits, licenses, approvals, identification numbers and other authorizations required by all Environmental Laws have been obtained and are in effect for the operations conducted on the Premises.

(k) Except as disclosed in the Environmental Report, no underground storage tanks, whether or not containing Hazardous Substances or any other substance, are located on or under the Premises.

(l) Except as disclosed in the Environmental Report, no above-ground storage tanks containing any Hazardous Substances are located on the Premises.

(m) Except as disclosed in the Environmental Report, no lead-based paint, asbestos or asbestos-containing materials are present in the Premises.

Section 4. Compliance with Environmental Laws . Indemnitors shall comply with all Environmental Laws in effect from time to time. To the extent required by any Environmental Law (or, if Environmental Laws are not applicable to the Hazardous Substances in question, then, to the extent reasonably otherwise necessary to avoid unreasonable risk of health or safety), Indemnitors shall immediately remove and dispose of any Hazardous Substances found on, in, under, about or affecting the Premises, and all such removals and disposals shall be undertaken and performed in compliance with all Environmental Laws. Except for Permitted Materials, Indemnitors shall not (a) release, or permit, allow or suffer any release or threat of release of any Hazardous Substances into, on, in, under, about or affecting the Premises or from the Premises onto, into or under any properties adjacent to the Premises, or any waterways located upon or near the Premises; (b) generate, manufacture, refine, transport, treat, handle, dispose or in any other manner deal with

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any Hazardous Substances or permit, allow or suffer any such activities from, into, on, in, under or about the Premises, surrounding property or any waterways located upon or near the Premises; or (c) store or permit, allow or suffer Hazardous Substances to be stored on, in, under or about the Premises. Indemnitors shall not permit, allow or suffer any Lien under any Environmental Law to attach to or encumber the Premises or any part thereof or interest therein. In the event Indemnitors shall fail to comply with any such Environmental Laws, during the existence of an Event of Default, Agent may, but shall not be obligated to, cause the Premises, the surrounding property or any waterways located upon or near the Premises to be freed from Hazardous Substances or take other Remedial Actions. The cost of any action taken by Agent pursuant to the immediately preceding sentence shall be payable by Indemnitors within five (5) Business Days after Agent’s written demand therefor. Indemnitors shall give Agent and its agents and employees such access to the Premises as Agent shall deem to be reasonably necessary or desirable to cause such removal of Hazardous Substances.

Section 5. Notification of Hazardous Substances and Actions . Indemnitors shall within ten (10) days notify Agent, or cause Agent to be promptly notified, if (a) any Indemnitor knows, suspects or believes that there may be any Hazardous Substances in, on or under the Premises, or in the soil, groundwater or soil vapor on, over or under the Premises that are in violation of Environmental Laws, (b) any action by any Governmental Authority is instituted or threatened under any Environmental Laws affecting any Indemnitor or the Premises, including any notice of inspection, abatement or noncompliance or (c) any claim is made or threatened by any third party against any Indemnitor or the Premises relating to any Hazardous Substances or a violation of any Environmental Laws.

Section 6. Environmental Audits . Agent shall have the right (but not the obligation), from time to time, to conduct an environmental audit of the Premises (a) to confirm completion of Remedial Actions and compliance with Environmental Laws in connection therewith, (b) if, in Agent’s reasonable judgment, it is appropriate under the circumstances during the existence of an Event of Default (including in connection with any action to foreclose the Mortgage), or (c) at any other time if based upon good faith belief by Agent of the existence of Hazardous Substances at the Premises which were not disclosed in the Environmental Report or if disclosed, in such amounts or concentrations which exceed the amounts or concentrations disclosed in the Environmental Report. Indemnitors shall cooperate in the conduct of all such environmental audits and pay the costs of any such audits.

