Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 03, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | Moody National REIT I, Inc. | |
Entity Central Index Key | 1,424,879 | |
Document Type | 10-Q | |
Trading Symbol | MNRTI | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 13,307,394 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
ASSETS | ||
Investment in hotel properties, net | $ 239,429,220 | $ 232,948,200 |
Cash and cash equivalents | 6,251,259 | 14,071,228 |
Restricted cash | 7,004,618 | 12,038,451 |
Accounts receivable, net of allowance of $30,000 and $32,000 as of September 30, 2016 and December 31, 2015, respectively | 1,047,554 | 731,618 |
Mortgage note receivable | 11,839,171 | |
Notes receivable from related parties | 13,500,000 | 9,000,000 |
Prepaid expenses and other assets | 2,599,935 | 1,962,532 |
Earnest money and deposits | 2,125,000 | |
Deferred franchise costs, net of accumulated amortization of $128,027 and $79,651 as of September 30, 2016 and December 31, 2015, respectively | 931,973 | 905,349 |
Due from related parties | 2,482,700 | 1,479,300 |
Total Assets | 273,247,259 | 287,100,849 |
Liabilities: | ||
Notes payable, net of unamortized debt issuance costs of $2,373,146 and $2,767,439 as of September 30, 2016 and December 31, 2015 | 169,640,362 | 175,468,985 |
Accounts payable and accrued expenses | 6,627,916 | 6,268,155 |
Due to related parties | 1,014,500 | 96,088 |
Dividends payable | 869,674 | 888,434 |
Operating partnership distributions payable | 47,667 | 49,391 |
Total Liabilities | 178,200,119 | 182,771,053 |
Special Partnership Units-100 Special Units of the Operating Partnership | 1,000 | 1,000 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value per share; 50,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.01 par value per share; 400,000,000 shares authorized, 13,278,268 and 13,091,766 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 132,783 | 130,918 |
Additional paid-in capital | 116,354,870 | 114,526,834 |
Accumulated deficit | (28,080,849) | (17,843,394) |
Total stockholders' equity | 88,406,804 | 96,814,358 |
Noncontrolling interest in Operating Partnership | 6,629,185 | 7,193,407 |
Noncontrolling interests in consolidated joint ventures | 10,151 | 321,031 |
Total Equity | 95,046,140 | 104,328,796 |
TOTAL LIABILITIES AND EQUITY | $ 273,247,259 | $ 287,100,849 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts recievable | $ 30,000 | $ 32,000 |
Accumulated amortization of deferred costs | 128,027 | 79,651 |
Debt issuance costs | $ 2,373,146 | $ 2,767,439 |
Special units of operating partnership (in units) | 100 | |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized | 50,000,000 | 50,000,000 |
Preferred stock, issued | ||
Preferred stock, outstanding | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 400,000,000 | 400,000,000 |
Common stock, issued | 13,278,268 | 13,091,766 |
Common stock, outstanding | 13,278,268 | 13,091,766 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue | ||||
Room revenue | $ 14,551,065 | $ 14,612,295 | $ 43,432,871 | $ 35,662,726 |
Other hotel revenue | 787,404 | 816,694 | 2,446,328 | 1,999,129 |
Total hotel revenue | 15,338,469 | 15,428,989 | 45,879,199 | 37,661,855 |
Interest income from notes receivable | 442,101 | 286,835 | 1,409,783 | 597,525 |
Total revenue | 15,780,570 | 15,715,824 | 47,288,982 | 38,259,380 |
Expenses | ||||
Hotel operating expenses | 9,652,424 | 9,146,693 | 27,847,055 | 22,390,381 |
Property taxes, insurance and other | 945,390 | 1,039,831 | 2,798,090 | 2,379,320 |
Depreciation and amortization | 3,005,575 | 2,741,430 | 8,718,359 | 6,660,814 |
Property acquisition | 1,554,135 | 112,283 | 3,328,909 | |
Corporate general and administrative | 1,395,796 | 836,446 | 3,602,859 | 2,292,008 |
Total expenses | 14,999,185 | 15,318,535 | 43,078,646 | 37,051,432 |
Operating income | 781,385 | 397,289 | 4,210,336 | 1,207,948 |
Other income (expense) | ||||
Gain on sale of hotel property | 10,141,096 | 10,141,096 | ||
Interest expense and amortization of debt issuance costs | (2,353,716) | (2,230,998) | (7,067,644) | (5,555,630) |
Total other income (expense), net | (2,353,716) | 7,910,098 | (7,067,644) | 4,585,466 |
Income (loss) before income tax expense (benefit) | (1,572,331) | 8,307,387 | (2,857,308) | 5,793,414 |
Income tax expense (benefit) | (334,737) | 333,000 | (405,423) | 465,000 |
Net income (loss) | (1,237,594) | 7,974,387 | (2,451,885) | 5,328,414 |
Income attributable to noncontrolling interests in consolidated joint ventures | (19,630) | (31,332) | (58,323) | |
(Income) loss attributable to noncontrolling interest in variable interest entity | (100,522) | 15,745 | ||
(Income) loss attributable to noncontrolling interest in Operating Partnership | 69,797 | (42,159) | 128,865 | (36,136) |
Net income (loss) attributable to common shareholders | $ (1,268,319) | $ 7,912,598 | $ (2,338,607) | $ 5,233,955 |
Per-share information - basic and diluted: | ||||
Net income (loss) attributable to common shareholders (in dollars per share) | $ (0.10) | $ 0.61 | $ (0.18) | $ 0.42 |
Dividends declared (in dollars per share) | $ 0.2 | $ 0.2 | $ 0.6 | $ 0.6 |
Weighted average shares outstanding (in shares) | 13,232,912 | 12,963,331 | 13,191,878 | 12,539,160 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Noncontrolling Interest in Operating Partnership [Member] | Noncontrolling Interest in Variable Interest Entity [Member] | Noncontrolling Interest in Consolidated Joint Venture [Member] | Total |
Balance, beginning at Dec. 31, 2015 | $ 130,918 | $ 114,526,834 | $ (17,843,394) | $ 7,193,407 | $ 321,031 | $ 104,328,796 | |
Balance, beginning (in shares) at Dec. 31, 2015 | 13,091,766 | 726,920 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Redemption of common stock | $ (1,057) | (1,070,104) | (1,071,161) | ||||
Redemption of common stock (in shares) | (105,740) | ||||||
Issuance of common stock pursuant to dividend reinvestment plan | $ 2,922 | 2,884,063 | 2,886,985 | ||||
Issuance of common stock pursuant to dividend reinvestment plan (in shares) | 292,242 | ||||||
Contribution of equity in variable interest entity | $ 15,745 | 15,745 | |||||
Stock-based compensation | 14,077 | 14,077 | |||||
Net income (loss) | (2,338,607) | $ (128,865) | $ (15,745) | 31,332 | (2,451,885) | ||
Dividends and distributions declared | (7,898,848) | (435,357) | (342,212) | (8,676,417) | |||
Balance, ending at Sep. 30, 2016 | $ 132,783 | $ 116,354,870 | $ (28,080,849) | $ 6,629,185 | $ 10,151 | $ 95,046,140 | |
Balance, ending (in shares) at Sep. 30, 2016 | 13,278,268 | 726,920 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income (loss) | $ (2,451,885) | $ 5,328,414 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Gain on sale of hotel property | (10,141,096) | |
Depreciation and amortization | 8,718,359 | 6,660,814 |
Amortization of debt issuance costs | 520,644 | 387,867 |
Stock-based compensation | 14,077 | 45,846 |
Deferred income tax benefit | (545,000) | (198,000) |
Changes in operating assets and liabilities | ||
Restricted cash | (249,918) | (582,275) |
Accounts receivable | (315,936) | (242,342) |
Prepaid expenses and other assets | (92,403) | (519,333) |
Accounts payable and accrued expenses | 359,761 | 3,491,620 |
Due to related parties | 44,165 | 89,732 |
Net cash provided by operating activities | 6,001,864 | 4,321,247 |
Cash flows from investing activities | ||
Proceeds from sale of hotel property | 22,107,775 | |
(Increase) decrease in restricted cash | 5,283,751 | (4,468,490) |
Decrease in earnest money and deposits | 2,125,000 | 1,391,210 |
Repayments of mortgage note receivable | 11,839,171 | 164,073 |
Origination of notes receivable from related parties | (4,500,000) | (9,000,000) |
Payment of deferred franchise costs | (75,000) | |
Due from related parties | (1,544,910) | |
Improvements and additions to hotel properties | (7,151,003) | (5,369,199) |
Acquisitions of hotel properties | (8,000,000) | (84,281,803) |
Net cash used in investing activities | (478,081) | (81,001,344) |
Cash flows from financing activities | ||
Proceeds from issuance of common stock | 27,342,069 | |
Redemptions of common stock | (1,071,161) | (426,629) |
Offering costs paid | (129,153) | (3,369,794) |
Special contribution | 350,000 | |
Dividends paid | (5,030,623) | (4,952,261) |
Operating partnership distributions paid | (437,081) | (104,110) |
Contribution of equity in variable interest entity | 15,745 | |
Proceeds of notes payable | 4,800,000 | 71,500,000 |
Repayment of notes payable | (11,022,916) | (12,756,997) |
Payment of deferred financing costs | (126,351) | (2,141,757) |
Distributions to noncontrolling interest in joint venture | (342,212) | (36,363) |
Net cash provided by (used in) financing activities | (13,343,752) | 75,404,158 |
Net change in cash and cash equivalents | (7,819,969) | (1,275,939) |
Cash and cash equivalents at beginning of period | 14,071,228 | 23,844,072 |
Cash and cash equivalents at end of period | 6,251,259 | 22,568,133 |
Supplemental Cash Flow Information | ||
Interest paid | 6,579,158 | 5,059,473 |
Income taxes paid | 262,064 | 188,780 |
Supplemental Disclosure of Non-Cash Investing and Financing Activity | ||
Decrease in accrued offering costs due to related party | (78,311) | |
Contributions from noncontrolling interests in operating partnership | 7,268,197 | |
Issuance of common stock from dividend reinvestment plan | 2,886,985 | 2,688,884 |
Dividends payable | 869,674 | 854,511 |
Operating partnership distributions payable | $ 47,667 | $ 66,410 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | 1. Organization Moody National REIT I, Inc. (the “Company”) was formed on January 15, 2008 as a Maryland corporation and elected to qualify as a real estate investment trust (“REIT”) commencing with the year ended December 31, 2011. The Company was organized to acquire a diverse portfolio of real properties, primarily in the hospitality sector, as well as other commercial properties, real estate securities and debt-related investments. The Company was initially capitalized with the sale of shares of its common stock to Moody National REIT Sponsor, LLC (“Sponsor”) on February 19, 2008. The Company’s fiscal year end is December 31. For more information on the Company’s capitalization, see Note 6 (“Equity”). As of September 30, 2016, the Company owned (1) ten hotel properties located in Texas, Tennessee, South Carolina and Pennsylvania, comprising a total of 1,273 rooms, (2) a joint venture interest in a 227-suite hotel property located in Lyndhurst, New Jersey and a joint venture interest in a 95-suite hotel property in Fort Worth, Texas, (3) a loan in the aggregate principal amount of $9,000,000 originated to an affiliate of Sponsor used to acquire a commercial property located in Katy, Texas and (4) a loan in the aggregate principal amount of $4,500,000 originated to an affiliate of Sponsor used to acquire a commercial property located in Houston, Texas. For more information on the Company’s portfolio, see Notes 3 (“Investment in Hotel Properties”) and 4 (“Notes Receivable”). On April 15, 2009, the Company commenced its initial public offering (the “Initial Public Offering”) pursuant to a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of $1,000,000,000 in shares of its common stock to the public in its primary offering and up to $100,000,000 in shares of its common stock to its stockholders pursuant to its distribution reinvestment plan (the “DRIP”). The Company accepted subscriptions for, and issued, 1,126,253 shares of its common stock in its Initial Public Offering, including 29,582 shares of common stock pursuant to the DRIP, resulting in aggregate gross offering proceeds of $10,966,713. On October 12, 2012, the Company terminated its Initial Public Offering. On October 12, 2012, the Company commenced its follow-on public offering (the “Follow-On Offering”) of up to $1,000,000,000 in shares of the Company’s common stock, comprised of up to $900,000,000 in shares offered to the public in the primary offering and up to $100,000,000 in shares offered to its stockholders pursuant to the DRIP. Effective February 20, 2015, the Company terminated the offer and sale of shares to the public in the primary portion of the Follow-On Offering, but continued to offer shares of common stock pursuant to the DRIP. As of the termination of the Follow-On Offering, the Company had accepted investors’ subscriptions for, and issued, 11,720,956 shares of its common stock in the Follow-On Offering, including 510,457 shares of common stock issued pursuant to the DRIP, resulting in aggregate gross offering proceeds of $112,104,990. On November 4, 2015, the Company filed a new registration statement to register the sale of up to $25,000,000 in shares of the Company’s common stock pursuant to the DRIP (“DRIP Offering”). The Company continues to offer shares of common stock pursuant to the DRIP Offering. As of September 30, 2016, the Company had accepted subscriptions for, and issued, 12,847,209 shares of common stock in the Company’s Initial Public Offering and Follow-On Offering, including 540,039 shares of common stock pursuant to the DRIP, resulting in aggregate gross offering proceeds of $123,071,703. As of September 30, 2016, the Company had sold 357,587 shares pursuant to the DRIP in the DRIP Offering, and 2,142,413 shares of common stock remained available for sale pursuant to the DRIP Offering. Subject to the proposed merger described below, the Company intends to use substantially all of the remaining net proceeds from the foregoing offerings and the proceeds from any other offering of the Company’s securities that the Company may conduct in the future to continue to acquire a diversified portfolio of real properties, real estate securities and debt-related investments. The Company intends to continue to invest primarily in hotel properties located in the United States and Canada that it owns exclusively or in joint ventures or other co-ownership arrangements with other persons. The Company may also invest in other property types consisting of multifamily, office, retail and industrial assets located in the United States and Canada as well as securities of real estate companies and debt-related investments. The Company may also make opportunistic investments in properties that may be under-developed or newly constructed and in properties that it believes are undervalued. On March 24, 2016, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $10.75 as of December 31, 2015. In connection with the determination of an estimated per share value, on March 24, 2016 the Company’s board of directors also determined to increase the purchase price of shares offered pursuant to the DRIP to $10.21, which became effective as of May 1, 2016. On October 13, 2016, the Company’s board of directors determined to suspend the DRIP. The suspension of the DRIP will become effective beginning with distributions made in November 2016 and will remain in effect unless and until the DRIP resumes, as determined by the Company’s board of directors. In the future, the Company’s board of directors may, in its sole discretion and from time to time, change the price at which it offers shares pursuant to the DRIP to reflect changes in the Company’s estimated value per share and other factors that the board of directors deems relevant. Also on March 24, 2016, the Company’s board of directors approved the formation of a special committee of two of the Company’s independent directors (the “Special Committee”), to consider potential strategic transactions. The Special Committee’s responsibilities include (i) the identification and investigation of potential strategic transactions, (ii) conducting negotiations with respect to any strategic transactions, (iii) the review and analysis of potential strategic transactions and (iv) making recommendations to the board of directors concerning any strategic transactions. The Special Committee is authorized to engage experts and advisors in connection with the foregoing responsibilities. In addition, in connection with the formation of the Special Committee, on March 24, 2016, the board of directors elected to suspend the Company’s share redemption program, which became effective as of May 6, 2016. On September 27, 2016, the Company jointly announced with Moody National REIT II, Inc. (“REIT II”) that the Special Committee, after reviewing strategic alternatives, had accepted a non-binding Letter of Intent (the “LOI”) from the special committee of the board of directors of REIT II regarding the acquisition of the Company by REIT II. Pending receipt of the necessary approvals, the acquisition would take the form of a merger, with gross merger consideration of $11.00 per share of the Company’s common stock before the payment of disposition fees and profit sharing amounts payable to Sponsor, financial advisory and legal fees payable by the Company, and other transaction and closing costs incurred by the Company; provided, that in no event would the net merger consideration payable to the holders of the Company’s common stock be less than $10.25 per share. Further, the LOI provides that the Company’s stockholders would have the option to receive shares of REIT II common stock or cash; provided, that no more than approximately 50% of the aggregate net merger consideration may be paid in cash. The LOI also provides that any definitive merger agreement would include go-shop and termination fee provisions. Entry into a definitive merger agreement with respect to the proposed merger is subject to a number of conditions, and there is no guarantee that a transaction pursuant to the LOI will occur. The Company’s management will expend time and resources in the negotiation of a definitive merger agreement, which time and resources may otherwise have been allocated to other operational needs of the Company. Additionally, the LOI is non-binding and there will be no contract or agreement regarding a transaction between the Company and REIT II until a definitive merger agreement is signed. Even if a definitive merger agreement is entered into, there can be no assurance as to whether or when the conditions to the closing of the proposed merger will be satisfied or waived, or as to whether or when the proposed merger will be consummated. The Company’s advisor is Moody National Advisor I, LLC (“Advisor”), a Delaware limited liability company and an affiliate of Sponsor. Subject to certain restrictions and limitations, Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company pursuant to an amended and restated advisory agreement (the “Advisory Agreement”), by and among the Company, Moody National Operating Partnership I, L.P., the Company’s operating partnership (the “OP”), and Advisor. The OP’s partnership agreement provides that the OP will be operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the OP will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the OP being taxed as a corporation rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the OP in acquiring and operating real estate assets, the OP will pay all of the Company’s administrative costs and expenses, and such expenses will be treated as expenses of the OP. The common units of the OP may be tendered for redemption once they have been outstanding for at least one year. At such time, the Company has the option to redeem the common units for shares of the Company’s common stock, cash or a combination thereof at the Company’s sole discretion. The special units of the OP (the “Special Units”) held by an affiliate of Advisor will be redeemed pursuant to the OP’s partnership agreement upon the termination or nonrenewal of the Advisory Agreement or upon certain other events outside of the control of the Special Unit holder. Upon the termination or nonrenewal of the Advisory Agreement by the Company for “cause” (as defined in the Advisory Agreement), all of the Special Units will be redeemed for $1.00. As described in more detail in Note 9 (“Subordinated Participation Interest”), upon the occurrence of any of the other events which trigger redemption of the Special Units, the Special Units will be redeemed, at Advisor’s option, for shares of the Company’s common stock, a non-interest bearing promissory note payable solely from the proceeds of asset sales, or a combination thereof. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include its accounts and the accounts of its subsidiaries over which it has control. All intercompany balances and transactions are eliminated in consolidation. The Company includes the accounts of its consolidated subsidiaries in its consolidated financial statements when the Company is the primary beneficiary for entities deemed to be variable interest entities (“VIEs”) through which the Company has a controlling interest. Interests in entities acquired are evaluated based on U.S. generally accepted accounting principles (“GAAP”), which requires the consolidation of VIEs in which the Company is deemed to have the controlling financial interest. The Company has the controlling financial interest if the Company has the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses or receive benefits from the VIE that could be significant to the Company. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance and the extent to which the Company has control or substantive participating rights under the respective ownership agreement. There are judgments and estimates involved in determining if an entity in which the Company has an investment is a VIE. The entity is evaluated to determine if it is a VIE by determining, among other things, if the equity investors as a group have a controlling financial interest in the entity and if the entity has sufficient equity at risk to finance its activities without additional subordinated financial support. The Company did not have a VIE interest as of September 30, 2016 or December 31, 2015. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial statements and the rules and regulations of the SEC. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, readers should refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on March 30, 2016. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Actual results could differ from those estimates. Organization and Offering Costs Organization and offering costs of the Company are paid directly by the Company or may be incurred by Advisor on behalf of the Company. Pursuant to the Advisory Agreement, the Company is obligated to reimburse Advisor or its affiliates, as applicable, for organization and offering costs incurred by Advisor associated with each of the Company’s public offerings, provided that within 60 days of the last day of the month in which a public offering ends, Advisor is obligated to reimburse the Company to the extent organization and offering costs incurred by the Company in connection with the completed public offering exceed 15.0% of the gross offering proceeds from the sale of the Company’s shares of common stock in the completed public offering. Such organization and offering costs include selling commissions and dealer manager fees paid to a dealer manager, legal, accounting, printing and other offering expenses, including marketing, salaries and direct expenses of Advisor’s employees and employees of Advisor’s affiliates and others. Any reimbursement of Advisor or its affiliates for organization and offering costs will not exceed actual expenses incurred by Advisor. All offering costs, including selling commissions and dealer manager fees, are recorded as an offset to additional paid-in capital, and all organization costs are recorded as an expense when the Company has an obligation to reimburse Advisor. The Company terminated its Follow-On Offering on February 20, 2015. Total offering costs for the Follow-On Offering were $14,121,598, comprised of $11,396,735 of offering costs for that offering incurred directly by the Company and $2,724,863 in offering costs incurred by and reimbursable to Advisor. As of September 30, 2016, total offering costs for the DRIP Offering were $124,000. The Company directly incurred $0 of offering costs for the DRIP Offering and $124,000 in reimbursable costs to Advisor. As of September 30, 2016, the Company had $0 payable to Advisor for reimbursable offering costs related to the Follow-On Offering and DRIP Offering. Offering costs related to the Follow-On Offering did not exceed 15.0% of the gross offering proceeds from the sale of the Company’s shares of common stock in that offering. The Company has not reimbursed Advisor any funds for organization costs for the Follow-On Offering. Income Taxes The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2011. Prior to qualifying for taxation as a REIT, the Company was subject to normal federal and state corporation income taxes. As a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90% of its REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) and satisfy the other organizational and operational requirements for REIT qualification. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. The Company leases the hotels it acquires to wholly-owned taxable REIT subsidiaries (“TRSs”) that are subject to federal, state and local income taxes. The Company accounts for income taxes of its TRSs using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company records a valuation allowance for net deferred tax assets that are not expected to be realized. The Company has reviewed tax positions under GAAP guidance that clarify the relevant criteria and approach for the recognition and measurement of uncertain tax positions. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return. A tax position may only be recognized in the consolidated financial statements if it is more likely than not that the tax position will be sustained upon examination. The Company had no material uncertain tax positions as of September 30, 2016. The preparation of the Company’s various tax returns requires the use of estimates for federal and state income tax purposes. These estimates may be subjected to review by the respective taxing authorities. A revision to an estimate may result in an assessment of additional taxes, penalties and interest. At this time, a range in which the Company’s estimates may change is not expected to be material. The Company will account for interest and penalties relating to uncertain tax provisions in the current period results of operations, if necessary. The Company has tax years 2011 through 2015 remaining subject to examination by various federal and state tax jurisdictions. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs, such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs for which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost approach: Amount required to replace the service capacity of an asset (replacement cost). Income approach: Techniques used to convert future income amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company elected not to use the fair value option in recording its financial instruments, which include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, notes payable, and accounts payable and accrued expenses. With the exception of the Company’s fixed-rate notes payable, the carrying amounts of these financial instruments approximate their fair values due to their short-term nature or variable interest rates. For fair value of the Company’s notes payable, see Note 5 (“Debt”). Concentration of Credit Risk As of September 30, 2016, the Company had cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insured levels. The Company diversifies its cash and cash equivalents with several banking institutions in an attempt to minimize exposure to any one of these institutions. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents or restricted cash. The Company is also exposed to credit risk with respect to its notes receivable from related parties. The failure of the borrowers on the notes receivable from related parties to make payments of interest and principal when due, or any other event of default under the notes receivable from related parties, would have an adverse impact on the Company’s results of operations. Valuation and Allocation of Real Property — Acquisition Upon acquisition, the purchase price of a hotel property is allocated to the tangible assets acquired, consisting of land, buildings and furniture, fixtures and equipment, any assumed debt, identified intangible assets and asset retirement obligations, if any, based on their fair values. Acquisition costs are charged to expense as incurred. Initial valuations are subject to change during the measurement period, but the measurement period ends as soon as the information is available. The measurement period shall not exceed one year from the acquisition date. The tangible assets acquired consist of land, buildings, furniture, fixtures and equipment. Land values are derived from appraisals, and buildings are calculated as replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods. The value of furniture, fixtures and equipment is based on their fair value using replacement costs less depreciation. Any difference between the fair value of the hotel property acquired and the purchase price of the hotel property is recorded as goodwill or a gain on acquisition of hotel property. The Company determines the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense. In allocating the purchase price of each of the Company’s properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. Many of these estimates are obtained from independent third party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates are based on judgments and subject to being imprecise; accordingly, if different estimates and assumptions were used, the valuation of the various categories of the Company’s hotel properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Company’s consolidated financial statements. These variances could be material to the Company’s results of operations and financial condition. Valuation and Allocation of Real Property — Ownership Investment in hotel properties is recorded at cost less accumulated depreciation. Major improvements that extend the life of an asset are capitalized and depreciated over a period equal to the shorter of the life of the improvement or the remaining useful life of the asset. The cost of ordinary repairs and maintenance are charged to expense when incurred. Depreciation or amortization expenses are computed using the straight-line and accelerated methods based upon the following estimated useful lives: Estimated Useful Lives Buildings and improvements 39-40 Exterior improvements 10-20 Furniture, fixtures and equipment 5-10 The Company designates a hotel property as held for sale when the sale is probable within the next twelve months. Generally, the Company considers a sale to be probable when a buyer completes its due diligence review, the Company has an executed contract for sale and the Company has received a substantial non-refundable deposit. Impairments The Company monitors events and changes in circumstances indicating that the carrying amounts of the hotel properties that it owns may not be recoverable. When such events or changes in circumstances are present, the Company assesses potential impairment by comparing estimated future undiscounted cash flows expected to be generated over the life of the asset from operating activities and from its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss to adjust the carrying amount of the asset to estimated fair value for assets held for use and fair value less costs to sell for assets held for sale. There were no such impairment losses for the three or nine months ended September 30, 2016 and 2015. In evaluating the Company’s hotel properties for impairment, the Company makes several estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during the Company’s ownership and the projected sales price of each of the properties. A change in these estimates and assumptions could result in a change in the estimated undiscounted cash flows or fair value of the Company’s hotel properties, which could in turn result in different conclusions regarding impairment and material changes to the Company’s consolidated financial statements. Revenue Recognition Hotel revenues, including room, food, beverage and other ancillary revenues, are recognized as the related services are delivered. Interest income is recognized when earned. Revenue is recorded net of any sales and other taxes collected from customers. Cash and Cash Equivalents Cash and cash equivalents represent cash on hand or held in banks and short-term investments with an initial maturity of three months or fewer at the date of purchase. Restricted Cash Restricted cash includes reserves for debt service, property taxes and insurance, as well as reserves for property improvements and replacement of furniture, fixtures and equipment, as required by certain management or mortgage debt agreement restrictions and provisions. Accounts Receivable The Company takes into consideration certain factors that require judgments to be made as to the collectability of receivables. Collectability factors taken into consideration are the amounts outstanding, payment history and financial strength of the customer, which taken as a whole determines the valuation. Ongoing credit evaluations are performed and an allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible. Impairment of Notes Receivable The Company reviews the notes receivable for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts recorded as assets on the consolidated balance sheets. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. When a loan is impaired, the Company measures impairment based on the present value of expected cash flows discounted at the loan’s effective interest rate against the value of the asset recorded on the consolidated balance sheets. The Company may also measure impairment based on a loan’s observable market price or the fair value of collateral, if the loan is collateral dependent. If a loan is deemed to be impaired, the Company records a valuation allowance through a charge to earnings for any shortfall. The Company’s assessment of impairment is based on considerable judgment and estimates. The Company did not record a valuation allowance during the three or nine months ended September 30, 2016 or 2015. Prepaid Expenses and Other Assets Prepaid expenses include prepaid property insurance and hotel operating expenses. Other assets include accrued interest receivable and the deferred income tax asset. Earnest money and Deposits Earnest money and deposits includes earnest money, rate-lock deposits and expense deposits for future acquisitions. Deferred Franchise Costs Deferred franchise costs are recorded at cost and amortized over the term of the respective franchise contract on a straight-line basis. Accumulated amortization of deferred franchise costs was $128,027 and $79,651 as of September 30, 2016 and December 31, 2015, respectively. Expected future amortization of deferred franchise costs as of September 30, 2016 is as follows: Years Ending December 31, Franchise Costs 2016 $ 17,092 2017 68,368 2018 68,368 2019 68,368 2020 68,368 Thereafter 641,409 Total $ 931,973 Debt Issuance Costs In accordance with ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” debt issuance costs are presented as a direct deduction from the carrying value of the notes payable on the consolidated balance sheets. All periods presented have been reclassified to conform with this presentation. Debt issuance costs are amortized as a component of interest expense over the term of the related debt using the straight-line method, which approximates the interest method. Accumulated amortization of deferred costs was $1,079,963 and $630,688 as of September 30, 2016 and December 31, 2015, respectively. Expected future amortization of debt issuance costs as of September 30, 2016 is as follows: Years Ending December 31, Loan Costs 2016 $ 180,982 2017 506,665 2018 238,049 2019 238,049 2020 238,700 Thereafter 970,701 Total $ 2,373,146 Earnings (Loss) per Share Earnings (loss) per share (“EPS”) is calculated based on the weighted average number of shares outstanding during each period. Basic and diluted EPS are the same for all periods presented. Non-vested shares of restricted stock, totaling 0 and 2,500 shares as of September 30, 2016 and 2015, respectively, held by the Company’s independent directors are included in the calculation of basic EPS because such shares have been issued and participate in dividends. Comprehensive Income For the periods presented, there were no differences between reported net income (loss) attributable to common shareholders and comprehensive income (loss). Recent Accounting Pronouncements In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities,” which enhances the reporting requirements surrounding the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income. ASU No. 2016-01 is effective for the Company’s fiscal year commencing on January 1, 2018. The Company does not anticipate that the adoption of ASU No. 2016-01 will have a material effect on the Company’s consolidated financial position or the Company’s consolidated results of operations. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which changes lessee accounting to reflect the financial liability and right-of-use asset that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for the Company’s fiscal year commencing on January 1, 2019, but early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on the Company’s consolidated financial statements and related disclosures. The Company has not yet selected a transition date nor has the Company determined the effect of ASU No. 2016-02 on the Company’s consolidated financial position or the Company’s consolidated results of operations. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplifies the accounting for income taxes for certain equity-based awards to employees. ASU No. 2016-09 is effective for the Company’s fiscal year commencing on January 1, 2017. The Company does not anticipate that the adoption of ASU No. 2016-09 will have a material effect on the Company’s consolidated financial position or the Company’s consolidated results of operations. |
Investment in Hotel Properties
Investment in Hotel Properties | 9 Months Ended |
Sep. 30, 2016 | |
Real Estate [Abstract] | |
Investment in Hotel Properties | 3. Investment in Hotel Properties The following table sets forth summary information regarding the Company’s investments in hotel properties as of September 30, 2016: Property Name Date Acquired Location Ownership Interest Purchase Price (1) Rooms Mortgage Debt Outstanding (2) Woodlands Hotel (Homewood Suites by Hilton) November 8, 2012 The Woodlands, Texas 100 % $ 12,000,000 91 $ 9,300,000 Germantown Hotel (Hyatt Place) April 9, 2013 Germantown, Tennessee 100 % 11,300,000 127 7,361,309 Charleston Hotel (Hyatt Place) July 2, 2013 North Charleston, South Carolina 100 % 11,800,000 113 7,447,608 Austin Hotel (Hampton Inn) December 30, 2013 Austin, Texas 100 % 15,350,000 123 11,086,888 Grapevine Hotel (Residence Inn) March 31, 2014 Grapevine, Texas 100 % 20,500,000 133 12,809,383 Lyndhurst Hotel (Marriott Courtyard) September 30, 2014 Lyndhurst, New Jersey (3 ) 33,322,000 227 30,989,447 Austin Arboretum Hotel (Hilton Garden Inn) November 20, 2014 Austin, Texas 100 % 29,250,000 138 19,000,000 Great Valley Hotel (Hampton Inn) March 27, 2015 Frazer, Pennsylvania 100 % 11,000,000 125 8,200,000 Nashville Hotel (Embassy Suites) June 16, 2015 Nashville, Tennessee 100 % 66,300,000 208 43,000,000 Homewood Suites Austin Hotel August 3, 2015 Austin, Texas 100 % 14,250,000 96 11,000,000 Fort Worth Hotel (TownPlace Suites) December 18, 2015 Fort Worth, Texas (4 ) 7,301,887 95 7,071,876 Houston Hotel (Hampton Inn) April 21, 2016 Houston, Texas 100 % 8,000,000 119 4,746,997 Totals $ 240,373,887 1,595 $ 172,013,508 (1) Excludes closing costs. (2) As of September 30, 2016. (3) The Lyndhurst Hotel is owned by MN Lyndhurst Venture, LLC (the “Lyndhurst Joint Venture”). The OP contributed $100 to the Lyndhurst Joint Venture in exchange for 100% of the Class B membership interests of the Lyndhurst Joint Venture (the “Lyndhurst Class B Interests”). Pursuant to the operating agreement of the Lyndhurst Joint Venture, the OP also agreed to pay up to $5.37 million in costs and fees and capital reserve requirements associated with the transfer of the Lyndhurst Hotel to the Lyndhurst Joint Venture, all of which amounts are deemed to be additional capital contributions by the OP to the Lyndhurst Joint Venture in exchange for additional Lyndhurst Class B Interests. The prior tenant-in-common owners of the Lyndhurst Hotel (the “Lyndhurst TIC Owners”) contributed their tenant-in-common ownership interests in the Lyndhurst Hotel (valued at $1,000 in the aggregate) to the Lyndhurst Joint Venture in exchange for non-voting Class A membership interests of the Lyndhurst Joint Venture (the “Lyndhurst Class A Interests”). The OP serves as the sole manager of the Lyndhurst Joint Venture and manages the business and affairs of the Lyndhurst Joint Venture. Cash available for distribution to the members of the Lyndhurst Joint Venture will be distributed as follows: (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Lyndhurst Joint Venture and a return of 100% of its unreturned capital contributions to the Lyndhurst Joint Venture, (2) next, 100% to the holders of the Lyndhurst Class A Interests until they have received a return of 100% of their capital contributions to the Lyndhurst Joint Venture (valued at $1,000 in the aggregate), and (3) next, 60% to the OP and 40% to the holders of the Lyndhurst Class A Interests. (4) The Fort Worth Hotel is owned by MN Fort Worth Venture, LLC (the “Fort Worth Joint Venture”). The OP contributed $100 to the Fort Worth Joint Venture in exchange for 100% of the Class B membership interests of the Fort Worth Joint Venture (the “Fort Worth Class B Interests”). Pursuant to the operating agreement of the Fort Worth Joint Venture, the OP also agreed to pay up to $3.146 million in costs and fees and capital reserve requirements associated with the transfer of the Fort Worth Hotel to the Fort Worth Joint Venture, all of which amounts are deemed to be additional capital contributions by the OP to the Fort Worth Joint Venture in exchange for additional Fort Worth Class B Interests. The prior tenant-in-common owners of the Fort Worth Hotel (the “Fort Worth TIC Owners”) contributed their tenant-in-common ownership interests in the Fort Worth Hotel (valued at $1,000 in the aggregate) to the Fort Worth Joint Venture in exchange for non-voting Class A membership interests of the Fort Worth Joint Venture (the “Fort Worth Class A Interests”). The OP serves as the sole manager of the Fort Worth Joint Venture and manages the business and affairs of the Fort Worth Joint Venture. Cash available for distribution to the members of the Fort Worth Joint Venture will be distributed as follows: (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Fort Worth Joint Venture and a return of 100% of its unreturned capital contributions to the Fort Worth Joint Venture, (2) next, 100% to the holders of the Fort Worth Class A Interests until they have received a return of 100% of their capital contributions to the Fort Worth Joint Venture (valued at $1,000 in the aggregate), and (3) next, 50% to the OP and 50% to the holders of the Fort Worth Class A Interests. Investments in hotel properties consisted of the following at September 30, 2016 and December 31, 2015: September 30, 2016 December 31, 2015 Land $ 27,923,000 $ 26,300,000 Buildings and improvements 207,245,258 199,088,102 Furniture, fixtures and equipment 27,196,749 21,825,902 Total cost 262,365,007 247,214,004 Accumulated depreciation (22,935,787 ) (14,265,804 ) Investment in hotel properties, net $ 239,429,220 $ 232,948,200 The following unaudited pro forma consolidated financial information for the three and nine months ended September 30, 2016 and 2015 is presented as if the Company acquired the Great Valley Hotel, the Nashville Hotel, the Homewood Suites Austin Hotel, the Fort Worth Hotel and the Houston Hotel as of January 1, 2015 and excludes the operations of and the gain from the sale of a hotel property located in Newark, California sold in 2015. This information is not necessarily indicative of what the actual results of operations would have been had the Company completed the acquisition of the Great Valley Hotel, the Nashville Hotel, the Homewood Suites Austin Hotel, the Fort Worth Hotel and the Houston Hotel as of January 1, 2015, nor does it purport to represent the Company’s future operations: Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Revenue $ 15,780,570 $ 16,095,471 $ 48,025,435 $ 46,868,785 Net loss (1,237,594 ) (895,731 ) (2,285,998 ) (4,469,014 ) Net loss attributable to common shareholders (1,268,319 ) (957,520 ) (2,188,465 ) (4,563,473 ) Net loss per common share - basic and diluted $ (0.10 ) $ (0.07 ) $ (0.17 ) $ (0.36 ) |
Notes Receivable
Notes Receivable | 9 Months Ended |
Sep. 30, 2016 | |
Receivables [Abstract] | |
Notes Receivable | 4. Notes Receivable As of September 30, 2016 and December 31, 2015, mortgage note receivable amounts were $0 and $11,839,171, respectively. As of September 30, 2016 and December 31, 2015, the amounts of notes receivable from related parties were $13,500,000 and $9,000,000, respectively. Hyatt Place Note On June 3, 2011 (the “Closing Date”), and effective as of May 5, 2011 (the “Effective Date”), the Company acquired a 74.5% joint venture interest in a mortgage note secured by a hotel property in Grapevine, Texas (the “Hyatt Place Note”) pursuant to the transaction described below. The Hyatt Place Note was issued by Moody National HP Grapevine Trust, a Delaware statutory trust (the “Trust”), in favor of Patriot Bank, a Texas banking association (“Patriot Bank”), and is secured by a lien on the underlying hotel property. As of the Closing Date, the Hyatt Place Note had an outstanding principal balance of $12,759,199. As of September 30, 2016, the OP’s membership interest in the Note Joint Venture was 74.5%, the Trust Members’ membership interest in the Note Joint Venture was 11.5% and Moody National Mortgage’s membership interest in the Note Joint Venture was 14%. The entire unpaid principal balance of the Hyatt Place Note and all accrued and unpaid interest thereon was due and payable in full on February 1, 2018 (the “Maturity Date”). The Hyatt Place Note accrued interest at a fixed rate of 5.15% per annum from the Closing Date through August 21, 2012 (the “First Change Date”). For the period from the First Change Date through August 21, 2015 (the “Second Change Date”), the Hyatt Place Note accrued interest at 5.15%, which is a fixed rate equal to (a) the variable interest rate per annum published in The Wall Street Journal On June 10, 2016, the Hyatt Place Note and the Acquisition Note and all accrued interest thereon were paid in full. The estimated fair value of the Hyatt Place Note as of December 31, 2015 was $11,839,171. The fair value of the Hyatt Place Note was estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized. Notes Receivable from Related Parties On August 21, 2015, the Company originated an unsecured loan in the aggregate principal amount of $9,000,000 (the “Related Party Note”) to Moody National DST Sponsor, LLC, a Texas limited liability company and an affiliate of Sponsor (“DST Sponsor”). Proceeds from the Related Party Note were used by DST Sponsor solely to acquire a commercial real property located in Katy, Texas (the “Subject Property”). The entire unpaid principal balance of the Related Party Note and all accrued and unpaid interest thereon and all other amounts due under the Related Party Note were due and payable in full on the earlier of (1) August 21, 2016 or (2) ten days following the sale of 100% of the equity ownership interests that are to be syndicated in the Subject Property. Interest on the outstanding principal balance of the Related Party Note accrues at a fixed per annum rate equal to 12%, provided that in no event will the interest rate exceed the maximum rate permitted by applicable law. DST Sponsor will pay the Company an origination fee in the amount of $90,000 and an exit fee in the amount of $90,000 upon the maturity date of the Related Party Note, including any earlier prepayment date or accelerated maturity date of the Related Party Note. The Related Party Note may be prepaid in whole or part by DST Sponsor without penalty at any time upon prior written notice to the Company. On August 15, 2016, the maturity date of the Related Party note was extended from August 21, 2016 to August 21, 2017 and the origination fee in the amount of $90,000 and an extension fee in the amount of $45,000 were paid to the Company by DST Sponsor. On April 29, 2016, the Company originated a loan in the aggregate principal amount of $4,500,000 (the “Related Party Mezzanine Note”) to Moody National Realty Company, L.P., a Texas limited partnership and an affiliate of Sponsor (“Realty”). Proceeds from the Related Party Mezzanine Note were used by Realty solely to acquire a multifamily real property located in Houston, Texas. The entire unpaid principal balance of the Related Party Mezzanine Note and all accrued and unpaid interest thereon and all other amounts due under the Related Party Mezzanine Note are due and payable in full on the earlier of (1) April 30, 2018, or (2) upon 90 days’ written notice of acceleration of the maturity date by the Company to Realty. Interest on the outstanding principal balance of the Related Party Mezzanine Note accrues at a fixed per annum rate equal to 10%, provided that in no event will the interest rate exceed the maximum rate permitted by applicable law. Realty will pay the Company an origination fee in the amount of $45,000 and an exit fee in the amount of $45,000 upon the maturity date of the Related Party Mezzanine Note, including any earlier prepayment date or accelerated maturity date. The Related Party Mezzanine Note may be prepaid in whole or part by Realty without penalty at any time upon prior written notice to the Company. The aggregate estimated fair value of the notes receivable from related parties as of September 30, 2016 and December 31, 2015 were $13,500,000 and $9,000,000, respectively. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | 5. Debt The Company’s aggregate borrowings are reviewed by the Company’s board of directors at least quarterly. Under the Company’s Second Articles of Amendment and Restatement (as amended, the “Charter”), the Company is prohibited from borrowing in excess of 300% of the value of the Company’s net assets. “Net assets” for purposes of this calculation is defined to be the Company’s total assets (other than intangibles), valued at cost prior to deducting depreciation, reserves for bad debts and other non-cash reserves, less total liabilities. However, the Company may temporarily borrow in excess of these amounts if such excess is approved by a majority of the Company’s independent directors and disclosed to stockholders in the Company’s next quarterly report, along with an explanation for such excess. As of September 30, 2016, the Company’s debt levels did not exceed 300% of the value of the Company’s net assets, as defined above. As of September 30, 2016 and December 31, 2015, the Company’s notes payable consisted of the following: Principal as of September 30, 2016 Principal as of December 31, 2015 Interest Rate at September 30, 2016 Maturity Date Hyatt Place Note Acquisition Note $ — $ 9,994,173 3.000 % May 5, 2018 Woodlands Hotel Loan 9,300,000 9,300,000 4.690 % April 11, 2025 Germantown Hotel Loan 7,361,309 7,465,018 4.300 % May 6, 2023 Charleston Hotel Loan 7,447,608 7,536,474 5.193 % August 1, 2023 Austin Hotel Loan 11,086,888 11,207,445 5.426 % January 6, 2024 Grapevine Hotel Loan 12,809,383 12,951,025 5.250 % April 6, 2024 Lyndhurst Hotel Loan 30,989,447 31,415,138 5.916 % September 6, 2017 Austin Arboretum Hotel Loan 19,000,000 19,000,000 4.530 % December 11, 2024 Great Valley Hotel Loan 8,200,000 8,200,000 4.700 % April 11, 2025 Nashville Hotel Loan 43,000,000 43,000,000 4.2123 % July 11, 2025 Homewood Suites Austin Loan 11,000,000 11,000,000 4.650 % August 11, 2025 TownPlace Suites Fort Worth Loan 7,071,876 7,167,151 6.136 % July 6, 2017 Hampton Inn Houston Loan 4,746,997 — 5.500 % April 28, 2017 Total notes payable 172,013,508 178,236,424 Less unamortized debt issuance costs (2,373,146 ) (2,767,439 ) Total notes payable, net of debt issuance costs $ 169,640,362 $ 175,468,985 The notes payable are secured by the respective hotel properties and are payable in monthly installments of principal and interest. Maturities of notes payable as of September 30, 2016 are as follows: Year ending September 30, 2016 $ 376,243 2017 44,043,295 2018 2,145,768 2019 2,248,650 2020 2,340,140 Thereafter 120,859,412 Total $ 172,013,508 Each of the Lyndhurst Hotel Loan, the TownPlace Suites Fort Worth Loan, and the Hampton Inn Houston Loan mature in 2017. The estimated fair value of the Company’s notes payable as of September 30, 2016 and December 31, 2015 was $175,000,000 and $177,000,000, respectively. The fair value of notes payable was estimated based on discounted cash flow analyses using Level 2 inputs for the current incremental borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Equity | 6. Equity Capitalization Under the Charter, the Company has the authority to issue 400,000,000 shares of common stock and 50,000,000 shares of preferred stock. All shares of common and preferred stock have a par value of $0.01 per share. As of September 30, 2016, the Company had issued 13,204,796 shares of common stock in the Company’s public offerings, including 897,625 shares issued pursuant to the DRIP. As of September 30, 2016, there were a total of 13,278,268 shares of the Company’s common stock issued and outstanding, including 22,222 shares sold to Sponsor and 51,250 shares of restricted stock, as discussed in Note 8 (“Incentive Award Plan”). The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. Distributions The Company’s board of directors has authorized and declared a distribution to its stockholders that (1) accrues daily to the Company’s stockholders of record as of the close of business on each day; (2) is payable in cumulative amounts on or before the 15 th The following table summarizes distributions paid in cash and pursuant to the DRIP for the nine months ended September 30, 2016 and 2015. Period Cash Distribution Distribution Paid Pursuant to DRIP (1) Total Amount of Distribution First Quarter 2016 $ 1,643,571 $ 965,287 $ 2,608,858 Second Quarter 2016 1,683,097 967,084 2,650,181 Third Quarter 2016 1,703,955 954,614 2,658,569 Total $ 5,030,623 $ 2,886,985 $ 7,917,608 First Quarter 2015 $ 1,348,289 $ 746,826 $ 2,095,115 Second Quarter 2015 1,623,871 964,050 2,587,921 Third Quarter 2015 1,980,101 978,008 2,958,109 Total $ 4,952,261 $ 2,688,884 $ 7,641,145 (1) Amount of distributions paid in shares of common stock pursuant to the DRIP. In connection with the determination by the Company’s board of directors of an estimated value per share of $10.75 as of December 31, 2015, on March 24, 2016, the Company’s board of directors also determined to increase the purchase price of shares offered pursuant to the Company’s distribution reinvestment plan to $10.21 per share. On October 13, 2016, the Company’s board of directors determined to suspend the DRIP, beginning with distributions to be made in November 2016. See Note 1 (“Organization”). Noncontrolling Interest in Operating Partnership Noncontrolling interest in the OP at September 30, 2016 was $6,629,185, which represented third-party ownership interests in the OP, and is reported in equity in the consolidated balance sheets. Income (loss) from the OP attributable to these noncontrolling interests was $(69,797) and $42,159 for the three months ended September 30, 2016 and 2015, respectively, and was $(128,865) and $36,136 for the nine months ended September 30, 2016 and 2015, respectively. Noncontrolling Interest in Variable Interest Entity Noncontrolling interest in Moody VIE at September 30, 2016 was $0, which represented ownership interests in Moody VIE. Income (loss) from Moody VIE attributable to these noncontrolling interests was $100,522 and $0 for the three months ended September 30, 2016 and 2015, respectively, and was $(15,745) and $0 for the nine months ended September 30, 2016 and 2015, respectively. Noncontrolling Interests in Consolidated Joint Ventures Noncontrolling interests in consolidated joint ventures at September 30, 2016 was $10,151, which represented third-party ownership interests in the Lyndhurst Joint Venture, the Fort Worth Joint Venture, and the Note Joint Venture, and is reported in equity in the consolidated balance sheets. Income from consolidated joint ventures attributable to these noncontrolling interests was $0 and $19,630 for the three months ended September 30, 2016 and 2015, respectively, and was $31,332 and $58,323 for the nine months ended September 30, 2016 and 2015, respectively. |