Section 7. Liability Not Limited . Indemnitors agree that the indemnities made and given in this Indemnity are separate and distinct from, independent of and in addition to Indemnitor’s other undertakings under the Loan Documents. Indemnitors agree that to the extent permitted by applicable law, a separate action may be brought to enforce the provisions of this Indemnity, which shall in no way be deemed to be an action on the Note or on any of the other Loan Documents. The obligations hereunder are secured by the Mortgage. Agent shall have the right to waive all or any portion of its Liens against the Collateral or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against each Indemnitor and all of each Indemnitor’s assets and property for the recovery of any amount due hereunder. Indemnitors

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acknowledge and agree that notwithstanding any term or provision contained herein or in the Loan Documents, all judgments and awards entered against any Indemnitor pursuant to this Indemnity shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Indemnitors shall be fully and personally liable for all judgments and awards entered against Indemnitors hereunder and such liability shall not be limited to the original principal amount of the obligations secured by the Mortgage. Indemnitors hereby waive the defense of laches and any applicable statute of limitations.

Section 8. Independent Obligations . The obligations of Indemnitors under this Indemnity are independent of, and shall not be measured, limited or otherwise affected by (a) any amounts at any time owing under the Loan or secured by the Mortgage, (b) the sufficiency or insufficiency of any Collateral (including the Mortgaged Property) given to Agent to secure repayment of the Loan, (c) the consideration given by Agent or any other party in order to acquire the Premises or the Collateral or any portion thereof, (d) the expiration or termination of any of the other Loan Documents or (e) the discharge or repayment in full of the Loan (whether by amounts paid or credit bid at a foreclosure sale or by discharge in connection with a deed in lieu of foreclosure, or otherwise).

Section 9. Unconditional Character of Obligations of Indemnitor .

(a) Obligations . The obligations of Indemnitors hereunder shall be absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgage or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against Borrower or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrower or any other Person under any Loan Document, or any setoff, counterclaim, recoupment, limitation or termination, and irrespective of any other circumstances which might otherwise limit recourse against Indemnitors by Agent or constitute a legal or equitable discharge or defense of a guarantor or surety. Agent may enforce the obligations of Indemnitors hereunder by a proceeding at law, in equity or otherwise, independent of any foreclosure or similar proceeding or any deficiency action against Borrower or any other Person at any time, and either before or after an action against the Collateral or any part thereof, Borrower or any other Person. Indemnitors waive diligence, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgage or any other Loan Documents against Borrower or any other Person, any right to require a proceeding first against Borrower or any other Person, or to proceed against the Indemnitors in any particular order, or to exhaust any security (including the Collateral) for the performance of the obligations of Borrower or any other Person, or to cause a marshalling of Borrower’s assets, and any protest, presentment, notice of default or other notice or demand whatsoever.

(b) Indemnity and Collateral . Without limiting the generality of the provisions of Section 9(a) hereof and except as otherwise limited by applicable law, the obligations of Indemnitors under this Indemnity, and the rights of Agent to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following:

62526567 8

(i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting, Borrower, any other Indemnitor or any other Person or the Collateral or any part thereof, including any automatic stay granted pursuant to any provision of a bankruptcy or similar law;

(iv) the conveyance to Agent, any Lender, any Affiliate of Agent or any Lender or Agent’s or any Lender’s nominee of the Collateral or any interest therein by a deed in lieu of foreclosure;

(v) the release of Borrower, any other Indemnitor or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise;

(vi) the release in whole or in part of the Collateral;

(viii) any recovery from any Indemnitor or any other obligor of any of the Obligations, which recovery is obtained under this Indemnity or any other guaranty or indemnity executed in connection with the Loan; or

(ix) any accuracy or inaccuracy of any representations or warranties made by Borrower, any other Indemnitor or any other Person in any of the Loan Documents.

(c) Waiver . Indemnitors hereby expressly and irrevocably waive all defenses in an action brought by Agent to enforce this Indemnity based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise.

62526567 9

by Agent, at any time and from time to time, without terminating, affecting or impairing the validity of this Indemnity or the obligations of Indemnitors hereunder.

(f) Agent’s Remedies . Agent may proceed to protect and enforce any or all of its rights under this Indemnity by suit in equity or action at law against any Indemnitor, whether for the specific performance of any covenants or agreements contained in this Indemnity or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Indemnitors. All rights, remedies, powers and privileges conferred by the other Loan Documents are cumulative of all other rights, remedies, powers and privileges herein or by law or in equity provided, or provided in any other Loan Document, and shall not be deemed to deprive Agent of any such other legal or equitable rights, remedies, powers and privileges to enforce the conditions, covenants and terms of this Indemnity or the other Loan Documents by judicial proceedings or otherwise, and the employment of any rights, remedies, powers and privileges hereunder or otherwise, shall not prevent the concurrent or subsequent employment of any other appropriate rights, remedies, powers and privileges.

(g) Actions . At the option of Agent, Indemnitors may be joined in any action or proceeding commenced by Agent against Borrower or any other Person in connection with or based upon the Note, the Loan Agreement, the Mortgage or any other Loan Documents and recovery may be had against Indemnitors in such action or proceeding or in any independent action or proceeding against Indemnitors to the extent of Indemnitors’ liability hereunder, without any requirement that Agent first assert, prosecute or exhaust any remedy or claim against Borrower or any other Person, or any security for the obligations of Borrower or any other Person. Any demand by Agent for payments, or performance of the obligations under, this Indemnity upon Indemnitors shall not be and shall not be construed to be a release or waiver by Agent of any other obligor with respect to such payment or obligation.

(h) Continuance or Reinstatement of Indemnity . Notwithstanding anything to the contrary contained in this Indemnity, Indemnitors agree that this Indemnity shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by any Indemnitor to Agent or any Lender and such payment is rescinded or must otherwise be returned by Agent or such Lender upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Indemnitor, all as though such payment had not been made. Agent may, but shall not be required to, litigate or otherwise dispute such rescission or its obligation to make such repayments.

62526567 10

(i) Payments to Indemnitor; Subrogation . In the event that any Indemnitor shall advance or become obligated to pay any sums under this Indemnity, or in the event that for any reason whatsoever, Borrower or any subsequent owner of the Collateral or any part thereof is now, or shall hereafter become, indebted to any Indemnitor, Indemnitors agree that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to lien, the time of payment and in all other respects to all Obligations, including principal and interest and other amounts, at any time owed to Agent and/or Lenders under the Loan Documents, and (ii) Indemnitors shall not be entitled to enforce or receive payment thereof until the actual and irrevocable receipt by Agent of payment in full of all Obligations. Nothing herein contained is intended or shall be construed to give any Indemnitor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Agent or any Lender in or to the Collateral, notwithstanding any payments made by any Indemnitor under this Indemnity, all such rights of subrogation and participation, if any, being hereby expressly postponed until the actual and irrevocable receipt by Agent of payment in full of all Obligations. If any amount shall be paid to any Indemnitor by reason of the payment of sums by any Indemnitor under this Indemnity at any time when any such sums due and owing to Agent and/or Lenders shall not have been fully paid, such amount shall be paid by such Indemnitor to Agent for credit and application against such sums due and owing to Agent and/or Lenders.

(j) Effect of Foreclosure, Exercise of Remedies . Subject to the last sentence of the definition “Environmental Losses” in Section 1 hereof, Indemnitors’ obligations hereunder shall continue notwithstanding a foreclosure, deed in lieu of foreclosure or similar proceeding or transaction involving the Mortgaged Property or any part thereof or other exercise by Agent of the other remedies under the Loan Documents, at law or in equity.

Section 10. Transfers . Guarantor shall not make (or permit to be made) any Transfer with respect to (i) any direct or indirect ownership interest in Borrower or Operating Lessee or (ii) the direct or indirect ownership interest of any Person in Guarantor, except in each case for a Permitted Transfer in accordance with the Loan Agreement.