Related Party Arrangements
Related Party Arrangements | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Arrangements | 7. Related Party Arrangements Advisor and certain affiliates of Advisor received fees and compensation in connection with the Company’s public offerings and have received and will continue to receive fees and compensation in connection with the acquisition, management and sale of the Company’s real estate investments. Selling Commissions and Dealer Manager Fees Moody Securities, LLC (“Moody Securities”), the dealer manager of the Company’s Initial Public Offering and Follow-On Offering, received a selling commission of up to 6.5% of gross offering proceeds raised in those offerings, all or a portion of which could be re-allowed to participating broker-dealers. In addition, the Company paid Moody Securities a dealer manager fee of up to 3.5% of gross offering proceeds raised in those offerings, a portion of which could be re-allowed to participating broker-dealers. No selling commissions or dealer manager fee are paid for sales pursuant to the DRIP. As of September 30, 2016, the Company had paid Moody Securities $746,368 and $8,646,755 in selling commissions related to the Initial Public Offering and Follow-On Offering, respectively, and $190,626 and $2,455,643 in dealer manager fees related to the Initial Public Offering and Follow-On Offering, respectively, which amounts have been recorded as a reduction to additional paid-in capital in the consolidated balance sheets. Organization and Offering Costs Advisor and its affiliates will be reimbursed up to 15.0% of offering proceeds for reimbursement of organization and offering expenses (including selling commissions and the dealer manager fee payable to Moody Securities) not to exceed actual expenses incurred. Advisor will be responsible for the payment of organization and offering expenses, other than selling commissions and dealer manager fees, to the extent they exceed 15.0% of gross offering proceeds, without recourse against or reimbursement by the Company. As of September 30, 2016, Advisor and its affiliates had incurred organization and offering expenses of approximately $3,214,000 related to the Initial Public Offering and $2,849,000 related to the Follow-On Offering and the DRIP Offering. As of September 30, 2016, total offering costs for the Follow-On Offering were $14,121,598. The Company directly incurred $11,396,735 of offering costs for the Follow-On Offering and $2,724,863 in offering costs reimbursable to Advisor for the Follow-On Offering. As of September 30, 2016, total offering costs for the DRIP Offering were $124,000. The Company directly incurred $0 of offering costs for the DRIP Offering and $124,000 in offering costs reimbursable to Advisor for the DRIP Offering. As of September 30, 2016, the Company had $0 payable to Advisor for offering costs related to the Follow-On Offering and DRIP Offerings. As of September 30, 2016, offering costs related to the Follow-On Offering did not exceed 15.0% of the gross offering proceeds from the sale of the Company’s shares of common stock in the Follow-On Offering. The Company has not reimbursed Advisor any funds for organization costs for the Follow-On Offering. Advisory Fees and Expense Reimbursement Acquisition Fee Advisor, or its affiliates, receives an acquisition fee equal to 1.5% of (1) the cost of investments the Company acquires or (2) the Company’s allocable cost of investments acquired in a joint venture. With respect to investments in and originations of loans, Advisor will receive an origination fee in lieu of an acquisition fee. The origination fee will equal 1.5% of the amount funded by the Company to invest in or originate such loan. For the nine months ended September 30, 2016, the Company paid Advisor acquisition fees of $120,000 in connection with the acquisition of the Houston Hotel. For the nine months ended September 30, 2015, the Company paid Advisor acquisition fees of $1,369,500 in connection with the acquisition of the Great Valley Hotel, the Nashville Hotel and the Homewood Suites Austin Hotel. Acquisition fees are recorded as property acquisition expenses in the Company’s consolidated statements of operations. As of September 30, 2016, the Company had not paid any origination fees to Advisor. Debt Financing Fee Advisor will receive a debt financing fee of 1.0% of the amount available under any loan or line of credit made available to the Company. It is anticipated that Advisor will pay some or all of these fees to third parties with whom it subcontracts to coordinate financing for the Company. For the nine months ended September 30, 2016, the Company paid $48,000 in debt financing fees to Advisor incurred in connection with the acquisition of the Houston Hotel. For the nine months ended September 30, 2015, the Company paid $715,500 in debt financing fees to Advisor for financing incurred in connection with the refinancing of the Woodlands Hotel and the acquisition of the Great Valley Hotel, the Nashville Hotel and the Homewood Suites Austin Hotel. Asset Management Fee The Company pays Advisor a monthly asset management fee of one-twelfth of 1.0% of the aggregate cost (before non-cash reserves and depreciation) of all real estate investments held by the Company at month-end. For the three months ended September 30, 2016 and 2015, the Company incurred asset management fees of $653,000 and $616,295, respectively, and for the nine months ended September 30, 2016 and 2015, the Company incurred asset management fees of $1,970,589 and $1,456,694, respectively, payable to Advisor, which are recorded in corporate general and administrative expenses in the accompanying consolidated statements of operations. Disposition Fee If Advisor provides a substantial amount of services in connection with the sale of a property or other investment, Advisor or its affiliates also will be paid a disposition fee equal to 3.0% of the contract sales price of each property or other investment sold, provided that total real estate commissions, including the disposition fee, do not exceed 6.0% of the contract sales price. The Company did not pay Advisor any disposition fees for the three or nine months ended September 30, 2016. For the three and nine months ended September 30, 2015, the Company paid a disposition fee to Advisor in the amount of $551,250, or 2.25% of the contract sales price, in connection with the sale of a hotel property in Newark, California. Operating Expense Reimbursement The Company will reimburse Advisor for all operating expenses paid or incurred by Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse Advisor for any amount by which its operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (1) 2% of the Company’s average invested assets, or (2) 25% of the Company’s net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Limitation”). Notwithstanding the above, the Company may reimburse Advisor for expenses in excess of this limitation if a majority of the independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the four fiscal quarters ended September 30, 2016, total operating expenses of the Company were $4,508,400, which included $3,296,119 in operating expenses incurred directly by the Company and $1,212,281 incurred by Advisor on behalf of the Company. Of the $4,508,400 in total operating expenses incurred during the four fiscal quarters ended September 30, 2016, $0 exceeded the 2%/25% Limitation. The Company reimbursed Advisor approximately $1,212,000 in operating expenses during the four fiscal quarters ended September 30, 2016. Additionally, Advisor has incurred $5,078,162 in operating expenses on the Company’s behalf prior to the four fiscal quarters ended September 30, 2016. Subject to a future determination by the Company’s board of directors, this amount is not reimbursable to Advisor nor an obligation of the Company. Advisor has waived all operating expenses reimbursable to Advisor for each of the 12 prior fiscal quarters ended March 31, 2014 to the extent such expenses had not been previously reimbursed to Advisor. Advisor further agreed that all expenses incurred directly by the Company during the waiver period will be paid by Advisor on behalf of the Company. Total reimbursable expenses so waived or assumed by Advisor were $1,967,721 as of September 30, 2016. Property Management Fees The Company has engaged Moody National Hospitality Management, LLC, an affiliate of the Sponsor (“Property Manager”), as its property manager. The Company pays Property Manager a property management fee and an accounting fee in connection with the operation and management of properties pursuant to the terms of hotel management agreements. For the three months ended September 30, 2016 and 2015, the Company paid the Property Manager property management fees of $450,608 and $462,418, respectively, and accounting fees of $85,000 and $77,500. For the nine months ended September 30, 2016 and 2015, the Company paid the Property Manager property management fees of $1,315,415 and $1,130,874, respectively, and accounting fees of $250,000 and $212,500, respectively, which are included in hotel operating expenses in the accompanying consolidated statements of operations. Notes Receivable from Related Parties On August 21, 2015, pursuant to the Related Party Note, the Company made a loan in the amount of $9,000,000 to DST Sponsor, an affiliate of the Company, the proceeds of which were used by DST Sponsor for the acquisition of a commercial property located in Katy, Texas. An origination fee of $90,000 and an extension fee in the amount of $45,000 were paid to the Company by DST Sponsor on August 15, 2016 and an exit fee of $90,000 is payable by DST Sponsor to the Company upon maturity of the Related Party Note. The Related Party Note bears interest at a rate of 12% per annum and was due August 21, 2016. The maturity date of the Related Party note was extended to August 21, 2017. On April 29, 2016, pursuant to the Related Party Mezzanine Note, the Company made a loan in the amount of $4,500,000 to Realty, the proceeds of which were used by Realty for the acquisition of a commercial property located in Houston, Texas. An origination fee of $45,000 and an exit fee of $45,000 is payable by Realty to the Company upon maturity of the Related Party Mezzanine Note. The Related Party Mezzanine Note bears interest at a rate of 10% per annum and is due April 30, 2018. Due from Related Parties On September 22, 2015, the Company assigned and transferred its Purchase Agreement, as amended, between the Company and a third-party seller for the property commonly referred to as the Hampton Inn Boston Logan Airport to Realty for the sum of $1,000,000. The $1,000,000 receivable is recorded in due from related parties in the accompanying consolidated balance sheets. Note Joint Venture As discussed in Note 4 (“Notes Receivable”), as of September 30, 2016, the OP owns a 74.5% membership interest in the Note Joint Venture, Moody National Mortgage owns a 14% membership interest in the Note Joint Venture and the Trust Members own the remaining 11.5% membership interests in the Note Joint Venture. Pursuant to the terms of the Note Joint Venture Agreement, Moody National Mortgage is entitled to receive approximately 14% of all distributions of cash from operations of the Note Joint Venture and the OP and the other Members are entitled to receive the remaining approximately 86% of distributions of cash from operations of the Note Joint Venture in proportion to their respective membership interests in the Note Joint Venture. On June 10, 2016, the Hyatt Place Note receivable and the Acquisition Note payable and all accrued interest thereon were paid in full. Great Valley Hotel On March 27, 2015, the OP acquired fee simple title to the Great Valley Hotel from the current tenant-in-common owners of the Great Valley Hotel (the “Great Valley TIC Owners”), for an aggregate purchase price, exclusive of closing costs, of $11,000,000. The Great Valley TIC Owners acquired their tenant-in-common interests in the Great Valley Hotel in a tenant-in-common program sponsored by an affiliate of the Company. Nashville Hotel On June 16, 2015, the OP acquired fee simple title to the Nashville Hotel from the current tenant-in-common owners of the Nashville Hotel (the “Nashville TIC Owners”), for an aggregate purchase price, exclusive of closing costs, of $66,300,000. The Nashville TIC Owners acquired their tenant-in-common interests in the Nashville Hotel in a tenant-in-common program sponsored by an affiliate of the Company. Fort Worth Hotel On December 18, 2015, the OP acquired an interest in the Fort Worth Hotel from the Fort Worth TIC Owners for an aggregate purchase price, exclusive of closing costs, including the assumption of the outstanding debt secured by the Fort Worth Hotel, of $7,301,887. The Fort Worth TIC Owners acquired their tenant-in-common interests in the Fort Worth Hotel in a tenant-in-common program sponsored by an affiliate of the Company. Houston Hotel On April 21, 2016, the OP acquired fee simple title to the Houston Hotel from the current tenant-in-common owners of the Houston Hotel (the “Houston TIC Owners”), for an aggregate purchase price, exclusive of closing costs, of $8,000,000. The Houston TIC Owners acquired their tenant-in-common interests in the Houston Hotel in a tenant-in-common program sponsored by an affiliate of the Company. Payment from Moody Securities On March 27, 2015, Moody Securities entered into a Notice of Acceptance Letter, Waiver and Consent with FINRA whereby Moody Securities, among other things, agreed to pay the Company $350,000 to be distributed pro rata to the Company’s stockholders in connection with the failure of Moody Securities to comply with FINRA Rule 2310 and the computation of organization and offering expenses incurred in connection with the Company’s initial public offering under FINRA rules. Moody Securities paid the Company $350,000 on July 21, 2015 which was recorded as a special contribution to the Company in the consolidated statements of equity and the Company made a special distribution to stockholders of $350,000 on July 28, 2015. Letter of Intent with REIT II On September 27, 2016, the Company and REIT II issued a joint press release announcing that they had entered into the LOI. There is no guarantee that a transaction pursuant to the LOI will occur. See Note 1 (“Organization”). |
Incentive Award Plan
Incentive Award Plan | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Incentive Award Plan | 8. Incentive Award Plan The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to the employees, directors and consultants of the Company and its affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. Shares of common stock will be authorized and reserved for issuance under the Incentive Award Plan. The Company has also adopted an independent directors compensation plan (the “Independent Directors Compensation Plan”) pursuant to which each of the Company’s then-current independent directors was entitled to receive 5,000 shares of restricted common stock when the Company raised the minimum offering amount of $2,000,000 in its initial public offering. Each new independent director that subsequently joins the Company’s board of directors will receive 5,000 shares of restricted stock on the date he or she joins the Company’s board of directors. In addition, on the date of each of the first four annual meetings of the Company’s stockholders at which an independent director is re-elected to the Company’s board of directors, he or she will receive 2,500 restricted shares of common stock. Subject to certain conditions, the non-vested shares of restricted stock granted pursuant to the Independent Directors Compensation Plan will vest and become non-forfeitable in four equal quarterly installments beginning on the first day of the first quarter following the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. As of September 30, 2016, there were 1,948,750 common shares remaining available for future issuance under the Incentive Award Plan and the Independent Directors Compensation Plan. A total of 0 and 2,500 shares of restricted stock were granted pursuant to the Independent Directors Compensation Plan during the three months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, a total of 51,250 shares of restricted common stock have been issued by the Company to the Company’s independent directors pursuant to the Independent Directors Compensation Plan. The weighted average grant date fair value of the shares of restricted stock issued by the Company pursuant to the Independent Directors Compensation Plan was $10.00 per share based on observable market transactions occurring near the dates of the grants. The Company recorded compensation related to such shares of restricted stock ratably from the grant date to the date the shares become fully vested based on the fair market value of such shares at the date they were granted. The Company recorded compensation related to such shares of restricted stock of $77 and $4,077 for the three months ended September 30, 2016 and 2015, respectively, and $14,077 and $45,846 for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, all shares of restricted common stock granted pursuant to the Independent Directors Compensation Plan which were granted as of August 12, 2015 had been vested and there was no remaining unrecognized compensation expense. The following is a summary of activity under the Independent Directors Compensation Plan for the nine months ended September 30, 2016 and year ended December 31, 2015: Number of Shares Weighted Average Grant Date Fair Value Balance of non-vested shares as of January 1, 2015 5,625 $ 10.00 Shares granted on August 12, 2015 2,500 10.00 Shares vested (6,250 ) 10.00 Balance of non-vested shares as of December 31, 2015 1,875 10.00 Shares vested (1,875 ) 10.00 Balance of non-vested shares as of September 30, 2016 0 $ 10.00 |