Section 11. Rights of Agent . Unless expressly provided to the contrary in any particular instance, with respect to any and all rights of Agent to (a) give or withhold any consent, approval or other authorization requested by any Indemnitor with respect to this Indemnity, (b) make any election or exercise any option granted herein, (c) make any decision, judgment or determination with respect hereto, (d) modify or amend this Indemnity or waive any obligation of any Indemnitor hereunder or grant any extension of time for performance of the same or (e) take or omit to take any other action of any kind whatsoever, Agent shall, to the maximum extent permitted by law, have the right, and Indemnitors expressly acknowledge Agent’s right, in each instance, to make or give the same or take such action or to omit to take such action, as the case may be, in its sole and absolute discretion.

Section 12. Further Assurances . Indemnitors shall, within five (5) Business Days after written request, make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings or other assurances, and take all such other action, as Agent may, from time to time,

62526567 11

deem reasonably necessary in order to give effect to the rights and benefits conferred on Agent and Lenders pursuant to this Indemnity.

Section 13. Amendments, Waivers, Consents and Approvals . No failure or delay of Agent in exercising any power or right hereunder or to demand payment for any sums due pursuant to this Indemnity or any other Loan Document, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No waiver of any provision of this Indemnity or in any of the other Loan Documents or consent to any departure by any Indemnitor or any other Person therefrom shall in any event be effective unless signed in writing by Agent, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Consents, approvals and waivers granted by Agent for any matters covered under this Indemnity or any Loan Document shall not be effective unless signed in writing by Agent, and such consents, approvals and waivers shall be narrowly construed to cover only the parties and facts identified in any such consent, approval or waiver. No notice or demand on any Indemnitor or any other Person in any case shall entitle any Indemnitor or such Person to any other or further notice or demand in similar or other circumstances. Unless expressly provided to the contrary, any consents, approvals or waivers of Agent or Lenders pursuant to this Indemnity or any other Loan Documents shall be granted or withheld in Agent’s or Lenders’ sole discretion, as the case may be. No amendment, modification or termination of any provision of this Indemnity shall be effective unless in writing and signed by Indemnitors and Agent.

Section 14. Binding Effect . This Indemnity shall be binding upon Indemnitors and their respective heirs, legatees, personal representatives, successors and assigns, and shall inure to the benefit of and shall be enforceable by Agent, Lenders and their respective successors and assigns.

Section 16. Notices . Any notice, demand, request, consent, approval or other communication, which any party hereto may be required or may desire to give hereunder, shall be made in accordance with Section 9.10 of the Loan Agreement to the party to whom notice is being given, in any of the foregoing cases at the address set forth below:


Agent :	Crédit Agricole Corporate and Investment Bank 1301 Avenue of the Americas New York, New York 10019 Attention: Alexander Larrinaga

with a copy to:

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Crédit Agricole Corporate and Investment Bank
1301 Avenue of the Americas
New York, New York 10019
Attention: Real Estate and Lodging Group- David Bowers

and to:

Kaye Scholer LLP
250 West 55th Street
New York, New York 10019-9710

Attention: Warren J. Bernstein, Esq.


Indemnitors :	The applicable Indemnitor 14185 Dallas Parkway, Suite 1100

Dallas, Texas 75254

Attention: David A. Brooks

with a copy to:

Andrews Kurth LLP
1717 Main Street, Suite 3700

Dallas, Texas 75201
Attention: Brigitte Kimichik, Esq.

Notwithstanding any provision contained herein or in any of the other Loan Documents to the contrary, in the event that Agent shall fail to give any notice to any Indemnitor under this Indemnity, the sole and exclusive remedy for such failure shall be to seek appropriate equitable relief to enforce this Indemnity to give such notice and to have any action of such Indemnitor postponed or revoked and any proceedings in connection therewith delayed or terminated pending the giving of such notice by Agent, and no Indemnitor shall have any right to damages (whether actual or consequential) or any other type of relief against Agent not specifically provided for herein, all of which damages or other relief are hereby expressly waived. The foregoing is not intended and shall not be deemed under any circumstances to require Agent to give notice of any type or nature to Indemnitors as expressly required hereby.

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invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 18. Captions . The captions, headings and arrangements used in this Indemnity are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions hereof.

Section 19. Governing Law; Choice of Forum; Consent to Service of Process and Jurisdiction; Waiver of Trial by Jury . This Indemnity shall be governed by, and construed in accordance with, the substantive and procedural laws of the State of New York. Indemnitors irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Indemnity, the Note or the other Loan Documents may be brought in (i) the courts of the United States of America located in the Southern District of New York or the District where the Premises are located or (ii) in the state courts of the State and County of New York or the state courts of the State and County where the Premises are located, (b) consent to the jurisdiction of each such court in any such suit, action or proceeding and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Indemnitors irrevocably consent to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Indemnitors at their address provided in Section 16 hereof, as the same may be changed pursuant to Section 16 hereof. Nothing in this Section 19 , however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against any Indemnitor or its property in the courts of any other jurisdiction. INDEMNITORS HEREBY WAIVE, AND AGENT, BY ACCEPTANCE OF THIS INDEMNITY, HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS INDEMNITY, WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 20. Definitional Provisions . For purposes of this Indemnity, (a) defined terms used in the singular shall import the plural and vice-versa; (b) the words “hereof,” “herein,” “hereunder” and similar terms when used in this Indemnity shall refer to this Indemnity as a whole and not to any particular provision of this Indemnity; (c) the words “include” and “including” wherever used in this Indemnity shall be deemed to be followed by the words “without limitation” and (d) all of the Loan Documents and other documents, instruments and agreements referred to in this Indemnity shall be deemed to mean such Loan Documents or other documents, instruments or agreements, as applicable, as they may from time to time be amended, supplemented, restated, consolidated, severed, split, extended, substituted for, partially released, replaced, increased, waived, cross-collateralized, renewed or otherwise modified in accordance with the terms of the Loan Documents.

62526567 14

Section 22. Joint and Several Obligations . The obligations of Indemnitors under this Indemnity shall be joint and several.

Section 23. Entire Agreement . This Indemnity and the other Loan Documents constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter contained in this Indemnity.

Section 24. Default Rate . Any amount payable hereunder by any Indemnitor that is not paid by Indemnitors within five (5) Business Days after demand therefor by Agent shall bear interest from the date of such written demand at the Default Rate.

[Signatures follow]

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IN WITNESS WHEREOF , Indemnitors have given this Indemnity as of the date first written above.

BORROWER:

ASHFORD PIER HOUSE LP,
a Delaware limited partnership

By: Ashford Pier House GP LLC, a Delaware

limited liability company, its general partner

By: /s/ David A. Brooks
Name: David A. Brooks
Title: President and Secretary

OPERATING LESSEE:

ASHFORD TRS PIER HOUSE LLC , a
Delaware limited liability company

By: /s/ Deric S. Eubanks
Name: Deric Eubanks
Title: President

GUARANTOR:

ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP , a Delaware limited liability company


By:	Ashford Prime OP General Partner LLC, General Partner By: /s/ David A. Brooks Name: David A. Brooks Title: Vice President

62526567

EXHIBIT 12.0

ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES

(dollars in thousands)



	Year Ended December 31,
	2014		2013			2012		2011		2010
Earnings
Income (loss) from continuing operations before provision for income taxes and noncontrolling interests	$	4,635	$	(15,585	)	$	591	$	2,273	$	(18,308	)
Add:
Interest on indebtedness	37,203		32,266			29,991		30,525		30,737
Amortization of debt expense and premium	1,828		745			1,253		1,278		1,251
Interest component of operating leases	264		227			220		182		226
	$	43,930	$	17,653		$	32,055	$	34,258	$	13,906

Fixed charges
Interest on indebtedness	$	37,203	$	32,266		$	29,991	$	30,525	$	30,737
Amortization of debt expense and premium	1,828		745			1,253		1,278		1,251
Interest component of operating leases	264		227			220		182		226
	$	39,295	$	33,238		$	31,464	$	31,985	$	32,214

Ratio of earnings to fixed charges	1.12					1.02		1.07

Deficit (Fixed charges)			$	15,585						$	18,308

EXHIBIT 21.1

Ashford Hospitality Prime, Inc.