Subordinated Participation Inte
Subordinated Participation Interest | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Subordinated Participation Interest | 9. Subordinated Participation Interest Pursuant to the limited partnership agreement of the OP, the holders of the Special Units will be entitled to distributions from the OP in an amount equal to 15.0% of net sales proceeds received by the OP on dispositions of its assets and dispositions of real properties by joint ventures or partnerships in which the OP owns a partnership interest, after the other holders of common units, including the Company, have received in the aggregate cumulative distributions from operating income, sales proceeds or other sources equal to their capital contributions plus an 8.0% cumulative non-compounded annual pre-tax return thereon. The Special Units will be redeemed for the above amount upon the earliest of: (1) the occurrence of certain events that result in the termination or non-renewal of the Advisory Agreement or (2) a listing of the Company’s common stock on a national securities exchange. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies Restricted Cash Under certain management and debt agreements existing at September 30, 2016 and December 31, 2015, the Company escrows payments required for insurance, real estate taxes, capital improvements, replacement of hotel furniture and fixtures, and debt service. The composition of the Company’s restricted cash as of September 30, 2016 and December 31, 2015 was as follows: September 30, 2016 December 31, 2015 Property improvement plan $ 1,612,776 $ 7,031,398 Real estate taxes 2,264,150 2,182,435 Insurance 292,607 379,907 Hotel furniture and fixtures 2,289,521 2,154,650 Seasonality 290,064 290,061 Expense deposit 255,500 — Total restricted cash $ 7,004,618 $ 12,038,451 Franchise Agreements As of September 30, 2016, all of the Company’s hotel properties are operated under franchise agreements with initial terms ranging from 10 to 20 years. Franchise agreements allow the properties to operate under their respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee, generally between 3.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs that amount to between 1.5% and 4.3% of room revenue. The Company incurred franchise fee expense of approximately $1,245,000 and $1,258,000 for the three months ended September 30, 2016 and 2015, respectively, and $3,718,000 and $2,997,000 for the nine months ended September 30, 2016 and 2015, respectively, which is included in hotel operating expenses in the accompanying consolidated statements of operations. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 11. Income Taxes The Company has formed TRSs that are C-corporations for federal income tax purposes and use the consolidated asset and liability method of accounting for income taxes. Tax return positions are recognized in the consolidated financial statements when they are “more-likely-than-not” to be sustained upon examination by the taxing authority. Deferred income tax assets and liabilities result from temporary differences. Temporary differences are differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future periods. A valuation allowance may be placed on deferred income tax assets, if it is determined that it is more likely than not that a deferred tax asset may not be realized. No provision for income taxes has been made for the Company (other than for each TRS) for the three and nine months ended September 30, 2016 and 2015 due to the Company’s election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2011. Prior to January 1, 2011, the Company was subject to federal and state income taxes, as it had not yet elected to be taxed as a REIT. The TRSs had deferred tax assets of $1,890,000 and $1,345,000 as of September 30, 2016 and December 31, 2015, respectively. As of September 30, 2016, the Company had operating loss carry-forwards of $355,800 expiring in 2030, 2031 and 2033. The income tax expense (benefit) for the three months and nine months ended September 30, 2016 and 2015 consisted of the following: Three months ended Nine months ended 2016 2015 2016 2015 Current expense $ 7,263 $ 302,000 $ 139,577 $ 663,000 Deferred expense (benefit) (342,000 ) 31,000 (545,000 ) (198,000 ) Total expense (benefit), net $ (334,737 ) $ 333,000 $ (405,423 ) $ 465,000 Federal $ (355,000 ) $ 225,000 $ (507,000 ) $ 375,000 State 20,263 108,000 101,577 90,000 Total tax expense (benefit) $ (334,737 ) $ 333,000 $ (405,423 ) $ 465,000 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | 13. Subsequent Events Distributions Declared On September 30, 2016, the Company declared a distribution in the aggregate amount of $869,674, of which $558,819 was paid in cash on October 15, 2016 and $310,855 was paid pursuant to the DRIP in the form of additional shares of the Company’s common stock. On October 31, 2016, the Company declared a distribution in the aggregate amount of $900,668 which is scheduled to be paid in cash on or about November 15, 2016. Suspension of the DRIP On October 13, 2016, the Company’s board of directors voted to suspend the DRIP. The suspension of the DRIP will become effective beginning with distributions made in November 2016 and will remain in effect unless and until the DRIP resumes, as determined by the Company’s board of directors. No modifications or changes were made to the DRIP. Repurchase of Shares On October 12, 2016, the Company repurchased 1,320.00 shares requested to be redeemed during the quarter at an average price of $10.75 per share. The Company’s share redemption program was suspended in May 2016 in all cases other than death or qualifying disability. This repurchase was made pursuant to the death/qualifying disability exception to the foregoing suspension. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include its accounts and the accounts of its subsidiaries over which it has control. All intercompany balances and transactions are eliminated in consolidation. The Company includes the accounts of its consolidated subsidiaries in its consolidated financial statements when the Company is the primary beneficiary for entities deemed to be variable interest entities (“VIEs”) through which the Company has a controlling interest. Interests in entities acquired are evaluated based on U.S. generally accepted accounting principles (“GAAP”), which requires the consolidation of VIEs in which the Company is deemed to have the controlling financial interest. The Company has the controlling financial interest if the Company has the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses or receive benefits from the VIE that could be significant to the Company. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance and the extent to which the Company has control or substantive participating rights under the respective ownership agreement. There are judgments and estimates involved in determining if an entity in which the Company has an investment is a VIE. The entity is evaluated to determine if it is a VIE by determining, among other things, if the equity investors as a group have a controlling financial interest in the entity and if the entity has sufficient equity at risk to finance its activities without additional subordinated financial support. The Company did not have a VIE interest as of September 30, 2016 or December 31, 2015. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial statements and the rules and regulations of the SEC. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, readers should refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on March 30, 2016. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Actual results could differ from those estimates. |
Organization and Offering Costs | Organization and Offering Costs Organization and offering costs of the Company are paid directly by the Company or may be incurred by Advisor on behalf of the Company. Pursuant to the Advisory Agreement, the Company is obligated to reimburse Advisor or its affiliates, as applicable, for organization and offering costs incurred by Advisor associated with each of the Company’s public offerings, provided that within 60 days of the last day of the month in which a public offering ends, Advisor is obligated to reimburse the Company to the extent organization and offering costs incurred by the Company in connection with the completed public offering exceed 15.0% of the gross offering proceeds from the sale of the Company’s shares of common stock in the completed public offering. Such organization and offering costs include selling commissions and dealer manager fees paid to a dealer manager, legal, accounting, printing and other offering expenses, including marketing, salaries and direct expenses of Advisor’s employees and employees of Advisor’s affiliates and others. Any reimbursement of Advisor or its affiliates for organization and offering costs will not exceed actual expenses incurred by Advisor. All offering costs, including selling commissions and dealer manager fees, are recorded as an offset to additional paid-in capital, and all organization costs are recorded as an expense when the Company has an obligation to reimburse Advisor. The Company terminated its Follow-On Offering on February 20, 2015. Total offering costs for the Follow-On Offering were $14,121,598, comprised of $11,396,735 of offering costs for that offering incurred directly by the Company and $2,724,863 in offering costs incurred by and reimbursable to Advisor. As of September 30, 2016, total offering costs for the DRIP Offering were $124,000. The Company directly incurred $0 of offering costs for the DRIP Offering and $124,000 in reimbursable costs to Advisor. As of September 30, 2016, the Company had $0 payable to Advisor for reimbursable offering costs related to the Follow-On Offering and DRIP Offering. Offering costs related to the Follow-On Offering did not exceed 15.0% of the gross offering proceeds from the sale of the Company’s shares of common stock in that offering. The Company has not reimbursed Advisor any funds for organization costs for the Follow-On Offering. |
Income Taxes | Income Taxes The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2011. Prior to qualifying for taxation as a REIT, the Company was subject to normal federal and state corporation income taxes. As a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90% of its REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) and satisfy the other organizational and operational requirements for REIT qualification. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. The Company leases the hotels it acquires to wholly-owned taxable REIT subsidiaries (“TRSs”) that are subject to federal, state and local income taxes. The Company accounts for income taxes of its TRSs using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company records a valuation allowance for net deferred tax assets that are not expected to be realized. The Company has reviewed tax positions under GAAP guidance that clarify the relevant criteria and approach for the recognition and measurement of uncertain tax positions. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return. A tax position may only be recognized in the consolidated financial statements if it is more likely than not that the tax position will be sustained upon examination. The Company had no material uncertain tax positions as of September 30, 2016. The preparation of the Company’s various tax returns requires the use of estimates for federal and state income tax purposes. These estimates may be subjected to review by the respective taxing authorities. A revision to an estimate may result in an assessment of additional taxes, penalties and interest. At this time, a range in which the Company’s estimates may change is not expected to be material. The Company will account for interest and penalties relating to uncertain tax provisions in the current period results of operations, if necessary. The Company has tax years 2011 through 2015 remaining subject to examination by various federal and state tax jurisdictions. |
Fair Value Measurement | Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs, such as quoted prices in active markets. Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets. Level 3: Unobservable inputs for which there is little or no market data, which require a reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following valuation techniques: Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Cost approach: Amount required to replace the service capacity of an asset (replacement cost). Income approach: Techniques used to convert future income amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company elected not to use the fair value option in recording its financial instruments, which include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, notes payable, and accounts payable and accrued expenses. With the exception of the Company’s fixed-rate notes payable, the carrying amounts of these financial instruments approximate their fair values due to their short-term nature or variable interest rates. For fair value of the Company’s notes payable, see Note 5 (“Debt”). |
Concentration of Credit Risk | Concentration of Credit Risk As of September 30, 2016, the Company had cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insured levels. The Company diversifies its cash and cash equivalents with several banking institutions in an attempt to minimize exposure to any one of these institutions. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents or restricted cash. The Company is also exposed to credit risk with respect to its notes receivable from related parties. The failure of the borrowers on the notes receivable from related parties to make payments of interest and principal when due, or any other event of default under the notes receivable from related parties, would have an adverse impact on the Company’s results of operations. |
Valuation and Allocation of Real Property - Acquisition | Valuation and Allocation of Real Property — Acquisition Upon acquisition, the purchase price of a hotel property is allocated to the tangible assets acquired, consisting of land, buildings and furniture, fixtures and equipment, any assumed debt, identified intangible assets and asset retirement obligations, if any, based on their fair values. Acquisition costs are charged to expense as incurred. Initial valuations are subject to change during the measurement period, but the measurement period ends as soon as the information is available. The measurement period shall not exceed one year from the acquisition date. The tangible assets acquired consist of land, buildings, furniture, fixtures and equipment. Land values are derived from appraisals, and buildings are calculated as replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods. The value of furniture, fixtures and equipment is based on their fair value using replacement costs less depreciation. Any difference between the fair value of the hotel property acquired and the purchase price of the hotel property is recorded as goodwill or a gain on acquisition of hotel property. The Company determines the fair value of assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense. In allocating the purchase price of each of the Company’s properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. Many of these estimates are obtained from independent third party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates are based on judgments and subject to being imprecise; accordingly, if different estimates and assumptions were used, the valuation of the various categories of the Company’s hotel properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Company’s consolidated financial statements. These variances could be material to the Company’s results of operations and financial condition. |
Valuation and Allocation of Real Property - Ownership | Valuation and Allocation of Real Property — Ownership Investment in hotel properties is recorded at cost less accumulated depreciation. Major improvements that extend the life of an asset are capitalized and depreciated over a period equal to the shorter of the life of the improvement or the remaining useful life of the asset. The cost of ordinary repairs and maintenance are charged to expense when incurred. Depreciation or amortization expenses are computed using the straight-line and accelerated methods based upon the following estimated useful lives: Estimated Useful Lives Buildings and improvements 39-40 Exterior improvements 10-20 Furniture, fixtures and equipment 5-10 The Company designates a hotel property as held for sale when the sale is probable within the next twelve months. Generally, the Company considers a sale to be probable when a buyer completes its due diligence review, the Company has an executed contract for sale and the Company has received a substantial non-refundable deposit. |
Impairments | Impairments The Company monitors events and changes in circumstances indicating that the carrying amounts of the hotel properties that it owns may not be recoverable. When such events or changes in circumstances are present, the Company assesses potential impairment by comparing estimated future undiscounted cash flows expected to be generated over the life of the asset from operating activities and from its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss to adjust the carrying amount of the asset to estimated fair value for assets held for use and fair value less costs to sell for assets held for sale. There were no such impairment losses for the three or nine months ended September 30, 2016 and 2015. In evaluating the Company’s hotel properties for impairment, the Company makes several estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during the Company’s ownership and the projected sales price of each of the properties. A change in these estimates and assumptions could result in a change in the estimated undiscounted cash flows or fair value of the Company’s hotel properties, which could in turn result in different conclusions regarding impairment and material changes to the Company’s consolidated financial statements. |
Revenue Recognition | Revenue Recognition Hotel revenues, including room, food, beverage and other ancillary revenues, are recognized as the related services are delivered. Interest income is recognized when earned. Revenue is recorded net of any sales and other taxes collected from customers. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents represent cash on hand or held in banks and short-term investments with an initial maturity of three months or fewer at the date of purchase. |
Restricted Cash | Restricted Cash Restricted cash includes reserves for debt service, property taxes and insurance, as well as reserves for property improvements and replacement of furniture, fixtures and equipment, as required by certain management or mortgage debt agreement restrictions and provisions. |
Accounts Receivable | Accounts Receivable The Company takes into consideration certain factors that require judgments to be made as to the collectability of receivables. Collectability factors taken into consideration are the amounts outstanding, payment history and financial strength of the customer, which taken as a whole determines the valuation. Ongoing credit evaluations are performed and an allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible. |
Impairment of Notes Receivable | Impairment of Notes Receivable The Company reviews the notes receivable for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts recorded as assets on the consolidated balance sheets. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. When a loan is impaired, the Company measures impairment based on the present value of expected cash flows discounted at the loan’s effective interest rate against the value of the asset recorded on the consolidated balance sheets. The Company may also measure impairment based on a loan’s observable market price or the fair value of collateral, if the loan is collateral dependent. If a loan is deemed to be impaired, the Company records a valuation allowance through a charge to earnings for any shortfall. The Company’s assessment of impairment is based on considerable judgment and estimates. The Company did not record a valuation allowance during the three or nine months ended September 30, 2016 or 2015. |
Prepaid Expenses and Other Assets | Prepaid Expenses and Other Assets Prepaid expenses include prepaid property insurance and hotel operating expenses. Other assets include accrued interest receivable and the deferred income tax asset. |
Earnest money and Deposits | Earnest money and Deposits Earnest money and deposits includes earnest money, rate-lock deposits and expense deposits for future acquisitions. |
Deferred Franchise Costs | Deferred Franchise Costs Deferred franchise costs are recorded at cost and amortized over the term of the respective franchise contract on a straight-line basis. Accumulated amortization of deferred franchise costs was $128,027 and $79,651 as of September 30, 2016 and December 31, 2015, respectively. Expected future amortization of deferred franchise costs as of September 30, 2016 is as follows: Years Ending December 31, Franchise Costs 2016 $ 17,092 2017 68,368 2018 68,368 2019 68,368 2020 68,368 Thereafter 641,409 Total $ 931,973 |
Deferred Loan Costs | Debt Issuance Costs In accordance with ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” debt issuance costs are presented as a direct deduction from the carrying value of the notes payable on the consolidated balance sheets. All periods presented have been reclassified to conform with this presentation. Debt issuance costs are amortized as a component of interest expense over the term of the related debt using the straight-line method, which approximates the interest method. Accumulated amortization of deferred costs was $1,079,963 and $630,688 as of September 30, 2016 and December 31, 2015, respectively. Expected future amortization of debt issuance costs as of September 30, 2016 is as follows: Years Ending December 31, Loan Costs 2016 $ 180,982 2017 506,665 2018 238,049 2019 238,049 2020 238,700 Thereafter 970,701 Total $ 2,373,146 |
Earnings (Loss) per Share | Earnings (Loss) per Share Earnings (loss) per share (“EPS”) is calculated based on the weighted average number of shares outstanding during each period. Basic and diluted EPS are the same for all periods presented. Non-vested shares of restricted stock, totaling 0 and 2,500 shares as of September 30, 2016 and 2015, respectively, held by the Company’s independent directors are included in the calculation of basic EPS because such shares have been issued and participate in dividends. |
Comprehensive Income | Comprehensive Income For the periods presented, there were no differences between reported net income (loss) attributable to common shareholders and comprehensive income (loss). |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities,” which enhances the reporting requirements surrounding the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income. ASU No. 2016-01 is effective for the Company’s fiscal year commencing on January 1, 2018. The Company does not anticipate that the adoption of ASU No. 2016-01 will have a material effect on the Company’s consolidated financial position or the Company’s consolidated results of operations. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which changes lessee accounting to reflect the financial liability and right-of-use asset that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for the Company’s fiscal year commencing on January 1, 2019, but early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on the Company’s consolidated financial statements and related disclosures. The Company has not yet selected a transition date nor has the Company determined the effect of ASU No. 2016-02 on the Company’s consolidated financial position or the Company’s consolidated results of operations. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplifies the accounting for income taxes for certain equity-based awards to employees. ASU No. 2016-09 is effective for the Company’s fiscal year commencing on January 1, 2017. The Company does not anticipate that the adoption of ASU No. 2016-09 will have a material effect on the Company’s consolidated financial position or the Company’s consolidated results of operations. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Schedule of estimated useful lives real property | Depreciation or amortization expenses are computed using the straight-line and accelerated methods based upon the following estimated useful lives: Estimated Useful Lives Buildings and improvements 39-40 Exterior improvements 10-20 Furniture, fixtures and equipment 5-10 |
Schedule of expected future amortization of deferred financing fees and franchise costs | Expected future amortization of deferred franchise costs as of September 30, 2016 is as follows: Years Ending December 31, Franchise Costs 2016 $ 17,092 2017 68,368 2018 68,368 2019 68,368 2020 68,368 Thereafter 641,409 Total $ 931,973 |
Schedule of expected future amortization of deferred loan costs | Expected future amortization of debt issuance costs as of September 30, 2016 is as follows: Years Ending December 31, Loan Costs 2016 $ 180,982 2017 506,665 2018 238,049 2019 238,049 2020 238,700 Thereafter 970,701 Total $ 2,373,146 |
Investment in Hotel Properties
Investment in Hotel Properties (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Real Estate [Abstract] | |
Schedule of investments in hotel properties | The following table sets forth summary information regarding the Company’s investments in hotel properties as of September 30, 2016: Property Name Date Acquired Location Ownership Interest Purchase Price (1) Rooms Mortgage Debt Outstanding (2) Woodlands Hotel November 8, 2012 The Woodlands, Texas 100 % $ 12,000,000 91 $ 9,300,000 Germantown Hotel April 9, 2013 Germantown, Tennessee 100 % 11,300,000 127 7,361,309 Charleston Hotel July 2, 2013 North Charleston, South Carolina 100 % 11,800,000 113 7,447,608 Austin Hotel December 30, 2013 Austin, Texas 100 % 15,350,000 123 11,086,888 Grapevine Hotel March 31, 2014 Grapevine, Texas 100 % 20,500,000 133 12,809,383 Lyndhurst Hotel September 30, 2014 Lyndhurst, New Jersey (3 ) 33,322,000 227 30,989,447 Austin Arboretum Hotel November 20, 2014 Austin, Texas 100 % 29,250,000 138 19,000,000 Great Valley Hotel March 27, 2015 Frazer, Pennsylvania 100 % 11,000,000 125 8,200,000 Nashville Hotel June 16, 2015 Nashville, Tennessee 100 % 66,300,000 208 43,000,000 Homewood Suites Austin Hotel August 3, 2015 Austin, Texas 100 % 14,250,000 96 11,000,000 Fort Worth Hotel December 18, 2015 Fort Worth, Texas (4 ) 7,301,887 95 7,071,876 Houston Hotel April 21, 2016 Houston, Texas 100 % 8,000,000 119 4,746,997 Totals $ 240,373,887 1,595 $ 172,013,508 (1) Excludes closing costs. (2) As of September 30, 2016. (3) The Lyndhurst Hotel is owned by MN Lyndhurst Venture, LLC (the “Lyndhurst Joint Venture”). The OP contributed $100 to the Lyndhurst Joint Venture in exchange for 100% of the Class B membership interests of the Lyndhurst Joint Venture (the “Lyndhurst Class B Interests”). Pursuant to the operating agreement of the Lyndhurst Joint Venture, the OP also agreed to pay up to $5.37 million in costs and fees and capital reserve requirements associated with the transfer of the Lyndhurst Hotel to the Lyndhurst Joint Venture, all of which amounts are deemed to be additional capital contributions by the OP to the Lyndhurst Joint Venture in exchange for additional Lyndhurst Class B Interests. The prior tenant-in-common owners of the Lyndhurst Hotel (the “Lyndhurst TIC Owners”) contributed their tenant-in-common ownership interests in the Lyndhurst Hotel (valued at $1,000 in the aggregate) to the Lyndhurst Joint Venture in exchange for non-voting Class A membership interests of the Lyndhurst Joint Venture (the “Lyndhurst Class A Interests”). The OP serves as the sole manager of the Lyndhurst Joint Venture and manages the business and affairs of the Lyndhurst Joint Venture. Cash available for distribution to the members of the Lyndhurst Joint Venture will be distributed as follows: (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Lyndhurst Joint Venture and a return of 100% of its unreturned capital contributions to the Lyndhurst Joint Venture, (2) next, 100% to the holders of the Lyndhurst Class A Interests until they have received a return of 100% of their capital contributions to the Lyndhurst Joint Venture (valued at $1,000 in the aggregate), and (3) next, 60% to the OP and 40% to the holders of the Lyndhurst Class A Interests. (4) The Fort Worth Hotel is owned by MN Fort Worth Venture, LLC (the “Fort Worth Joint Venture”). The OP contributed $100 to the Fort Worth Joint Venture in exchange for 100% of the Class B membership interests of the Fort Worth Joint Venture (the “Fort Worth Class B Interests”). Pursuant to the operating agreement of the Fort Worth Joint Venture, the OP also agreed to pay up to $3.146 million in costs and fees and capital reserve requirements associated with the transfer of the Fort Worth Hotel to the Fort Worth Joint Venture, all of which amounts are deemed to be additional capital contributions by the OP to the Fort Worth Joint Venture in exchange for additional Fort Worth Class B Interests. The prior tenant-in-common owners of the Fort Worth Hotel (the “Fort Worth TIC Owners”) contributed their tenant-in-common ownership interests in the Fort Worth Hotel (valued at $1,000 in the aggregate) to the Fort Worth Joint Venture in exchange for non-voting Class A membership interests of the Fort Worth Joint Venture (the “Fort Worth Class A Interests”). The OP serves as the sole manager of the Fort Worth Joint Venture and manages the business and affairs of the Fort Worth Joint Venture. Cash available for distribution to the members of the Fort Worth Joint Venture will be distributed as follows: (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Fort Worth Joint Venture and a return of 100% of its unreturned capital contributions to the Fort Worth Joint Venture, (2) next, 100% to the holders of the Fort Worth Class A Interests until they have received a return of 100% of their capital contributions to the Fort Worth Joint Venture (valued at $1,000 in the aggregate), and (3) next, 50% to the OP and 50% to the holders of the Fort Worth Class A Interests. |
Schedule of pro forma consolidated financial information | Investments in hotel properties consisted of the following at September 30, 2016 and December 31, 2015: September 30, 2016 December 31, 2015 Land $ 27,923,000 $ 26,300,000 Buildings and improvements 207,245,258 199,088,102 Furniture, fixtures and equipment 27,196,749 21,825,902 Total cost 262,365,007 247,214,004 Accumulated depreciation (22,935,787 ) (14,265,804 ) Investment in hotel properties, net $ 239,429,220 $ 232,948,200 |
Schedule of earning per share | The following unaudited pro forma consolidated financial information for the three and nine months ended September 30, 2016 and 2015 is presented as if the Company acquired the Great Valley Hotel, the Nashville Hotel, the Homewood Suites Austin Hotel, the Fort Worth Hotel and the Houston Hotel as of January 1, 2015 and excludes the operations of and the gain from the sale of a hotel property located in Newark, California sold in 2015. This information is not necessarily indicative of what the actual results of operations would have been had the Company completed the acquisition of the Great Valley Hotel, the Nashville Hotel, the Homewood Suites Austin Hotel, the Fort Worth Hotel and the Houston Hotel as of January 1, 2015, nor does it purport to represent the Company’s future operations: Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Revenue $ 15,780,570 $ 16,095,471 $ 48,025,435 $ 46,868,785 Net loss (1,237,594 ) (895,731 ) (2,285,998 ) (4,469,014 ) Net loss attributable to common shareholders (1,268,319 ) (957,520 ) (2,188,465 ) (4,563,473 ) Net loss per common share - basic and diluted $ (0.10 ) $ (0.07 ) $ (0.17 ) $ (0.36 ) |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | As of September 30, 2016 and December 31, 2015, the Company’s notes payable consisted of the following: Principal as of September 30, 2016 Principal as of December 31, 2015 Interest Rate at September 30, 2016 Maturity Date Hyatt Place Note Acquisition Note $ — $ 9,994,173 3.000 % May 5, 2018 Woodlands Hotel Loan 9,300,000 9,300,000 4.690 % April 11, 2025 Germantown Hotel Loan 7,361,309 7,465,018 4.300 % May 6, 2023 Charleston Hotel Loan 7,447,608 7,536,474 5.193 % August 1, 2023 Austin Hotel Loan 11,086,888 11,207,445 5.426 % January 6, 2024 Grapevine Hotel Loan 12,809,383 12,951,025 5.250 % April 6, 2024 Lyndhurst Hotel Loan 30,989,447 31,415,138 5.916 % September 6, 2017 Austin Arboretum Hotel Loan 19,000,000 19,000,000 4.530 % December 11, 2024 Great Valley Hotel Loan 8,200,000 8,200,000 4.700 % April 11, 2025 Nashville Hotel Loan 43,000,000 43,000,000 4.2123 % July 11, 2025 Homewood Suites Austin Loan 11,000,000 11,000,000 4.650 % August 11, 2025 TownPlace Suites Fort Worth Loan 7,071,876 7,167,151 6.136 % July 6, 2017 Hampton Inn Houston Loan 4,746,997 — 5.500 % April 28, 2017 Total notes payable 172,013,508 178,236,424 Less unamortized debt issuance costs (2,373,146 ) (2,767,439 ) Total notes payable, net of debt issuance costs $ 169,640,362 $ 175,468,985 |
Schedule of maturities of notes payable | Maturities of notes payable as of September 30, 2016 are as follows: Year ending September 30, 2016 $ 376,243 2017 44,043,295 2018 2,145,768 2019 2,248,650 2020 2,340,140 Thereafter 120,859,412 Total $ 172,013,508 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Schedule of distributions paid in cash and pursuant to the DRIP | The following table summarizes distributions paid in cash and pursuant to the DRIP for the nine months ended September 30, 2016 and 2015. Period Cash Distribution Distribution Paid Pursuant to DRIP (1) Total Amount of Distribution First Quarter 2016 $ 1,643,571 $ 965,287 $ 2,608,858 Second Quarter 2016 1,683,097 967,084 2,650,181 Third Quarter 2016 1,703,955 954,614 2,658,569 Total $ 5,030,623 $ 2,886,985 $ 7,917,608 First Quarter 2015 $ 1,348,289 $ 746,826 $ 2,095,115 Second Quarter 2015 1,623,871 964,050 2,587,921 Third Quarter 2015 1,980,101 978,008 2,958,109 Total $ 4,952,261 $ 2,688,884 $ 7,641,145 (1) Amount of distributions paid in shares of common stock pursuant to the DRIP. |
Incentive Award Plan (Tables)
Incentive Award Plan (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of activity under the Independent Directors Compensation Plan | The following is a summary of activity under the Independent Directors Compensation Plan for the nine months ended September 30, 2016 and year ended December 31, 2015: Number of Weighted Average Grant Balance of non-vested shares as of January 1, 2015 5,625 $ 10.00 Shares granted on August 12, 2015 2,500 10.00 Shares vested (6,250 ) 10.00 Balance of non-vested shares as of December 31, 2015 1,875 10.00 Shares vested (1,875 ) 10.00 Balance of non-vested shares as of September 30, 2016 0 $ 10.00 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of composition of restricted cash | The composition of the Company’s restricted cash as of September 30, 2016 and December 31, 2015 was as follows: September 30, 2016 December 31, 2015 Property improvement plan $ 1,612,776 $ 7,031,398 Real estate taxes 2,264,150 2,182,435 Insurance 292,607 379,907 Hotel furniture and fixtures 2,289,521 2,154,650 Seasonality 290,064 290,061 Expense deposit 255,500 — Total restricted cash $ 7,004,618 $ 12,038,451 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense (benefit) | The income tax expense (benefit) for the three months and nine months ended September 30, 2016 and 2015 consisted of the following: Three months ended Nine months ended 2016 2015 2016 2015 Current expense $ 7,263 $ 302,000 $ 139,577 $ 663,000 Deferred expense (benefit) (342,000 ) 31,000 (545,000 ) (198,000 ) Total expense (benefit), net $ (334,737 ) $ 333,000 $ (405,423 ) $ 465,000 Federal $ (355,000 ) $ 225,000 $ (507,000 ) $ 375,000 State 20,263 108,000 101,577 90,000 Total tax expense (benefit) $ (334,737 ) $ 333,000 $ (405,423 ) $ 465,000 |
Organization (Details Narrative
Organization (Details Narrative) | Nov. 04, 2015USD ($) | Sep. 30, 2016USD ($)Number$ / sharesshares | Sep. 30, 2015USD ($) | Feb. 20, 2015USD ($)shares | Oct. 12, 2012USD ($)shares | Mar. 24, 2016$ / shares | Dec. 31, 2015shares | Dec. 18, 2015Number | Sep. 30, 2014Number | Apr. 15, 2009USD ($) |
Origination of note receivable from related party | $ | $ 4,500,000 | $ 9,000,000 | ||||||||
Common stock, authorized, value | $ | $ 900,000,000 | $ 1,000,000,000 | ||||||||
Common stock, authorized in Distribution Reinvestment Plan, value | $ | $ 100,000,000 | $ 100,000,000 | ||||||||
Proceeds from stock and DRIP offering | $ | $ 25,000,000 | |||||||||
Common stock, issued | 13,278,268 | 13,091,766 | ||||||||
Shares available for sale pursuant to DRIP | 357,587 | |||||||||
Share price (in dollars per share) | $ / shares | $ 10.75 | |||||||||
Redemption price of special units upon termination | $ / shares | $ 1 | |||||||||
Common Stock [Member] | ||||||||||
Common stock issued under DRIP | 292,242 | |||||||||
Common stock, issued | 13,204,796 | |||||||||
Proceeds from offering of common stock | $ | $ 123,071,703 | |||||||||
Shares available for sale pursuant to DRIP | 2,142,413 | |||||||||
DRIP Common Stock [Member] | ||||||||||
Common stock, issued | 897,625 | |||||||||
Share price (in dollars per share) | $ / shares | $ 10.21 | |||||||||
Initial Public Offering [Member] | ||||||||||
Issuance of common stock and operating partnership units, net of offering costs, shares | 1,126,253 | |||||||||
Common stock issued under DRIP | 29,582 | |||||||||
Proceeds from stock and DRIP offering | $ | $ 10,966,713 | |||||||||
Common stock, issued | 12,847,209 | |||||||||
Follow On Offering [Member] | ||||||||||
Issuance of common stock and operating partnership units, net of offering costs, shares | 11,720,956 | |||||||||
Common stock issued under DRIP | 510,457 | |||||||||
Proceeds from stock and DRIP offering | $ | $ 112,104,990 | |||||||||
Common stock, issued | 540,039 | |||||||||
TEXAS (Katy) [Member] | ||||||||||
Origination of note receivable from related party | $ | $ 9,000,000 | |||||||||
TEXAS (Houston) [Member] | ||||||||||
Origination of note receivable from related party | $ | $ 4,500,000 | |||||||||
Fort Worth Hotel [Member] | ||||||||||
Number of rooms | Number | 95 | 95 | ||||||||
Lyndhurst Hotel [Member] | ||||||||||
Number of rooms | Number | 227 | 227 | ||||||||
Texas, Tennessee, South Carolina and Pennsylvania Hotel Property [Member] | ||||||||||
Number of hotel properties | Number | 10 | |||||||||
Number of rooms | Number | 1,273 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 27, 2016 | Dec. 31, 2015 | |
Total offering costs under DRIP | $ 124,000 | |||
REIT distribution threshold for federal corporate income tax benefit | 90.00% | |||
Accumulated amortization of deferred costs | $ 128,027 | $ 79,651 | ||
Nonvested restricted stock included in earnings per share | 0 | 2,500 | ||
Deferred Franchise Costs [Member] | ||||
Accumulated amortization of deferred costs | $ 128,027 | 79,651 | ||
Deferred Loan Costs [Member] | ||||
Accumulated amortization of deferred costs | $ 1,079,963 | $ 630,688 | ||
Moody National Advisor I LLC - Advisor [Member] | ||||
Percent of organization and offering costs (in percent) | 15.00% | |||
Moody National Advisor I LLC - Advisor [Member] | Follow On Offering [Member] | ||||
Percent of organization and offering costs (in percent) | 15.00% | |||
Total offering costs | $ 14,121,598 | |||
Offering cost directly incurred by company | 11,396,735 | |||
Offering cost reimbursed to advisor | 2,724,863 | |||
Total offering costs under DRIP | 0 | |||
Payable to Advisor for offering costs | $ 0 | |||
Limit on offering costs, percent | 15.00% | |||
Moody National REIT II Inc [Member] | Letter of Intent [Member] | ||||
Gross merger consideration per share | $ 11 | |||
Net merger consideration payable per share | $ 10.25 | |||
Percentage for merger consideration | 50.00% |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Exterior Improvements [Member] | Lower Range [Member] | |
Estimated Useful Lives | 10 years |
Exterior Improvements [Member] | Upper Range [Member] | |
Estimated Useful Lives | 20 years |
Furniture, Fixtures And Equipment [Member] | Lower Range [Member] | |
Estimated Useful Lives | 5 years |
Furniture, Fixtures And Equipment [Member] | Upper Range [Member] | |
Estimated Useful Lives | 10 years |
Buildings And Improvements [Member] | Lower Range [Member] | |
Estimated Useful Lives | 39 years |
Buildings And Improvements [Member] | Upper Range [Member] | |
Estimated Useful Lives | 40 years |
Summary of Significant Accoun30
Summary of Significant Accounting Policies (Details 1) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Expected future amortization of deferred costs: | ||
Total | $ 931,973 | $ 905,349 |
Deferred Franchise Costs [Member] | ||
Expected future amortization of deferred costs: | ||
2,016 | 17,092 | |
2,017 | 68,368 | |
2,018 | 68,368 | |
2,019 | 68,368 | |
2,020 | 68,368 | |
Thereafter | 641,409 | |
Total | 931,973 | |
Deferred Loan Costs [Member] | ||
Expected future amortization of deferred costs: | ||
2,016 | 180,982 | |
2,017 | 506,665 | |
2,018 | 238,049 | |
2,019 | 238,049 | |
2,020 | 238,700 | |
Thereafter | 970,701 | |
Total | $ 2,373,146 |
Investment in Hotel Propertie31
Investment in Hotel Properties (Details Narrative) - USD ($) | Dec. 18, 2015 | [1] | Sep. 30, 2014 | [1] | Sep. 30, 2016 | |
Purchase price | [1] | $ 240,373,887 | ||||
Lyndhurst Hotel [Member] | ||||||
Purchase price | $ 33,322,000 | $ 5,370,000 | ||||
Description of cash available for distribution | (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Lyndhurst Joint Venture and a return of 100% of its unreturned capital contributions to the Lyndhurst Joint Venture, (2) next, 100% to the holders of the Lyndhurst Class A Interests until they have received a return of 100% of their capital contributions to the Lyndhurst Joint Venture (valued at $1,000 in the aggregate), and (3) next, 60% to the OP and 40% to the holders of the Lyndhurst Class A Interests. | |||||
Fort Worth Hotel [Member] | ||||||
Purchase price | $ 7,301,887 | $ 3,146,000 | ||||
Description of cash available for distribution | (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Fort Worth Joint Venture and a return of 100% of its unreturned capital contributions to the Fort Worth Joint Venture, (2) next, 100% to the holders of the Fort Worth Class A Interests until they have received a return of 100% of their capital contributions to the Fort Worth Joint Venture (valued at $1,000 in the aggregate), and (3) next, 50% to the OP and 50% to the holders of the Fort Worth Class A Interests. | |||||
Class B Interests [Member] | Lyndhurst Hotel [Member] | ||||||
Valuation of membership interests | $ 100 | |||||
Class B Interests [Member] | Fort Worth Hotel [Member] | ||||||
Valuation of membership interests | 100 | |||||
Class A Interests [Member] | Lyndhurst Hotel [Member] | ||||||
Valuation of membership interests | 1,000 | |||||
Class A Interests [Member] | Fort Worth Hotel [Member] | ||||||
Valuation of membership interests | $ 1,000 | |||||
[1] | Excludes closing costs. |
Investment in Hotel Propertie32
Investment in Hotel Properties (Details) | Apr. 21, 2016USD ($)Number | Dec. 18, 2015USD ($)Number | Aug. 03, 2015USD ($)Number | Jun. 16, 2015USD ($)Number | Mar. 27, 2015USD ($)Number | Nov. 20, 2014USD ($)Number | Sep. 30, 2014USD ($)Number | Mar. 31, 2014USD ($) | Dec. 30, 2013USD ($)Number | Jul. 02, 2013USD ($)Number | Apr. 09, 2013USD ($)Number | Nov. 08, 2012USD ($)Number | Sep. 30, 2016USD ($)Number | Jun. 30, 2014Number | |||
Purchase Price | [1] | $ 240,373,887 | |||||||||||||||
Mortgage Debt Outstanding | [2] | 172,013,508 | |||||||||||||||
Woodlands Hotel [Member] | |||||||||||||||||
Property Name | Woodlands Hotel (Homewood Suites by Hilton) | ||||||||||||||||
Date Acquired | Nov. 8, 2012 | ||||||||||||||||
Location | The Woodlands, Texas | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 12,000,000 | |||||||||||||||
Number of rooms | Number | 91 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 9,300,000 | |||||||||||||||
Germantown Hotel [Member] | |||||||||||||||||
Property Name | Germantown Hotel (Hyatt Place) | ||||||||||||||||
Date Acquired | Apr. 9, 2013 | ||||||||||||||||
Location | Germantown, Tennessee | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 11,300,000 | |||||||||||||||
Number of rooms | Number | 127 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 7,361,309 | |||||||||||||||
Charleston Hotel [Member] | |||||||||||||||||
Property Name | Charleston Hotel (Hyatt Place) | ||||||||||||||||
Date Acquired | Jul. 2, 2013 | ||||||||||||||||
Location | North Charleston, South Carolina | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 11,800,000 | |||||||||||||||
Number of rooms | Number | 113 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 7,447,608 | |||||||||||||||
Austin Hotel [Member] | |||||||||||||||||
Property Name | Austin Hotel (Hampton Inn) | ||||||||||||||||
Date Acquired | Dec. 30, 2013 | ||||||||||||||||
Location | Austin, Texas | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 15,350,000 | |||||||||||||||
Number of rooms | Number | 123 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 11,086,888 | |||||||||||||||
Grapevine Hotel [Member] | |||||||||||||||||
Property Name | Grapevine Hotel (Residence Inn) | ||||||||||||||||
Date Acquired | Mar. 31, 2014 | ||||||||||||||||
Location | Grapevine, Texas | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 20,500,000 | |||||||||||||||
Number of rooms | Number | 133 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 12,809,383 | |||||||||||||||
Lyndhurst Hotel [Member] | |||||||||||||||||
Property Name | Lyndhurst Hotel (Marriott Courtyard) | ||||||||||||||||
Date Acquired | Sep. 30, 2014 | ||||||||||||||||
Location | Lyndhurst, New Jersey | ||||||||||||||||
Ownership Percentage | [3] | ||||||||||||||||
Purchase Price | $ 33,322,000 | [1] | $ 5,370,000 | ||||||||||||||
Number of rooms | Number | 227 | 227 | |||||||||||||||
Mortgage Debt Outstanding | [2] | $ 30,989,447 | |||||||||||||||
Austin Arboretum Hotel [Member] | |||||||||||||||||
Property Name | Austin Arboretum Hotel (Hilton Garden Inn) | ||||||||||||||||
Date Acquired | Nov. 20, 2014 | ||||||||||||||||
Location | Austin, Texas | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 29,250,000 | |||||||||||||||
Number of rooms | Number | 138 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 19,000,000 | |||||||||||||||
Great Valley Hotel [Member] | |||||||||||||||||
Property Name | Great Valley Hotel (Hampton Inn) | ||||||||||||||||
Date Acquired | Mar. 27, 2015 | ||||||||||||||||
Location | Frazer, Pennsylvania | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 11,000,000 | |||||||||||||||
Number of rooms | Number | 125 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 8,200,000 | |||||||||||||||
Nashville Hotel [Member] | |||||||||||||||||
Property Name | Nashville Hotel (Embassy Suites) | ||||||||||||||||
Date Acquired | Jun. 16, 2015 | ||||||||||||||||
Location | Nashville, Tennessee | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 66,300,000 | |||||||||||||||
Number of rooms | Number | 208 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 43,000,000 | |||||||||||||||
Homewood Suites Austin Hotel [Member] | |||||||||||||||||
Property Name | Homewood Suites Austin Hotel (Homewood Suites) | ||||||||||||||||
Date Acquired | Aug. 3, 2015 | ||||||||||||||||
Location | Austin, Texas | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 14,250,000 | |||||||||||||||
Number of rooms | Number | 96 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | 11,000,000 | |||||||||||||||
Fort Worth Hotel [Member] | |||||||||||||||||
Property Name | Fort Worth Hotel (TownPlace Suites) | ||||||||||||||||
Date Acquired | Dec. 18, 2015 | ||||||||||||||||
Location | Fort Worth, Texas | ||||||||||||||||
Ownership Percentage | [4] | ||||||||||||||||
Purchase Price | $ 7,301,887 | [1] | $ 3,146,000 | ||||||||||||||
Number of rooms | Number | 95 | 95 | |||||||||||||||
Mortgage Debt Outstanding | [2] | $ 7,071,876 | |||||||||||||||
Houston Hotel [Member] | |||||||||||||||||
Property Name | Houston Hotel (Hampton Inn) | ||||||||||||||||
Date Acquired | Apr. 21, 2016 | ||||||||||||||||
Location | Houston, Texas | ||||||||||||||||
Ownership Percentage | 100.00% | ||||||||||||||||
Purchase Price | [1] | $ 8,000,000 | |||||||||||||||
Number of rooms | Number | 119 | ||||||||||||||||
Mortgage Debt Outstanding | [2] | $ 4,746,997 | |||||||||||||||
[1] | Excludes closing costs. | ||||||||||||||||
[2] | As of September 30, 2016. | ||||||||||||||||
[3] | The Lyndhurst Hotel is owned by MN Lyndhurst Venture, LLC (the "Lyndhurst Joint Venture"). The OP contributed $100 to the Lyndhurst Joint Venture in exchange for 100% of the Class B membership interests of the Lyndhurst Joint Venture (the "Lyndhurst Class B Interests"). Pursuant to the operating agreement of the Lyndhurst Joint Venture, the OP also agreed to pay up to $5.37 million in costs and fees and capital reserve requirements associated with the transfer of the Lyndhurst Hotel to the Lyndhurst Joint Venture, all of which amounts are deemed to be additional capital contributions by the OP to the Lyndhurst Joint Venture in exchange for additional Lyndhurst Class B Interests. The prior tenant-in-common owners of the Lyndhurst Hotel (the "Lyndhurst TIC Owners") contributed their tenant-in-common ownership interests in the Lyndhurst Hotel (valued at $1,000 in the aggregate) to the Lyndhurst Joint Venture in exchange for non-voting Class A membership interests of the Lyndhurst Joint Venture (the "Lyndhurst Class A Interests"). The OP serves as the sole manager of the Lyndhurst Joint Venture and manages the business and affairs of the Lyndhurst Joint Venture. Cash available for distribution to the members of the Lyndhurst Joint Venture will be distributed as follows: (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Lyndhurst Joint Venture and a return of 100% of its unreturned capital contributions to the Lyndhurst Joint Venture, (2) next, 100% to the holders of the Lyndhurst Class A Interests until they have received a return of 100% of their capital contributions to the Lyndhurst Joint Venture (valued at $1,000 in the aggregate), and (3) next, 60% to the OP and 40% to the holders of the Lyndhurst Class A Interests. | ||||||||||||||||
[4] | The Fort Worth Hotel is owned by MN Fort Worth Venture, LLC (the "Fort Worth Joint Venture"). The OP contributed $100 to the Fort Worth Joint Venture in exchange for 100% of the Class B membership interests of the Fort Worth Joint Venture (the "Fort Worth Class B Interests"). Pursuant to the operating agreement of the Fort Worth Joint Venture, the OP also agreed to pay up to $3.146 million in costs and fees and capital reserve requirements associated with the transfer of the Fort Worth Hotel to the Fort Worth Joint Venture, all of which amounts are deemed to be additional capital contributions by the OP to the Fort Worth Joint Venture in exchange for additional Fort Worth Class B Interests. The prior tenant-in-common owners of the Fort Worth Hotel (the "Fort Worth TIC Owners") contributed their tenant-in-common ownership interests in the Fort Worth Hotel (valued at $1,000 in the aggregate) to the Fort Worth Joint Venture in exchange for non-voting Class A membership interests of the Fort Worth Joint Venture (the "Fort Worth Class A Interests"). The OP serves as the sole manager of the Fort Worth Joint Venture and manages the business and affairs of the Fort Worth Joint Venture. Cash available for distribution to the members of the Fort Worth Joint Venture will be distributed as follows: (1) first, 100% to the OP until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Fort Worth Joint Venture and a return of 100% of its unreturned capital contributions to the Fort Worth Joint Venture, (2) next, 100% to the holders of the Fort Worth Class A Interests until they have received a return of 100% of their capital contributions to the Fort Worth Joint Venture (valued at $1,000 in the aggregate), and (3) next, 50% to the OP and 50% to the holders of the Fort Worth Class A Interests. |
Investment in Hotel Propertie33
Investment in Hotel Properties (Details 1) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Real Estate [Abstract] | ||
Land | $ 27,923,000 | $ 26,300,000 |
Buildings and improvements | 207,245,258 | 199,088,102 |
Furniture, fixtures and equipment | 27,196,749 | 21,825,902 |
Total cost | 262,365,007 | 247,214,004 |
Accumulated depreciation | (22,935,787) | (14,265,804) |
Investment in hotel properties, net | $ 239,429,220 | $ 232,948,200 |
Investment in Hotel Propertie34
Investment in Hotel Properties (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Real Estate [Abstract] | ||||
Revenue | $ 15,780,570 | $ 16,095,471 | $ 48,025,435 | $ 46,868,785 |
Net loss | (1,237,594) | (895,731) | (2,285,998) | (4,469,014) |
Net loss attributable to common shareholders | $ (1,268,319) | $ (957,520) | $ (2,188,465) | $ (4,563,473) |
Net loss per common share - basic and diluted | $ (0.10) | $ (0.07) | $ (0.17) | $ (0.36) |
Notes Receivable (Details Narra
Notes Receivable (Details Narrative) - USD ($) | Apr. 29, 2016 | Aug. 21, 2015 | Aug. 15, 2015 | Jun. 03, 2011 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Mortgage note receivable | $ 11,839,171 | |||||||
Origination of note receivable from related party | 4,500,000 | $ 9,000,000 | ||||||
Notes receivable from related parties | 13,500,000 | 9,000,000 | ||||||
Debt face amount | 172,013,508 | 178,236,424 | ||||||
Acquisition of Hyatt Place Note purchase price | [1] | $ 240,373,887 | ||||||
Fair value of notes receivable | 11,839,171 | |||||||
Moody National Operating Partnership I, L.P (OP) [Member] | ||||||||
Membership interest percentage (in percent) | 74.50% | |||||||
Trust Member [Member] | ||||||||
Membership interest percentage (in percent) | 11.50% | |||||||
Moody National Mortgage Corporation [Member] | ||||||||
Membership interest percentage (in percent) | 14.00% | |||||||
Hyatt Place Acquisition Note [Member] | ||||||||
Debt face amount | $ 11,483,280 | $ 9,994,173 | ||||||
Hyatt Place Property Note [Member] | ||||||||
Name of issuer | Moody National HP Grapevine Trust | |||||||
Name of notes acquired entity | MNHP Note Holder, LLC | |||||||
Outstanding principal balance | $ 12,759,199 | |||||||
Membership interest percentage (in percent) | 74.50% | |||||||
Description of interest terms | The Hyatt Place Note accrued interest at a fixed rate of 5.15% per annum from the Closing Date through August 21, 2012 (the First Change Date). For the period from the First Change Date through August 21, 2015 (the Second Change Date), the Hyatt Place Note accrued interest at 5.15%, which is a fixed rate equal to (a) the variable interest rate per annum published in The Wall Street Journal | |||||||
Fixed interest rate (in percent) | 5.15% | |||||||
Variable interest rate, basis | Prime Rate in Effect | |||||||
Spread on interest rate | 1.90% | |||||||
Related Party Note [Member] | ||||||||
Origination of note receivable from related party | $ (9,000,000) | |||||||
Membership interest percentage (in percent) | 100.00% | |||||||
Notes receivable accrues fixed rate (in percent) | 12.00% | |||||||
Notes receivable origination fee | $ 90,000 | $ 90,000 | ||||||
Notes receivable exit fee | $ 90,000 | |||||||
Extension fee | $ 45,000 | |||||||
Mezzanine Note Receivable [Member] | ||||||||
Origination of note receivable from related party | $ (4,500,000) | |||||||
Notes receivable accrues fixed rate (in percent) | 10.00% | |||||||
Notes receivable origination fee | $ 45,000 | |||||||
Notes receivable exit fee | $ 45,000 | |||||||
Number of days for written notice | 90 days | |||||||
[1] | Excludes closing costs. |
Debt (Details Narrative)
Debt (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
Percentage of prohibited borrowing capacity to net assets | 300.00% | |
Estimated fair value on notes payable | $ 175,000,000 | $ 177,000,000 |
Debt (Details)
Debt (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Dec. 31, 2015 | Jun. 03, 2011 | |
Notes Payable | $ 172,013,508 | $ 178,236,424 | |
Less unamortized debt issuance costs | (2,373,146) | (2,767,439) | |
Total notes payable, net of debt issuance costs | 172,013,508 | 175,468,985 | |
Nashville Hotel [Member] | |||
Notes Payable | $ 43,000,000 | 43,000,000 | |
Interest Rate | 4.2123% | ||
Maturity Date | Jul. 11, 2025 | ||
Homewood Suites Austin Loan [Member] | |||
Notes Payable | $ 11,000,000 | 11,000,000 | |
Interest Rate | 4.65% | ||
Maturity Date | Aug. 11, 2025 | ||
Fort Worth Hotel [Member] | |||
Notes Payable | $ 7,071,876 | 7,167,151 | |
Interest Rate | 6.136% | ||
Maturity Date | Jul. 6, 2017 | ||
Houston Hotel [Member] | |||
Notes Payable | $ 4,746,997 | ||
Interest Rate | 5.50% | ||
Maturity Date | Apr. 28, 2017 | ||
Hyatt Place Acquisition Note [Member] | |||
Notes Payable | 9,994,173 | $ 11,483,280 | |
Interest Rate | 3.00% | ||
Maturity Date | May 5, 2018 | ||
Woodlands Loan [Member] | |||
Notes Payable | $ 9,300,000 | 9,300,000 | |
Interest Rate | 4.69% | ||
Maturity Date | Apr. 11, 2025 | ||
Germantown Hotel Loan [Member] | |||
Notes Payable | $ 7,361,309 | 7,465,018 | |
Interest Rate | 4.30% | ||
Maturity Date | May 6, 2023 | ||
Charleston Hotel Loan [Member] | |||
Notes Payable | $ 7,447,608 | 7,536,474 | |
Interest Rate | 5.193% | ||
Maturity Date | Aug. 1, 2023 | ||
Austin Hotel Loan [Member] | |||
Notes Payable | $ 11,086,888 | 11,207,445 | |
Interest Rate | 5.426% | ||
Maturity Date | Jan. 6, 2024 | ||
Grapevine Hotel Loan [Member] | |||
Notes Payable | $ 12,809,383 | 12,951,025 | |
Interest Rate | 5.25% | ||
Maturity Date | Apr. 6, 2024 | ||
Lyndhurst Hotel Loan [Member] | |||
Notes Payable | $ 30,989,447 | 31,415,138 | |
Interest Rate | 5.916% | ||
Maturity Date | Sep. 6, 2017 | ||
Austin Arboretum Hotel Loan [Member] | |||
Notes Payable | $ 19,000,000 | 19,000,000 | |
Interest Rate | 4.53% | ||
Maturity Date | Dec. 11, 2024 | ||
Great Valley Hotel Loan [Member] | |||
Notes Payable | $ 8,200,000 | $ 8,200,000 | |
Interest Rate | 4.70% | ||
Maturity Date | Apr. 11, 2025 |
Debt (Details 1)
Debt (Details 1) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Year ending March 31, | ||
2,016 | $ 376,243 | |
2,017 | 44,043,295 | |
2,018 | 2,145,768 | |
2,019 | 2,248,650 | |
2,020 | 2,340,140 | |
Thereafter | 120,859,412 | |
Total | $ 172,013,508 | $ 175,468,985 |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Mar. 24, 2016 | Dec. 31, 2015 | |
Common stock, authorized | 400,000,000 | 400,000,000 | 400,000,000 | |||
Preferred stock, authorized | 50,000,000 | 50,000,000 | 50,000,000 | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | |||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | |||
Common stock, issued | 13,278,268 | 13,278,268 | 13,091,766 | |||
Common stock, outstanding | 13,278,268 | 13,278,268 | 13,091,766 | |||
Distribution paid per share | $ 0.002192 | $ 0.002192 | ||||
Annualized distribution rate | 8.00% | 8.00% | ||||
Share price | $ 10.75 | |||||
Noncontrolling interest in operating partnership | $ 6,629,185 | $ 6,629,185 | ||||
Income (loss) attributable to noncontrolling interest in operating partnership | (69,797) | $ 42,159 | (128,865) | $ 36,136 | ||
Noncontrolling interest in variable interest entity | 0 | 0 | ||||
Loss attributable to noncontrolling interest in variable interest entity | 100,522 | 0 | (15,745) | 0 | ||
Noncontrolling interest in consolidated joint ventures | 10,151 | 10,151 | $ 321,031 | |||
Income attributable to noncontrolling interest from consolidated joint venture | $ 19,630 | $ 31,332 | $ 58,323 | |||
Sponsor [Member] | ||||||
Common stock, issued | 22,222 | 22,222 | ||||
Common Stock [Member] | ||||||
Common stock, issued | 13,204,796 | 13,204,796 | ||||
DRIP Common Stock [Member] | ||||||
Common stock, issued | 897,625 | 897,625 | ||||
Share price | 10.21 | |||||
Independent directors compensation plan [Member] | Restricted stock [Member] | ||||||
Outstanding shares of restricted stock | 51,250 | 51,250 | ||||
Distributions Declared [Member] | ||||||
Share price | $ 10 | $ 10 | $ 10.75 | |||
DRIP [Member] | ||||||
Share price | $ 10.21 |
Equity (Details)
Equity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||||||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |||||||
Cash Distribution | $ 5,030,623 | $ 4,952,261 | ||||||||||||
Cash Distributions [Member] | ||||||||||||||
Cash Distribution | $ 1,703,955 | $ 1,683,097 | $ 1,643,571 | $ 1,980,101 | $ 1,623,871 | $ 1,348,289 | 5,030,623 | 4,952,261 | ||||||
Distribution Paid Pursuant to DRIP | 954,614 | [1] | 967,084 | 965,287 | [1] | 978,008 | [1] | 964,050 | 746,826 | [1] | 2,886,985 | [1] | 2,688,884 | [1] |
Total Amount of Distribution | $ 2,658,569 | $ 2,650,181 | $ 2,608,858 | $ 2,958,109 | $ 2,587,921 | $ 2,095,115 | $ 7,917,608 | $ 7,641,145 | ||||||
[1] | Amount of distributions paid in shares of common stock pursuant to the DRIP. |
Related Party Arrangements (Det
Related Party Arrangements (Details Narrative) - USD ($) | Apr. 29, 2016 | Aug. 21, 2015 | Aug. 15, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 22, 2015 |
Total offering costs under DRIP | $ 124,000 | $ 124,000 | $ 124,000 | |||||||
Percentage of acquisition fee (in percent) | 1.50% | 1.50% | 1.50% | |||||||
Percentage of origination fee in lieu of acquisition (in percent) | 1.50% | 1.50% | 1.50% | |||||||
Debt financing fee percentage | 1.00% | 1.00% | 1.00% | |||||||
Advisor expense reimbursement - alternative 1 | 2.00% | 2.00% | 2.00% | |||||||
Advisor expense reimbursement - alternative 2 | 25.00% | 25.00% | 25.00% | |||||||
Operating expenses | $ 4,508,400 | |||||||||
Operating expenses not reimbursable | $ 5,078,162 | $ 5,078,162 | 5,078,162 | |||||||
Property management fees | 450,608 | $ 462,418 | 1,315,415 | $ 1,130,874 | ||||||
Accounting fees paid | 85,000 | 77,500 | 250,000 | 212,500 | ||||||
Origination of note receivable from related party | (4,500,000) | (9,000,000) | ||||||||
The Company [Member] | ||||||||||
Operating expenses | 3,296,119 | |||||||||
Moody National Realty Company LP [Member] | ||||||||||
Receivable from realty | $ 1,000,000 | |||||||||
Acquisitions in 2016 - Houston Hotel [Member] | ||||||||||
Acquisition fee | $ 120,000 | 120,000 | $ 120,000 | |||||||
Debt financing fee | 48,000 | |||||||||
Acquisitions in 2015 - Great Valley Hotel and Nashville Hotel [Member] | ||||||||||
Acquisition fee | 1,369,500 | 1,369,500 | $ 1,369,500 | |||||||
Acquisitions in 2015 - Great Valley Hotel, Nashvillel Hotel and Woodlands Hotel [Member] | ||||||||||
Debt financing fee | $ 715,500 | |||||||||
Follow On Offering [Member] | ||||||||||
Selling commission | 8,646,755 | |||||||||
Dealers manager fee | $ 2,455,643 | |||||||||
Moody National Advisor I LLC - Advisor [Member] | ||||||||||
Percent of organization and offering costs (in percent) | 15.00% | 15.00% | 15.00% | |||||||
Monthly asset management fee percentage | 0.833% | 0.833% | 0.833% | |||||||
Assets management fee | $ 653,000 | $ 616,295 | $ 1,970,589 | $ 1,456,694 | ||||||
Operating expenses | $ 1,212,281 | |||||||||
Operating expenses exceeded specified limit | 1,212,000 | |||||||||
Reimbursable expenses waived or assumed | $ 1,967,721 | $ 1,967,721 | $ 1,967,721 | |||||||
Moody National Advisor I LLC - Advisor [Member] | Follow On Offering [Member] | ||||||||||
Percent of organization and offering costs (in percent) | 15.00% | 15.00% | 15.00% | |||||||
Accumulated offering costs | $ 2,849,000 | $ 2,849,000 | $ 2,849,000 | |||||||
Total offering costs | 14,121,598 | 14,121,598 | 14,121,598 | |||||||
Offering cost directly incurred by company | 11,396,735 | 11,396,735 | 11,396,735 | |||||||
Offering cost reimbursed to advisor | 2,724,863 | 2,724,863 | 2,724,863 | |||||||
Receivable from Advisor for offering costs | 124,000 | 124,000 | 124,000 | |||||||
Total offering costs under DRIP | 0 | 0 | 0 | |||||||
Payable to Advisor for offering costs | 0 | 0 | 0 | |||||||
Moody National Advisor I LLC - Advisor [Member] | Initial Public Offering [Member] | ||||||||||
Accumulated offering costs | $ 3,214,000 | $ 3,214,000 | $ 3,214,000 | |||||||
Percentage of disposition fee on sale of each property (in percent) | 3.00% | 3.00% | 3.00% | |||||||
Maximum percentage of disposition fee and real estate commissions (in percent) | 6.00% | 6.00% | 6.00% | |||||||
Disposition fee | $ 551,250 | $ 551,250 | ||||||||
Disposition fee percentage | 2.25% | 2.25% | ||||||||
Moody Securities [Member] | Initial Public Offering [Member] | ||||||||||
Percentage of selling commisssion on gross offering (in percent) | 6.50% | |||||||||
Percentage of dealers manager fee on gross offering (in percent) | 3.50% | |||||||||
Selling commission | $ 746,368 | |||||||||
Dealers manager fee | $ 190,626 | |||||||||
Related Party Note [Member] | ||||||||||
Origination of note receivable from related party | $ 9,000,000 | |||||||||
Notes receivable accrues fixed rate (in percent) | 12.00% | |||||||||
Notes receivable origination fee | $ 90,000 | $ 90,000 | ||||||||
Notes receivable exit fee | $ 90,000 | |||||||||
Extension fee | $ 45,000 | |||||||||
Mezzanine Note Receivable [Member] | ||||||||||
Origination of note receivable from related party | $ 4,500,000 | |||||||||
Notes receivable accrues fixed rate (in percent) | 10.00% | |||||||||
Notes receivable origination fee | $ 45,000 | |||||||||
Notes receivable exit fee | $ 45,000 |
Related Party Arrangements (D42
Related Party Arrangements (Details Narrative 1) - USD ($) | Apr. 21, 2016 | Dec. 18, 2015 | Jul. 28, 2015 | Jul. 21, 2015 | Jun. 16, 2015 | Mar. 27, 2015 | Sep. 30, 2016 | ||
Purchase price | [1] | $ 240,373,887 | |||||||
Moody Securities [Member] | |||||||||
Proceeds from related parties | $ 350,000 | $ 350,000 | |||||||
Moody Securities [Member] | Notice of Acceptance Letter, Waiver and Consent With FINRA [Member] | |||||||||
Proceeds from related parties | $ 350,000 | ||||||||
Houston Hotel [Member] | |||||||||
Purchase price | [1] | $ 8,000,000 | |||||||
Fort Worth Hotel [Member] | |||||||||
Purchase price | $ 7,301,887 | [1] | $ 3,146,000 | ||||||
Nashville Hotel [Member] | |||||||||
Purchase price | [1] | $ 66,300,000 | |||||||
Great Valley Hotel [Member] | |||||||||
Purchase price | [1] | 11,000,000 | |||||||
Moody National Operating Partnership I, L.P (OP) [Member] | |||||||||
Membership interest percentage (in percent) | 74.50% | ||||||||
Percent of cash received from operations | 86.00% | ||||||||
Moody National Operating Partnership I, L.P (OP) [Member] | Houston Hotel [Member] | |||||||||
Purchase price | $ 8,000,000 | ||||||||
Moody National Operating Partnership I, L.P (OP) [Member] | Fort Worth Hotel [Member] | |||||||||
Purchase price | $ 7,301,887 | ||||||||
Moody National Operating Partnership I, L.P (OP) [Member] | Nashville Hotel [Member] | |||||||||
Purchase price | $ 66,300,000 | ||||||||
Moody National Operating Partnership I, L.P (OP) [Member] | Great Valley Hotel [Member] | |||||||||
Purchase price | $ 11,000,000 | ||||||||
Trust Member [Member] | |||||||||
Membership interest percentage (in percent) | 11.50% | ||||||||
Percent of cash received from operations | 86.00% | ||||||||
Moody National Mortgage Corporation [Member] | |||||||||
Membership interest percentage (in percent) | 14.00% | ||||||||
Percent of cash received from operations | 14.00% | ||||||||
[1] | Excludes closing costs. |
Incentive Award Plan (Details N
Incentive Award Plan (Details Narrative) - Independent directors compensation plan [Member] - Restricted stock [Member] - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Shares granted | 2,500 | |||||
Outstanding shares | 51,250 | 51,250 | ||||
Weighted average grant date fair value | $ 10 | $ 10 | $ 10 | $ 10 | ||
Compensation expenses | $ 77 | $ 4,077 | $ 14,077 | $ 45,846 | ||
Non-vested shares | 0 | 0 | 1,875 | 5,625 | ||
Board of Directors [Member] | ||||||
Entitlement number of shares issued, minimum offering exceeds certain specified limit | 5,000 | |||||
Minimum offering amount threshold | $ 2,000,000 | |||||
Number of shares issued to new joining directors | 5,000 | |||||
Entitlement number of shares issued, reelection of directors at annual general meeting | 2,500 | |||||
Number of remaining shares available for future issuance | 1,948,750 | 1,948,750 | ||||
Shares granted | 0 | 2,500 | ||||
Weighted average grant date fair value | $ 10 | $ 10 |
Incentive Award Plan (Details)
Incentive Award Plan (Details) - Independent directors compensation plan [Member] - Restricted stock [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Number of Shares | ||
Balance of non-vested shares, beginning | 1,875 | 5,625 |
Shares granted | 2,500 | |
Shares vested | (1,875) | (6,250) |
Balance of non-vested shares, ending | 0 | 1,875 |
Weighted Average Grant Date Fair Value | ||
Balance of non-vested shares, beginning | $ 10 | $ 10 |
Shares granted | 10 | |
Shares vested | 10 | 10 |
Balance of non-vested shares, ending | $ 10 | $ 10 |
Subordinated Participation In45
Subordinated Participation Interest (Details Narrative) | Sep. 30, 2016 |
Debt Disclosure [Abstract] | |
Maximum percentage of income received to special unit holders | 15.00% |
Percentage of additional operating income received | 8.00% |
Commitments and Contingencies46
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Description of franchise agreements | Franchise agreements allow the properties to operate under their respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee, generally between 3.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs that amount to between 1.5% and 4.3% of room revenue. | |||
Franchise Fees | $ 1,245,000 | $ 1,258,000 | $ 3,718,000 | $ 2,997,000 |
Upper Range [Member] | ||||
Term of franchise agreements | 20 years | |||
Royalty fees on room revenue | 6.00% | |||
Additional franchise fees on room revenue | 4.30% | |||
Lower Range [Member] | ||||
Term of franchise agreements | 10 years | |||
Royalty fees on room revenue | 3.00% | |||
Additional franchise fees on room revenue | 1.50% |
Commitments and Contingencies47
Commitments and Contingencies (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Commitments and Contingencies Disclosure [Abstract] | ||
Property improvement plan | $ 1,612,776 | $ 7,031,398 |
Real estate taxes | 2,264,150 | 2,182,435 |
Insurance | 292,607 | 379,907 |
Hotel furniture and fixtures | 2,289,521 | 2,154,650 |
Seasonality | 290,064 | 290,061 |
Expense deposit | 255,500 | |
Total restricted cash | $ 7,004,618 | $ 12,038,451 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Operating loss carry-forwards | $ 355,800 | |
TRS [Member] | ||
Deferred tax assets | $ 1,890,000 | $ 1,345,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Components of income tax expense (benefit) | ||||
Current expense | $ 7,263 | $ 302,000 | $ 139,577 | $ 663,000 |
Deferred expense (benefit) | (342,000) | 31,000 | (545,000) | (198,000) |
Total expense (benefit), net | (334,737) | 333,000 | (405,423) | 465,000 |
Income tax by jurisdiction | ||||
Federal | (355,000) | 225,000 | (507,000) | 375,000 |
State | 20,263 | 108,000 | 101,577 | 90,000 |
Total tax expense (benefit) | $ (334,737) | $ 333,000 | $ (405,423) | $ 465,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Oct. 15, 2016 | Oct. 12, 2016 | Oct. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Subsequent Event [Line Items] | |||||
Distribution declared | $ 869,674 | $ 888,434 | |||
Distributions Declared [Member] | |||||
Subsequent Event [Line Items] | |||||
Distribution declared | $ 869,674 | ||||
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Shares repurchased during the period | 1,320 | ||||
Average price (in dollars per share) | $ 10.75 | ||||
Subsequent Event [Member] | Distributions Declared [Member] | |||||
Subsequent Event [Line Items] | |||||
Distribution declared | $ 900,668 | ||||
Cash distribution | $ 558,819 | ||||
Distribution paid pursuant to DRIP | $ 310,855 |