Subsidiaries List

AHP SMA GP, LLC

AHP SMA, LP

Ashford Chicago GP LLC

Ashford Chicago LP

Ashford Chicago Junior Mezz LLC

Ashford Chicago Senior Mezz LLC

Ashford HHC III LLC

Ashford HHC Partners III LP

Ashford Hospitality Prime Limited Partnership

Ashford Prime OP General Partner LLC

Ashford Prime OP Limited Partner LLC

Ashford Philadelphia Annex GP LLC

Ashford Philadelphia Annex LP

Ashford Pier House GP LLC

Ashford Pier House LP

Ashford Pier House Mezz A LLC

Ashford Pier House Mezz B LLC

Ashford Plano-M LP

Ashford Prime TRS Corporation

Ashford San Francisco II LP

Ashford Sapphire III GP LLC

Ashford Sapphire VII GP LLC

Ashford Seattle Downtown LP

Ashford Seattle Waterfront LP

Ashford Tampa International Hotel, LP

Ashford TRS Chicago II LLC

Ashford TRS Chicago Junior Mezz LLC

Ashford TRS Chicago Senior Mezz LLC

Ashford TRS Philadelphia Annex LLC

Ashford TRS Pier House LLC

Ashford TRS Pier House Mezz A LLC

Ashford TRS Pier House Mezz B LLC

Ashford TRS Sapphire III LLC

Ashford TRS Sapphire VII LLC

CHH III Tenant Parent Corp.

CHH Capital Hotel GP LLC

CHH Capital Hotel Partners LP

CHH Capital Tenant Corp.

CHH Torrey Pines Hotel GP LLC

CHH Torrey Pines Hotel Partners LP

CHH Torrey Pines Tenant Corp.

EXHIBIT 21.2

Ashford Hospitality Prime, Inc.

Special Purpose Entities List

Ashford Philadelphia Annex GP LLC

Ashford Philadelphia Annex LP

Ashford Plano-M LP

Ashford San Francisco II LP

Ashford Seattle Downtown LP

Ashford Seattle Waterfront LP

Ashford Tampa International Hotel Partnership, LP

CHH Capital Hotel Partners LP

CHH Torrey Pines Hotel Partners LP

Ashford Sapphire III GP LLC

Ashford Sapphire VII GP LLC

Ashford TRS Philadelphia Annex LLC

Ashford TRS Sapphire III LLC

Ashford TRS Sapphire VII LLC

CHH Capital Tenant Corp.

CHH Torrey Pines Tenant Corp.

CHH Capital Hotel GP LLC

CHH Torrey Pines Hotel GP LLC

Ashford Chicago LP

Ashford Chicago GP LLC

Ashford TRS Chicago II LLC

Ashford Pier House LP

Ashford Pier House GP LLC

Ashford TRS Pier House LLC

Ashford Pier House Mezz B LLC

Ashford Pier House Mezz A LLC

Ashford TRS Pier House Mezz B LLC

Ashford TRS Pier House Mezz A LLC

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333–200420 and No. 333-200718 and Form S-8 No. 333-194968) of Ashford Hospitality Prime, Inc., and in the related Prospectuses of our report dated March 16, 2015, with respect to the consolidated financial statements and schedule of Ashford Hospitality Prime, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2014.

/s/ Ernst & Young LLP

Dallas, Texas

March 16, 2015

EXHIBIT 31.1

CERTIFICATION

I, Monty J. Bennett, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Ashford Hospitality Prime, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2015



/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Deric S. Eubanks, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Ashford Hospitality Prime, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2015



/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashford Hospitality Prime, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Monty J. Bennett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2015



/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashford Hospitality Prime, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deric S. Eubanks, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2015



/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer