ESH Hospitality 10-K 2013 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2013

-OR-

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

For the transition period from                 to                

Commission file number 001-36190

Extended Stay America, Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-3140312
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Commission file number 001-36191

ESH Hospitality, Inc.

(Exact name of registrant as specified in its charter)

Delaware	27-3559821
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

11525 N. Community House Road, Suite 100

Charlotte, North Carolina 28277

(Address of principal executive offices, including zip code)

(980) 345-1600

(Registrants’ telephone number, including area code)

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

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.01 per share, of Extended Stay America, Inc. and Class B Common Stock, par value $0.01 per share, of ESH Hospitality, Inc., which are attached and trade together as a Paired Share.	New York Stock Exchange

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

None None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Extended Stay America, Inc.	Yes  ¨	No  x
ESH Hospitality, Inc.	Yes  ¨	No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Extended Stay America, Inc.	Yes  ¨	No  x
ESH Hospitality, Inc.	Yes  ¨	No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Extended Stay America, Inc.	Yes  x	No  ¨
ESH Hospitality, Inc.	Yes  x	No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Extended Stay America, Inc.	Yes  x	No  ¨
ESH Hospitality, Inc.	Yes  x	No  ¨

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

Extended Stay America, Inc.	x
ESH Hospitality, Inc.	x

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

Extended Stay America, Inc.	Large accelerated filer¨	Accelerated filer  ¨
	Non-accelerated filerx (Do not check if a smaller reporting company)	Smaller reporting company  ¨
ESH Hospitality, Inc.	Large accelerated filer¨	Accelerated filer  ¨
	Non-accelerated filer  x (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Extended Stay America, Inc.	Yes  ¨	No  x
ESH Hospitality, Inc.	Yes  ¨	No  x

As of June 28, 2013, the last business day of the registrants’ most recently completed second quarter, the registrants’ Paired Shares were not publicly traded. The registrants’ Paired Shares began trading on the New York Stock Exchange on November 13, 2013. As of March 10, 2014, the aggregate value of the registrants’ Paired Shares held by non-affiliates was approximately $900.9 million, based on the number of shares held by non-affiliates as of March 10, 2014 and the closing price of the registrants’ Paired Shares on the New York Stock Exchange on March 10, 2014.

Indicate by check mark whether the registrants have filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

As of March 10, 2014, Extended Stay America, Inc. had 204,787,500 shares of common stock outstanding and ESH Hospitality, Inc. had 204,787,500 shares of Class B common stock and 250,295,833 shares of Class A common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statements relating to the 2014 Annual Meetings of Shareholders are incorporated by reference into Part III of this combined annual report on Form 10-K.

TABLE OF CONTENTS

		Page
ABOUT THIS COMBINED ANNUAL REPORT			ii
CERTAIN DEFINED TERMS			iv
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			iv
PART I
Item 1.	Business		1
Item 1A.	Risk Factors		6
Item 1B.	Unresolved Staff Comments		29
Item 2.	Properties		29
Item 3.	Legal Proceedings		30
Item 4.	Mine Safety Disclosures		30
PART II
Item 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		30
Item 6.	Selected Financial Data		34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		74
Item 8.	Financial Statements and Supplementary Data		75
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		153
Item 9A.	Controls and Procedures		153
Item 9B.	Other Information		153
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		154
Item 11.	Executive Compensation		154
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		154
Item 13.	Certain Relationships and Related Transactions, and Director Independence		155
Item 14.	Principal Accounting Fees and Services		155
PART IV
Item 15.	Exhibits, Financial Statement Schedules		155

i

ABOUT THIS COMBINED ANNUAL REPORT

This combined annual report on Form 10-K is filed by Extended Stay America, Inc., a Delaware corporation (the “Corporation”), and its controlled subsidiary, ESH Hospitality, Inc., a Delaware corporation (“ESH REIT”). Both the Corporation and ESH REIT have securities that have been registered under the Securities Act of 1933, as amended (the “Securities Act”), which are publicly traded and listed on the New York Stock Exchange (the “NYSE”) as Paired Shares (as defined below). As further discussed below, unless otherwise indicated or the context requires, the terms the “Company,” “Extended Stay,” “Extended Stay America,” “we,” “our” and “us” refer to the Corporation, ESH REIT and their subsidiaries considered as a single enterprise.

We believe combining the annual reports on Form 10-K of the Corporation and ESH REIT into this single report results in the following benefits:

• Enhances investors’ understanding of the Corporation and ESH REIT by enabling investors, whose ownership of Paired Shares gives them an ownership interest in our hotel properties through ESH REIT and in the operation of our business through the Corporation, to view the business as a whole.

• Eliminates duplicative and potentially confusing disclosure and provides a more streamlined presentation, since a substantial amount of our disclosure applies to the Corporation and ESH REIT.

• Creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

On November 18, 2013, the Corporation and ESH REIT completed their initial public offering (the “Offering”) of Paired Shares. Prior to the Offering, we completed the Pre-IPO Transactions (as defined in “Business—Our Recent Operating History—The Pre-IPO Transactions”), which restructured and reorganized the existing business. Unless otherwise indicated or the context requires:

• Company. Subsequent to the Pre-IPO Transactions, the term “Company” refers to the Corporation, ESH REIT and their subsidiaries considered as a single enterprise. For the period from October 8, 2010 (the “Acquisition Date”) through the Pre-IPO Transactions, the term “Company” refers to ESH REIT, ESH Strategies (as defined below), HVM (as defined below) and their subsidiaries considered as a single enterprise.

• Corporation. The term “Corporation” refers to Extended Stay America, Inc., a Delaware corporation, and its subsidiaries (excluding ESH REIT and its subsidiaries), which include the Operating Lessees (as defined below), ESH Strategies (as defined below) and ESA Management (as defined below). The Corporation controls ESH REIT through its ownership of ESH REIT’s Class A common stock, which represents approximately 55% of the outstanding common stock of ESH REIT.

• ESH REIT. Subsequent to the Pre-IPO Transactions, the term “ESH REIT” refers to ESH Hospitality, Inc., a Delaware corporation that has elected to be taxed as a REIT, and its subsidiaries. For the period from the Acquisition Date through the Pre-IPO Transactions, the term “ESH REIT” refers to ESH Hospitality LLC, a Delaware limited liability company that elected to be taxed as a REIT, its subsidiaries, which prior to the Pre-IPO Transactions, included three taxable REIT subsidiaries (the “Operating Lessees”) and HVM (as defined below), a consolidated variable interest entity. ESH REIT is a majority-owned subsidiary of the Corporation. For the period from the Acquisition Date through the Pre-IPO Transactions, ESH REIT was indirectly owned by the Sponsors (as defined below).

• ESH Strategies. The term “ESH Strategies” refers to ESH Hospitality Strategies LLC, a Delaware limited liability company, and its subsidiaries. ESH Strategies owns the intellectual property related to our business and is a wholly-owned subsidiary of the Corporation. For the period from the Acquisition Date through to the Pre-IPO Transactions, ESH Strategies was owned by the Sponsors (as defined below).

• ESA ManagementandHVM. The term “ESA Management” refers to ESA Management LLC, a Delaware limited liability company, and its subsidiaries. ESA Management manages the leased hotel properties on behalf of the Operating Lessees, and is a wholly-owned subsidiary of the Corporation. ESH REIT leases its hotel properties to the Operating Lessees. For the period from the Acquisition Date through the Pre-IPO Transactions, the Operating Lessees engaged HVM LLC (“HVM”) as an eligible independent contractor within the meaning of Section 856(d)(9) of the Internal Revenue Code of 1986, as amended (the “Code”), to manage the leased hotel properties on behalf of the Operating Lessees.

ii

• Company Predecessor. The term “Company Predecessor” refers to substantially all of the assets and operations of Homestead Village LLC that were auctioned off by the former debtors of Homestead Village LLC in its Chapter 11 reorganization, which were acquired by ESH REIT and ESH Strategies, collectively, on the Acquisition Date. The acquisition was accounted for as a business combination in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations.”

• ESH REIT Predecessor. The term “ESH REIT Predecessor” refers to the portion of the assets and operations of Homestead Village LLC acquired by ESH REIT on the Acquisition Date. The acquisition was accounted for as a business combination in accordance with FASB ASC 805, “Business Combinations.”

• Paired Shares. The term “Paired Shares” means the shares of common stock, par value $0.01 per share, of the Corporation together with the shares of Class B common stock, par value $0.01 per share, of ESH REIT, which are attached and trade as a single unit.

• Sponsors. The term “Sponsors” collectively refers to Centerbridge Partners, L.P., Paulson & Co. Inc. and the Blackstone Group, L.P. and their affiliates.

See “Business—Our Corporate Structure” for a simplified structure chart reflecting our current corporate structure.

For ease of presentation:

• When we refer to our ownership of hotel properties, we are referring to the hotel properties owned by subsidiaries of ESH REIT.

• When we refer to the management and operation of our hotel properties, we are referring to the management of hotel properties by ESA Management, which is owned by the Corporation, subsequent to the Pre-IPO Transactions, and the management of hotel properties by HVM prior to the Pre-IPO Transactions.

• When we refer to our brands, we are referring to intellectual property related to our business owned by ESH Strategies.

• When we refer to our management team, our executives or officers, we are referring to the management team (and executives and officers) of the Corporation and ESH REIT. Prior to the Pre-IPO Transactions, when we refer to our management team, our executives or officers, we are referring to HVM’s management team (and executives and officers).

To help investors understand the differences between the Company and ESH REIT, this combined annual report on Form 10-K presents the following sections or portions of sections for each of the Company and ESH REIT (where applicable):

• Part II Item 5 – Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

• Part II Item 6 – Selected Financial Data

• Part II Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

• Part II Item 7A – Quantitative and Qualitative Disclosures About Market Risk

• Part II Item 8 – Financial Statements and Supplementary Data

As required by FASB ASC 810, “Consolidations,” due to the Corporation’s controlling financial interest in ESH REIT, the Corporation is required to consolidate ESH REIT’s financial position, results of operations, comprehensive income and cash flows with those of the Corporation. As such, selected financial data, management’s discussion and analysis of financial condition and results of operations and financial statements are presented herein for each of the Company, on a consolidated and combined basis, and ESH REIT. The Corporation’s stand-alone financial condition and related information is discussed herein where applicable.

This report also includes separate Part II Item 9A – Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Corporation and ESH REIT in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Corporation and the Chief Executive Officer and the Chief Financial Officer of ESH REIT have made the requisite certifications and that the Corporation and ESH REIT are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

iii

CERTAIN DEFINED TERMS

The following are definitions of certain key lodging operating metrics used in this combined annual report on Form 10-K:

“ADR” or “average daily rate” means hotel room revenues divided by total number of rooms sold in a given period.

“Extended stay market” means the market of hotels with a fully equipped kitchenette in each guest room, which accept reservations and do not require a lease, as defined byThe Highland Group.

“Hotel operating profit” means the sum of room and other hotel revenues less hotel operating expenses (excluding loss on disposal of assets) and “hotel operating margin” means the ratio of hotel operating profit divided by the sum of room and other hotel revenues.

“Mid-price extended stay segment” means the segment of the extended stay market that generally operates at a daily rate between $45 and $95, as defined by The Highland Group.

“Occupancy” or “occupancy rate” means the total number of rooms sold in a given period divided by the total number of rooms available at a hotel or group of hotels.

“RevPAR” or “revenue per available room” means the product of average daily room rate multiplied by the average daily occupancy achieved for a hotel or group of hotels in a given period. RevPAR does not include other ancillary revenues, such as food and beverage revenues or parking, telephone or other guest service revenues generated by a hotel.

The following terms when used in connection with our company-wide initiatives to renovate and make improvements to our hotel properties have the following meanings in this combined annual report on Form 10-K (in all cases, unless the context otherwise requires or where otherwise indicated):

“Hotel renovations” or “Platinum renovation package” refer to upgrades that typically include remodeling of common areas, new paint, carpet, signage, tile or vinyl flooring and counters in bathrooms and kitchens, as well as the refurbishment of furniture, replacement of aged mattresses and installation of new flat screen televisions, artwork, lighting and bedspreads.

“Post-Renovation Period” means the twelve-month period starting the month after the completion of the Ramp-Up Period.

“Pre-Renovation Period” means the twelve-month period ending the month prior to the commencement of renovations.

“Ramp-Up Period” means, typically, the additional three-month period for a renovated hotel to return to occupancy levels approximating Pre-Renovation Period levels following the Renovation Period.

“Renovation Period” means the approximately three-month period it takes to complete a Platinum hotel renovation, during which the hotel experiences temporary disruption and weakened performance.

“Room refreshes” or “Silver refresh package” refer to upgrades that typically include the replacement of aged mattresses and installation of new flat screen televisions, lighting, bedspreads and signage.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This combined annual report on Form 10-K contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts included in this combined annual report on Form 10-K may be forward-looking. Statements herein regarding our ongoing hotel reinvestment program, our ability to meet our debt service obligations, our future capital expenditures, our distribution or dividend strategy, our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position and our business outlook, business trends and other information referred to under “Business,” “Risk Factors,” “Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distribution Policies” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements.

iv

When used in this combined annual report on Form 10-K, the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “will,” “look forward to” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this combined annual report on Form 10-K. Such risks, uncertainties and other important factors include, but are not limited to:

• changes in U.S. general and local economic activity and the impact of these changes on consumer demand for lodging and related services in general and for extended stay lodging in particular;

• levels of spending in the business, travel and leisure industries, as well as consumer confidence;

• increased competition and the over-building of hotels in our markets;

• incidents or adverse publicity concerning our hotels or other extended stay hotels;

• our ability to implement our business strategies profitably;

• declines in occupancy and average daily rate;

• our ability to retain the services of certain members of our management;

• the ability of ESH REIT to qualify, and remain qualified, as a REIT under the Code;

• actual or constructive ownership (including deemed ownership by virtue of certain attribution provisions under the Code) of Paired Shares by investors who we do not control may cause ESH REIT to fail to meet the REIT income tests;

• the availability of capital for renovations and future acquisitions;

• the high fixed cost of hotel operations;

• the seasonal and cyclical nature of the real estate and lodging businesses;

• interruptions in transportation systems, which may result in reduced business or leisure travel;

• events beyond our control, such as war, terrorist attacks, travel-related health concerns and natural disasters;

• changes in distribution arrangements, such as through internet travel intermediaries;

• our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems;

• decreases in brand loyalty due to increasing use of internet reservation channels;

• fluctuations in the supply and demand for hotel rooms;

• changes in the tastes and preferences of our customers;

• our ability to integrate and successfully operate any hotel properties acquired in the future and the risks associated with these hotel properties;

• changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs or changes in interpretations thereof or increased taxes resulting from tax audits;

• the cost of compliance with and liabilities under environmental, health and safety laws;

• changes in real estate and zoning laws and increases in real property tax rates;

• increases in interest rates and operating costs;

v

• our substantial indebtedness;

• inadequate insurance coverage;

• adverse litigation judgments or settlements; and

• our status as a “controlled company.”

There may be other factors that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed in this combined annual report on Form 10-K. You should evaluate all forward-looking statements made in this combined annual report on Form 10-K in the context of these risks and uncertainties.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

vi

PART I

Item 1. Business

Our Company

We are the largest owner/operator of company-branded hotels in North America. Our business operates in the extended stay lodging industry, and we own and operate 684 hotel properties comprising approximately 76,200 rooms located in 44 states across the United States and in Canada. We own and operate 632 of our hotels under the core brand, Extended Stay America, which serves the mid-price extended stay segment, and accounts for approximately half of the segment by number of rooms in the United States. In addition, we own and operate three Extended Stay Canada hotels and 49 hotels in the economy extended stay segment under the Crossland Economy Studios and Hometown Inn brands. For the year ended December 31, 2013, the Company had revenues of approximately $1.1 billion, Adjusted EBITDA of approximately $518.6 million and net income of approximately $82.7 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—The Company” for a definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA.

Our extended stay hotels are designed to provide an affordable and attractive alternative to traditional lodging or apartment accommodations and are targeted toward self-sufficient, value-conscious guests. Our hotels feature fully-furnished rooms with in-room kitchens, complimentary grab-and-go breakfast, free WiFi, flat screen TVs and limited housekeeping service, which is typically provided on a weekly basis. Our guests include business travelers, professionals on temporary work or training assignments, persons relocating, temporarily displaced or purchasing a home and anyone else in need of temporary housing. These guests generally rent accommodations on a weekly or longer term basis.

In 2013, our average length of stay was approximately 26 days, our occupancy was 74.2% and our hotels generated property-level hotel operating margins greater than 50%.

We were founded in January 1995 as a developer, owner and operator of extended stay hotels. Following a period focused primarily on new development, we became a consolidator of hotel properties by selectively acquiring extended stay companies and hotels, ultimately creating the largest mid-price extended stay company in the United States. We were acquired out of bankruptcy by the Sponsors on October 8, 2010. We now operate an extended stay hospitality platform with approximately 10,000 employees and are led by a management team with extensive public company experience in hospitality, consumer retail and service businesses.

Our Recent Operating History

Prior to the Offering, we restructured and reorganized our then-existing business through a series of transactions (collectively, as described more fully below, the “Pre-IPO Transactions”). We believe that our business is now more operationally efficient because all of the assets, operations and management of our business, other than ownership of the hotel properties, is housed in one entity. Ownership of Paired Shares gives investors an ownership interest in our hotel properties through ESH REIT and in the operation of our business through the Corporation. The structure permits us to retain some, though not all, of the REIT benefits of our prior structure (i.e., while ESH REIT continues to be taxed as a REIT for U.S. federal income tax purposes, all distributions paid by ESH REIT to the Corporation are subject to corporate level tax, effectively eliminating a majority of the tax benefit of REIT status for the consolidated and combined Company taken as a whole).

The Corporation

Extended Stay America, Inc. was incorporated in Delaware on July 8, 2013. The Corporation manages and operates the 684 hotels owned by ESH REIT. The hotel properties are managed by ESA Management, a wholly-owned subsidiary of the Corporation, pursuant to management agreements with the operating lessees, and operated by the Operating Lessees, wholly-owned subsidiaries of the Corporation, pursuant to leases with ESH REIT. The substantial majority of the hotels are operated under the core brand, Extended Stay America. A wholly-owned subsidiary of the Corporation owns the brands related to our business.

1

ESH REIT

ESH Hospitality, Inc. was formed as a limited liability in Delaware on September 16, 2010 and was converted to a corporation on November 5, 2013. ESH REIT has elected to be taxed as a REIT. ESH REIT owns the Company’s 684 hotels, which are managed and operated by subsidiaries of the Corporation as described in the preceding paragraph.

The Pre-IPO Transactions

The Corporation was formed for the purpose of effecting the Pre-IPO Transactions. Prior to the Pre-IPO Transactions, ESH Hospitality Holdings LLC, a Delaware limited liability company (“Holdings”), owned all of ESH REIT’s then-outstanding common units. Prior to the Pre-IPO Transactions, the Sponsors owned an approximate 99% interest in Holdings and the remaining interests were owned by certain members of the board of managers of Holdings and employees of HVM. Prior to the Pre-IPO Transactions, the Operating Lessees were each taxable REIT subsidiaries that leased the hotel properties from ESH REIT pursuant to operating leases. HVM was an eligible independent contractor, within the meaning of Section 856(d)(9) of the Code, that managed the hotel properties pursuant to management agreements with the Operating Lessees. Subsidiaries of ESH Strategies owned the trademarks and licensed their use to the Operating Lessees pursuant to trademark license agreements.

Through the Pre-IPO Transactions, the existing business was restructured and reorganized such that Holdings was liquidated and substantially all of the common stock of ESH REIT was distributed to the Sponsors; the Operating Lessees, ESH Strategies and the assets and obligations of HVM were transferred to the Corporation; the shareholders of ESH REIT transferred to the Corporation all of the Class A common stock of ESH REIT; and 100% of the common stock of the Corporation and all of the Class B common stock of ESH REIT were paired, forming the Paired Shares.

The Corporation, through its direct wholly-owned subsidiaries, now leases the hotel properties from ESH REIT, owns the trademarks related to the business and self-manages the hotel properties. In addition, the Corporation owns all of the Class A common stock of ESH REIT, which represents approximately 55% of the outstanding shares of common stock of ESH REIT. The Corporation used the majority of the proceeds it received in the Offering to purchase a sufficient number of additional shares of Class A common stock of ESH REIT to ensure that, upon the completion of the Offering, the Class A common stock of ESH REIT owned by the Corporation represented approximately 55% of the outstanding common stock of ESH REIT.

Our Brands

We own and operate substantially all of our hotels under the core Extended Stay America brand and during 2013 completed a rebranding program to consolidate the remaining hotels that were operated under the former brand portfolio of Homestead Studio Suites, Studio Plus and Extended Stay Deluxe under this single brand. Our Extended Stay America-branded hotels feature:

• In-room kitchens;

• Free WiFi;

• Free grab-and-go breakfast;

• Flat screen TVs with premium cable channels;

• On-site guest laundry; and

• Unlimited local phone service.

We own and operate 632 Extended Stay America hotels with approximately 69,600 rooms in the United States and three hotels with 500 rooms in Canada under the Extended Stay Canada brand. Additionally, we continue to own and operate 47 hotels with approximately 5,900 rooms under the Crossland Economy Studios brand and two hotels with 265 rooms under the Hometown Inn brand. Crossland and Hometown Inn operate in a lower price tier than Extended Stay America-branded hotels, offering fewer amenities and smaller room sizes and primarily appeal to guests with longer duration stays.

2

Our Corporate Structure

The chart below summarizes our corporate structure as of the date of this combined annual report on Form 10-K.

3

Our Industry

U.S. Lodging Industry

The lodging industry is a significant part of the U.S. economy, generating over $122.3 billion of room revenues in 2013 and comprising approximately 4.9 million hotel rooms as of December 31, 2013, according to STR, Inc. Lodging industry performance is generally tied to both macro-economic and micro-economic trends in the United States and, similar to other industries, experiences both positive and negative operating cycles. Since the 2008 to 2009 recession, demand in the U.S. lodging industry has begun to recover while supply growth has remained at historically low rates. According to PricewaterhouseCoopers (“PwC”), room supply grew 0.7% in 2013 and is expected to grow 1.0% in 2014, which is still well below historical annual supply growth of 1.7% over the last 15 years. RevPAR has grown in the U.S. lodging industry for each year starting in 2010 and according to PwC, RevPAR for the overall U.S. lodging industry grew 5.4% in 2013 and is expected to grow 6.0% in 2014.

U.S. Extended Stay Segment

Extended stay hotels represent a growing segment within the U.S. lodging industry with approximately 360,925 rooms that generated approximately $7.9 billion of revenues for the year ended December 31, 2013, according to The Highland Group. The extended stay segment tends to follow the cyclicality of the overall lodging industry.

Extended stay hotels are further differentiated by price point into economy, mid-price and upscale segments. Our business is focused primarily on the mid-price extended stay segment, which comprised approximately 39% of the supply of extended stay rooms in 2013. RevPAR growth for the mid-price extended stay segment has outpaced the U.S. lodging industry as a whole since 2009 as well as the economy and upscale extended stay segments. The mid-price extended stay segment rebounded from an industry trough with RevPAR growth of 33.4% between 2009 and 2013, which was higher than the overall U.S. lodging industry as well as the economy and upscale extended stay segments, each of which grew at 28.2%, 21.5% and 22.2%, respectively, for the same period.

Seasonality

The lodging industry is seasonal in nature. Based upon the operating history of our hotels, we believe that our business is not as seasonal in nature as the overall lodging industry. However, our revenues are generally lower during the first and fourth quarters of each calendar year as is typical in the U.S. lodging industry. Because many of our expenses are fixed and do not fluctuate with changes in revenues, declines in revenues can cause disproportionate fluctuations or decreases in our quarterly earnings and cash flows during these periods.

Cyclicality

The lodging industry is cyclical and its fundamental performance tends to follow the general economy, albeit on a lagged basis. There is a history of increases and decreases in demand for hotel rooms, in occupancy levels and in rates realized by owners of hotels through economic cycles. Variability of results through some of the cycles in the past has been more severe due to changes in the supply of hotel rooms in given markets or in given categories of hotels. The combination of changes in economic conditions and in the supply of hotel rooms can result in significant volatility in results of operations for owners of hotel properties. The costs of running a hotel tend to be more fixed than variable. Because of this, in an environment of either increasing or decreasing revenues, the rate of change in earnings will be greater than the rate of change in revenues. See “Risk Factors—The lodging industry, including the extended stay segment, is cyclical and a worsening of general economic conditions or low levels of economic growth could materially adversely affect our business, financial condition, results of operations and our ability to pay dividends to our shareholders.”

Competition

We operate in a highly competitive industry. Competition in the lodging industry is based on a number of factors, including room rates, quality of accommodations, service levels, convenience of location, reputation, reservation systems, name recognition and the supply and availability of lodging in local markets, including short-term lease apartments and limited service hotels. Competitors may include new participants in the lodging industry generally and participants in other segments of the lodging industry that may enter the extended stay segment. They may also include existing participants in the extended stay segment that may increase their

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product offerings to include facilities in the budget, economy or mid-price segments. We also compete for travelers with hotels outside the extended stay segment as well as serviced apartments. Competition is for both quality locations to build new facilities and for guests to fill and pay for those facilities. We also face competition from third-party internet travel intermediaries, such as Priceline.com, Expedia.com and Travelocity.com, and specialized intermediaries that locate and reserve hotel rooms for corporate lodgers. See “Risk Factors—Risks Related to the Lodging Industry—We operate in a highly competitive industry.”

Employees

We employ approximately 10,000 employees. Approximately 9,500 of these employees are property-level employees, comprised of approximately 3,200 full time employees and approximately 6,300 part time employees. None of our employees are represented by unions or covered by collective bargaining agreements. We consider our relations with our employees to be good.

Sales, Marketing and Reservations

Our sales team is made up of approximately 115 sales professionals focused on growing our business with key accounts, building relationships with new customers and coaching our property operation teams on local sales. We are organized regionally, or by account, and our team focuses on the following customers: major Fortune 500 companies; small and medium sized businesses; travel agencies; relocation and staffing consultants; and medical, technology, government and educational organizations. Approximately 40% of our revenue in 2013 was derived from accounts managed by this team. Our upgraded brand and amenity offering now allows our sales force to target a broader corporate customer base. We believe further penetration of corporate accounts will yield a more profitable customer base.

We seek to maximize revenue in each hotel through our revenue management team, made up of approximately 35 associates. They are responsible for determining prices and managing the availability of room inventory to different channels and customer segments. Historically, we had very limited staffing and focus on this area. Beginning in 2012, we significantly expanded our staffing and investment in revenue management. We have centralized our approach and developed several analytical tools to inform pricing and inventory decisions. We believe we have an opportunity to further improve the team’s effectiveness and efficiency by deploying an automated revenue management system.

Our marketing strategy is focused on growing awareness of our brands and demand for our hotels through a combination of media channels, including TV, print and radio, public relations and email marketing. We also put a significant emphasis on our internet activity, buying search engine placement, internet display advertising and other media to drive traffic to our website. We maintain a customer database and use it for targeted marketing activity. Additionally, we have introduced marketing in new channels, such as TV and radio, in part to support our consolidation under a single brand.

We use a central reservation system to provide access to our hotel inventory through a wide variety of channels—property-direct, our central call center, our desktop and mobile websites, travel agency global distribution systems and our wholesale and online distribution booking partners. We outsource our reservation system, our call center and management of our website. For the year ended December 31, 2013, approximately 60% of our revenue was derived from property-direct reservations, approximately 8% was derived from our central call center, approximately 17% was derived from our own proprietary website, approximately 6% was derived from online booking partners and approximately 9% was derived from global distribution systems. We believe we also have an opportunity to increase the power and reach of our distribution network by enhanced connections with additional agency, merchant and wholesale partners.

Environmental Matters

Our hotel properties are subject to various federal, state and local environmental laws that impose liability for contamination. Under these laws, governmental entities have the authority to require us, as the current or former owner of the property, to perform or pay for the clean-up of contamination (including hazardous substances, waste or petroleum products) at or emanating from the property and to pay for natural resource damage arising from contamination. These laws often impose liability without regard to whether the owner or operator knew of or caused the contamination. Such liability can be joint and several, so that each covered person can be responsible for all of the costs involved, even if more than one person may have been responsible for the contamination. We can also be liable to private parties for costs of remediation, personal injury and death and/or property damage resulting from contamination at or emanating from our hotel properties. Moreover, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral or to sell the property on favorable terms or at all. Furthermore, persons who sent waste to a waste disposal facility, such as a landfill or an incinerator, may be liable for costs associated with cleanup of that facility.

        Recent Phase I environmental assessments have been obtained for each of our hotel properties. The Phase I environmental assessments were intended to identify potential contamination, but did not include any invasive sampling procedures, such as soil or ground water sampling. The Phase I environmental assessments identified a number of known or potential environmental conditions associated with historic uses of the hotel properties or adjacent properties. However, the Phase I environmental assessments did not identify any environmental liability that we believe would have a material adverse effect on our business, assets, results of operations or liquidity. It is possible that these environmental assessments did not reveal all potential environmental liabilities, such as the presence of former underground tanks for the storage of petroleum-based or waste products, that could create a potential for release of hazardous substances. In addition, it is possible that environmental liabilities have arisen since the assessments were completed. No assurances can be given that (i) future regulatory requirements will not impose any material environmental liability, or (ii) the current environmental condition of our hotel properties will not be affected by the condition of properties in the vicinity of our hotel properties (such as the presence of leaking underground storage tanks) or by third parties unrelated to us.

We have obtained environmental insurance with respect to each of our hotel properties, subject to limits, deductibles and exclusions customarily carried for similar properties. We believe that the environmental insurance policies are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice; however, our environmental insurance coverage may not be sufficient to fully cover our losses.

In addition, our hotels (including our real property, operations and equipment) are subject to various federal, state and local environmental, health and safety regulatory requirements that address a wide variety of issues, including, but not limited to, the use, management and disposal of hazardous substances and wastes, air emissions, discharges of waste materials (such as refuge or sewage), the registration, maintenance and operation of our boilers and storage tanks, asbestos, and lead-based paint. Some of our hotels also routinely handle and use hazardous or regulated substances and wastes as part of their operations, which are subject to regulation (for example, swimming pool chemicals or biological waste). Our hotels incur costs to comply with these environmental, health and safety laws and regulations, and if these regulatory requirements are not met or become more stringent in the future, or unforeseen events result in the discharge of dangerous or toxic substances at our hotel properties, we could be subject to increased costs of compliance, fines and penalties for non-compliance, and material liability from third parties for harm to the environment, damage to real property or personal injury and death. We are aware of no past or present environmental liability for non-compliance with environmental, health and safety laws and regulations that we believe would have a material adverse effect on our business, assets or results of operations.

Certain hotels we currently own or those we acquire in the future contain, may contain, or may have contained asbestos-contaminating material (“ACM”). Environmental, health and safety laws require that ACM be properly managed and maintained, and include requirements to undertake special precautions, such as removal or abatement, if ACM would be disturbed during maintenance, renovation or demolition of a building. These laws regarding ACM may impose fines and penalties on building owners, employers and operators for failure to comply with these requirements or expose us to third-party liability. We are not presently aware of any ACM at our hotel properties that would result in a material adverse effect on our business, assets or results of operations.

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

Regulation

A number of states and local governments regulate the licensing of hotels by requiring registration, disclosure statements and compliance with specific standards of conduct. We believe that each of our hotels has the necessary permits and approvals to operate its respective business, and we intend to continue to obtain these permits and approvals for any new hotels. We are also subject to laws governing our relationship with our employees, including minimum wage requirements, overtime, working conditions and work permit requirements. An increase in the minimum wage rate, employee benefit costs or other costs associated with employees could materially adversely affect our business. There are frequently proposals under consideration, at the federal and state levels, to increase the minimum wage.

Under the American with Disabilities Act of 1990 (the “ADA”), all public accommodations are required to meet certain federal requirements related to access and use by disabled persons. We attempt to satisfy ADA requirements in the designs for our hotels, but we cannot assure you that we will not be subjected to a material ADA claim. If that were to happen, we could be ordered to spend substantial sums to achieve compliance, fines could be imposed against us, and we could be required to pay damage awards to private litigants. The ADA and other regulatory initiatives could materially adversely affect our business as well as the lodging industry in general.

Insurance

We currently have the types and amounts of insurance coverage that we consider appropriate for a company in our business. While we believe that our insurance coverage is adequate, our business, results of operations and financial condition could be materially adversely affected if we were held liable for amounts exceeding the limits of our insurance coverage or for claims outside the scope of our insurance coverage.

Available Information

Our website address is www.extendedstay.com. Our combined annual reports on Form 10-K, combined quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available free of charge through our website under “Investor Relations,” as soon as reasonably practicable after the electronic filing of these reports is made with the Securities and Exchange Commission (“SEC”). The information contained on, or that can be accessed through, our website, is expressly not incorporated by reference in this combined annual report on Form 10-K.

Item 1A. Risk Factors

You should carefully consider the following risks as well as the other information included in this combined annual report on Form 10-K. Any of the following risks could materially and adversely affect our business, financial condition or results of operations and our ability to pay dividends to our shareholders.

Risks Related to the Lodging Industry

We operate in a highly competitive industry.

The lodging industry is highly competitive. We compete with traditional hotels and lodging facilities (including limited service hotels), other purpose built extended stay hotels (including those owned and operated by major hospitality chains with well-established and recognized brands and individually-owned extended stay hotels) and alternative lodging (including serviced apartments). We expect that competition within the mid-price and economy segments of the extended stay lodging market will continue as we face increased competition from third-party internet travel intermediaries, such as Priceline.com, Expedia.com and Travelocity.com, and specialized intermediaries that locate and reserve hotel rooms for corporate lodgers. We compete based on a number of factors, including room rates, quality of accommodations, service levels, convenience of location, reputation, reservation systems, brand recognition and supply and availability of alternative lodging. See “Business—Competition.” To maintain our rates,

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we may face pressure to offer increased services and amenities at our hotel properties, comparable to those offered at traditional hotels, which could increase our operating costs and reduce our profitability. We do not expect to increase our rates to match our competitors, and a number of our competitors have a significant number of individuals participating in their guest loyalty programs, which may enable them to attract more customers and more effectively retain such customers. Our competitors may also have greater financial and marketing resources than we do, which could allow them to reduce their rates, offer greater convenience, services or amenities, build new hotels in direct competition with our existing hotels, improve their properties, expand and improve their marketing efforts, all of which could have a material adverse effect on our business, financial condition and results of operations.

The lodging industry, including the extended stay segment, is cyclical and a worsening of general economic conditions or low levels of economic growth could materially adversely affect our business, financial condition, results of operations and our ability to pay dividends to our shareholders.

The performance of the lodging industry, including the extended stay segment, is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Declines in corporate budgets and spending and consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence and high unemployment or adverse political conditions can lower the revenues and profitability of our hotels.

Changes in consumer demand and general business cycles can subject, and have subjected, our revenues to significant volatility. The majority of our expenses are relatively fixed. These fixed expenses include labor costs, interest, rent, property taxes, insurance and utilities, all of which may increase at a greater rate than our revenues. The expenses of owning and operating hotels are not significantly reduced when circumstances such as market and economic factors and competition cause a reduction in revenues. Where cost-cutting efforts are insufficient to offset declines in revenues, we could experience a material decline in margins and reduced operating cash flows or losses. If we are unable to decrease our expenses significantly or rapidly when demand for our hotels decreases, the decline in our revenues could have a materially adverse effect on our net operating cash flows and profitability. This effect can be especially pronounced during periods of economic contraction or slow economic growth, such as the recent economic recession.

In addition to general economic conditions, new hotel room supply is an important factor that can affect the lodging industry’s performance and overbuilding has the potential to further exacerbate the negative effect of an economic downturn or precipitate a cycle turn. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. Decline in hotel room demand, or a continued growth in hotel room supply, could result in revenues that are substantially below expectations or result in losses, which could have a material adverse effect on our business, financial condition, results of operations and our ability to pay dividends to our shareholders. See “Business—Our Industry” for a description of increases in hotel room supply.

The extended stay segment has tended to follow the overall cyclicality of the lodging industry. In periods of declining demand, competition for guests may result in more reliance on longer-term guests, who generally pay lower rates than shorter-term guests, which could reduce revenues and margins. Equally, in periods of increasing demand, a transition to shorter-term guests paying higher rates might result in increased hotel expenses for amenities considered necessary to attract those guests, such as daily rather than weekly housekeeping, potentially reducing margins.

Uncertainty regarding the rate and pace of recovery from the recent economic downturn and the impact any such recovery may have on the lodging industry makes it difficult to predict future profitability levels. A slowing of the current economic recovery or new economic weakness could materially adversely affect our revenues and profitability.

We are subject to the operating risks common to the lodging industry.

Changes in general and local economic and market conditions and other factors beyond our control as well as the business, financial, operating and other risks common to the lodging industry and inherent to the ownership of hotels could materially adversely affect demand for lodging products and services. This includes demand for rooms at hotel properties that we own, operate or acquire. These factors include:

• changes in the relative mix of extended stay brands in various industry price categories;

• over-building of hotels in our markets;

• changes in the desirability of particular geographic locations, lodging preferences and travel patterns of customers;

• increases in customer price sensitivity, making it more difficult to achieve planned ADR increases;

• dependence on corporate and commercial travelers and on tourism;

• decreased corporate budgets and spending and cancellations, deferrals or renegotiations of group business;

• high levels of unemployment and depressed housing prices;

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

• increases in the cost, or the lack of availability, of capital to operate, maintain and renovate our hotel properties;

• potential increases in labor costs, including as a result of increases to federal and state minimum wage levels, unionization of the labor force and increasing health care insurance expense;

• changes in taxes and governmental regulations that influence or set wages, prices, interest rates or construction and maintenance procedures and costs;

• the costs and administrative burdens associated with compliance with applicable laws and regulations; and

• events beyond our control that may disproportionately affect the travel industry, such as war, terrorist attacks, travel-related health concerns, transportation and fuel prices, interruptions in transportation systems, travel-related accidents, fires, natural disasters and severe weather.

These factors can adversely affect, and from time to time have materially adversely affected, individual hotel properties, particular regions or business as a whole. How we manage any one or more of these factors, or any crisis, could limit or reduce demand and the rates we are able to charge for rooms or services, which could materially adversely affect our operating results and growth. These factors may be exacerbated by the relatively illiquid nature of our real estate holdings, which will limit our ability to vary our portfolio in response to changes in economic and other conditions.

Our revenues are subject to seasonal fluctuations.

The lodging industry is seasonal in nature. Our occupancy rates and revenues generally are lower than average during the first and fourth quarter of each calendar year. Quarterly variations in revenues at our hotel properties could materially adversely affect our near-term operating revenues and cash flows, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business

If we fail to implement our business strategies, our business, financial condition and results of operations could be materially adversely affected.

Our financial performance and success depend in large part on our ability to successfully implement our business strategies. See “Business—Our Business Strategy.” We cannot assure you that we will be able to successfully implement our business strategies, realize any benefit from our strategies or be able to continue improving our results of operations. We may spend significant amounts in connection with our business strategies, which would result in increased costs but may not result in increased revenues or improved results of operations.

Implementation of our business strategies could be affected by a number of factors beyond our control, such as increased competition, legal and regulatory developments, general economic conditions or an increase in operating costs. Any failure to successfully implement our business strategies could materially adversely affect our business, financial condition and results of operations. We may, in addition, decide to alter or discontinue certain aspects of our business strategies at any time.

Our capital expenditures may not result in our expected improvements in our business.

We are executing a phased capital investment program across our portfolio in order to seek to drive incremental market share gains. This program is dedicated to seeking increased revenue through our Platinum renovation and Silver refresh programs to upgrade 633, or approximately 93%, of our hotels. Capital investments with respect to in-process or completed phases of our hotel reinvestment program are expected to total approximately $365.8 million, of which approximately $322.9 has been spent as of December 31, 2013. During 2014, we expect to spend in excess of $75.0 million on current and future phases of our reinvestment program. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Expenditures.”

The realization of returns on our investments in line with our expectations is dependent on a number of factors, including, but not limited to, general economic conditions, events beyond our control, whether our assumptions in making the investment were correct and changes in the factors underlying our investment decision, such as changes in the tastes and preferences of our customers. We can provide no assurance that we will continue to see returns on our previous capital expenditure investments, that we will realize our expected returns on our current investments, or any returns at all, or that our future investments will result in our expected returns on investments, returns that are consistent with our prior returns on capital expenditure investments, or any returns at all. Growth that we do realize as a result of our capital expenditures is expected to stabilize over time. A failure to realize our expected returns on our investments in our hotel properties could materially adversely affect our business, financial condition and results of operations.

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Access to capital, timing, budgeting and other risks associated with the ongoing need for capital expenditures at our hotel properties could materially adversely affect our financial condition and limit our ability to compete effectively and pay dividends to our shareholders.

The lodging industry is a capital intensive business that requires significant capital expenditures to own and operate hotel properties. In addition, we must maintain, renovate and improve our hotel properties in order to remain competitive, maintain the value and brand standards of our hotel properties and comply with applicable laws and regulations.

Maintenance, renovations and improvements to our hotel properties create an ongoing need for cash and, to the extent we cannot fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained. We also intend to pay regular dividends, which means we may not retain cash for future capital expenditures. Access to the capital that we need to renovate and maintain our existing hotel properties and to acquire new hotel properties is critical to the continued growth of our business and our revenues. The availability of capital or the conditions under which we can obtain capital can have a significant impact on the overall level, cost and pace of future renovation or development and therefore the ability to grow our revenues. As of December 31, 2013, we had total indebtedness of approximately $2.9 billion. Our substantial indebtedness may impair our ability to borrow additional amounts. Our ability to access additional capital could also be limited by the terms of our indebtedness and any future indebtedness, which restrict or will restrict our ability to incur debt under certain circumstances. In particular, the 2012 Mortgage Loan and the 2012 Mezzanine Loans prohibit any further encumbrances on the collateral securing that indebtedness, which is comprised of substantially all of our hotels. In the past, reduced investments in our properties resulted in declining performance of our business.

Additionally, our ongoing operational requirements and capital expenditures subject us to the following risks:

• potential environmental problems, such as the need to remove or abate asbestos-containing materials;

• design defects, construction cost overruns (including labor and materials) and delays;

• difficulty obtaining zoning, occupancy and other required permits or authorizations;

• the possibility that revenues will be reduced temporarily while rooms offered are out of service due to capital improvement projects; and

• a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available on affordable terms or at all.

If the cost of funding renovations or enhancements exceeds budgeted amounts, and/or the time period for renovation is longer than initially anticipated, our profits could be reduced. If we are forced to spend larger amounts of cash from operations than anticipated to operate, maintain or renovate existing hotel properties, then our ability to use cash for other purposes, including paying dividends to our shareholders or the potential acquisition of hotel properties, could be limited and our profits could be reduced. Similarly, if we cannot access the capital we need to fund our operations or implement our business strategies, we may need to postpone or cancel planned maintenance, renovations or improvements plans, which could impair our ability to compete effectively and harm our business, financial condition and results of operations.

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We are exposed to the risks resulting from real estate ownership, which could increase our costs, reduce our profitability and limit our ability to respond to market conditions.

Our principal assets consist of real property. Our real estate ownership subjects us to additional risks not applicable to those competitors in the lodging industry that only manage or franchise hotel properties, including:

• the illiquid nature of real estate, which may limit our ability to promptly sell one or more hotels in our portfolio in response to changing financial conditions;

• adverse changes in economic and market conditions;

• real estate, insurance, zoning, tax, environmental and eminent domain laws, including the condemnation of our properties;

• fluctuations in real estate values or potential impairments in the value of our assets;

• the ongoing need for capital improvements and expenditures to maintain, renovate or upgrade hotel properties;

• risks associated with mortgage debt, including the possibility of default, fluctuating interest rate levels and the availability of replacement financing;

• risks associated with the possibility that expense increases will outpace revenue increases and that in the event of an economic downturn, the high proportion of fixed expenses among our costs will make it difficult to reduce our expenses to the extent required to offset declining revenues;

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

• events beyond our control, such as war, terrorist attacks and force majeure events, including earthquakes, tornados, hurricanes, fires or floods.

Economic and other conditions may materially adversely affect the valuation of our hotel properties resulting in impairment charges that could have a material adverse effect on our business, results of operations and earnings.

We hold goodwill, intangible assets and a significant amount of long-lived assets. We evaluate our tangible and intangible assets annually for impairment, or more frequently based on various triggers, including when a property has current or projected operating losses or when other material trends, contingencies or changes in circumstances indicate that a triggering event has occurred, such that an asset’s value may not be recoverable. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.” During times of economic distress, declining demand and declining earnings often result in declining asset values. As a result, we have incurred and we may in the future incur impairment charges, which in the future could be material and adversely affect our results of operations and earnings.

We have a significant amount of debt and the agreements governing our indebtedness place, and any future indebtedness may place, restrictions on us, reducing operational flexibility and creating default risks.

We have a significant amount of debt. As of December 31, 2013, we had total indebtedness of approximately $2.9 billion and the Company had a debt-to-equity ratio of 2.2x. In the future, subject to compliance with the covenants included in our indebtedness, we may incur additional indebtedness and intercompany indebtedness, to finance future hotel acquisitions, renovation and improvement activities and for other corporate purposes. A substantial level of indebtedness could have a material adverse effect on our business, results of operations and financial condition because it could, among other things:

• require us to dedicate a substantial portion of our cash flows to make principal and interest payments on indebtedness, thereby reducing our cash flows available to fund working capital, capital expenditures and other general corporate purposes, including our ability to pay cash dividends to our shareholders;

• increase our vulnerability to general adverse economic and industry conditions and limit our flexibility in planning for, or reacting to, changes in our business and our industry;

• limit our ability to borrow additional funds or refinance indebtedness on favorable terms or at all to expand our business or ease liquidity constraints; and

• place us at a competitive disadvantage relative to competitors that have less indebtedness or greater resources.

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We cannot assure you that our business will generate sufficient cash flows to enable us to pay our indebtedness, fund our other liquidity needs or pay dividends to our shareholders. If we are unable to meet our debt service obligations, our indebtedness will prevent us from paying cash dividends with respect to our stock. In such case, in order to satisfy the REIT distribution requirements imposed by the Code, ESH REIT may distribute taxable stock dividends to its shareholders in the form of additional shares of its stock.

If we fail to generate sufficient cash flows to meet our debt service obligations, we expect that we will need to refinance all or a portion of our debt on or before maturity. We cannot assure you that we will be able to refinance any of our debt on attractive terms on or before maturity, commercially reasonable terms or at all, particularly because of our substantial levels of debt and because of restrictions on debt prepayment and additional debt incurrence contained in the agreements governing our existing debt. Our future results of operations and our ability to service, extend or refinance our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

In addition, the agreements governing our indebtedness contain covenants that place restrictions on us. These covenants may restrict, among other activities, our ability to:

• merge, consolidate or transfer all or substantially all of our assets;

• sell, transfer, pledge or encumber our stock or the ownership interests of our subsidiaries;

• incur additional debt;

• enter into, terminate or modify leases for our hotel properties;

• make certain expenditures, including capital expenditures;

• pay dividends on or repurchase our capital stock; and

• enter into certain transactions with affiliates.

In addition, the occurrence of (i) an Event of Default under any of the 2012 Mortgage Loan or the 2012 Mezzanine Loans, (ii) a Debt Yield Trigger Event (a Debt Yield, as defined in the 2012 Mortgage Loan, of less than 9.0%) or (iii) a Guarantor Bankruptcy Event would result in a Cash Trap Event, as defined in the 2012 Mortgage Loan. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements are fully funded (including the payment of budgeted management fees and operating expenses), would be held by the loan service agent as additional collateral for the 2012 Mortgage Loan, which would prevent ESH REIT from making cash dividends.

The occurrence of a Debt Yield Trigger Event (a Debt Yield, as defined in the Corporation revolving credit facility, of less than 11.5%, increasing to 12.0% on and after November 18, 2014, as of the last day of any calendar month), a Default or an Event of Default (each as defined in the Corporation revolving credit facility) would require the Corporation to prepay advances existing under the Corporation revolving credit facility and cash collateralize outstanding letters of credit. The Corporation may cure a Trigger Event by (a) repaying advances and cash collateralizing outstanding letters of credit and (b) maintaining the threshold Debt Yield level for three consecutive months following the month in which the Trigger Event occurred. During a Trigger Event, a Default or an Event of Default, the Corporation is restricted from making cash dividends. As of December 31, 2013, the Company’s Debt Yield was 16.8% and a Cash Trap Event was not in effect under any of its debt agreements.

The occurrence of a Debt Yield Trigger Event, (a Debt Yield, as defined in the ESH REIT revolving credit facility, of less than 11.0%, increasing to 11.5% on and after November 18, 2014, as of the last day of any calendar month), a Default or an Event of Default (each as defined in the ESH REIT revolving credit facility) would require ESH REIT to prepay advances existing under ESH REIT revolving credit facility and cash collateralize outstanding letters of credit. ESH REIT may cure a Trigger Event by (a) repaying advances and cash collateralizing outstanding letters of credit and (b) maintaining the threshold Debt Yield level for three consecutive months following the month in which the Trigger Event occurred. During a Trigger Event, a Default or an Event of Default, ESH REIT is restricted from making cash dividends (subject to certain exceptions to be agreed). As of December 31, 2013, ESH REIT’s Debt Yield was 16.9% and a Cash Trap Event was not in effect under any of its debt agreements.

These covenants could impair our ability to grow our business, take advantage of attractive business opportunities, successfully compete or pay dividends. For a description of the covenants imposed by the agreements governing our indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness.” Our ability to comply with the financial and other restrictive covenants may be affected by events beyond our control, including general economic, financial and industry conditions. A breach of any of the covenants under any of the agreements governing our

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indebtedness could result in an event of default. Cross-default provisions in the debt agreements could cause an event of default under one debt agreement to trigger an event of default under other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders could elect to declare all outstanding debt under such agreements to be immediately due and payable. If we are unable to repay or refinance the accelerated debt, the lenders could proceed against any assets pledged to secure that debt, which could include the foreclosure on some or all of the hotel properties securing such indebtedness. Furthermore, the agreements governing any future indebtedness will likely contain covenants that place restrictions on us.

Mortgage and mezzanine debt obligations expose us to the possibility of foreclosure, which could result in the loss of any hotel property subject to mortgage or mezzanine debt.

The 2012 Mortgage Loan is secured by mortgages on 680 of our 684 hotel properties and related assets. Several mezzanine loans are secured by pledges of direct and indirect equity in the 2012 Mortgage Loan obligors. Incurring mortgage and other secured debt obligations increases our risk of property losses because defaults on secured indebtedness may result in foreclosure actions initiated by lenders and ultimately our loss of the hotel properties or other properties securing such loans. If such obligors were in default under a mortgage loan or mezzanine loan, we could lose some or all of the hotel properties securing, directly or indirectly, such loan to foreclosure. For tax purposes, a foreclosure of our hotel properties would be treated as a sale of the hotel for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the hotel, it would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder ESH REIT’s ability to meet the REIT distribution requirements imposed by the Code. ESH REIT may assume or incur new mortgage indebtedness on hotel properties that it acquires in the future. Any default under any one of ESH REIT’s mortgage debt obligations may increase its risk of default on its other indebtedness.

Our business depends on the quality and reputation of our brands, and any deterioration in the quality or reputation of our brands or the lodging industry could materially adversely affect our market share, reputation, business, financial condition and results of operations.

Our brands and our reputation are among our most important assets. We have consolidated the substantial majority of our hotels under the Extended Stay America brand. Our ability to attract and retain guests depends, in part, upon the external perceptions of Extended Stay America and Crossland Economy Studios, the quality of our hotels and services and our corporate and management integrity. An incident involving the potential safety or security of our guests or employees, or negative publicity regarding safety or security at our competitors’ properties or in respect of our third-party vendors and the industry, and any media coverage resulting therefrom, may harm our brands and our reputation, cause a loss of consumer confidence in Extended Stay America and the industry, and materially adversely affect our results of operations. The considerable expansion in the use of social media and online review sites over recent years has compounded the potential scope and speed of any negative publicity that could be generated by such incidents, whether or not the description of any events by social media is accurate. Adverse incidents have occurred in the past and may occur in the future.

In addition, we believe that the Corporation’s trademarks and other intellectual property are fundamental to the reputation of our brands. The Corporation develops, maintains, licenses and polices a substantial portfolio of trademarks and other intellectual property rights. To the extent necessary, the Corporation enforces its intellectual property rights to protect the value of its trademarks, our development activities, to protect our good name, to promote its brand name recognition, to enhance our competitiveness and to otherwise support our business goals and objectives. The Corporation relies on trademark laws to protect its proprietary rights. Monitoring for unauthorized use of the Corporation’s intellectual property is difficult. Litigation may be necessary to enforce the Corporation’s intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources, may result in counterclaims or other claims against the Corporation and could significantly harm our results of operations. From time to time, the Corporation applies to have certain trademarks registered. There is no guarantee that such trademark registrations will be granted. We cannot assure you that all of the steps the Corporation has taken to protect its trademarks will be adequate to prevent imitation of its trademarks by others. The unauthorized reproduction of the Corporation’s trademarks could diminish the value of our brands and their market acceptance, competitive advantages or goodwill, which could materially adversely affect our business and financial condition.

We could incur significant costs related to government regulation and litigation over environmental, health and safety matters.

Our hotel properties are subject to various federal, state and local environmental laws that impose liability for contamination. Under these laws, governmental entities have the authority to require us, as the current or former owner of the property, to perform or pay for the clean-up of contamination (including hazardous substances, waste or petroleum products) at or emanating from the property and to pay for natural resource damage arising from contamination. These laws often impose liability without regard to whether the owner or operator knew of or caused the contamination. Such liability can be joint and several, so that each covered person can be responsible for all of the costs involved, even if more than one person may have been responsible for the contamination. We can also be liable to private parties for costs of remediation, personal injury and death and/or property damage resulting from

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contamination at or emanating from our hotel properties. Moreover, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral or to sell the property on favorable terms or at all. Furthermore, persons who sent waste to a waste disposal facility, such as a landfill or an incinerator, may be liable for costs associated with cleanup of that facility.

In addition, our hotels (including our real property, operations and equipment) are subject to various federal, state and local environmental, health and safety regulatory requirements that address a wide variety of issues, including, but not limited to, the use, management and disposal of hazardous substances and wastes, air emissions, discharges of waste materials (such as refuge or sewage), the registration, maintenance and operation of our boilers and storage tanks, asbestos and lead-based paint. Some of our hotels also routinely handle and use hazardous or regulated substances and wastes as part of their operations, which are subject to regulation (for example, swimming pool chemicals or biological waste). Our hotels incur costs to comply with these environmental, health and safety laws and regulations and if these regulatory requirements are not met or become more stringent in the future or unforeseen events result in the discharge of dangerous or toxic substances at our hotel properties, we could be subject to increased costs of compliance, fines and penalties for non-compliance and material liability from third parties for harm to the environment, damage to real property or personal injury and death.

In particular, certain hotels we currently own or those we acquire in the future contain, may contain, or may have contained, ACM. Environmental, health and safety laws require that ACM be properly managed and maintained, and include requirements to undertake special precautions, such as removal or abatement, if ACM would be disturbed during maintenance, renovation or demolition of a building. These laws regarding ACM may impose fines and penalties on building owners, employers and operators for failure to comply with these requirements or expose us to third-party liability.

We may be liable for indemnification or similar payments relating to the Company Predecessor in accordance with the Fifth Amended Plan of Reorganization (the “Plan”), the bankruptcy court’s order confirming the Plan (the “Confirmation Order”), and under certain agreements providing for indemnification in connection with the Company Predecessor.

We may be liable for indemnification or similar payments relating to the Company Predecessor. Under its constitutive documents, other agreements or applicable law, the Company Predecessor had obligations to defend, indemnify, reimburse, exculpate, advance fees and expenses, or limit the liabilities of certain officers and employees for certain matters relating to the Company Predecessor (the “Predecessor Indemnification Obligations”). Under the Plan and the Confirmation Order, we retained Predecessor Indemnification Obligations to those officers and employees who were officers and employees both prior to and after the effective date of the Plan. We may, therefore, face liabilities with respect to such Predecessor Indemnification Obligations. In addition, we may face liabilities arising from a separate agreement providing for Predecessor Indemnification Obligations to a former officer. Currently, certain claims remain outstanding against several of our former officers and employees in litigation brought on behalf of the Litigation Trust, which could trigger our Predecessor Indemnification Obligations, and new claims may arise in the future against those we have agreed to indemnify. While we believe the likelihood that we will be required to fund any material Predecessor Indemnification Obligations is remote and we are unable to quantify the potential exposure for which we may have to provide indemnification in the future, to the extent that we are required to fund any Predecessor Indemnification Obligations, our results of operations and our liquidity and capital resources could be materially and adversely affected.

The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in those geographic areas in which we operate a substantial portion of our hotels.

The concentration of our hotel properties in a particular geographic area may materially impact our operating results if that area is impacted by negative economic developments. As of December 31, 2013, 13.5% of our rooms were in California, 10.3% of our rooms were in Texas, 7.9% of our rooms were in Florida and 5.2% of our rooms were in Illinois. We are particularly susceptible to adverse economic or other conditions in these markets (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes and the cost of complying with governmental regulations or increased regulation), as well as to natural disasters or terrorist events that occur in these markets. Our business, financial condition and results of operations would be materially adversely affected by any significant adverse developments in any of those markets. Our operations may also be materially adversely affected if competing hotels are built in these markets. Furthermore, submarkets within any of these markets may be dependent on the economic performance of a limited number of industries which drive those markets.

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We may seek to expand through acquisitions of other companies and hotel properties, and we may also seek to diversify through franchising; these activities may be unsuccessful or divert our management’s attention.

We intend to consider strategic and complementary acquisitions of other companies and hotel properties. In many cases, we will be competing for these opportunities with third parties that may have substantially greater financial resources than we do. Acquisitions of companies or hotel properties are subject to risks that could affect our business, including risks related to:

• failing to consummate acquisitions after incurring significant transaction costs;

• issuing shares of stock that could dilute the interests of our existing shareholders;

• spending cash and incurring debt;

• contributing hotel properties or related assets to ventures that could result in recognition of losses;

• assuming unknown and contingent liabilities; or

• creating additional expenses.

We cannot assure you that we will be able to successfully identify opportunities or complete transactions on commercially reasonable terms or at all, or that we will actually realize any anticipated benefits from such acquisitions. There may be high barriers to entry, including restrictive zoning laws, limited availability of hotel properties and higher costs of land, in many key markets and scarcity of available acquisition, development and investment opportunities in desirable locations. Similarly, we cannot assure you that we will be able to obtain financing for acquisitions on attractive terms or at all, or that the ability to obtain financing will not be restricted by the terms of our indebtedness or any future indebtedness. In addition, the pairing arrangement may prevent our use of common tax-free acquisition structures, which may increase the cost and difficulty of acquiring other businesses and hotel properties and inhibit our ability to expand through acquisitions.

The success of any such acquisition will also depend, in part, on our ability to integrate the acquisition with our existing operations. We may experience difficulty with integrating acquired companies, hotel properties or other assets, including difficulties relating to:

• acquiring hotel properties with undisclosed defects in design or construction or requiring unanticipated capital improvements;

• entering new markets;

• coordinating sales, distribution and marketing functions;

• integrating information technology systems; and

• preserving the important licensing, distribution, marketing, customer, labor and other relationships of the acquired assets.

We own and operate all of the hotel properties associated with our brands. In the future, we may seek to realize the benefits of franchising and franchise certain of our hotel properties pursuant to agreements with third-party franchisees. We currently do not have experience operating a significant franchising business and expect that the development and implementation of any franchise system will likely require significant expenditures and could divert management’s attention from other business concerns, each of which could have a material adverse effect on our business, financial condition and results of operations. The viability of any franchising business will depend on our ability to establish and maintain good relationships with franchisees. If we enter the franchising business, we may be exposed to additional risks, including, but not limited to, the financial condition and access to capital of franchisees, reputational harm due to the action of franchisees and litigation as a result of disagreements with franchisees. At this time we cannot guarantee that we will seek to expand or diversify our business through franchising in the near future.

In addition, any such acquisition or franchising activity could demand significant attention from our management that would otherwise be available for our regular operations, which could have a material adverse effect on our business.

An increase in the use of third-party internet intermediaries to book online hotel reservations could materially adversely affect our business, financial condition and results of operations.

Some of the rooms at our hotels are booked through third-party internet travel intermediaries and other online travel service providers. These intermediaries primarily focus on leisure travel and also provide offerings for corporate travel and group meetings. Intermediaries use a variety of aggressive online marketing methods to attract customers, including the purchase, by certain companies, of trademarked online keywords such as “Extended Stay” from internet search engines to steer customers toward their websites. These intermediaries hope that consumers will eventually develop brand loyalties to their reservation system rather than to our brands. Accordingly, our business, financial condition and results of operations could be harmed if travel intermediaries succeed in significantly shifting loyalties from our brands to their reservation systems and diverting bookings away from our website or through their fees increasing the overall cost of internet bookings for our hotels.

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A failure by our intermediaries to attract or retain their customer bases could lower demand for hotel rooms and, in turn, reduce our revenues. Additionally, if bookings by these third-party intermediaries increase, these intermediaries may be able to obtain higher commissions or other significant contract concessions from us, increasing the overall cost of these third-party distribution channels. Some of our distribution agreements with these companies are not exclusive, have a short term, are terminable at will or are subject to early termination provisions. The loss of distributors, increased distribution costs or the renewal of distribution agreements on significantly less favorable terms could adversely impact our business.

We are reliant upon technology and the disruption or malfunction in our information technology systems could materially adversely affect our business.

The lodging industry depends upon the use of sophisticated information technology and systems, including those utilized for reservations, property management, procurement and operation of our administrative systems. For example, we depend on our central reservation system, which allows bookings of hotel rooms directly, via telephone through our call centers, by travel agents, online through our website and through our online reservation partners. We operate third-party systems, making us reliant on third-party service providers, data communication networks and software upgrades, maintenance and support. Many of our information technology systems are outdated and require substantial upgrading. These technologies are costly and are expected to require refinements that may cause disruptions to many of our key information and technology systems. If we are unable to replace or introduce information technology and other systems as quickly as our competitors or within budgeted costs or schedules, or if we are unable to achieve the intended benefits of any new information technology or other systems, our results of operations could be adversely affected and our ability to compete effectively could be diminished.

Further, we have from time to time experienced disruptions of these systems, and disruptions of the operation of these systems as a result of failures related to our internal or our service provider systems and support may occur in the future. Information technology systems that we rely upon are also vulnerable to damage or interruption from:

• events beyond our control, such as war, terrorist attacks and force majeure events, including earthquakes, tornados, hurricanes, fires or floods;

• power losses, computer systems failures, internet and telecommunications or data network failures, service provider negligence, improper operation by or supervision of employees, user error, physical and electronic losses of data and similar events; and

• computer viruses, cyber attacks, penetration by individuals seeking to disrupt operations or misappropriate information and other breaches of security.

The occurrence of any of these problems at any of our information technology facilities, any of our call centers or any third party service providers could cause interruptions or delays in our business or loss of data, or render us unable to process reservations. In addition, if our information technology systems are unable to provide the information communications capacity that we need, or if our information technology systems suffer problems caused by installing system enhancements, we could experience similar failures or interruptions. If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such failures, or if our property and business interruption insurance does not sufficiently compensate us for any losses that we may incur, our revenues and profits could be reduced and the reputation of our brands and our business could be harmed.

Cyber risk and the failure to maintain the integrity of internal or customer data could result in faulty business decisions and harm our reputation or subject us to costs, fines or lawsuits, or limit our ability to accept credit cards.

Our businesses require the collection, transmission and retention of large volumes of internal and customer data, including credit card numbers and other personally identifiable information of our customers, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. We and our service providers also maintain personally identifiable information about our employees. The integrity and protection of that customer, employee and company data is critical to us. If that data is inaccurate or incomplete, we could make faulty decisions. Further, our customers and employees have a high expectation that we and our service providers will adequately protect their personal information. The information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and customer and employee expectations, or may require significant additional investments or time in order to do so. Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our and our service provider’s information systems and records. Our reliance on computer, internet-based and mobile systems and communications and the frequency and sophistication of efforts by hackers to gain unauthorized access to such systems have increased significantly in recent years. A breach

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in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, customers’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims or legal proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from customers, financial institutions, regulators, payment card associations, employees and other persons, any of which could have a material adverse effect on our financial condition and results of operations.

In addition, we are subject to the Payment Card Industry Data Security Standard (the “PCI DSS”), a set of requirements administered by the Payment Card Industry Security Standards Council, an independent body created by the major credit card brands, and designed to ensure that companies handling credit card information maintain a secure environment. We are not currently in compliance with the PCI DSS and accordingly have been subject to monthly penalties imposed by VISA. We expect to come into compliance in the next three months; however, there can be no assurance that we will successfully do so. If we fail to achieve PCI DSS compliance, we could become subject to substantially increased penalties or lose our ability to accept credit card payments. As approximately 81.0% of our room revenue for the year ended December 31, 2013 was paid by credit card, loss of the ability to accept credit cards for payment would likely create a significant disruption to our operations, could reduce our occupancy levels and could have a material adverse effect on our business, financial condition and results of operations.

Changes in privacy laws could adversely affect our ability to market our products effectively.

We rely on a variety of direct marketing techniques, including telemarketing, email, marketing and postal mailings. Any future restrictions in laws such as the Telemarketing Sales Rule, CAN-SPAM Act and various state laws or new federal laws regarding marketing and solicitation or data protection laws that govern these activities could adversely affect the continuing effectiveness of telemarketing, email and postal mailing techniques and could force changes in our marketing strategies. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our revenues. We also obtain access to potential customers from travel service providers and other companies with whom we have substantial relationships and market to some individuals on these lists directly or by including our marketing message in the other company’s marketing materials. If access to these lists was prohibited or otherwise restricted, our ability to develop new customers and introduce them to our products could be materially impaired.

We are exposed to a variety of risks associated with safety, security and crisis management.

There is a constant need to protect the safety and security of our guests, employees and assets against natural and man-made threats. These include but are not limited to exceptional events such as extreme weather, civil or political unrest, violence and terrorism, serious and organized crime, fraud, employee dishonesty, cyber crime, fire and day-to-day accidents, incidents and petty crime, which impact the guest or employee experience, could cause loss of life, sickness or injury and result in compensation claims, fines from regulatory bodies, litigation and impact our reputation. Serious incidents or a combination of events could escalate into a crisis, which if managed poorly could further expose our brands to reputational damage, which could have a material adverse effect on our business, financial condition and results of operations.

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

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

Compliance with the laws and regulations that apply to our hotel properties could materially adversely affect our ability to make future acquisitions or renovations, result in significant costs or delays and adversely affect our business strategies.

Our hotels are subject to various local laws and regulatory requirements that address our ability to obtain licenses for our operations. In particular, we are subject to permitting and licensing requirements, which can restrict the use of our hotel properties and increase the cost of acquisition, renovation and operation of our hotels. In addition, federal and state laws and regulations, including laws such as the ADA, impose further restrictions on our operations. Under the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. We may be subject to audits or investigations of all of our hotels to determine our compliance. Some of our hotels may not be fully compliant with the ADA. If one or more of the hotels in our portfolio is not in compliance with the ADA or any other regulatory requirements, we may be required to incur additional costs to bring the

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property into compliance and we might be required to pay damages or governmental fines. In addition, the obligation to make readily achievable accommodations is an ongoing one. Existing requirements may change and future requirements may require us to make significant unanticipated capital expenditures that could materially adversely affect our business, financial condition, liquidity, results of operations and cash flows.

Hospitality companies have been the target of class actions and other lawsuits alleging violations of federal and state law and other claims, and we may be subject to legal claims.

Our operating income and profits may be reduced by legal or governmental proceedings brought by or on behalf of our employees, customers or other third parties. In recent years, a number of hospitality companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, discrimination and other alleged violations of law. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits have been instituted against us from time to time, and we cannot assure you that we will not incur substantial damages and expenses resulting from lawsuits of this type or other claims, which could have a material adverse effect on our business, financial condition and results of operations.

Changes in federal, state, local or foreign tax regulation or disputes with tax authorities could materially adversely affect our business, financial condition and profitability by increasing our tax costs.

The determination of our provision for income taxes and other tax liabilities requires estimations and significant judgments and there are many transactions and calculations where the ultimate tax determination is uncertain. We are subject to taxation at the federal, state or provincial and local levels in the United States and Canada. Our future tax rates could be materially adversely affected by changes in composition of earnings in jurisdictions with differing tax rates, changes in the valuation of our deferred tax assets and liabilities and substantive changes to tax rules and the application thereof by United States federal, state, local and foreign governments, all of which could result in materially higher corporate taxes than would be incurred under existing tax law or interpretation and could adversely affect our profitability. Further, our determination of ourtax liability is always subject to audit and review by applicable domestic and foreign tax authorities. Any adverse outcome of any such audit or review could have an adverse effect on our business and reduce our profits to the extent potential tax liabilities exceed our reserves, and the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

In addition, the recent economic downturn has reduced tax revenues for United States federal, state and local governments and as a result tax authorities have increased their efforts to raise revenues through changes in tax laws and audits. Increased efforts by tax authorities to raise revenues through changes in tax laws and audits could materially increase our effective tax rate.

Increases in ESH REIT’s property taxes could materially adversely affect our profitability and ability to pay dividends to our shareholders.

Hotel properties are subject to real and personal property taxes. These taxes may increase as tax rates change and as ESH REIT’s hotel properties are assessed or reassessed by taxing authorities. In particular, ESH REIT’s property taxes could increase following acquisitions as acquired properties are reassessed. In recent periods, state and local governments have been seeking to increase property taxes. If property taxes increase, our business, financial condition, results of operations and ESH REIT’s ability to make distributions to its shareholders could be materially adversely affected.

Our insurance may not fully compensate us for damage to or losses involving our hotel properties.

We maintain comprehensive insurance on each of our hotel properties, including liability, fire and extended coverage, in the types and amounts we believe are adequate and customary in our industry. Nevertheless, there are some types of losses, generally of a catastrophic nature, such as hurricanes, earthquakes, fires, floods, terrorist acts or liabilities that result from breaches in the security of our information technology systems, that may be uninsurable or too expensive to justify obtaining insurance. Additionally, market forces beyond our control could limit the scope of insurance coverage that we can obtain or restrict our ability to obtain insurance coverage at reasonable rates. As a result, we may not be successful in obtaining insurance without increases in cost or decreases in coverage levels. We use our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to obtaining appropriate insurance on our hotel properties at a reasonable cost and on suitable terms. In the event of significant damage or loss, our insurance coverage may not be sufficient to cover the full current market value or replacement value of our investment in a property, and in some cases could result in certain losses being totally uninsured. In addition, inflation, changes in building codes and zoning ordinances, environmental considerations and other factors might make it impossible or impractical to use insurance proceeds to replace or repair a property that has been damaged or destroyed. Under these and other circumstances, insurance proceeds may not be adequate to restore our economic position with respect to a damaged or destroyed property. Accordingly, ESH REIT could lose some or all of the capital it has invested in a property, as well as the anticipated future revenue from the property, and ESH REIT could remain obligated for guarantees, debt or other financial obligations of the property. Our debt instruments, consisting of

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Mortgage Loans secured by our hotel properties, Mezzanine Loans and the revolving credit facilities of the Corporation and ESH REIT, contain customary covenants requiring us to maintain insurance. Although we believe that we currently maintain sufficient insurance coverage to satisfy these obligations, there is no assurance that in the future we will be able to procure coverage at a reasonable cost. In addition, there can be no assurance that the lenders under these instruments will not take the position that we do not have sufficient insurance coverage and therefore is in breach of these debt instruments allowing the lenders to declare an event of default and accelerate repayment of debt.

We are dependent upon our ability to attract and retain key officers and other highly qualified personnel.

Our success and our ability to implement our business strategies will depend in large part upon the efforts and skills of our senior management and our ability to attract and retain key officers and other highly qualified personnel. Competition for such personnel is intense. There can be no assurance that we will continue to be successful in attracting and retaining qualified personnel. If we lose or suffer an extended interruption in the services of one or more of our key officers, our business, financial condition and results of operations could be materially adversely affected. Accordingly, there can be no assurance that our senior management will be able to successfully execute and implement our business and operating strategies.

We have a new management team that does not have experience in the extended stay segment.

During the past several years we have substantially changed our management team. Our chief executive officer started in February 2012, our chief financial officer started in July 2011 and our chief operating officer started in September 2013, and each had no extended stay hotel industry experience prior to joining Extended Stay. It is important to our success that the new members of the management team quickly understand the extended stay hotel industry. If they are unable to do so, our business, financial conditions and results of operations could be materially adversely affected.

Labor shortages could restrict our ability to operate our hotels or implement our business strategies or result in increased labor costs that could reduce our profitability.

Our success depends in large part on our ability to attract, retain, train, manage and engage our employees. Our hotels are staffed 24 hours a day, seven days a week by thousands of employees around the country. If we are unable to attract, retain, train, manage and engage skilled employees, our ability to manage and staff our hotel properties adequately could be impaired, which could reduce customer satisfaction and harm our reputation. Staffing shortages could also hinder our ability to implement our business strategy. Because payroll costs are a major component of the operating expenses at our hotel properties, a shortage of skilled labor could also require higher wages that would increase our labor costs, which could reduce our profitability and limit our ability to pay dividends to shareholders. In addition, increases in minimum wage rates could result in significantly increased costs for us and result in reduced margins and profitability.

Attempts by labor organizations to organize groups of our employees or changes in labor laws could disrupt our operations, increase our labor costs or interfere with the ability of our management to focus on implementing our business strategies.

We may become subject to collective bargaining agreements, similar agreements or regulations enforced by governmental entities in the future. Changes in the federal regulatory scheme could make it easier for unions to organize groups of our employees. If relationships with our employees or other field personnel become adverse, our hotel properties could experience labor disruptions such as strikes, lockouts and public demonstrations. Additionally, if such changes take effect, our employees or other field personnel could be subject to organizational efforts, which could potentially lead to disruptions or require our management’s time to address unionization issues. Labor regulation could also lead to higher wage and benefit costs, changes in work rules that raise operating expenses and legal costs, and limit our ability to take cost saving measures during economic downturns. These or similar agreements, legislation or changes in regulations could disrupt our operations, hinder our ability to cross-train and cross-promote our employees due to prescribed work rules and job classifications, reduce our profitability or interfere with the ability of our management to focus on executing our business and operating strategies.

Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profitability or limit our ability to operate our business.

In the normal course of our business, we are often involved in various legal proceedings. We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of these legal proceedings. Additionally, we could become the subject of future claims by third parties, including guests who use our hotels, our employees, our shareholders or regulators. Any significant adverse determinations, judgments or settlements could reduce our profitability and could materially adversely affect our business, financial condition and results of operations or limit our ability to operate our business. Further, we may incur costs related to claims for which we have appropriate third party indemnity, but such third parties fail to fulfill their contractual obligations. See “Legal Proceedings.”

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Risks Related to ESH REIT and its Status as a REIT

Failure of ESH REIT to qualify as a REIT or remain qualified as a REIT would cause it to be taxed as a regular C corporation, which would expose it to substantial tax liability and could substantially reduce the amount of cash available to pay dividends to its shareholders.

ESH REIT elected to be taxed as a REIT for U.S. federal income tax purposes effective as of October 7, 2010. We believe ESH REIT has been organized and operated in such a manner so as to qualify as a REIT and ESH REIT currently intends to continue to operate as a REIT. However, qualification as a REIT involves the application of highly technical and complex provisions of the Code, for which only a limited number of judicial and administrative interpretations exist. The complexity of these provisions is greater in the case of a REIT that owns hotels and leases them to a corporation with which a portion of its stock is paired. As a result, ESH REIT is likely to encounter a greater number of interpretive issues under the REIT qualification rules, and more such issues which lack clear guidance, than are other REITs. Even an inadvertent or technical mistake could jeopardize ESH REIT’s REIT qualification.

In connection with the Offering, the Company received an opinion that ESH REIT should have qualified as a REIT as of that time. We believe ESH REIT has operated in conformity with the requirements to qualify as a REIT since that date, and that ESH REIT continues to satisfy the structural requirements to maintain its REIT status. One of the requirements unique to our structure is that, in order for ESH REIT to qualify as a REIT, no shareholder may actually or constructively own 10 percent or more of the value of shares of ESH REIT or the Corporation. While we do not monitor share ownership for purposes of this test, in the event that a shareholder crosses the 10-percent threshold, we believe that the excess share provisions of the ESH REIT and Corporation charters should be triggered to reduce the relevant shareholder’s ownership and insulate the Company from risk with respect to this issue.

If ESH REIT failed to qualify as a REIT in any taxable year, and no available relief provision applied, it would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates, and distributions to holders of its stock would not be deductible by it in computing its taxable income. ESH REIT may also be subject to additional state and local taxes if it fails to qualify as a REIT. Any such corporate tax liability could be substantial and would reduce the amount of cash available for investment, debt service and distribution to holders of its stock, which in turn could have a material adverse effect on the value and market price of the Shares. To the extent that distributions to shareholders by ESH REIT have been made on the belief that ESH REIT qualified as a REIT, ESH REIT might be required to borrow funds or to liquidate certain of its investments to pay the applicable tax. If, for any reason, ESH REIT failed to qualify as a REIT and it was not entitled to relief under certain Code provisions, it would be subject to a material tax liability and unable to elect REIT status for the four taxable years following the year during which it ceased to so qualify, which could materially adversely affect our business and operating strategies and the market value of the Shares.

Failure to qualify as a REIT could result from a number of factors, including, without limitation:

• the leases of ESH REIT’s hotels to the Corporation are not respected as true leases for U.S. federal income tax purposes;

• rents received from the Corporation are treated as rents received from a “related party tenant”;

• ESH REIT is not respected as an entity separate from the Corporation or the REIT qualification tests are applied to ESH REIT on a combined basis with the Corporation; or

• failure to satisfy the REIT distribution requirements due to restrictions under ESH REIT’s indebtedness.

In addition, if ESH REIT fails to qualify as a REIT, it will no longer be required to make distributions as a condition to REIT qualification and all of its distributions to holders of its common stock, after payment of corporate level tax as noted above, would be taxable as regular C corporation dividends to the extent of ESH REIT’s current and accumulated earnings and profits. Thus, if ESH REIT failed to qualify as a REIT, dividends paid to ESH REIT’s shareholders currently taxed as individuals would be qualified dividend income, currently taxed at preferential rates, and ESH REIT’s shareholders currently taxed as corporations (including the Corporation) would be entitled to the dividends received deduction with respect to such dividends, subject in each case to applicable limitations under the Code. As a result of all these factors, ESH REIT’s failure to qualify as a REIT could impair our business and operating strategies and materially adversely affect the market price of the Shares.

If rents received by ESH REIT from the Corporation are treated as rent received from a “related party tenant,” ESH REIT will fail to qualify as a REIT.

To qualify as “rents from real property” for purposes of the two gross income tests applicable to REITs, ESH REIT must not own, actually or constructively (by virtue of certain attribution provisions of the Code), 10% or more (by vote or value) of the stock of any corporate lessee or 10% or more of the assets or net profits of any non-corporate lessee (a “related party tenant”). The Corporation will be treated as a related party tenant for purposes of the gross income tests if ESH REIT owns, actually or constructively (by virtue of certain attribution provisions of the Code), 10% or more of the stock (by vote or value) of the Corporation. The Corporation does not believe that it is a related party tenant of ESH REIT.

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However, events beyond our knowledge or control could result in a shareholder, including an investor in the Sponsors, owning or being deemed to own 10% or more of the paired common stock. The ownership attribution rules that apply for purposes of the 10% threshold are complex and may cause the outstanding shares owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, for instance, the acquisition of less than 10% of the outstanding paired common stock (or the acquisition of an interest in an entity which owns paired common stock) by an individual or entity could cause that individual or entity to be treated as owning in excess of 10% of ESH REIT. In addition, a person may be treated as owning 10% or more of the value of stock of ESH REIT by virtue of owning an interest in an entity other than a Sponsor-managed fund that owns an interest in ESH REIT. Although ESH REIT intends to make timely annual demands of certain shareholders of record to disclose the beneficial owners of Shares issued in their name, as required by the Treasury Regulations, monitoring actual or constructive ownership of the Shares, including by investors in the Sponsors, on a continuous basis is not feasible. The charters of the Corporation and ESH REIT contain restrictions on the amount of shares of stock of either entity so that no person can own, actually or constructively (by virtue of certain attribution provisions of the Code), more than 9.8% of the outstanding shares of any class or series of stock of either ESH REIT or the Corporation. The Class A common stock of ESH REIT and the 125 shares of preferred stock of ESH REIT are not subject to the 9.8% ownership limitation under the charter of ESH REIT. However, given the breadth of the Code’s constructive ownership rules and the fact that it is not feasible for ESH REIT and the Corporation to continuously monitor actual and constructive ownership of paired common stock, there can be no assurance that such restrictions will be effective in preventing any person from actually or constructively acquiring 9.8% or more of the outstanding shares of any class or series of stock of the Corporation or ESH REIT. If the Corporation were treated as a “related party tenant” of ESH REIT, ESH REIT would not be able to satisfy either of the two gross income tests applicable to REITs and would fail to qualify for REIT status. If ESH REIT failed to qualify as a REIT and it was not entitled to relief under certain Code provisions, it would be subject to a material tax liability and unable to elect REIT status for the four taxable years following the year during which it ceased to so qualify. In addition, it is unlikely ESH REIT would avail itself of certain relief provisions under the Code customarily available to a REIT that has failed to satisfy a REIT requirement but wants to retain its REIT status. If a REIT fails to satisfy either of the two gross income requirements, such relief provisions require payment of a punitive tax in an amount equal to 100% of the estimated profits of the REIT attributable to the amount of gross income by which the REIT failed the gross income tests. Since substantially all ESH REIT’s gross income will be rent paid pursuant to the operating leases with the Corporation, a substantial part of ESH REIT’s total profits could become subject to such 100% tax under such relief provisions of the Code if this rent failed to qualify under the two gross income tests. In that event, ESH REIT would not likely pursue any of the relief provisions available to REITs under certain provisions of the Code.

Our structure has been infrequently utilized by public companies and has not been employed by a public company since a similar structure was employed by a public company in 2006, and the IRS could challenge ESH REIT’s qualification as a REIT.

Our structure has been infrequently utilized by public companies and has not been employed by a public company since a similar structure was employed by a public company in 2006, and there is little guidance on the tax treatment of a paired share arrangement. Section 269B of the Code provides that the determination of whether an entity qualifies as a REIT must be made on a combined basis if the entity is “stapled” to another entity. ESH REIT and the Corporation will be considered “stapled entities” if more than 50% of the value of the beneficial ownership of shares of ESH REIT is paired with the shares of the Corporation. We believe that the value of the Class B common stock does not represent more than 50% of the value of all of the shares of stock of ESH REIT and, accordingly, that ESH REIT and the Corporation are not “stapled entities” for purposes of Section 269B of the Code. If ESH REIT failed to qualify as a REIT under this rule and it was not entitled to relief under certain Code provisions, it would be subject to a material tax liability and unable to elect REIT status for the four taxable years following the year during which it ceased to so qualify. Additionally, the IRS could challenge the REIT status of ESH REIT on the basis that the Class B common stock is not freely transferrable. Such assertion, if successful, would result in the loss of ESH REIT’s REIT status. If ESH REIT failed to qualify as a REIT under this rule and it was not entitled to relief under certain Code provisions, it would be subject to a material tax liability and unable to elect REIT status for the four taxable years following the year during which it ceased to so qualify. Finally, the IRS could also assert that the Corporation should be treated as owning all of the common stock of ESH REIT. If upheld, such an assertion would effectively eliminate the benefit of REIT status for ESH REIT. No advance ruling has been or will be sought from the IRS regarding ESH REIT’s qualification as a REIT or any other matter discussed in this prospectus.

The ownership limits that apply to REITs, as prescribed by the Code and by ESH REIT’s charter, may inhibit market activity in the Shares and restrict our business combination opportunities.

In order for ESH REIT to qualify to be taxed as a REIT, not more than 50% in value of the outstanding shares of its stock may be owned, beneficially or constructively, by five or fewer individuals, as defined in the Code to include certain entities, at any time during the last half of each taxable year after the first year for which it elected to qualify to be taxed as a REIT. Subject to certain exceptions, ESH REIT’s charter authorizes its board of directors to take such actions as are necessary and desirable to preserve its qualification to be taxed as a REIT. ESH REIT’s charter also provides that, unless exempted by the board of directors, no person may

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own more than 9.8% of the outstanding shares of any class or series of its stock. The constructive ownership rules are complex and may cause shares of stock owned directly or constructively (by virtue of certain attribution provisions of the Code) by a group of related individuals or entities to be constructively owned by one individual or entity. These ownership limits could delay or prevent a transaction or a change in control of us that might involve a premium price for Shares or otherwise be in the best interests of our shareholders.

If ESH REIT’s leases with the Corporation are not respected as true leases for U.S. federal income tax purposes, ESH REIT would fail to qualify as a REIT.

To qualify as a REIT, ESH REIT is required to satisfy two gross income tests, pursuant to which specified percentages of its gross income must be passive income, such as rent. For the rent paid pursuant to the operating leases with the Corporation, which should comprise substantially all of ESH REIT’s gross income, to constitute qualifying rental income for purposes of the gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and must not be treated as service contracts, joint ventures or some other type of arrangement. ESH REIT has structured the leases, and intends to structure any future leases, so that the leases will be respected as true leases for U.S. federal income tax purposes, but there can be no assurance that the IRS will not challenge this treatment or that a court would not sustain such a challenge. If the leases were not respected as true leases for U.S. federal income tax purposes, ESH REIT would not be able to satisfy either of the two gross income tests applicable to REITs and would fail to qualify for REIT status. If ESH REIT failed to qualify as a REIT and it was not entitled to relief under certain Code provisions, it would be subject to a material tax liability and unable to elect REIT status for the four taxable years following the year during which it ceased to so qualify.

If rents received by ESH REIT from the Corporation do not reflect arm’s-length terms, the IRS could seek to recharacterize the rents.

The rates of rent payable by the Corporation to ESH REIT under the operating leases are intended to reflect arm’s-length terms. However, transfer pricing is an inherently subjective matter, and the IRS could, under Section 482 of the Code, assert that the rates of rent between the Corporation and ESH REIT do not reflect arm’s-length terms. If the IRS was successful in asserting that the rates of rent were not on arm’s-length terms, it could adversely impact our REIT qualification or our effective tax rate and tax liability.

Our principal Operating Lessee recently received a notice that it will be subject to an audit by the Internal Revenue Service.

On February 10, 2014, we received notice that the Company’s principal Operating Lessee will be subject to an audit by the Internal Revenue Service (the “IRS”) with respect to its 2011 taxable year, during which it was a taxable REIT subsidiary of ESH REIT. We note that the IRS has conducted audits of other lodging REITs and their taxable REIT subsidiaries, and in at least three cases has focused on the transfer pricing aspects of the hotel leases between the REIT and its taxable REIT subsidiaries. In two of those cases, the IRS found the terms of the leases not to be on arm’s-length terms and proposed adjustments in connection with the audits. We believe our rent provisions reflect arm’s-length terms. However, there can be no assurances that the IRS will agree, and the outcome of the anticipated audit and its impact on the Company cannot be predicted at this time.

ESH REIT has a limited operating history as a publicly traded REIT and may not be successful in operating as a publicly traded REIT, which may adversely affect its ability to make distributions to its shareholders.

ESH REIT has a limited operating history as a publicly traded REIT. The REIT rules and regulations are highly technical and complex. ESH REIT cannot assure you that its management team’s past experience will be sufficient to successfully operate ESH REIT as a publicly traded REIT, implement appropriate operating and investment policies and comply with Code or Treasury Regulations that are applicable to it. Failure to comply with the income, asset and other requirements imposed by the REIT rules and regulations could prevent ESH REIT from qualifying as a REIT and could force it to pay unexpected taxes and penalties, which may adversely affect its ability to make distributions to its shareholders.

Even if ESH REIT continues to qualify as a REIT, it may face other tax liabilities that could reduce our cash flows.

Even if ESH REIT continues to qualify for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes on its income and assets including, but not limited to, taxes on any undistributed income and property and transfer taxes. In order to maintain its status as a REIT, each year ESH REIT must distribute to holders of its common stock at least 90% of its REIT taxable income, determined before the deductions for dividends paid and excluding any net capital gain. To the extent that ESH REIT satisfies this distribution requirement, but distributes less than 100% of its taxable income and net capital gain, it will be subject to U.S. federal corporate income tax on its undistributed REIT taxable income and net capital gain. In addition, ESH REIT will be subject to a 4% nondeductible excise tax if the actual amount that it pays out to holders of its common stock in a calendar year is less than a minimum amount specified under the Code. ESH REIT generally expects to distribute approximately 95% of its REIT taxable income. Thus, ESH REIT will be subject to U.S. federal corporate income tax on its undistributed REIT taxable income and net capital gain and may be subject to U.S. federal excise tax. Any of these taxes would decrease cash available for distributions to holders of its common stock, and lower distributions of cash could adversely affect the market price of the Shares.

The REIT distribution requirements could materially adversely affect ESH REIT’s liquidity and may force ESH REIT to borrow funds or sell assets during unfavorable market conditions or make taxable distributions of its capital stock.

In order to meet the REIT distribution requirements and avoid the payment of income and excise taxes, ESH REIT may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. ESH REIT’s cash flows may be insufficient to fund required REIT distributions as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt service obligations or amortization payments. The insufficiency of ESH REIT’s cash flows to cover its distribution requirements could have a material adverse effect on its ability to incur additional indebtedness or sell equity securities in order to fund distributions required to maintain its qualification as a REIT.

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ESH REIT may from time to time make distributions to its shareholders in the form of its taxable stock dividends, which could result in shareholders incurring tax liability without receiving sufficient cash to pay such tax.

Although it has no current intention to do so, ESH REIT may in the future distribute taxable stock dividends to its shareholders in the form of additional shares of its stock. ESH REIT might distribute additional shares of its Class A common stock, shares of Class B common stock and/or shares of its preferred stock to the Corporation and/or shares of its Class B common stock to the holders of its Class B common stock. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of ESH REIT’s current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, shareholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells ESH REIT common or preferred shares that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of the Shares at the time of the sale. Furthermore, with respect to certain non-U.S. shareholders, ESH REIT may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in its common stock.

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

Certain dividends known as qualified dividends payable to U.S. shareholders that are individuals, trusts or estates currently are subject to the same tax rates as long-term capital gains, which are significantly lower than the maximum rates for ordinary income. Dividends paid by REITs, however, generally are not eligible for such reduced rates. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs and the Shares.

Applicable REIT laws may restrict certain business activities and increase our overall tax liability.

As a REIT, ESH REIT is subject to various restrictions on the types of income it can earn, assets it can own and activities in which it can engage. Business activities that could be impacted by applicable REIT laws include, but are not limited to, activities such as developing alternative uses of real estate, including the development and/or sale of hotel properties. Due to these restrictions, we anticipate that we will conduct certain business activities, including those mentioned above, through the Corporation. The Corporation is taxable as a regular C corporation and is subject to U.S. federal, state, local and, if applicable, foreign taxation on its taxable income. To qualify as a REIT, ESH REIT must satisfy certain asset, income, organizational, distribution, shareholder ownership and other requirements on an ongoing basis. In order to meet these tests, ESH REIT may be required to forego investments it might otherwise make. Thus, ESH REIT’s compliance with the REIT requirements may hinder our business and operating strategies, financial condition and results of operations.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Code substantially limit ESH REIT’s ability to hedge its assets and liabilities. Any income from a hedging transaction that ESH REIT enters into primarily to manage risk of currency fluctuations or to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests that apply to REITs, provided that certain identification requirements are met. To the extent that ESH REIT enters into other types of hedging transactions or fails to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, ESH REIT may be required to limit its use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of ESH REIT’s hedging activities because its TRS may be subject to tax on gains or expose ESH REIT to greater risks associated with changes in interest rates than it would otherwise choose to bear. In addition, losses in a TRS will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against past or future taxable income in the TRS.

The application of FIRPTA to non-U.S. holders of Class B common stock of ESH REIT is not clear.

A non-U.S. person disposing of a U.S. real property interest (“USRPI”), including shares of a U.S. corporation whose assets consist principally of USRPIs, is generally subject to tax under the Foreign Investment in Real Property Tax Act (“FIRPTA”), on the gain recognized on the disposition, in which case they would also be required to file U.S. tax returns with respect to such gain. FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is a “domestically controlled REIT.” We intend to take the position that ESH REIT is a domestically controlled REIT under the Code. However, there can be no assurance that the IRS will not challenge this treatment or that a court would not sustain such a challenge. If ESH REIT were to fail to qualify as a “domestically controlled REIT,” gains realized by a non-U.S. holder on a sale of Class B common stock would be subject to tax under FIRPTA unless the Class B common stock was regularly traded on an established securities market (such as the NYSE) and the

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non-U.S. holder did not at any time during a specified testing period directly or indirectly own more than 5% of the value of the outstanding Class B common stock. While there is no authority addressing whether a component of a paired interest will be considered to be regularly traded on an established securities market by virtue of the paired interest being considered to be regularly traded on an established securities market, we intend to take the position that the Class B common stock of ESH REIT is traded on an established securities market following the Offering.

Non-U.S. holders of Class B common stock of ESH REIT may be subject to tax under FIRPTA on distributions.

Non-U.S. holders of Class B common stock may incur tax on distributions that are attributable to gain from a sale or exchange of a USRPI by ESH REIT under FIRPTA. A USRPI includes certain interests in real property and stock in corporations at least 50% of whose assets consist of USRPIs. Under FIRPTA, a non-U.S. shareholder is taxed on distributions attributable to gain from sales of USRPIs as if such gain were effectively connected with a U.S. trade or business of the non-U.S. shareholder, in which case they would also be required to file U.S. tax returns with respect to such gains. A non-U.S. shareholder thus would be taxed on such a distribution at the normal capital gains rates applicable to U.S. shareholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non-U.S. corporate shareholder not entitled to treaty relief or exemption also may be subject to the 30% branch profits tax on such a distribution.

If the Class B common stock is regularly traded on an established securities market located in the United States, capital gain distributions on the Class B common stock that are attributable to ESH REIT’s sale of real property will be treated as ordinary dividends rather than as gain from the sale of a USRPI as long as the non-U.S. shareholder did not own more than 5% of the Class B common stock at any time during the one-year period preceding the distribution. As a result, non-U.S. shareholders generally will be subject to withholding tax on such capital gain distributions in the same manner as they are subject to withholding tax on ordinary dividends. As noted above, we intend to take the position that the Class B common stock will be regularly traded on an established securities market located in the United States following the Offering. If the Class B common stock is not considered to be regularly traded on an established securities market located in the United States or the non-U.S. shareholder owned more than 5% of the Class B common stock at any time during the one-year period preceding the distribution, capital gain distributions that are attributable to ESH REIT’s sale of real property would be subject to tax under FIRPTA, as described in the preceding paragraph. In such case, ESH REIT must withhold 35% of any distribution that ESH REIT could designate as a capital gain dividend. A non-U.S. shareholder may receive a credit against its tax liability for the amount ESH REIT withholds. Moreover, if a non-U.S. shareholder disposes of ESH REIT common stock during the 30-day period preceding a dividend payment, and such non-U.S. shareholder (or a person related to such non-U.S. shareholder) acquires or enters into a contract or option to acquire the Class B common stock within 61 days of the first day of the 30-day period described above, and any portion of such dividend payment would, but for the disposition, be treated as a USRPI capital gain to such non-U.S. shareholder, then such non-U.S. shareholder shall be treated as having USRPI capital gain in an amount that, but for the disposition, would have been treated as USRPI capital gain.

Risks Related to the Corporation

The Corporation is subject to tax at regular corporate rates.

The Corporation is subject to U.S. federal income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates, and distributions to holders of Corporation common stock are not deductible by it in computing its taxable income. In calculating its taxable income, the Corporation must include as income any dividends received from ESH REIT. Distributions to holders of Corporation common stock are taxable as dividends to the extent of current and accumulated earnings and profits. Dividends paid by the Corporation to noncorporate U.S. shareholders that constitute qualified dividend income will be taxable to the shareholder at the preferential rates applicable to long-term capital gains provided the shareholder meets certain holding period requirements. Distributions in excess of the Corporation’s current and accumulated earnings and profits would generally be considered a return of capital for U.S. federal income tax purposes to the extent of the holder’s adjusted tax basis in their shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in their shares. If distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such stock.

The application of FIRPTA could adversely affect non-U.S. holders of the Paired Shares.

The Corporation is expected to be a United States real property holding corporation under the Code. As a result, under FIRPTA, certain non-U.S. holders of Corporation common stock may be subject to U.S. federal income tax on gain from the disposition of such stock, in which case they would also be required to file U.S. tax returns with respect to such gain. Whether these FIRPTA provisions apply depends on the amount of Corporation common stock that such non-U.S. holder holds and whether, at the time they dispose of their shares, Corporation common stock is regularly traded on an established securities market (such as the NYSE) within the meaning of the applicable Treasury Regulations. While there is no authority addressing whether a component of a paired interest will be considered to be traded on an established securities market by virtue of the paired interest being considered to be traded on an established securities market, we intend to take the position that the common stock of the Corporation is traded on an established securities market. So long as the Corporation common stock is regularly traded as noted above, only a non-U.S. holder who has held,

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actually or constructively, more than 5% of the Corporation’s common stock at any time during the applicable testing period may be subject to U.S. federal income tax on the disposition of such common stock under FIRPTA. In addition, a separate valuation of the Class B common stock of ESH REIT and common stock of the Corporation may not be available. As a result, the portion of any gain on the disposition of a Paired Share that is attributable to shares of common stock of the Corporation, and subject to FIRPTA, may be difficult to determine.

If ESH REIT was to lose its REIT status, it could materially adversely affect the Corporation, and therefore materially adversely affect the Company.

The Corporation will receive a substantial portion of its income in the form of distributionsfrom ESH REIT. If ESH REIT was not treated as a REIT, it would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates, and distributionsto holders of its stock, including the Corporation, would not be deductible by it in computing its taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to holders of its stock, including the Corporation, and would likely reduce the value of the ESH REIT Class A common stock held by the Corporation, which in turn could have a material adverse effect on the value of the Corporation’s common stock. See “—Risks Related to ESH REIT and its Status as a REIT.”

Risks Related to the Paired Shares

If our stock price fluctuates, you could lose a significant part of your investment.

The market price of the Paired Shares may be influenced by many factors including:

• announcements of new hotels or services or significant price reductions by us or our competitors;

• changes in tax law or interpretations thereof;

• the failure of securities analysts to cover the Paired Shares or changes in analysts’ financial estimates;

• variations in quarterly results of operations;

• default on our indebtedness or foreclosure of our hotel properties;

• economic, legal and regulatory factors unrelated to our performance;

• increased competition;

• future sales of the Paired Shares or the perception that such sales may occur;

• investor perceptions of us and the lodging industry;

• events beyond our control, such as war, terrorist attacks, travel-related health concerns, transportation and fuel prices, travel-related accidents, natural disasters and severe weather; and

• the other factors listed in this “Risk Factors” section.

As a result of these factors, investors in Paired Shares may not be able to resell their Paired Shares at or above their purchase price. In addition, our stock price may be volatile. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us. Accordingly, these broad market and industry factors may significantly reduce the market price of the Paired Shares, regardless of our operating performance.

Certain of our shareholders each beneficially own a substantial amount of the Paired Shares and have substantial control over us and their interests may conflict with or differ from your interests as a shareholder.

Affiliates of Centerbridge, Paulson and Blackstone each beneficially own approximately 27.2% of the Paired Shares, with no individual entity owning, actually or constructively, more than 9.8% as provided in the respective charters of the Corporation and ESH REIT, and we are a “controlled company” within the meaning of the NYSE rules and ESH REIT is controlled by virtue of its ownership by the Corporation, regardless of the Sponsors’ ownership. In addition, four directors of the Corporation and three directors of ESH REIT were designated by the Sponsors pursuant to the shareholders agreement between the Corporation, ESH REIT and the Sponsors. Further, the Sponsors are entitled to consent rights on specified matters pursuant to the shareholders agreement. As a result, the Sponsors are able to exert a significant degree of influence or actual control over our management and affairs and over matters requiring shareholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets and other significant business or corporate transactions. These shareholders may have interests that are different from yours and

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may vote in a way with which you disagree and which may be adverse to your interests. In addition, this concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of the Paired Shares to decline or prevent our shareholders from realizing a premium over the market price for their Paired Shares.

Additionally, each of the Sponsors is in the business of making investments in companies and may acquire and hold, and in a few instances have acquired and held, interests in businesses that compete directly or indirectly with us. One or more of the Sponsors may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. The Corporation’s and ESH REIT’s charters provide that none of the Sponsors, any of their affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.

As restrictions on resale end or if the Sponsors exercise their registration rights, a significant number of Paired Shares could become eligible for resale. As a result, the market price of our stock could decline if the Sponsors sell their Paired Shares or are perceived by the market as intending to sell them. See “—Future sales or the possibility of future sales of a substantial amount of the Paired Shares may depress the price of the Paired Shares.”

Future sales or the possibility of future sales of a substantial amount of the Paired Shares may depress the price of the Paired Shares.

Future sales or the availability for sale of substantial amounts of the Paired Shares in the public market could adversely affect the prevailing market price of the Paired Shares and could impair our ability to raise capital through future sales of equity securities.

The charters of the Corporation and ESH REIT authorize us to issue 3,500,000,000 Paired Shares, of which 204,787,500 Paired Shares are outstanding as of March 10, 2014. 32,487,500 Paired Shares were sold in our initial public offering, which are freely transferable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”). The remaining 172,300,000 Paired Shares, including the Paired Shares owned by the Sponsors and our executive officers and directors, are restricted from immediate resale under the federal securities laws and the lock-up agreements between the Sponsors, our executive officers and directors and the underwriters, but may be sold in the near future. Following the expiration of the applicable lock-up period, all these Paired Shares will be eligible for resale under Rule 144 or Rule 701 of the Securities Act, subject to volume limitations and applicable holding period requirements. In addition, the Sponsors have the ability to cause us to register the resale of their Paired Shares.

We may issue Paired Shares or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of Paired Shares, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those Paired Shares or other securities in connection with any such acquisitions and investments.

We have also filed a registration statement on Form S-8 covering 8,000,000 Paired Shares in connection with our employee benefit plans.

We cannot predict the size of future issuances of the Paired Shares or the effect, if any, that future issuances and sales of the Paired Shares will have on the market price of the Paired Shares. Sales of substantial amounts of the Paired Shares (including Paired Shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for the Paired Shares.

Under our equity incentive plans, the granting entity will need to compensate the non-granting entity for the issuance of its component share of the Paired Shares.

The Extended Stay America, Inc. 2013 Long-Term Incentive Plan (“Corporation 2013 LTIP”) and the ESH Hospitality, Inc. 2013 Long-Term Incentive Plan (“ESH REIT 2013 LTIP,” each a “2013 LTIP”) contemplate grants of Paired Shares to employees, officers and directors of the Corporation and ESH REIT (each a “Granting Entity”), as applicable. Each Granting Entity makes awards to eligible participants under its respective 2013 LTIP in respect of Paired Shares, subject to the non-Granting Entity’s approval of the terms of each award made under the Granting Entity’s 2013 LTIP, and the non-Granting Entity’s agreement to issue its component of the Paired Share (i.e., with respect to the Corporation, a share of common stock, and with respect to ESH REIT, a share of Class B common stock) to the grantee at the time of delivery of its component of the Paired Share.

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The Granting Entity will compensate the non-Granting Entity generally in cash for its issuance of its component of the Paired Share for the fair market value at the time of issuance. In some cases, the applicable Granting Entity may have to pay more for a share of the non-Granting Entity than it would have otherwise paid at the time of grant as the result of an increase in the value of a Paired Share between the time of grant and the time of exercise or settlement. In addition, the Corporation may need to acquire additional shares of Class A common stock of ESH REIT at the time of issuance of the shares of Class B common stock of ESH REIT in order to maintain its 55% interest in ESH REIT.

Under the 2013 LTIPs, a grant of RSUs results in the recognition of total compensation expense equal to the grant date fair value of such grant. Compensation expense related to a grant is recognized on a straight-line basis over the requisite service period of each grant. As it relates to the Company’s financial statements, with respect to grants issued to directors of ESH REIT, such compensation expense is recognized on a mark-to-market basis each period rather than on a straight-line basis.

If securities analysts do not publish research or reports about Extended Stay, or if they issue unfavorable commentary about us or our industry or downgrade the Paired Shares, the price of the Paired Shares could decline.

The trading market for the Paired Shares depends in part on the research and reports that third-party securities analysts publish about Extended Stay and the lodging industry. One or more analysts could downgrade the Paired Shares or issue other negative commentary about Extended Stay or our industry. In addition, we may be unable or slow to maintain and attract additional research coverage. Alternatively, if one or more of these analysts cease coverage of Extended Stay, we could lose visibility in the market. As a result of one or more of these factors, the trading price of the Paired Shares could decline.

Delaware law and our organizational documents may impede or discourage a takeover, which could deprive our shareholders of the opportunity to receive a premium for their shares.

The Corporation and ESH REIT are Delaware corporations, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change of control would be beneficial to our existing shareholders. In addition, provisions of the Corporation’s and ESH REIT’s charters and bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our boards of directors. These provisions include, among others:

• the ability of our boards of directors to designate one or more series of preferred stock and issue shares of preferred stock without shareholder approval;

• actions by shareholders may not be taken by written consent, except that any action required or permitted to be taken by our shareholders may be effected by written consent until such time as the Sponsors cease to own 50% or more of the outstanding Paired Shares;

• the sole power of a majority of the boards of directors to fix the number of directors;

• advance notice requirements for nominating directors or introducing other business to be conducted at shareholder meetings, provided that such notice will not be applicable to the Sponsors so long as they own at least 50% of the outstanding Paired Shares; and

• the limited ability of shareholders to call special meetings while the Sponsors own at least 50% of the outstanding Paired Shares;

• the affirmative supermajority vote of our shareholders to amend anti-takeover provisions in our charters and bylaws.

The foregoing factors, as well as the significant ownership of Paired Shares by the Sponsors, and certain covenant restrictions under our indebtedness could impede a merger, takeover or other business combination or discourage a potential investor from making a tender offer for the Paired Shares, which, under certain circumstances, could reduce the market price of the Paired Shares.

The Corporation and ESH REIT may each issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of the Paired Shares, which could depress the price of the Paired Shares.

        The Corporation has 21,202 shares of 8.0% voting preferred stock outstanding. ESH REIT has 125 shares of 12.5% preferred stock outstanding. The Corporation’s charter authorizes the Corporation to issue up to 350,000,000 shares of one or more additional series of preferred stock. ESH REIT’s charter authorizes ESH REIT to issue up to 350,000,000 shares of one or more additional series of preferred stock. The boards of directors of the Corporation and ESH REIT will have the authority to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by shareholders. Preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of the Paired Shares. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for the Paired Shares at a premium over the market price and adversely affect the market price and the voting and other rights of the holders of the Paired Shares.

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ESH REIT may be subject to adverse legislative or regulatory tax changes that could adversely affect the market price of the Paired Shares.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. ESH REIT, the Corporation and holders of Class B common stock could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation, which could effectively eliminate our structure, and in turn, adversely affect the market price of the Paired Shares.

There is a possibility that there will be amendments to or elimination of the pairing arrangement, which may, in turn, impact ESH REIT’s status as a REIT.

Each share of common stock of the Corporation is attached to and trades together with the Class B common stock of ESH REIT. Under the Corporation’s and ESH REIT’s charters, each of the respective board of directors may modify or eliminate this pairing arrangement without the consent of its respective shareholders at any time if that board of directors no longer deems it in the best interests of the Corporation or ESH REIT, as the case may be, for their shares to continue to be attached and trade together. At this time, neither board has determined the circumstances under which the pairing arrangement would be terminated. However, circumstances that the respective board might consider in making such a determination may include, for example, the enactment of legislation that would significantly reduce or eliminate the benefits of our current structure. With respect to such determination, the respective board must fulfill at all times its respective fiduciary duties and, therefore, it is not possible to predict at this time the future circumstances under which the respective board would terminate the pairing arrangement. In addition, holders of Paired Shares have the option, by the vote of a majority of the Paired Shares then outstanding, to eliminate the pairing arrangement in accordance with the respective charters of the Corporation and ESH REIT. The pairing arrangement will be automatically terminated upon bankruptcy of either of the Corporation or ESH REIT.

The Corporation and ESH REIT each have the right, at their option and without the consent of the holders of the Paired Shares, to acquire shares of Class B common stock of ESH REIT from the holders of such shares in exchange for cash, securities of the Corporation or ESH REIT, as the case may be, and/or any other property with a fair market value, as determined by a valuation firm or investment bank, at least equal to the fair market value of the Class B common stock of ESH REIT being exchanged. The Corporation and ESH REIT each have the right, at their option and without the consent of the holders of the Paired Shares, to acquire shares of the Corporation’s common stock from the holders of such shares in exchange for cash, securities of the Corporation or ESH REIT, as the case may be, and/or any other property with a fair market value, as determined by a valuation firm or investment bank, at least equal to the fair market value of the Corporation’s common stock being exchanged. Holders of the Paired Shares could be subject to U.S. federal income tax on the exchange of shares of Class B common stock of ESH REIT or shares of common stock of the Corporation and may not receive cash to pay the tax from the Corporation or ESH REIT.

After any such acquisition, shares of the Corporation’s common stock may be paired with shares of Class B common stock of ESH REIT in a different proportion, but such shares will continue to be attached and trade together. Further, the Corporation’s charter and ESH REIT’s charter allow the respective boards of directors of the Corporation and ESH REIT to, in their sole discretion, issue unpaired shares of their capital stock. Trading in unpaired shares of the Corporation or ESH REIT may reduce the liquidity or value of the Paired Shares. The Class A common stock of ESH REIT owned by the Corporation is also freely transferable and if transferred, the transferee will hold unpaired shares of common stock of ESH REIT.

ESH REIT’s board of directors could terminate its status as a REIT, subjecting ESH REIT’s taxable income to U.S. federal income taxation, which would increase its liabilities for taxes.

Under ESH REIT’s charter, its board of directors may terminate its REIT status, without the consent of its shareholders, at any time if the board no longer deems it in the best interests of ESH REIT to continue to qualify under the Code as a REIT, subject to the Sponsors’ consent rights pursuant to the shareholders agreement between the Corporation, ESH REIT and the Sponsors. ESH REIT’s board of directors has not yet determined the circumstances under which ESH REIT’s status as a REIT would be terminated. However, circumstances that the board may consider in making such a determination may include, for example:

• the enactment of new legislation that would significantly reduce or eliminate the benefits of being a REIT or having a paired share arrangement; or

• ESH REIT no longer being able to satisfy the REIT requirements.

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With respect to this determination, ESH REIT’s board must fulfill at all times its fiduciary duties and, therefore, it is not possible to predict at this time the future circumstances under which the board would terminate ESH REIT’s status as a REIT.

If ESH REIT’s status as REIT is terminated, its taxable income will be subject to U.S. federal income taxation (including any applicable alternative minimum tax) at regular corporate rates. If ESH REIT’s status was terminated and it was not entitled to relief under certain Code provisions, it would be unable to elect REIT status for the four taxable years following the year during which it ceased to so qualify.

We are exposed to risks relating to evaluations of our internal controls required by Section 404 of the Sarbanes-Oxley Act.

We are in the process of evaluating our internal controls systems to allow management to report on, and our independent auditors to audit, our internal controls over financial reporting. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and will be required to comply with Section 404 in full (including an auditor attestation on management’s internal controls report) in our combined annual report on Form 10-K for the year ending December 31, 2014 (subject to any change in applicable SEC rules). Furthermore, upon completion of this process, we may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting Oversight Board (“PCAOB”) rules and regulations that remain unremediated. As a public company, we will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

If we fail to implement the requirements of Section 404 in a timely manner, regulatory authorities such as the SEC or the PCAOB might subject us to sanctions or investigation. If we do not implement improvements to our disclosure controls and procedures or to our internal controls in an effective or timely manner, our independent registered public accounting firm may not be able to certify as to the effectiveness of our internal controls over financial reporting pursuant to an audit of our controls. This may subject us to adverse regulatory consequences or a loss of confidence in the reliability of our financial statements. We could also suffer a loss of confidence in the reliability of our financial statements if we or our independent registered public accounting firm reports a material weakness in our internal controls, if we do not develop and maintain effective controls and procedures or if we are otherwise unable to deliver timely and reliable financial information. Any loss of confidence in the reliability of our financial statements or other negative reaction to our failure to develop timely or adequate disclosure controls and procedures or internal controls could result in a decline in the price of the Paired Shares. In addition, if we fail to remedy any material weakness, our financial statements may be inaccurate, we may face restricted access to the capital markets and the trading price of the Paired Shares may be adversely affected. In connection with the audits of our 2013 and 2012 financial statements, our management and auditors identified “significant deficiencies.”

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and the NYSE, may strain our resources, increase our costs and divert management’s attention, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the corporate governance standards of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the NYSE. These requirements place a strain on our management, systems and resources. The Exchange Act requires us to file annual, quarterly and current reports with respect to our business and financial condition within specified time periods and to prepare proxy statements with respect to the annual meetings of shareholders of the Corporation and ESH REIT. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. The NYSE requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting and comply with the Exchange Act and NYSE requirements, significant resources and management oversight are required. This may divert management’s attention from other business concerns and lead to significant costs associated with compliance, which could have a material adverse effect on us and the price of the Paired Shares. Advocacy efforts by shareholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs.

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We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements.

A company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” within the meaning of the NYSE rules and may elect not to comply with certain corporate governance requirements of the NYSE, including:

• the requirement that a majority of the boards of directors of the Corporation and ESH REIT consist of independent directors;

• the requirement that each of the Corporation and ESH REIT have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

• the requirement that each of the Corporation and ESH REIT have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

We rely on all of the exemptions listed above. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2013, we owned and operated 684 hotels. The average age of our hotel properties at December 31, 2013 was 14.9 years. We are under long-term ground leases at four of our hotel properties with initial terms terminating at various dates between 2016 and 2096 with most leases including multiple renewal options for generally five or 10 year periods. Other than the four ground leases described above, all remaining hotel properties and grounds are fully owned. The following table shows certain information regarding those hotels.

State/Country	Hotels	Number of Rooms	% of Total Rooms
California	85	10,310	13.5%
Texas	69	7,817	10.3%
Florida	54	6,017	7.9%
Illinois	34	3,932	5.2%
North Carolina	33	3,421	4.5%
Virginia	30	3,291	4.3%
Georgia	30	3,248	4.3%
Ohio	30	2,878	3.8%
Washington	23	2,690	3.5%
Arizona	19	2,229	2.9%
New Jersey	19	2,224	2.9%
Michigan	19	2,114	2.8%
Colorado	17	2,095	2.8%
Maryland	19	2,063	2.7%
Tennessee	19	2,015	2.6%
Missouri	16	1,724	2.3%
Pennsylvania	16	1,713	2.2%
Massachusetts	13	1,434	1.9%
New York	11	1,323	1.7%
Indiana	13	1,228	1.6%
South Carolina	11	1,102	1.4%
Minnesota	10	1,043	1.4%
Oregon	7	898	1.2%
Kentucky	10	892	1.2%
Louisiana	7	791	1.0%
Kansas	7	767	1.0%
Alabama	7	692	0.9%
Wisconsin	6	664	0.9%
Nevada	5	652	0.9%

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State/Country	Hotels	Number of Rooms	% of Total Rooms
Utah	5	622	0.8%
Connecticut	5	570	0.7%
Canada	3	500	0.7%
Oklahoma	5	474	0.6%
New Mexico	4	459	0.6%
Alaska	4	420	0.6%
Rhode Island	4	403	0.5%
Arkansas	3	305	0.4%
Mississippi	3	273	0.4%
Montana	2	208	0.3%
Iowa	2	190	0.2%
Delaware	1	142	0.2%
Idaho	1	107	0.1%
New Hampshire	1	101	0.1%
Maine	1	92	0.1%
Nebraska	1	86	0.1%
Total	684	76,219	100.0%

We lease our corporate headquarters in Charlotte, North Carolina. The initial lease term expires in August 2021 with two additional five year renewal terms. Our offices are sufficient to meet our present needs, and we do not anticipate any difficulty in securing additional office space, as needed, on terms acceptable to us.

Item 3. Legal Proceedings

We are from time to time subject to various claims and lawsuits incidental to our business. In the opinion of management, these claims and suits, individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated and combined financial statements, results of operations or liquidity or on ESH REIT’s consolidated financial statements, results of operations or liquidity.

Item 4. Mine Safety Disclosures

None.

PART II

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

Market Information

The Paired Shares are listed on the NYSE under the symbol “STAY” and commenced trading on November 13, 2013. Below is a summary of the high and low prices of our Paired Shares for the quarterly period since the date of our initial public offering:

2013	High		Low
Fourth Quarter (from November 13, 2013, date of initial trading)	$	26.26	$	20.00

The Class A common stock of ESH REIT is held by the Corporation and has never been publicly traded.

Holders of Record

As of March 10, 2014, there were 117 holders of record of the Paired Shares and the Corporation was the only holder of ESH REIT’s Class A common stock. Because many of our Paired Shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of beneficial owners represented by these record holders.

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Distribution Policies

We intend to make distributions of $0.15 per Paired Share per quarter. We intend to maintain our distribution rate unless our consolidated and combined results of operations, net income, Adjusted EBITDA, liquidity, cash flows, financial condition or prospects, economic conditions or other factors differ materially from the assumptions used in projecting our intended distribution rate. We intend to make our expected distributions in respect of the Class B common stock of ESH REIT. In the event distributions in respect of the Class B common stock of ESH REIT are not sufficient to meet our expected distributions, the expected distributions may be completed through distributions in respect of the common stock of the Corporation using funds distributed to the Corporation as distributions on the Class A common stock of ESH REIT, after allowance for tax, if any, on those funds.

The Corporation’s and ESH REIT’s boards of directors are independent of one another and owe separate fiduciary duties to the Corporation and ESH REIT. Each board of directors will separately determine the form, timing and amount of any distributions to be paid by the respective entities for any period. For a description of the Corporation’s distribution policy, please see “—Corporation Distribution Policy” and for ESH REIT’s distribution policy, see “—ESH REIT Distribution Policy.”

Corporation Distribution Policy

The Corporation’s board of directors has not declared any distributions on the Corporation’s common stock and currently has no intention to do so, except as described above. The payment of any distributions will be at the discretion of the Corporation’s board of directors. Any such distributions will be made subject to the Corporation’s compliance with applicable law and will depend on, among other things, the receipt by the Corporation of dividends from ESH REIT in respect of the Class A common stock, the Corporation’s results of operations and financial condition, level of indebtedness, capital requirements, capital contributions to ESH REIT, contractual restrictions, restrictions in any existing or future debt agreements of the Corporation or ESH REIT and in any preferred stock and other factors that the Corporation’s board of directors may deem relevant.

The Corporation’s ability to pay dividends will depend on its receipt of cash dividends from ESH REIT, which may further restrict its ability to pay distributions. In particular, ESH REIT’s ability to pay distributions is restricted by the terms of its indebtedness. In cases in which the terms of any of the Corporation’s or ESH REIT’s existing or future indebtedness prohibits the payment of cash dividends, ESH REIT may declare and pay taxable stock dividends to maintain its REIT status. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness” for a description of the restrictions on the Corporation’s and ESH REIT’s ability to pay distributions.

ESH REIT Distribution Policy

ESH REIT intends to make regular quarterly cash distributions to its shareholders (including the Corporation), as more fully described below. To qualify as a REIT, ESH REIT must distribute annually to its shareholders an amount at least equal to:

• 90% of its REIT taxable income, computed without regard to the deduction for dividends paid and excluding any net capital gain; plus

• 90% of the excess of its net income, if any, from foreclosure property over the tax imposed on such income by the Code; less

• the sum of certain items of non-cash income that exceeds a percentage of ESH REIT’s income.

ESH REIT will be subject to income tax on its taxable income that is not distributed and to an excise tax to the extent that certain percentages of its taxable income are not distributed by specified dates. ESH REIT generally expects to distribute approximately 95% of its REIT taxable income. ESH REIT will be subject to U.S. federal corporate income tax on its undistributed REIT taxable income and net capital gain and may be subject to U.S. federal excise tax. Taxable income as computed for purposes of the forgoing tax rules will not necessarily correspond to ESH REIT’s income before income taxes as determined under accounting principles generally accepted in the United States (“GAAP”) for financial reporting purposes.

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On February 26, 2014, the board of directors of ESH REIT declared a pro rata cash distribution of $0.08 per share for the fourth quarter of 2013 on its Class A common stock and Class B common stock with respect to the period commencing upon the completion of the Offering and ending on December 31, 2013, based on our intended distribution rate of $0.15 per Paired Share for a full quarter. The dividend is payable on March 26, 2014, to shareholders of record as of March 12, 2014.

The timing and frequency of ESH REIT’s distributions will be authorized by ESH REIT���s board of directors, in its sole discretion, and declared based on a variety of factors, including:

• actual consolidated results of operations;

• ESH REIT’s debt service requirements;

• capital expenditure requirements for its hotel properties;

• ESH REIT’s taxable income;

• the annual distribution requirement under the REIT provisions of the Code;

• contractual restrictions;

• restrictions in any current or future debt agreements and in any preferred stock;

• ESH REIT’s operating expenses; and

• other factors that ESH REIT’s board of directors may deem relevant.

Class A common stock and Class B common stock are entitled to any common stock dividends that ESH REIT’s board of directors may declare. Each share of Class A and Class B common stock will be entitled to the same amount of dividends per share, except that, in cases in which the terms of any of ESH REIT’s existing or future indebtedness prohibits the payment of cash dividends, ESH REIT may declare and pay taxable stock dividends in respect of the Class A common stock that differ from dividends paid in respect of the Class B common stock in order to maintain its REIT status. Approximately 55% of ESH REIT’s dividends will be paid to the Corporation on account of the Class A common stock.

ESH REIT’s ability to pay distributions is restricted by the terms of its indebtedness. In cases in which the terms of any of ESH REIT’s existing or future indebtedness prohibits the payment of cash dividends, ESH REIT may declare and pay taxable stock dividends in order to maintain its REIT status. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness” for a description of the restrictions on ESH REIT’s ability to pay distributions. In cases where ESH REIT distributes additional shares of its Class B common stock to the holders of its Class B common stock, the Corporation may correspondingly distribute a number of additional shares of its common stock, which together with the shares of Class B common stock distributed by ESH REIT will form Paired Shares.

Stock Performance Graph

The following graph compares the total shareholder return on the Paired Shares to the cumulative total returns of the Standard and Poor’s 500 Stock Index (“S&P 500”) and the Standard and Poor’s 500 Hotel Index (“S&P Hotel Index”) for the period from November 13, 2013, the date on which our Paired Shares commenced trading on the NYSE, through December 31, 2013. The graph assumes an initial investment of $100 on November 13, 2013 in the Paired Shares and in each of the indices and also assumes the reinvestment of dividends where applicable. The results shown in the graph below are not necessarily indicative of future performance.

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This performance graph shall and related information shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

Recent Sales of Unregistered Securities

On November 6, 2013, the Corporation issued 100 shares of common stock to Holdings and the holders of the ownership interests of ESH REIT’s predecessor, ESH Hospitality LLC, for consideration of $100. The issuance of these shares of common stock was made pursuant to an exemption provided by Section 4(a)(2) of the Securities Act. At the time of the issuance of such shares, the Corporation was owned and controlled by employees of the Sponsors.

On November 11, 2013, ESH REIT issued 39,706,944 shares of Class A common stock to the Corporation in consideration of a note issued to ESH REIT by the Corporation in the principal amount of $357,314,750.50. On November 18, 2013, the Corporation paid to ESH REIT $357,586,999.53, including $272,249.03 of accrued interest, in satisfaction of the note described in the preceding sentence. The issuance of these shares of Class A common stock was made pursuant to an exemption provided by Section 4(a)(2) of the Securities Act. At the time of issuance of such shares, the Corporation and ESH REIT were commonly controlled and owned.

On November 12, 2013, the Corporation issued 172,199,900 shares of common stock to its existing shareholders in consideration of the shareholders’ contribution to the Corporation of 210,466,667 shares of Class A common stock of ESH REIT. The issuance of these shares of common stock was made pursuant to an exemption provided by Section 4(a)(2) of the Securities Act. All of the recipients of the shares were existing shareholders of the Corporation.

Also on November 12, 2013, ESH REIT issued 122,222 shares of Class A common stock to the Corporation in consideration of a note issued to ESH REIT in the principal amount of $1,099,851.03. On November 18, 2013, the Corporation paid to ESH REIT $1,100,569.33, including $718.30 of accrued interest, in satisfaction of the note described in the preceding sentence. The issuance of these shares of Class A common stock was made pursuant to an exemption provided by Section 4(a)(2) of the Securities Act. At the time of issuance of such shares, the Corporation and ESH REIT were commonly controlled and owned.

Use of Proceeds from Registered Securities

        On November 18, 2013, the Corporation and ESH REIT completed an initial public offering of 32,487,500 Paired Shares for cash consideration of $20.00 per Paired Share, each Paired Share consisting of one share of common stock, par value $0.01 per share, of the Corporation, that is attached to and trades as a single unit with one share of Class B common stock, par value $0.01 per share, of ESH REIT. The Offering included 4,237,500 Paired Shares purchased by the underwriters in connection with the exercise in full of their option to purchase additional Paired Shares. The Paired Shares sold in the Offering were registered under the Securities Act pursuant to the Corporation and ESH REIT’s Registration Statement on Form S-1 (File No. 333-190052), which was declared effective by the SEC on November 12, 2013. The Offering raised gross proceeds to the Corporation and ESH REIT of approximately $649.8 million, and net proceeds to the Corporation and ESH REIT of approximately $602.2 million after deducting underwriting discounts, commissions and other transaction costs. The Offering proceeds were divided among the Corporation and ESH REIT based on their relative valuations. The Corporation used the majority of the proceeds it received to purchase shares of Class A common stock of ESH REIT to maintain its ownership of approximately 55% of the outstanding common stock of ESH REIT. ESH REIT used its proceeds from the Offering, including proceeds received pursuant to the sale of Class A common stock to the Corporation, in addition to cash on hand, to repay approximately $331.0 million of its Mezzanine A Loan, approximately $218.5 million of its Mezzanine B Loan and approximately $165.5 million of its Mezzanine C Loan.

Deutsche Bank Securities, Goldman, Sachs & Co., J.P. Morgan, Citigroup, BofA Merrill Lynch, Barclays, Morgan Stanley and Macquarie Capital acted as joint book-running managers for the Offering. Blackstone Capital Markets, Baird, Houlihan Lokey and Stifel acted as co-managers for the Offering.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

None.

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Item 6. Selected Financial Data

Selected Historical Financial and Other Data—The Company

The selected historical consolidated and combined financial data of the Company for the years ended December 31, 2013, 2012 and 2011 and as of December 31, 2013 and 2012 have been derived from the audited consolidated and combined financial statements of the Company included elsewhere in this combined annual report on Form 10-K. The selected historical consolidated and combined financial data of the Company for the period from October 8, 2010 through December 31, 2010 and as of December 31, 2011 and 2010 have been derived from the audited consolidated and combined financial statements of the Company not included elsewhere in this combined annual report on Form 10-K. The selected historical consolidated and combined financial data of the Company Predecessor for the period from January 1, 2010 through October 7, 2010 and the year ended December 31, 2009 and as of December 31, 2009 have been derived from the audited consolidated and combined financial statements of the Company Predecessor not included elsewhere in this combined annual report on Form 10-K. The following information should be read in conjunction with, and is qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical audited consolidated and combined financial statements and related notes and other financial information included herein.

On October 8, 2010, the Company acquired substantially all of the businesses, assets and operations of the Company Predecessor that were auctioned off by the former debtors of the Company Predecessor, which was in Chapter 11 reorganization. The Company succeeded principally all of the assets and operations of the Company Predecessor. As a result, the historical consolidated and combined financial results of the Company are presented alongside those of the Company Predecessor herein. The acquisition was accounted for as a business combination in accordance with FASB ASC 805, “Business Combinations.” Certain financial information of the Company is not comparable to that of the Company Predecessor. This information includes, but may not be limited to, depreciation and amortization expense, restructuring and acquisition transaction expenses, interest expense, income tax expense and reorganization gain, net.

	Company								Company Predecessor
(Dollars in millions, other than ADR and RevPAR)	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011		Period from October 8, 2010 through December 31, 2010		Period from January 1, 2010 through October 7, 2010		Year Ended December 31, 2009
Statement of operations data:
Room revenues	$	1,114.0	$	984.3	$	913.0	$	188.7	$	659.9	$	818.4
Other hotel revenues		17.8		16.9		18.7		4.1		13.2		15.0
Management fees, license fees and other revenues	��	1.0		10.3		11.0		2.6		7.5		0.3
Total revenues		1,132.8		1,011.5		942.7		195.4		680.6		833.7
Hotel operating expenses		540.6		493.6		463.4		101.8		351.3		440.8
General and administrative expenses		108.3		88.5		75.0		17.6		66.9		84.1
Depreciation and amortization		168.1		129.9		120.4		27.0		290.6		378.9
Managed property payroll expenses		0.7		6.6		6.4		1.5		4.8		—
Restructuring expenses		0.6		5.8		10.5		—		—		—
Acquisition transaction expenses		0.2		1.7		0.6		21.5		—		—
Impairment of long-lived assets		3.3		1.4		—		—		44.6		27.6
Office building operating expenses		—		—		1.0		0.2		0.8		—

34

	Company												Company Predecessor
(Dollars in millions, other than per share data, ADR and RevPAR)	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Period from October 8, 2010 through December 31, 2010			Period from January 1, 2010 through October 7, 2010			Year Ended December 31, 2009
Loss on lease termination		—			—			—			—			—			12.1
Allowance for receivables from affiliates		—			—			—			—			—			19.6
Total operating expenses		821.8			727.5			677.3			169.6			759.0			963.1
Other income		1.1			0.3			0.2			0.2			1.3			—
Income (loss) from operations		312.1			284.3			265.6			26.0			(77.1	)		(129.4	)
Interest expense		234.6			257.7			212.5			49.6			—			297.2
Adequate protection payments in lieu of interest		—			—			���			—			167.0			—
Loss on derivative instruments		—			—			—			—			—			0.4
Interest income		0.2			0.3			0.6			—			—			0.2
Income (loss) before reorganization gain (loss) and income taxes		77.7			26.9			53.7			(23.6	)		(244.1	)		(426.8	)
Reorganization gain (loss), net		—			—			—			—			3,430.5			(41.4	)
Income (loss) before income tax (benefit) expense		77.7			26.9			53.7			(23.6	)		3,186.4			(468.2	)
Income tax (benefit) expense		(5.0	)		4.6			7.1			(1.5	)		(120.4	)		929.9
Net income (loss)		82.7			22.3			46.6			(22.1	)		3,306.8			(1,398.1	)
Net loss (income) attributable to noncontrolling interests		3.5			(1.6	)		(1.0	)		(0.4	)		(1,517.3	)		1,309.4
Net income (loss) attributable to common shareholders or members	$	86.2		$	20.7		$	45.6		$	(22.5	)	$	1,789.5		$	(88.7	)
Net income per share-basic	$	0.49		$	0.12		$	0.27		$	(0.13	)	$	10.66		$	(0.53	)
Net income per share-diluted	$	0.49		$	0.12		$	0.26		$	(0.13	)	$	10.66		$	(0.53	)
Other financial data:
Cash flows provided by (used in):
Operating activities	$	311.3		$	201.1		$	180.6		$	15.6		$	106.6		$	39.0
Investing activities		(165.3	)		(223.8	)		(43.4	)		(3,920.0	)		(41.7	)		39.2
Financing activities		(189.0	)		27.6			(50.1	)		3,914.5			(1.6	)		(21.7	)
Capital expenditures		(172.5	)		(271.5	)		(106.1	)		(11.6	)		(38.0	)		(32.4	)
EBITDA(a)		480.2			414.2			386.0			53.0			3,644.0			207.7
Adjusted EBITDA(a)		518.6			434.9			409.8			74.8			260.7			289.3
Hotel operating profit(b)		594.1			508.5			468.9			91.0			324.4			393. 1
Hotel operating margin(b)		52.5	%		50.8	%		50.3	%		47.2	%		48.2	%		47.2	%

35

	Company												Company Predecessor
(Dollars in millions, other than ADR and RevPAR)	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Period from October 8, 2010 through December 31, 2010			Period from January 1, 2010 through October 7, 2010			Year Ended December 31, 2009
Operating data:
Rooms (at period end)		76,219			75,928			73,657			73,657			73,657			73,795
Average occupancy rate		74.2	%		73.3	%		75.1	%		72.3	%		75.9	%		65.8	%
ADR	$	54.15		$	49.77		$	45.20		$	42.10		$	42.07		$	44.74
RevPAR	$	40.18		$	36.46		$	33.96		$	30.44		$	31.93		$	29.44

	Company								Company Predecessor
(Dollars in millions)	December 31, 2013		December 31, 2012		December 31, 2011		December 31, 2010		December 31, 2009
Balance sheet data:
Cash and cash equivalents(1)	$	60.5	$	103.6	$	98.6	$	11.4	$	79.5
Restricted cash		47.3		61.6		236.7		253.2		0.2
Property and equipment, net		4,127.3		4,110.6		3,844.1		3,860.6		6,346.0
Total assets		4,449.7		4,491.7		4,357.3		4,351.6		6,536.1
Mortgage loans payable		2,519.8		2,525.7		1,980.2		2,004.3		4,108.3
Mezzanine loans payable		365.0		1,080.0		700.0		700.0		3,295.5
Other debt		41.2		—		—		—		—
Total liabilities		3,108.5		3,738.9		2,805.9		2,824.1		8,466.4
Total consolidated and combined equity (deficit)(1)		1,341.2		752.8		1,551.4		1,527.5		(1,930.3	)
Total liabilities and consolidated and combined equity	$	4,449.7	$	4,491.7	$	4,357.3	$	4,351.6	$	6,536.1

(1) In February 2014, ESH REIT declared a REIT dividend with respect to the fourth quarter of 2013 of $0.08 per share payable to holders of record of ESH REIT Class A common stock and Class B common stock as of March 12, 2014, or approximately $36.4 million.

(a) EBITDA and Adjusted EBITDA. Earnings before interest expense, net, income taxes, depreciation and amortization (“EBITDA”) is a commonly used measure in many industries. We adjust EBITDA when evaluating our performance because we believe that the adjustment for certain items, such as restructuring and acquisition transaction expenses, impairment charges related to long-lived assets, bankruptcy-related gains and expenses, non-cash equity-based compensation and other items not indicative of ongoing operating performance, provides useful supplemental information to investors regarding our ongoing operating performance. We believe that EBITDA and Adjusted EBITDA provide useful information to investors regarding our results of operations that help us and our investors evaluate the ongoing operating performance of our hotels and facilitate comparisons between us and other lodging companies, hotel owners and capital-intensive companies.

EBITDA and Adjusted EBITDA, as presented, may not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, net income per share, cash flow from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various real estate or hotel assets such as capital expenditures, interest expense and other items have been and will continue to be incurred and are not reflected in EBITDA or Adjusted EBITDA. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of operating performance. Our historical consolidated and combined statements of operations and cash flows include interest expense, capital expenditures and other excluded items, all of which should be considered when evaluating our performance, in addition to our non-GAAP financial measures. Additionally, EBITDA and Adjusted EBITDA should not solely be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to pay dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—The Company—EBITDA and Adjusted EBITDA.”

36

The following table provides a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the years ended December 31, 2013, 2012 and 2011, the period from October 8, 2010 through December 31, 2010, the period from January 1, 2010 through October 7, 2010 and the year ended December 31, 2009 (in millions):

	Company												Company Predecessor
	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Period from October 8, 2010 through December 31, 2010			Period from January 1, 2010 through October 7, 2010			Year Ended December 31, 2009
Net income (loss)	$	82.7		$	22.3		$	46.6		$	(22.1	)	$	3,306.8		$	(1,398.1	)
Interest expense, net		234.4			257.4			211.9			49.6			167. 0			297.0
Income tax (benefit) expense		(5.0	)		4.6			7.1			(1.5	)		(120.4	)		929.9
Depreciation and amortization		168.1			129.9			120.4			27.0			290.6			378.9
EBITDA		480.2			414.2			386.0			53.0			3,644.0			207.7
Restructuring expenses		0.6			5.8			10.5			—			—			—
Acquisition transaction expenses		0.2			1.7			0.6			21.5			—			—
Impairment of long-lived assets		3.3			1.4			—			—			44.6			27.6
Bankruptcy-related (gain) expense, net		—			—			—			—			(3,430.5	)		41.4
Non-cash equity-based compensation		20.2			4.4			4.7			0.3			—			—
Other expenses		14.1	(1)		7.4	(2)		8.0	(3)		—			2.6	(4)		12.6	(5)
Adjusted EBITDA	$	518.6		$	434.9		$	409.8		$	74.8		$	260.7		$	289.3

(1) For the year ended December 31, 2013, includes costs related to preparations for our initial public offering, consisting primarily of the Pre-IPO Transactions, of $11.2 million and loss on disposal of assets of $2.9 million.

(2) For the year ended December 31, 2012, includes costs related to preparations for our initial public offering, consisting primarily of the Pre-IPO Transactions, of $1.6 million, consulting fees related to implementation of our new strategic initiatives, including services related to pricing and yield management projects, of $4.9 million and loss on disposal of assets of $0.9 million.

(3) For the year ended December 31, 2011, includes consulting fees related to implementation of our new strategic initiatives, including services related to pricing and yield management projects, of $7.4 million and loss on disposal of assets of $0.6 million.

(4) For the period from January 1, 2010 through October 7, 2010, includes loss on disposal of assets of $2.6 million.

(5) For the year ended December 31, 2009, includes loss on capital lease termination of $12.1 million and loss on disposal of assets of $0.5 million.

(b) Hotel Operating Profit and Hotel Operating Margin. Hotel operating profit and hotel operating margin measure owned hotel-level operating results prior to debt service, depreciation and amortization and general and administrative expenses and are supplemental measures of aggregate hotel-level profitability. Both measures are used by us to evaluate the operating profitability of our hotels. We define hotel operating profit as the sum of room and other hotel revenues less hotel operating expenses (excluding loss on disposal of assets) and hotel operating margin as the ratio of hotel operating profit divided by the sum of room and other hotel revenues. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—The Company—Hotel Operating Profit and Hotel Operating Margin.”

The following table provides a reconciliation of our room revenues, other hotel revenues and hotel operating expenses (excluding loss on disposal of assets) to hotel operating profit and hotel operating margin for the years ended December 31, 2013, 2012 and 2011, the period from October 8, 2010 through December 31, 2010, the period from January 1, 2010 through October 7, 2010 and the year ended December 31, 2009 (in millions):

37

	Company												Company Predecessor
	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Period from October 8, 2010 through December 31, 2010			Period from January 1, 2010 through October 7, 2010			Year Ended December 31, 2009
Room revenues	$	1,114.0		$	984.3		$	913.0		$	188.7		$	659.9		$	818.4
Other hotel revenues		17.8			16.9			18.7			4.1			13.2			15.0
Total hotel revenues		1,131.8			1,001.2			931.7			192.8			673.1			833.4
Hotel operating expenses		537.7	(1)		492.7	(2)		462.8	(3)		101.8			348.7	(4)		440.3	(5)
Hotel operating profit	$	594.1		$	508.5		$	468.9		$	91.0		$	324.4		$	393.1
Hotel operating margin		52.5	%		50.8	%		50.3	%		47.2	%		48.2	%		47.2	%

(1) For the year ended December 31, 2013, excludes loss on disposal of assets of $2.9 million.

(2) For the year ended December 31, 2012, excludes loss on disposal of assets of $0.9 million.

(3) For the year ended December 31, 2011, excludes loss on disposal of assets of $0.6 million.

(4) For the period from January 1, 2010 through October 7, 2010, excludes loss on disposal of assets of $2.6 million.

(5) For the year ended December 31, 2009, excludes loss on disposal of assets of $0.5 million.

Selected Historical Financial and Other Data—ESH REIT

The selected historical consolidated financial data of ESH REIT for the years ended December 31, 2013, 2012 and 2011 and as of December 31, 2013 and 2012 have been derived from the audited consolidated financial statements of ESH REIT included elsewhere in this combined annual report on Form 10-K. The selected historical consolidated financial data of ESH REIT for the period from October 8, 2010 through December 31, 2010 and as of December 31, 2011 have been derived from the audited consolidated financial statements of ESH REIT not included elsewhere in this combined annual report on Form 10-K. The selected historical consolidated financial data for ESH REIT as of December 31, 2010 has been derived from the unaudited consolidated statements of ESH REIT not included elsewhere in this combined annual report on Form 10-K. The selected historical combined financial data of ESH REIT Predecessor for the period from January 1, 2010 through October 7, 2010 and for the year ended December 31, 2009 and as of December 31, 2009 have been derived from the unaudited combined financial statements of ESH REIT Predecessor not included elsewhere in this combined annual report on Form 10-K. The following information should be read in conjunction with, and is qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical audited consolidated financial statements and related notes and other financial information included herein.

The historical combined financial statements of ESH REIT Predecessor were prepared by combining the financial results of the entities that owned the hotel properties and the assets and operating companies of the Company Predecessor, other than those acquired by ESH Strategies, and represent the assets and entities consolidated in the financial statements of ESH REIT after the Acquisition Date. Certain financial information of ESH REIT Predecessor is not comparable to that of ESH REIT. This information includes, but may not be limited to, depreciation and amortization expense, restructuring and acquisition transaction expenses, interest expense, income tax expense and reorganization gain, net.

38

	ESH REIT									ESH REIT Predecessor
(Dollars in millions)	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011		Period from October 8, 2010 through December 31, 2010			Period from January 1, 2010 through October 7, 2010			Year Ended December 31, 2009
Statement of operations data:
Rental revenues	$	71.9	$	—	$	—	$	—		$	—		$	—
Hotel room revenues		984.0		984.3		913.0		188.7			659.9			818.4
Other hotel revenues		15.6		16.9		18.7		4.1			13.2			15.0
Management fees and other revenues		1.0		10.3		11.2		2.6			7.3			0.3
Total revenues		1,072.5		1,011.5		942.9		195.4			680.4			833.7
Hotel operating expenses		478.7		493.6		463.4		101.8			351.3			440.8
General and administrative expenses		86.8		87.8		72.4		17.5			66.9			83.9
Depreciation and amortization		167.2		129.9		120.4		27.0			290.6			378.9
Managed property payroll expenses		0.6		6.6		6.4		1.5			4.8			—
Trademark license fees		3.0		3.0		2.8		0.6			0.7			0.8
Restructuring expenses		0.6		5.8		10.5		—			—			—
Acquisition transaction expenses		0.2		1.7		0.6		21.5			—			—
Impairment of long—lived assets		3.3		1.4		—		—			11.1			22.3
Office building operating expenses		—		—		1.0		0.2			0.8			—
Loss on lease termination		—		—		—		—			—			12.1
Allowance for receivables from affiliates		—		—		—		—			—			19.6
Total operating expenses		740.4		729.8		677.5		170.1			726.2			958.4
Other income		1.1		0.4		0.2		0.2			1.4			—
Income (loss) from operations		333.2		282.1		265.6		25.5			(44.4	)		(124.7	)
Interest expense		234.2		257.7		212.5		49.6			—			297.3
Adequate protection payments in lieu of interest		—		—		—		—			167.1			—
Loss on derivative instruments		—		—		—		—			—			0.5
Interest income		0.6		0.3		0.6		—			0.1			0.1
Income (loss) before reorganization gain (loss) and income taxes		99.6		24.7		53.7		(24.1	)		(211.4	)		(422.4	)

39

	ESH REIT												ESH REIT Predecessor
(Dollars in millions, other than per share data)	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Period from October 8, 2010 through December 31, 2010			Period from January 1, 2010 through October 7, 2010			Year Ended December 31, 2009
Reorganization gain (loss), net		—			—			—			—			3,430.5			(41.4	)
Income (loss) before income tax (benefit) expense		99.6			24.7			53.7			(24.1	)		3,219.1			(463.8	)
Income tax (benefit) expense		(0.9	)		4.6			7.1			(1.5	)		(120.4	)		929.9
Net income (loss)		100.5			20.1			46.6			(22.6	)		3,339.5			(1,393.7	)
Net (income) loss attributable to noncontrolling interests		(0.8	)		(1.6	)		(1.1	)		(0.4	)		(1,545.5	)		1,306.6
Net income (loss) attributable to shareholders or members	$	99.7		$	18.5		$	45.5		$	(23.0	)	$	1,794.0		$	(87.1	)
Net income per share:
Class A-Basic	$	0.26		$	0.05		$	0.12		$	(0.06	)	$	4.81		$	(0.23	)
												��
Class A-Diluted	$	0.26		$	0.05		$	0.12		$	(0.06	)	$	4.81		$	(0.23	)
Class B-Basic	$	0.26		$	0.05		$	0.12		$	(0.06	)	$	4.81		$	(0.23	)
Class B-Diluted	$	0.25		$	0.05		$	0.12		$	(0.06	)	$	4.81		$	(0.23	)
Other financial data:
Cash flows provided by (used in):
Operating activities	$	295.2		$	194.2		$	180.5		$	15.7		$	106.0		$	56.9
Investing activities		(164.1	)		(223.8	)		(43.4	)		(3,909.5	)		(41.7	)		20.5
Financing activities		(215.7	)		34.3			(50.1	)		3,903.9			(1.6	)		(21.7	)
Capital expenditures		(171.9	)		(271.5	)		(106.1	)		(11.6	)		(38.0	)		(32.4	)

	ESH REIT								ESH REIT  Predecessor
(Dollars in millions)	December 31, 2013		December 31, 2012		December 31, 2011		December 31, 2010		December 31, 2009
Balance sheet data:
Cash and cash equivalents(1)	$	18.6	$	103.3	$	98.5	$	11.4	$	77.9
Restricted cash		45.9		61.6		236.7		253.2		0.2
Property and equipment, net		4,119.9		4,110.6		3,844.1		3,860.6		6,346.0
Total assets		4,328.3		4,487.4		4,346.7		4,341.1		6,490.5
Mortgage loans payable		2,519.8		2,525.7		1,980.2		2,004.3		4,108.3
Mezzanine loans payable		365.0		1,080.0		700.0		700.0		3,295.5
Revolving credit facility		20.0		—		—		—		—

40

	ESH REIT									ESH REIT  Predecessor
(Dollars in millions)	December 31, 2013		December 31, 2012			December 31, 2011		December 31, 2010		December 31, 2009
Total liabilities		3,000.8		3,741.2	��		2,806.5		2,824.6		8,466.4
Total consolidated and combined equity (deficit)(1)		1,327.5		746.2			1,540.2		1,516.5		(1,975.9	)
Total liabilities and consolidated and combined equity	$	4,328.3	$	4,487.4		$	4,346.7	$	4,341.1	$	6,490.5

(1) In February 2014, ESH REIT declared a REIT dividend with respect to the fourth quarter of 2013 of $0.08 per share payable to holders of record of ESH REIT Class A common stock and Class B common stock as of March 12, 2014, or approximately $36.4 million.

EBITDA, Adjusted EBITDA, hotel operating profit and hotel operating margin are not meaningful or useful measures for ESH REIT on a stand-alone basis due to the fact that a Paired Share represents an investment in the Company, as a single enterprise, which is reflected in the consolidated and combined Company results; therefore, we believe these performance measures are meaningful for the Company only.

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

The following discussion should be read in conjunction with “Business-Our Recent Operating History-The Pre-IPO Transactions,” “Selected Historical Financial and Other Data” and:

• the consolidated and combined financial statements and related notes of the Company included in Item 8 of this combined annual report on Form 10-K; and

• the consolidated financial statements and related notes of ESH REIT included in Item 8 of this combined annual report on Form 10-K.

We have presented below separate “Results of Operations” for each of the Company and ESH REIT. Where appropriate, the following discussion includes analysis of the effects of the Pre-IPO Transactions and the Offering. Portions of the following discussion reflect the changes in our structure resulting from the Pre-IPO Transactions. Prior to the Pre-IPO Transactions, the Operating Lessees, which were wholly-owned subsidiaries of ESH REIT, leased the hotel properties from ESH REIT pursuant to operating leases. HVM, an eligible independent contractor (within the meaning of Section 856(d)(9) of the Internal Revenue Code of 1986, as amended (the “Code”)), managed the hotel properties pursuant to management agreements with the Operating Lessees. ESH Strategies owned the trademarks and licensed their use to the Operating Lessees pursuant to trademark license agreements. The Pre-IPO Transactions restructured and reorganized the existing business and legal entities such that the Operating Lessees, ESH Strategies and the assets and obligations of HVM were transferred to the Corporation. Additionally, our assets and operations, other than ownership of our real estate assets (which continue to be owned by ESH REIT), are held by the Corporation and operated as an integrated enterprise. Subsequent to the Pre-IPO Transactions, the Corporation owns all of the Class A common stock of ESH REIT, representing approximately 55% of the outstanding common stock of ESH REIT.

The following discussion may contain forward-looking statements about our market, analysis, future trends, the demand for our services and other future results, among other topics. Actual results may differ materially from those suggested by our forward-looking statements for various reasons, including those discussed in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Those sections expressly qualify any subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf.

Overview

We are the largest owner/operator of company-branded hotels in North America. Our business operates in the extended stay lodging industry, and as of December 31, 2013, we own and operate 684 hotel properties comprising approximately 76,200 rooms located in 44 states across the United States and in Canada. We own and operate 632 of our hotels under the core brand, Extended Stay America, which serves the mid-price extended stay segment, and accounts for approximately half of the segment by number of rooms in the United States. In addition, we own and operate three Extended Stay Canada hotels, 47 hotels in the economy extended stay segment under the Crossland Economy Studios brand and two hotels in the economy extended stay segment under the Hometown Inn brand. On December 31, 2013, we completed the acquisition of two hotels which, through the date of acquisition, we previously managed. Effective January 1, 2014, the operations of these hotels will be included in the operating results of our consolidated portfolio.

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Our extended stay hotels are designed to provide an affordable and attractive alternative to traditional lodging or apartment accommodations and are targeted toward self-sufficient, value-conscious guests. Our hotels feature fully-furnished rooms with in-room kitchens, complimentary grab-and-go breakfast, free WiFi, flat screen TVs and limited housekeeping service, which is typically provided on a weekly basis. Our guests include business travelers, professionals on temporary work or training assignments, persons relocating, temporarily displaced or purchasing a home and anyone else in need of temporary housing. These guests generally rent accommodations on a weekly or longer term basis.

Key Metrics Evaluated by Management

We evaluate the performance of our business through the use of certain non-GAAP financial measures. “GAAP” refers to generally accepted accounting principles in the United States. Each of these non-GAAP financial measures should be considered as supplemental measures to GAAP performance measures such as total revenues, net income, net income per share and cash flow provided by operating activities. We provide a more detailed discussion of certain of these non-GAAP financial measures, how management uses such measures to evaluate our financial condition and operating performance, a discussion of certain limitations of such measures and a reconciliation of such measures to the nearest GAAP measures under “—Non-GAAP Financial Measures-The Company.”

Average daily rate (“ADR”) is a commonly used measure within the lodging industry to evaluate hotel financial performance. ADR represents hotel room revenues divided by total number of rooms sold in a given period. ADR measures average room price attained by a hotel or group of hotels, and ADR trends provide useful information concerning pricing policies and the nature of the customer base of a hotel or group of hotels. Changes in room rates have an impact on overall revenues and profitability.

Occupancy is a commonly used measure within the lodging industry to evaluate hotel financial performance. Occupancy represents the total number of rooms sold in a given period divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of our hotels’ available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ADR levels as demand for hotel rooms increases or decreases.

Revenue per available room (“RevPAR”) is a commonly used measure within the lodging industry to evaluate hotel financial performance. RevPAR is defined as the product of the average daily room rate charged and the average daily occupancy achieved for a hotel or group of hotels in a given period. RevPAR does not include other ancillary revenues, such as food and beverage revenues or parking, telephone or other guest service revenues generated by a hotel. Although RevPAR does not include these other hotel revenues, it generally is considered a key indicator of core revenues for many hotels. For the year ended December 31, 2013, room revenues represented approximately 98.3% of our total revenues.

RevPAR changes that are driven predominately by occupancy have different implications on incremental hotel operating profit than do changes that are driven predominately by ADR. For example, increases in occupancy at a hotel would lead to increases in room revenues and other hotel revenues, as well as incremental operating costs (including housekeeping services, utilities and room amenity costs). RevPAR increases due to higher room rates, however, would generally not result in additional operational room-related costs, with the exception of those charged or incurred as a percentage of revenue, such as credit card fees. As a result, changes in RevPAR driven by increases or decreases in ADR generally have a greater effect on operating profitability than changes in RevPAR driven by occupancy levels. Due to seasonality in our business, we review RevPAR by comparing current periods to the same periods in prior years.

Additional non-GAAP financial measures include:

• EBITDA and Adjusted EBITDA. Earnings before interest expense, net, income taxes, depreciation and amortization (“EBITDA”) is a commonly used measure in many industries. We adjust EBITDA when evaluating our performance because we believe that the adjustment for certain items, such as restructuring and acquisition transaction expenses, impairment charges related to long-lived assets, non-cash equity-based compensation and other items not indicative of ongoing operating performance, provides useful supplemental information to investors regarding our ongoing operating performance. We believe that EBITDA and Adjusted EBITDA provide useful information to investors regarding our results of operations that help us and our investors evaluate the ongoing operating performance of our hotels and facilitate comparisons between us and other lodging companies, hotel owners and capital-intensive companies.

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• Hotel Operating Profit and Hotel Operating Margin. Hotel operating profit and hotel operating margin measure hotel-level operating results prior to debt service, depreciation and amortization and general and administrative expenses and are supplemental measures of aggregate hotel-level profitability. Both measures are used by us to evaluate the operating profitability of our hotels. We define hotel operating profit as the sum of room and other hotel revenues less hotel operating expenses (excluding loss on disposal of assets) and hotel operating margin as the ratio of hotel operating profit divided by the sum of room and other hotel revenues.

Understanding Our Results of Operations – The Company

Revenues and Expenses. The Company’s revenues are derived primarily from the operation of our owned hotels. Hotel operating expenses account for the largest portion of the Company’s operating expenses and reflect the expenses of our owned hotels. The following table presents the components of the Company’s revenues as a percentage of our total revenues for the year ended December 31, 2013:

	Percentage of 2013 Revenues
•      Room revenues. Room revenues are driven primarily by ADR and occupancy. Pricing policy, as well as the customer mix of a hotel, is a significant driver of ADR. Due to our high occupancy levels, our current focus is on increasing RevPAR by increasing ADR. For the year ended December 31, 2013, we experienced RevPAR growth of approximately 10.2% due to the collective impact of our hotel reinvestment program, upgraded operational practices, investments in marketing and brand awareness and focus on service excellence. We believe our continued focus on these initiatives will drive continued RevPAR growth at or above the level of our competitive set for at least 2014.	98.3%
•      Other hotel revenues. Other hotel revenues include ancillary revenues such as laundry revenues, additional housekeeping fees and pet charges. Occupancy and the customer mix of a hotel, as well as the number of guests that have long-term stays, are the key drivers of other hotel revenues.	1.6%
•      Management fees, license fees and other revenues. Management fees, license fees and other revenues represent total gross fees earned from our two managed hotels, which we acquired on December 31, 2013, as well as the reimbursement of payroll expenses incurred on behalf of these managed hotels. Revenue of the managed hotels is the principal driver of management fees and license fees and occupancy of the managed hotels is one of the principal drivers of the reimbursement of payroll expenses. Due to the business and entity restructuring that occurred in connection with the Pre-IPO Transactions and our acquisition of the two managed hotels, we expect to have no management fees, license fees and other revenues in 2014.	0.1%

The following table presents the components of the Company’s operating expenses as a percentage of our total operating expenses for the year ended December 31, 2013:

Percentage of 2013  Operating Expenses

•      Hotel operating expenses. Hotel operating expenses include all expenses associated with operating our owned hotels. These costs, although primarily fixed in nature, do have some variable components. Those that are relatively fixed include payroll, real property taxes and insurance. Occupancy is a key driver of expenses that have a high degree of variability such as room supplies, repair and maintenance and utilities. Other variable expenses include internet advertising costs, hotel reservation services and travel agent commissions.

65.8%

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We experienced an increase in hotel operating expenses of approximately $46.9 million for the year ended December 31, 2013, driven in part by enhancements to our product and service offering, including complimentary grab-and-go breakfast and free in-room WiFi. As a result, in 2013 we saw hotel operating expenses increase at a rate greater than we would expect to be typical in future periods.
•     General and administrative expenses. General and administrative expenses include expenses associated with corporate overhead. These costs consist primarily of compensation expense of our corporate staff, professional fees, including consulting, audit, tax and legal fees and global brand marketing expense.	13.2	%
•     Depreciation and amortization. Depreciation and amortization is a non-cash charge that relates primarily to the acquisition and related usage of hotels and other property and equipment.	20.4	%
•     Managed property payroll expenses. Managed property payroll expenses include all payroll expenses related to the hotel staff of our two managed hotels, which we acquired on December 31, 2013. We are fully reimbursed for these costs as stipulated in the respective management agreements. The reimbursement of these costs is included as a component of management fees, license fees and other revenues. We expect to have no managed property payroll expenses in 2014.	0.1	%
•     Restructuring expenses. Restructuring expenses are costs associated with an anticipated business combination or one-time termination benefits and employee relocation costs. During 2013, we initiated an operations restructuring which changed certain aspects of our property staffing model. For these programs, expenses included employee relocation, recruitment, separation payments and other costs.	0.1	%
•     Acquisition transaction expenses. Acquisition transaction expenses are legal, professional and other such fees directly related to the acquisition of hotels.	0.0	%
•     Impairment of long-lived assets. Impairment of long-lived assets is a non-cash charge recognized when events and circumstances indicate that the carrying value of an asset may not be recoverable.	0.4	%

Understanding Our Results of Operations – ESH REIT

Revenues and Expenses. Prior to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflected room and other hotel revenues, as rental revenues and expenses with respect to the operating leases between ESH REIT and its previously owned subsidiaries, the Operating Lessees, eliminated in consolidation and the Operating Lessee’s results of operations were owned by ESH REIT. Further, ESH REIT’s consolidated results of operations reflected all hotel operating expenses. Subsequent to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflect ESH REIT’s sole source of revenue, rental revenues earned under its operating leases, which are no longer eliminated in consolidation due to the fact that ESH REIT no longer owns the Operating Lessees. Also, ESH REIT’s consolidated results of operations reflect only those hotel operating expenses directly related to ownership of the hotels, such as real estate taxes and insurance expense, and do not include hotel operating expenses incurred by the Operating Lessees.

Prior to the Pre-IPO Transactions, HVM managed the hotel properties pursuant to management agreements with the Operating Lessees. ESH REIT held a variable interest in HVM and consolidated the financial position, results of operations, comprehensive income and cash flows of HVM, including the management fees earned by HVM pursuant to the management agreements. Subsequent to the Pre-IPO Transactions, ESA Management, a wholly-owned subsidiary of the Corporation, manages the hotel properties.

The following table presents the components of ESH REIT’s revenues as a percentage of ESH REIT’s total revenues for the year ended December 31, 2013:

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	Percentage of 2013  Revenues
•      Rental revenues. Rental revenues represent the revenues generated from leasing the hotel properties to the Operating Lessees. Rental revenues consist of fixed minimum rental payments plus specified percentages of hotel room revenues earned by the Operating Lessees over designated hotel room revenue thresholds. For the period from January 1, 2013 through the Pre-IPO Transactions, ESH REIT owned the Operating Lessees; therefore, rental revenues earned were eliminated in consolidation. Subsequent to the Pre-IPO Transactions, rental revenues earned are no longer eliminated. For 2014 and beyond, rental revenues will be the sole source of ESH REIT’s consolidated revenue.	6.7%
•      Hotel room revenues. Room revenues are driven primarily by ADR and occupancy. Pricing policy, as well as the customer mix of a hotel, is a significant driver of ADR.
For the period from January 1, 2013 through the Pre-IPO Transactions, ESH REIT owned the Operating Lessees; therefore, hotel room revenues were included in ESH REIT’s consolidated results of operations. Subsequent to the Pre-IPO Transactions, ESH REIT no longer owns the Operating Lessees and hotel room revenues are no longer included in ESH REIT’s consolidated results of operations. For 2014 and beyond, ESH REIT’s consolidated operating results will reflect no hotel room revenues, only lease rental revenues.	91.7%
•      Other hotel revenues. Other hotel revenues include ancillary revenues such as laundry revenues, additional housekeeping fees and pet charges. For the period from January 1, 2013 through the Pre-IPO Transactions, ESH REIT owned the Operating Lessees; therefore, other hotel revenues were included in ESH REIT’s consolidated results of operations. Subsequent to the Pre-IPO Transactions, ESH REIT no longer owns the Operating Lessees and the other hotel revenues are no longer included in ESH REIT’s consolidated results of operations. For 2014 and beyond, ESH REIT’s consolidated operating results will reflect no other hotel revenues, only lease rental revenues.	1.5%
•      Management fees and other revenues. Management fees and other revenues represent total gross fees earned from two managed hotels, which were acquired on December 31, 2013, as well as the reimbursement of payroll expenses incurred on behalf of these managed hotels. For the period from January 1, 2013 through the Pre-IPO Transactions, ESH REIT held a variable interest in and consolidated HVM; therefore, management fees for our managed hotels were included in ESH REIT’s consolidated results of operations. Subsequent to the Pre-IPO Transactions, management fees are no longer included in ESH REIT’s consolidated results of operations. For 2014 and beyond, ESH REIT’s consolidated operating results will reflect no management fees, only lease rental revenues.	0.1%

The following table presents the components of ESH REIT’s operating expenses as a percentage of ESH REIT’s total operating expenses for the year ended December 31, 2013:

Percentage of 2013  Operating Expenses

•      Hotel operating expenses. Prior to the Pre-IPO Transactions, hotel operating expenses included all expenses associated with operating our owned hotels. These costs, although primarily fixed in nature, did have some variable components. Those that were relatively fixed included payroll, real property taxes and insurance. Occupancy is a key driver of expenses that have a high degree of variability such as room supplies, repair and maintenance and utilities. Other variable expenses included internet advertising costs, hotel reservation services and travel agent commissions. Subsequent to the Pre-IPO Transactions, hotel operating expenses include only those expenses directly related to ownership of the hotels, such as real estate taxes and insurance expenses.

64.7%

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•     General and administrative expenses. Prior to the Pre-IPO Transactions, since ESH REIT consolidated the results of operations of HVM, a variable interest entity, general and administrative expenses included expenses associated with all corporate overhead. These costs consisted primarily of compensation expense of our corporate staff, professional fees, including consulting, audit, tax and legal fees and global brand marketing expense. Subsequent to the Pre-IPO Transactions, ESH REIT neither owns nor consolidates the management entity, ESA Management; therefore, general and administrative expenses include only those overhead expenses incurred directly by ESH REIT and administrative service costs paid to ESA Management.	11.7	%
•     Depreciation and amortization. Depreciation and amortization is a non-cash charge that relates primarily to the acquisition and related usage of hotels and other property and equipment.	22.6	%
•     Managed property payroll expenses. Prior to the Pre-IPO Transactions, since ESH REIT consolidated the results of HVM, a variable interest entity, managed property payroll expenses included all payroll expenses related to the hotel staff of two managed hotels, which we acquired on December 31, 2013. HVM was fully reimbursed for these costs as stipulated in the respective management agreements. The reimbursement of these costs was included as a component of management fees and other revenues. Subsequent to the Pre-IPO Transactions, ESH REIT neither owns nor consolidates the management entity, ESA Management. For 2014 and beyond, ESH REIT’s consolidated operating results will reflect no hotel operating expenses.	0.1	%
•     Trademark license fees. Prior to the Pre-IPO Transactions, ESH REIT owned the Operating Lessees, which paid fees to ESH Strategies for the use of their trademark licenses. Trademark license fees directly correlated with hotel room revenues at the hotel properties. Subsequent to the Pre-IPO Transactions, ESH REIT no longer owns the Operating Lessees. For 2014 and beyond, ESH REIT’s consolidated results of operations will reflect no trademark license fees.	0.4	%
•     Restructuring expenses. Restructuring expenses are costs associated with an anticipated business combination or one-time termination benefits and employee relocation costs. For these programs, expenses included employee relocation, recruitment, separation payments and other costs.	0.1	%
•     Acquisition transaction expenses. Acquisition transaction expenses are legal, professional and other such fees directly related to the acquisition of hotels.	0.0	%
•     Impairment of long-lived assets. Impairment of long-lived assets is a non-cash charge recognized when events and circumstances indicate that the carrying value of an asset may not be recoverable.	0.4	%

Results of Operations

Results of Operations discusses each of the Company’s consolidated and combined financial statements and ESH REIT’s consolidated financial statements, each of which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and costs and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those relating to property and equipment, goodwill, income taxes, equity-based compensation, revenue recognition, consolidation policies and contingencies. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

For the period from the Pre-IPO Transactions through December 31, 2013, the consolidated and combined financial statements of the Company include the financial position, results of operations, comprehensive income, changes in equity and cash flows of the Corporation and its subsidiaries, including the Operating Lessees, ESH Strategies, ESA Management and ESH REIT. Third party equity interests in ESH REIT, which consist of the Class B common stock of ESH REIT and represent approximately 45% of ESH REIT’s total common equity, are not owned by the Company and therefore are presented as noncontrolling interests.

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For the periods prior to the Pre-IPO Transactions, the consolidated and combined financial statements of the Company include the financial position, results of operations, comprehensive income, changes in equity and cash flows of the Company’s predecessor, which includes ESH REIT’s predecessor, ESH Hospitality LLC, ESH Strategies and HVM. Third party equity interests in HVM, which represented all of HVM’s equity, were not owned by the Company’s predecessor and therefore are presented as noncontrolling interests. ESH REIT and ESH Strategies became a consolidated group by the time of the completion of the Offering. Since the Pre-IPO Transactions, which resulted in these entities becoming a consolidated group, were accounted for at historical cost, the Company’s predecessor financial information combines ESH REIT’s predecessor financial information with that of ESH Strategies.

For the period from the Pre-IPO Transactions through December 31, 2013, the consolidated financial statements of ESH REIT include the financial position, results of operations, comprehensive income, changes in equity and cash flows of ESH REIT and its subsidiaries.

For the periods prior to the Pre-IPO Transactions, the consolidated financial statements of ESH REIT include the financial position, results of operations, comprehensive income, changes in equity and cash flows of ESH REIT’s predecessor, ESH Hospitality LLC, and its subsidiaries, which included the Operating Lessees. Third party equity interests in HVM, a consolidated variable interest entity, which represented all of HVM’s equity, were not owned by ESH REIT and therefore are presented as noncontrolling interests.

Results of Operations – The Company

Comparison of Years Ended December 31, 2013 and December 31, 2012

As of December 31, 2013, we owned and operated 684 hotels consisting of approximately 76,200 rooms. As of December 31, 2012, we owned 682 hotels consisting of approximately 75,900 rooms. In the third quarter of 2011, we began renovating our hotels which, during the years ended December 31, 2013 and 2012, reduced the total number of rooms in service. Further, on December 13, 2012, we acquired 17 hotels from HFI Acquisitions Company LLC (“HFI”) and on December 31, 2013, we acquired two hotels from LVP Acquisition Corporation (“LVP”). Effective January 1, 2014, the results of operations of the two acquired hotels will be included in the Company’s consolidated and combined results of operations.

The following table presents our consolidated and combined results of operations for the years ended December 31, 2013 and 2012, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31,		Year Ended December 31,
	2013		2012		Change ($)			Change (%)
Revenues:
Room revenues	$	1,113,956	$	984,273	$	129,683			13.2	%
Other hotel revenues		17,787		16,898		889			5.3	%
Management fees, license fees and other revenues		1,075		10,291		(9,216	)		(89.6	)%
Total revenues		1,132,818		1,011,462		121,356			12.0	%
Operating expenses:
Hotel operating expenses		540,551		493,635		46,916			9.5	%
General and administrative expenses		108,325		88,543		19,782			22.3	%
Depreciation and amortization		168,053		129,938		38,115			29.3	%
Managed property payroll expenses		728		6,600		(5,872	)		(89.0	)%

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Restructuring expenses		605			5,763			(5,158	)	(89.5	)%
Acquisition transaction expenses		235			1,675			(1,440	)	(86.0	)%
Impairment of long-lived assets		3,330			1,420			1,910		134.5	%
Total operating expenses		821,827			727,574			94,253		13.0	%
Other income		1,134			384			750		195.3	%
Income from operations		312,125			284,272			27,853		9.8	%
Interest expense		234,593			257,656			(23,063	)	(9.0	)%
Interest income		(134	)		(307	)		173		(56.4	)%
Income before income tax (benefit) expense		77,666			26,923			50,743		188.5	%
Income tax (benefit) expense		(4,990	)		4,642			(9,632	)	207.5	%
Net income		82,656			22,281			60,375		271.0	%
Net loss (income) attributable to noncontrolling interests		3,575			(1,549	)		5,124		(330.8	)%
Net income attributable to common shareholders or members	$	86,231		$	20,732		$	65,499		315.9	%

The following table presents key operating metrics, including occupancy, ADR and RevPAR, for our owned hotels for the years ended December 31, 2013 and 2012, respectively:

	Year Ended December 31,			Year Ended December 31,
	2013			2012			Change (%)
Number of hotel properties(1)		684			682			0.3	%
Number of rooms(1)		76,219			75,928			0.4	%
Occupancy		74.2	%		73.3	%		1.2	%
ADR	$	54.15		$	49.77			8.8	%
RevPAR	$	40.18		$	36.46			10.2	%

(1) On December 31, 2013, we acquired two hotel properties consisting of 291 rooms; results of operations of the acquired hotels will be included in our consolidated and combined results of operations effective January 1, 2014.

Room revenues. Room revenues increased by approximately $129.7 million, or 13.2%, to approximately $1,114.0 million for the year ended December 31, 2013 compared to approximately $984.3 million for the year ended December 31, 2012. Excluding room revenues of approximately $30.1 million related to the 17 HFI hotels for the year ended December 31, 2013 and approximately $1.3 million for the period from December 13, 2012 through December 31, 2012, the increase in room revenues of approximately $100.9 million was due to a 8.9% increase in ADR and a 1.5% increase in occupancy, resulting in a 10.4% increase in RevPAR, which was primarily a result of our hotel reinvestment program, operating and service initiatives and more consistent pricing and discount policies.

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Other hotel revenues. Other hotel revenues remained relatively consistent, increasing by approximately $0.9 million, or 5.3%, to approximately $17.8 million for the year ended December 31, 2013 compared to approximately $16.9 million for the year ended December 31, 2012.

Management fees, license fees and other revenues. Management fees, license fees and other revenues decreased by approximately $9.2 million, or 89.6%, to approximately $1.1 million for the year ended December 31, 2013 compared to approximately $10.3 million for the year ended December 31, 2012. Management fees and license fees from managed hotel properties directly correlate with room revenues at those hotel properties and totaled approximately $0.4 million and $2.9 million for the years ended December 31, 2013 and 2012, respectively. The reimbursement of payroll expenses incurred on behalf of the managed hotel properties totaled approximately $0.7 million and $6.6 million for the years ended December 31, 2013 and 2012, respectively. These decreases were due to the fact that the 17 HFI hotels acquired in December 2012 were managed by us during the year ended December 31, 2012, but were owned by us during the year ended December 31, 2013. We expect to have no management fees, license fees and other revenues in 2014.

Hotel operating expenses. Hotel operating expenses increased by approximately $46.9 million, or 9.5%, to approximately $540.6 million for the year ended December 31, 2013 compared to approximately $493.6 million for the year ended December 31, 2012. Excluding hotel operating expenses of approximately $15.9 million related to the 17 HFI hotels for the year ended December 31, 2013 and approximately $0.7 million for the period from December 13, 2012 through December 31, 2012, the increase in hotel operating expenses of approximately $31.8 million was partly driven by an increase of approximately $8.7 million due to the offering of complimentary grab-and-go breakfast at substantially all of our hotels during the year ended December 31, 2013 as compared to a smaller percentage of our hotels during the year ended December 31, 2012. Also, the increase was related to increases in hotel staff payroll expense, reservations expense, real estate taxes, marketing expense due to our increased focus on internet advertising and utility expenses for the year ended December 31, 2013 compared to the year ended December 31, 2012.

Hotel operating margin increased to 52.5% for the year ended December 31, 2013 compared to 50.8% for the year ended December 31, 2012. The increase in hotel operating margin was primarily related to our increase in ADR. Total hotel revenues increased by approximately $130.6 million for the year ended December 31, 2013 compared to the year ended December 31, 2012, while hotel operating profit increased by approximately $85.6 million for the same period, which represents an operating margin flow-through, defined as the change in hotel operating profit divided by the change in total room and other hotel revenues, of approximately 65.6%.

General and administrative expenses. General and administrative expenses increased by approximately $19.8 million, or 22.3%, to approximately $108.3 million for the year ended December 31, 2013, compared to approximately $88.5 million for the year ended December 31, 2012. This increase was driven by a $15.8 million increase in stock compensation expense, approximately $14.6 million of which related to the modification of the vesting schedules of awards outstanding prior to the Pre-IPO Transactions, as well as $6.0 million in legal fees during the year ended December 31, 2013, both of which are related to our initial public offering. In 2014, the Company expects to incur approximately $5.0 million in public company transition costs.

Depreciation and amortization.Depreciation and amortization increased by approximately $38.1 million, or 29.3%, to approximately $168.1 million for the year ended December 31, 2013 compared to approximately $129.9 million for the year ended December 31, 2012. Excluding depreciation expense of approximately $5.8 million related to the 17 HFI hotels for the year ended December 31, 2013 and approximately $0.3 million for the period from December 13, 2012 through December 31, 2012, the increase of approximately $32.7 million in depreciation and amortization was primarily due to an increase in investment in hotel assets as a result of our ongoing hotel reinvestment program.

Managed property payroll expenses.Managed property payroll expenses decreased by approximately $5.9 million, or 89.0%, to approximately $0.7 million for the year ended December 31, 2013 compared to approximately $6.6 million for the year ended December 31, 2012. This decrease is due to the fact that the 17 HFI hotels acquired in December 2012 were managed by us during the year ended December 31, 2012, but were owned by us during the year ended December 31, 2013. We expect to have no managed property payroll expenses in 2014.

Restructuring expenses. During the year ended December 31, 2013, we initiated an operations restructuring which changed certain aspects of our property staffing model, for which we incurred costs of approximately $0.6 million. During the year ended December 31, 2011, we initiated a corporate restructuring that we completed during the year ended December 31, 2012, which included, among other things, the relocation of the corporate headquarters to Charlotte, North Carolina, for which we incurred costs of approximately $5.8 million, approximately $2.0 million of which was a non-cash charge related to executive separation payments during the year ended December 31, 2012. For these restructuring programs, expenses included employee relocation, recruitment and separation payments and other costs. As of December 31, 2013, all costs associated with both of these programs had been incurred.

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Acquisition transaction expenses. During the year ended December 31, 2013, we incurred acquisition transaction costs of approximately $0.2 million related to our acquisition of assets of the 17 HFI hotels and the two LVP hotels. During the year ended December 31, 2012, we incurred acquisition transaction costs of approximately $1.7 million related to our acquisition of assets of the 17 HFI hotels.

Impairment of long-lived assets. Asset impairments are recorded as required based on an evaluation of property and equipment and intangible assets for impairment. We recognized an impairment charge of approximately $3.3 million related to property and equipment during the year ended December 31, 2013 and approximately $1.4 million during the year ended December 31, 2012.

Interest expense.Interest expense decreased by approximately $23.1 million, or 9.0%, to approximately $234.6 million for the year ended December 31, 2013 compared to approximately $257.7 million for the year ended December 31, 2012. The decrease is due to a decrease in debt extinguishment and other costs of approximately $18.1 million as well as a net decrease in contractual interest expense and amortization of deferred financing costs of $5.0 million.

Subsequent to the Offering, the Corporation entered into the Corporation revolving credit facility and ESH REIT repaid $715.0 million of its outstanding mezzanine loans, terminated the Extended Stay LLC revolving credit facility and entered into the ESH REIT revolving credit facility, which resulted in debt extinguishment and other costs of approximately $27.1 million, composed of prepayment penalties of approximately 13.4 million, the write-off of unamortized deferred financing costs of approximately $11.7 million and other costs of approximately $2.0 million. In November 2012, ESH REIT refinanced its then-outstanding mortgage and mezzanine loans, which resulted in debt extinguishment and other costs of approximately $45.1 million, composed of prepayment penalties of approximately $10.5 million, the write-off of unamortized deferred financing costs of approximately $34.4 million and other costs of approximately $0.2 million. As a result of the debt refinancing in 2012, ESH REIT’s total debt increased by approximately $945.1 million and its weighted-average interest rate decreased by approximately 2.0%. This resulted in a net decrease in contractual interest expense and amortization of deferred financing costs of approximately $5.0 million. The partial prepayment of mezzanine loan principal subsequent to the Offering further reduced the Company’s weighted average interest rate, which was approximately 4.4% as of December 31, 2013. In 2014, the Company expects to incur approximately $148.0 million in interest expense, including the amortization of deferred financing costs, substantially all of which will be incurred at ESH REIT.

Income tax (benefit) expense. Our effective income tax rate decreased by 23.6% to (6.4)% for the year ended December 31, 2013 compared to 17.2% for the year ended December 31, 2012, primarily due to an income tax benefit of approximately $6.6 million related to the recognition of a deferred tax asset associated with the change in ESH REIT’s expected distribution policy. Taxable income associated with the Pre-IPO Transactions was exempt from federal tax, as it was generally earned by ESH REIT. The Company’s effective tax rate is lower than the federal statutory rate of 35% due to ESH REIT’s status as a REIT under the provisions of the Code during these periods and the fact that prior to the Pre-IPO Transactions, the income of HVM and ESH Strategies was not taxed at the corporate level due to their limited liability company status.

In 2014, the Company’s taxable income will include the taxable income of its wholly-owned subsidiaries, ESA Management, ESH Strategies and the Operating Lessees, and will also include dividend income related to its ownership of the shares of Class A common stock of ESH REIT, which represents approximately 55% of the outstanding common stock of ESH REIT. Beginning in 2014, ESH REIT expects to distribute 95% of its taxable income and therefore will incur federal and state income tax on the taxable income not distributed. Changes in ESH REIT’s currently contemplated distribution policy may impact income tax expense in 2014 and beyond, which may include the consideration of the realizability of ESH REIT’s deferred tax asset and the potential establishment of a valuation allowance thereon. As a result of the changes associated with the Pre-IPO Transactions and the revised ESH REIT distribution policy, the Company expects its effective tax rate in 2014 to be in the range of 23% to 24%.

Comparison of Years Ended December 31, 2012 and December 31, 2011

As of December 31, 2011, we owned and operated 665 hotels consisting of approximately 73,700 rooms and managed 19 hotels consisting of approximately 2,600 rooms. On December 13, 2012, we acquired the 17 HFI hotels, which HVM previously managed. Therefore, as of December 31, 2012, we owned and operated 682 hotels consisting of approximately 75,900 rooms and managed two hotels consisting of approximately 290 rooms. In the third quarter of 2011, we began renovating our hotels which, during the third and fourth quarters of 2011 and the year ended December 31, 2012, reduced the total number of rooms in service.

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The following table presents our results of operations for the years ended December 31, 2012 and 2011, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31, 2012			Year Ended December 31, 2011			Change ($)			Change (%)
Revenues:
Room revenues	$	984,273		$	912,988		$	71,285			7.8	%
Other hotel revenues		16,898			18,693			(1,795	)		(9.6	)%
Management fees, license fees and other revenues		10,291			11,047			(756	)		(6.8	)%
Total revenues		1,011,462			942,728			68,734			7.3	%
Operating expenses:
Hotel operating expenses		493,635			463,369			30,266			6.5	%
General and administrative expenses		88,543			75,041			13,502			18.0	%
Depreciation and amortization		129,938			120,438			9,500			7.9	%
Managed property payroll expenses		6,600			6,409			191			3.0	%
Restructuring expenses		5,763			10,491			(4,728	)		(45.1	)%
Acquisition transaction expenses		1,675			593			1,082			182.5	%
Impairment of long-lived assets		1,420			—			1,420			n/a
Office building operating expenses		—			1,010			(1,010	)		n/a
Total operating expenses		727,574			677,351			50,223			7.4	%
Other income		384			232			152			65.5	%
Income from operations		284,272			265,609			18,663			7.0	%
Interest expense		257,656			212,474			45,182			21.3	%
Interest income		(307	)		(550	)		243			(44.2	)%
Income before income taxes		26,923			53,685			(26,762	)		(49.9	)%
Income tax expense		4,642			7,050			(2,408	)		(34.2	)%
Net income		22,281			46,635			(24,354	)		(52.2	)%
Net income attributable to noncontrolling interests		(1,549	)		(1,062	)		(487	)		45.9	%
Net income attributable to members	$	20,732		$	45,573		$	(24,841	)		(54.5	)%

The following table presents key operating metrics, including occupancy, ADR and RevPAR, for our owned hotels for the years ended December 31, 2012 and 2011, respectively:

	Year Ended December 31, 2012			Year Ended December 31, 2011			Change (%)
Number of hotel properties(1)		682			665			2.6	%
Number of rooms(1)		75,928			73,657			3.1	%
Occupancy		73.3	%		75.1	%		(2.4	)%
ADR	$	49.77		$	45.20			10.1	%
RevPAR	$	36.46		$	33.96			7.4	%

(1) Difference in number of hotel properties and rooms between periods is due to acquisition of the 17 HFI hotels on December 13, 2012.

Room revenues. Room revenues increased by approximately $71.3 million, or 7.8%, to approximately $984.3 million for the year ended December 31, 2012 compared to approximately $913.0 million for the year ended December 31, 2011. The increase in room revenues was due to a 10.1% increase in ADR, which was primarily a result of operating initiatives related to our pricing policy and consistency with respect to room discounts across our portfolio, offset by a 2.4% decrease in occupancy, which was primarily due to guest displacement associated with our hotel renovations, resulting in a 7.4% increase in RevPAR.

Other hotel revenues. Other hotel revenues decreased by approximately $1.8 million, or 9.6%, to approximately $16.9 million for the year ended December 31, 2012 compared to approximately $18.7 million for the year ended December 31, 2011. The decrease in other hotel revenues was primarily due to a decrease in internet access fees as a result of the offering of free basic WiFi in all of our rooms with an option to purchase upgraded WiFi at all of our hotels beginning in January 2012.

        Management fees, license fees and other revenues. Management fees, license fees and other revenues decreased by approximately $0.8 million, or 6.8%, to approximately $10.3 million for the year ended December 31, 2012 compared to approximately $11.0 million for the year ended December 31, 2011. Management fees and license fees from managed hotel properties directly correlate with room revenues at those hotel properties and remained consistent at approximately $2.9 million for the years ended December 31, 2012 and 2011. The reimbursement of payroll expenses incurred on behalf of the managed hotel properties increased by approximately $0.2 million, or 3.0%, to approximately $6.6 million for the year ended December 31, 2012 compared to approximately $6.4 million for the year ended December 31, 2011. Offsetting these increases, other revenues during the year ended December 31, 2011 consisted of revenues from the lease of the unoccupied portion of our corporate office building of approximately $1.7 million, which was sold on December 29, 2011.

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Hotel operating expenses. Hotel operating expenses increased by approximately $30.3 million, or 6.5%, to approximately $493.6 million for the year ended December 31, 2012 compared to approximately $463.4 million for the year ended December 31, 2011. The increase in hotel operating expenses was mainly driven by increases in hotel staff payroll expense of approximately $10.7 million. Also, the increase was related to higher marketing expense of approximately $7.6 million due to an increased focus on internet advertising. Additionally, there was an increase in real estate taxes of approximately $2.8 million and an increase in travel agent reservations and commissions of approximately $2.4 million. The remaining increase was primarily due to the offering of complimentary grab-and-go breakfast at the majority of our hotels during the year ended December 31, 2012 as compared to a limited number of hotels during the year ended December 31, 2011.

Hotel operating margin increased to 50.8% for the year ended December 31, 2012 compared to 50.3% for the year ended December 31, 2011. The increase in hotel operating margin was primarily related to our increase in ADR while maintaining approximately the same level of occupancy. Total hotel revenues increased by approximately $69.5 million for the year ended December 31, 2012 compared to the year ended December 31, 2011, while hotel operating profit increased by approximately $39.5 million for the same period, which represents an operating margin flow-through, defined as the change in hotel operating profit divided by the change in total room and other hotel revenues, of approximately 56.8%, which reflects, in part, the impact of spending during the period for our hotel reinvestment program.

General and administrative expenses.General and administrative expenses increased by approximately $13.5 million, or 18.0%, to approximately $88.5 million for the year ended December 31, 2012 compared to approximately $75.0 million for the year ended December 31, 2011. This increase was driven by global brand marketing costs of approximately $10.0 million primarily as a result of the introduction of television advertising during the year ended December 31, 2012. Also, the increase was partially related to approximately $4.3 million of compensation expense due to the enhancement of the number and depth of senior management positions in connection with our corporate restructuring as well as approximately $1.6 million related to preparation for our initial public offering. Partially offsetting these increases was a decrease of approximately $2.4 million related to consulting fees associated with the implementation of our strategic initiatives.

Depreciation and amortization. Depreciation and amortization increased by approximately $9.5 million, or 7.9%, to approximately $129.9 million for the year ended December 31, 2012 compared to approximately $120.4 million for the year ended December 31, 2011. The increase in depreciation and amortization is the result of the increase in investment in hotel assets as a result of our ongoing hotel reinvestment program.

Managed property payroll expenses.Managed property payroll expenses increased by approximately $0.2 million, or 3.0%, to approximately $6.6 million for the year ended December 31, 2012 compared to approximately $6.4 million for the year ended December 31, 2011.

Restructuring expenses.During the year ended December 31, 2011, we initiated a corporate restructuring that we completed during the year ended December 31, 2012, which included, among other things, the relocation of the corporate headquarters to Charlotte, North Carolina, for which we incurred costs of approximately $5.8 million, approximately $2.0 million of which was a non-cash charge related to executive separation payments and approximately $10.5 million, approximately $1.6 million of which was a non-cash charge related to a loss on the sale of our former corporate office building, during the years ended December 31, 2012 and 2011, respectively.

Acquisition transaction expenses. During the year ended December 31, 2012, we incurred acquisition transaction costs of approximately $1.7 million related to our acquisition of assets of the 17 HFI hotels. During the year ended December 31, 2011, we incurred acquisition transaction costs of approximately $0.6 million related to our acquisition of substantially all of the Company Predecessor’s businesses, assets and operations in October 2010.

Impairment of long-lived assets.Asset impairments are recorded as required based on an evaluation of property and equipment and intangible assets for impairment. During the year ended December 31, 2012, we recognized an impairment charge of approximately $1.4 million related to property and equipment. During the year ended December 31, 2011, no impairment charges were recognized.

Office building operating expenses.During the year ended December 31, 2011, we owned our former corporate office building and leased the unoccupied portion of the building to third-party tenants. We sold the office building on December 29, 2011; thus, we incurred no office building operating expenses for the year ended December 31, 2012 compared to approximately $1.0 million for the year ended December 31, 2011.

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Interest expense.Interest expense increased by approximately $45.2 million, or 21.3%, to approximately $257.7 million for the year ended December 31, 2012 compared to approximately $212.5 million for the year ended December 31, 2011. In connection with ESH REIT’s November 2012 debt refinancing, ESH REIT incurred debt extinguishment and other costs of approximately $45.1 million, which are included as a component of interest expense. As a result of the refinancing in 2012, ESH REIT’s total debt increased by approximately $945.1 million and its weighted-average interest rate decreased by approximately 2.0%. This resulted in a net increase in contractual interest expense and amortization of deferred financing costs of approximately $0.1 million.

Income tax expense.Our effective income tax rate increased by 4.1% to 17.2% for the year ended December 31, 2012 compared to 13.1% for the year ended December 31, 2011, primarily due to the impact of ESH REIT’s November 2012 debt refinancing, as prepayment penalties and other charges generated almost no income tax benefit because they occurred at ESH REIT. These rates are lower than the federal statutory rate of 35% primarily due to ESH REIT’s status as a REIT under the provisions of the Code.

Results of Operations—ESH REIT

Comparison of Years Ended December 31, 2013 and December 31, 2012

ESH REIT owns all of our 684 hotel properties. For the periods through the Pre-IPO Transactions, the consolidated results of operations of ESH REIT include the results of operations of ESH REIT’s predecessor, ESH Hospitality LLC, and its subsidiaries, which included the Operating Lessees. Additionally, for periods through the Pre-IPO transactions, ESH REIT’s consolidated results of operations include the results of operations of HVM, a consolidated variable interest entity. Third party equity interests in HVM, which represented all of HVM’s equity, were not owned by ESH REIT and therefore are presented as noncontrolling interests.

For the period from the Pre-IPO Transactions through December 31, 2013, the consolidated results of operations of ESH REIT include the results of operations of ESH REIT and its subsidiaries, which do not include the Operating Lessees. Further, the results of operations of ESA Management, which now performs the management and administrative services previously performed by HVM, are not consolidated within ESH REIT’s results, as ESA Management is owned by the Corporation.

ESH REIT’s consolidated results of operations subsequent to the Pre-IPO Transactions, as well as in 2014 and beyond, will present consolidated operating results in a manner which reflects ESH REIT’s legal structure and the entity-related changes that were a result of the Pre-IPO Transactions. For example:

• Prior to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflected room and other hotel revenues, as lease rental income and expense with respect to the operating leases between ESH REIT and its previously owned, consolidated subsidiaries, the Operating Lessees, respectively, eliminated in consolidation and the Operating Lessee’s results of operations were owned by ESH REIT. Subsequent to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflect ESH REIT’s sole source of revenue, lease rental income earned under its operating leases, which are no longer eliminated in consolidation due to the fact that ESH REIT no longer owns the Operating Lessees. ESH REIT is no longer entitled to the Operating Lessees’ hotel room and other hotel revenues.

• Prior to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflected all hotel operating expenses, whether such costs were incurred by ESH REIT (i.e., real estate taxes and insurance, which are directly related to the ownership of the hotels) or by the Operating Lessees (i.e., utilities, hotel property payroll, marketing and repair and maintenance expense, which the Operating Lessees incur as prescribed by the operating leases). Subsequent to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflect only those hotel operating expenses that are incurred directly by ESH REIT.

• Prior to the Pre-IPO Transactions, since ESH REIT consolidated the results of operations of HVM, administrative service costs paid to HVM eliminated in consolidation. Subsequent to the Pre-IPO Transactions, such costs do not eliminate in consolidation and are reflected as a component of general and administrative expenses.

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As of December 31, 2013, ESH REIT owned 684 hotels consisting of approximately 76,200 rooms. As of December 31, 2012, ESH REIT owned 682 hotels consisting of approximately 75,900 rooms. In the third quarter of 2011, ESH REIT began renovating its hotels which, during the years ended December 31, 2013 and 2012, reduced the total number of rooms in service. Further, on December 13, 2012, ESH REIT acquired the 17 HFI hotels and on December 31, 2013, ESH REIT acquired the two LVP hotels. Effective January 1, 2014, the rental revenue and applicable hotel operating expenses of the two acquired hotels will be included in ESH REIT’s consolidated results of operations.

The following table presents ESH REIT’s consolidated results of operations for the years ended December 31, 2013 and 2012, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended			Year Ended
	December 31,			December 31,
	2013			2012			Change ($)			Change (%)
Revenues:
Rental revenues	$	71,900		$	—		$	71,900			n/a
Hotel room revenues		983,950			984,273			(323	)		0.0	%
Other hotel revenues		15,576			16,898			(1,322	)		(7.8	)%
Management fees and other revenues		1,113			10,346			(9,233	)		(89.2	)%
Total revenues		1,072,539			1,011,517			61,022			6.0	%
Operating expenses:
Hotel operating expenses		478,727			493,635			(14,908	)		(3.0	)%
General and administrative expenses		86,676			87,807			(1,131	)		(1.3	)%
Depreciation and amortization		167,185			129,938			37,247			28.7	%
Managed property payroll expenses		639			6,600			(5,961	)		(90.3	)%
Trademark license fees		2,998			3,004			(6	)		(0.2	)%
Restructuring expenses		605			5,763			(5,158	)		(89.5	)%
Acquisition transaction expenses		235			1,675			(1,440	)		(86.0	)%
Impairment of long-lived assets		3,330			1,420			1,910			134.5	%
Total operating expenses		740,395			729,842			10,553			1.4	%
Other income		1,075			384			691			179.9	%
Income from operations		333,219			282,059			51,160			18.1	%
Interest expense		234,258			257,656			(23,398	)		(9.1	)%
Interest income		(629	)		(307	)		(322	)		104.9	%
Income before income tax (benefit) expense		99,590			24,710			74,880			303.0	%
Income tax (benefit) expense		(876	)		4,642			(5,518	)		118.9	%
Net income		100,466			20,068			80,398			400.6	%
Net income attributable to noncontrolling interests		(730	)		(1,549	)		819			(52.9	)%
Net income attributable to shareholders or members	$	99,736		$	18,519		$	81,217			438.6	%

Rental revenues.Consolidated rental revenues were approximately $71.9 million for the year ended December 31, 2013 compared to $0 for the year ended December 31, 2012. For the period from January 1, 2013 through the Pre-IPO Transactions, the consolidated results of operations of ESH REIT included the results of operations of the Operating Lessees. Therefore, during that

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period, ESH REIT’s rental revenues, as well as the Operating Lessee’s rental expenses, were eliminated in consolidation. For the period from the Pre-IPO Transactions through December 31, 2013, the consolidated results of operations of ESH REIT did not include the results of operations of the Operating Lessees. Therefore, during that period, rental revenues were not eliminated in consolidation. Rental revenues consist of fixed minimum rental payments plus specified percentages of hotel revenues earned by the Operating Lessees over designated thresholds.

Hotel room revenues. In connection with the Pre-IPO Transactions, ESH REIT transferred the Operating Lessees to the Corporation; therefore, ESH REIT’s consolidated results of operations for the year ended December 31, 2013 include results of operations of the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions. ESH REIT’s consolidated results of operations for the year ended December 31, 2012 include the results of operations of the Operating Lessees for the full year.

Hotel room revenues decreased by approximately $0.3 million, to approximately $984.0 million for the year ended December 31, 2013 compared to approximately $984.3 million for the year ended December 31, 2013. Excluding room revenues of approximately $26.3 million related to the 17 HFI hotels for the year ended December 31, 2013 and approximately $1.3 million for the period from December 13, 2012 through December 31, 2012, room revenues decreased by approximately $25.3 million. The decrease was due to the fact that for the year ended December 31, 2013, subsequent to the Pre-IPO Transactions, room revenues do not include the room revenues of the Operating Lessees. The decrease, therefore, is a result of the inclusion of slightly greater than ten months of Operating Lessee room revenues in the year ended December 31, 2013 as compared with the inclusion of a full year of Operating Lessee room revenues in the year ended December 31, 2012.

Other hotel revenues. Other hotel revenues decreased by approximately $1.3 million, or 7.8%, to approximately $15.6 million for the year ended December 31, 2013 compared to approximately $16.9 million for the year ended December 31, 2012. Excluding other hotel revenues of approximately $0.3 million related to the 17 HFI hotels for the year ended December 31, 2013 and $0 for the period from December 13, 2012 through December 31, 2012, other hotel revenues decreased by approximately $1.6 million. The decrease was a result of the inclusion of other hotel revenues related to the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions in the year ended December 31, 2013 as compared with the inclusion of other hotel revenues related to the Operating Lessees for the full year ended December 31, 2012.

Management fees and other revenues. A subsidiary of the Corporation acquired all of the assets and assumed all of the liabilities of HVM in connection with the Pre-IPO Transactions; therefore, ESH REIT’s consolidated results of operations for the year ended December 31, 2013 include results of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions. ESH REIT’s consolidated results of operations for the year ended December 31, 2012 include the results of operations for HVM for the full year.

Management fees and other revenues decreased by approximately $9.2 million, or 89.2%, to approximately $1.1 million for the year ended December 31, 2013 compared to approximately $10.3 million for the year ended December 31, 2012. Management fees from managed hotel properties totaled approximately $0.5 million and $2.9 million for the years ended December 31, 2013 and 2012, respectively. The reimbursement of payroll expenses incurred on behalf of the managed hotel properties totaled approximately $0.6 million and $6.6 million for the years ended December 31, 2013 and 2012, respectively. These decreases were due to the fact that the 17 HFI hotels acquired in December 2012 were managed by HVM during most of the year ended December 31, 2012, but were owned by ESH REIT during the year ended December 31, 2013. For the period from the Pre-IPO Transactions through December 31, 2013, the consolidated results of operations of ESH REIT do not include the results of operations of the management entity.

Hotel operating expenses. In connection with the Pre-IPO Transactions, ESH REIT transferred the Operating Lessees to the Corporation; therefore, ESH REIT’s consolidated results of operations for the year ended December 31, 2013 include results of operations of the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions. ESH REIT’s consolidated results of operations for the year ended December 31, 2012 include the results of operations of the Operating Lessees for the full year.

Hotel operating expenses decreased by approximately $14.9 million, or 3.0%, to approximately $478.7 million for the year ended December 31, 2013 compared to approximately $493.6 million for the year ended December 31, 2012. Excluding hotel operating expenses of approximately $13.4 million related to the 17 HFI hotels for the year ended December 31, 2013 and approximately $0.7 million for the period from December 13, 2012 through December 31, 2012, hotel operating expenses decreased by approximately $27.6 million. This decrease is due to the fact that for the year ended December 31, 2013, subsequent to the Pre-IPO Transactions, hotel operating expenses include only those hotel operating expenses directly related to ownership of the hotels, such as

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real estate taxes and insurance expense, and do not include hotel operating expenses incurred by the Operating Lessees. The decrease, therefore, was a result of the inclusion of slightly greater than ten months of Operating Lessee hotel operating expenses in the year ended December 31, 2013 as compared with the inclusion of a full year of Operating Lessee hotel operating expenses in the year ended December 31, 2012.

Subsequent to the Pre-IPO Transactions, hotel operating margin is not a relevant operating measure for ESH REIT as its sole source of consolidated revenue is rental revenue generated from leasing the hotel properties to the Operating Lessees, and its hotel operating expenses represent only a portion of the hotels’ total operating expenses, specifically those related to the ownership of, but not the operation of, the hotel properties.

General and administrative expenses. General and administrative expenses decreased by approximately $1.1 million, or 1.3%, to approximately $86.7 million for the year ended December 31, 2013, compared to approximately $87.8 million for the year ended December 31, 2012. The overall decrease is due to a decrease in consulting expenses of approximately $4.3 million related to the implementation of new strategic initiatives, including services related to pricing and yield management projects, as well as a decrease in payroll related expenses of approximately $3.2 million for the period from the Pre-IPO Transactions through December 31, 2013, during which the management entity was not consolidated with or by ESH REIT. Offsetting these decreases, there was an increase of approximately $9.0 million in public company transaction and transition costs as a result of the Offering completed in November 2013.

In 2014, ESH REIT’s general and administrative expenses are expected to include payroll and related expenses of ESH REIT employees, professional fees, including legal, audit and tax fees, board of directors fees, directors and officers insurance and other public company costs. In addition, ESH REIT will incur costs under its services agreement with ESA Management for certain overhead services performed on ESH REIT’s behalf. The services relate to shared executive management (including the Chief Executive Officer, the Chief Financial Officer and the Chief Legal Officer), accounting, financial analysis, training and technology. These costs are expected to include payroll and other costs related to shared officers and executives, as well as shared payroll and other costs related to finance and accounting personnel.

Depreciation and amortization. Depreciation and amortization increased by approximately $37.2 million, or 28.7%, to approximately $167.2 million for the year ended December 31, 2013 compared to approximately $129.9 million for the year ended December 31, 2012. Excluding depreciation expense of approximately $5.8 million related to the 17 HFI hotels for the year ended December 31, 2013 and approximately $0.3 million for the period from December 13, 2012 through December 31, 2012, the increase of approximately $31.8 million in depreciation and amortization was primarily due to an increase in investment in hotel assets as a result of our ongoing hotel reinvestment program.

Managed property payroll expenses. Managed property payroll expenses decreased by approximately $6.0 million, or 90.3%, to approximately $0.6 million for the year ended December 31, 2013 compared to approximately $6.6 million for the year ended December 31, 2012. This decrease is due to the fact that the 17 HFI hotels acquired in December 2012 were managed by HVM during the year ended December 31, 2012, but were owned by us during the year ended December 31, 2013. Subsequent to the Pre-IPO Transactions, the management entity is not consolidated with or by ESH REIT; therefore, in future periods, there will be no managed property payroll expenses.

Trademark license fees. Trademark license fees remained consistent at $3.0 million for the years ended December 31, 2013 and 2012. Prior to the Pre-IPO Transactions, ESH REIT owned the Operating Lessees, which pay fees to ESH Strategies for the use of their trademark licenses. Trademark license fees are directly correlated with hotel room revenues at the hotel properties. Subsequent to the Pre-IPO Transactions, ESH REIT no longer owns the Operating Lessees. For 2014 and beyond, ESH REIT’s consolidated results of operations will reflect no trademark license fees.

Restructuring expenses. During the year ended December 31, 2013 and prior to the Pre-IPO Transactions, HVM, a consolidated variable interest entity, initiated an operations restructuring, which changed certain aspects of its property staffing model, and incurred costs of approximately $0.6 million. During the year ended December 31, 2011, HVM initiated a corporate restructuring that was completed during the year ended December 31, 2012, which included, among other things, the relocation of the corporate headquarters to Charlotte, North Carolina, and incurred costs of approximately $5.8 million, approximately $2.0 million of which was a non-cash charge related to executive separation payments during the year ended December 31, 2012. For these restructuring programs, expenses included employee relocation, recruitment and separation payments and other costs. As of the Pre-IPO Transactions, all costs associated with both of these programs had been incurred.

Acquisition transaction expenses. During the year ended December 31, 2013, we incurred acquisition transaction costs of approximately $0.2 million related to ESH REIT’s acquisition of assets of the 17 HFI hotels and the two LVP hotels. During the year ended December 31, 2012, ESH REIT incurred acquisition transaction costs of approximately $1.7 million related to its acquisition of assets of the 17 HFI hotels.

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Impairment of long-lived assets. Asset impairments are recorded as required based on an evaluation of property and equipment and intangible assets for impairment. We recognized an impairment charge of approximately $3.3 million related to property and equipment during the year ended December 31, 2013 and approximately $1.4 million during the year ended December 31, 2012.

Interest expense.Interest expense decreased by approximately $23.4 million, or 9.1%, to approximately $234.3 million for the year ended December 31, 2013 compared to approximately $257.7 million for the year ended December 31, 2012. The decrease is due to a decrease in debt extinguishment and other costs of approximately $18.2 million as well as a net decrease in contractual interest expense and amortization of deferred financing costs of $5.2 million.

Subsequent to the Offering, ESH REIT repaid $715.0 million of its mezzanine loans, terminated the Extended Stay LLC revolving credit facility and entered into the ESH REIT revolving credit facility, which resulted in debt extinguishment and other related costs of approximately $26.9 million, composed of prepayment penalties of approximately $13.4 million, the write-off of unamortized deferred financing costs of approximately $11.7 million and other costs of approximately $1.8 million. In November 2012, ESH REIT refinanced its then-outstanding mortgage and mezzanine loans, which resulted in debt extinguishment and other costs of approximately $45.1 million, composed of prepayment penalties of approximately $10.5 million, the write-off of unamortized deferred financing costs of approximately $34.4 million and other costs of approximately $0.2 million. As a result of the debt refinancing in 2012, ESH REIT’s total debt increased by approximately $945.1 million and its weighted-average interest rate decreased by approximately 2.0%. This resulted in a net decrease in contractual interest expense and amortization of deferred financing costs of approximately $5.2 million. The partial prepayment of mezzanine loan principal subsequent to the Offering further reduced ESH REIT’s weighted average interest rate, which was approximately 4.4% as of December 31, 2013. In 2014, ESH REIT expects to incur approximately $148.0 million in interest expense, including the amortization of deferred financing costs.

Income tax expense. ESH REIT’s effective income tax rate decreased by 19.7% to (0.9)% for the year ended December 31, 2013 compared to 18.8% for the year ended December 31, 2012, primarily due to an income tax benefit of approximately $6.6 million related to the recognition of a net deferred tax asset associated with the change in ESH REIT’s expected distribution policy. ESH REIT’s effective tax rate is lower than the federal statutory rate of 35% due to its status as a REIT under the provisions of the Code during these periods and the fact that prior to the Pre-IPO Transactions, the income of HVM was not taxed at the corporate level due to its limited liability company tax status.

While ESH REIT has historically distributed 100% of its taxable income, beginning in 2014, it intends to distribute approximately 95% of its taxable income. Accordingly, ESH REIT will be subject to income taxes on approximately 5% of its taxable income. As a result, deferred tax balances have been adjusted during the year to reflect the fact that an estimated 5% of ESH REIT’s future taxable income will be subject to tax. This change in distribution policy resulted in the recognition of a deferred tax asset during 2013 of approximately $7.8 million related to ESH REIT’S net operating loss carryforwards that existed as of December 31, 2012. In addition, net deferred tax liabilities of approximately $1.2 million were recorded during 2013 related to temporary differences that are now expected to be included in taxable income in the future. Changes in ESH REIT’s currently contemplated distribution policy may impact income tax expense in 2014 and beyond, which may include the consideration of the realizability of ESH REIT’s deferred tax asset and the potential establishment of a valuation allowance thereon.

Comparison of Years Ended December 31, 2012 and December 31, 2011

As of December 31, 2011, ESH REIT and its subsidiaries owned and operated 665 hotels consisting of approximately 73,700 rooms and managed 19 hotels consisting of approximately 2,600 rooms. On December 13, 2012, ESH REIT acquired the 17 HFI hotels, which HVM previously managed. Therefore, as of December 31, 2012, ESH REIT and its subsidiaries owned and operated 682 hotels consisting of approximately 75,900 rooms and managed two hotels consisting of approximately 290 rooms. In the third quarter of 2011, we began renovating our hotels which, during the third and fourth quarters of 2011 and all of 2012, reduced the total number of rooms in service.

The following table presents ESH REIT’s and its subsidiaries’ results of operations for the years ended December 31, 2012 and 2011 including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31, 2012		Year Ended December 31, 2011		Change ($)			Change (%)
Revenues:
Room revenues	$	984,273	$	912,988	$	71,285			7.8	%
Other hotel revenues		16,898		18,693		(1,795	)		(9.6	)%
Management fees and other revenues		10,346		11,172		(826	)		(7.4	)%
Total revenues		1,011,517		942,853		68,664			7.3	%
Operating expenses:
Hotel operating expenses		493,635		463,369		30,266			6.5	%
General and administrative expenses		87,807		72,413		15,394			21.3	%
Depreciation and amortization		129,938		120,438		9,500			7.9	%

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Managed property payroll expenses		6,600			6,409			191		3.0	%
Trademark license fees		3,004			2,795			209		7.5	%
Restructuring expenses		5,763			10,491			(4,728	)	(45.1	)%
Acquisition transaction expenses		1,675			593			1,082		182.5	%
Impairment of long-lived assets		1,420			—			1,420		n/a
Office building operating expenses		—			1,010			(1,010	)	n/a
Total operating expenses		729,842			677,518			52,324		7.7	%
Other income		384			232			152		65.5	%
Income from operations		282,059			265,567			16,492		6.2	%
Interest expense		257,656			212,474			45,182		21.3	%
Interest income		(307	)		(550	)		243		(44.2	)%
Income before income taxes		24,710			53,643			(28,933	)	(53.9	)%
Income tax expense		4,642			7,050			(2,408	)	(34.2	)%
Net income		20,068			46,593			(26,525	)	(56.9	)%
Net income attributable to noncontrolling interests		(1,549	)		(1,062	)		(487	)	45.9	%
Net income attributable to members	$	18,519		$	45,531		$	(27,012	)	(59.3	)%

Room revenues. Room revenues increased by approximately $71.3 million, or 7.8%, to approximately $984.3 million for the year ended December 31, 2012 compared to approximately $913.0 million for the year ended December 31, 2011. The increase in room revenues was due to a 10.1% increase in ADR, which was primarily a result of operating initiatives related to pricing policy and consistency with respect to room discounts across our portfolio, offset by a 2.4% decrease in occupancy, which was primarily due to guest displacement associated with our hotel renovations, resulting in a 7.4% increase in RevPAR.

Other hotel revenues. Other hotel revenues decreased by approximately $1.8 million, or 9.6%, to approximately $16.9 million for the year ended December 31, 2012 compared to approximately $18.7 million for the year ended December 31, 2011. The decrease in other hotel revenues was primarily due to a decrease in internet access fees as a result of the offering of free basic WiFi in all of our rooms with an option to purchase upgraded WiFi at all of our hotels beginning in January 2012.

Management fees and other revenues. Management fees and other revenues decreased by approximately $0.8 million, or 7.4%, to approximately $10.3 million for the year ended December 31, 2012 compared to approximately $11.2 million for the year ended December 31, 2011. Fees from managed hotel properties and ESH Strategies remained consistent at approximately $3.0 million for the years ended December 31, 2012 and 2011 and were primarily driven by fees from managed hotel properties, which directly correlate with room revenues at those hotel properties. The reimbursement of payroll expenses incurred on behalf of the managed hotel properties increased by approximately $0.2 million, or 3.0%, to approximately $6.6 million for the year ended December 31, 2012 compared to approximately $6.4 million for the year ended December 31, 2011. Offsetting these increases, other revenues during the year ended December 31, 2011 consisted of revenues from the lease of the unoccupied portion of our corporate office building of approximately $1.7 million, which was sold on December 29, 2011.

Hotel operating expenses. Hotel operating expenses increased by approximately $30.3 million, or 6.5%, to approximately $493.6 million for the year ended December 31, 2012 compared to approximately $463.4 million for the year ended December 31, 2011. The increase in hotel operating expenses was mainly driven by increases in hotel staff payroll expense of approximately $10.7 million. Also, the increase was related to higher marketing expense of approximately $7.6 million due to an increased focus on internet advertising. Additionally, there was an increase in real estate taxes of approximately $2.8 million and an increase in travel agent reservations and commissions of approximately $2.4 million. The remaining increase was primarily due to the offering of complimentary grab-and-go breakfast at the majority of our hotels during the year ended December 31, 2012 as compared to a limited number of hotels during the year ended December 31, 2011.

Hotel operating margin increased to 50.8% for the year ended December 31, 2012 compared to 50.3% for the year ended December 31, 2011. The increase in hotel operating margin was primarily related to our increase in ADR while maintaining approximately the same level of occupancy. Total hotel revenues increased by approximately $69.5 million for the year ended December 31, 2012 compared to the year ended December 31, 2011, while hotel operating profit increased by approximately $39.5 million for the same period, which represents an operating margin flow-through, defined as the change in hotel operating profit divided by the change in total room and other hotel revenues, of approximately 56.8%, which reflects, in part the impact of spending during the period for our hotel reinvestment program.

General and administrative expenses.General and administrative expenses increased by approximately $15.4 million, or 21.3%, to approximately $87.8 million for the year ended December 31, 2012 compared to approximately $72.4 million for the year ended December 31, 2011. This increase was driven by global brand marketing costs of approximately $10.0 million primarily as a result of the introduction of television advertising during the year ended December 31, 2012. Also, the increase was partially related to approximately $4.3 million of compensation expense due to the enhancement of the number and depth of senior management positions in connection with our corporate restructuring as well as approximately $1.6 million related to preparation for our initial public offering. Partially offsetting these increases was a decrease of approximately $0.5 million related to consulting fees associated with the implementation of our strategic initiatives.

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Depreciation and amortization. Depreciation and amortization increased by approximately $9.5 million, or 7.9%, to approximately $129.9 million for the year ended December 31, 2012 compared to approximately $120.4 million for the year ended December 31, 2011. The increase in depreciation and amortization is the result of the increase in investment in hotel assets as a result of our ongoing hotel reinvestment program.

Managed property payroll expenses.Managed property payroll expenses increased by approximately $0.2 million, or 3.0%, to approximately $6.6 million for the year ended December 31, 2012 compared to approximately $6.4 million for the year ended December 31, 2011.

Trademark license fees.Trademark license fees increased by approximately $0.2 million, or 7.5%, to approximately $3.0 million for the year ended December 31, 2012 compared to approximately $2.8 million for the year ended December 31, 2011. Trademark license fees directly correlate with room revenues.

Restructuring expenses.During the year ended December 31, 2011, we initiated a corporate restructuring that we completed during the year ended December 31, 2012, which included, among other things, the relocation of the corporate headquarters to Charlotte, North Carolina, for which we incurred costs of approximately $5.8 million, approximately $2.0 million of which was a non-cash charge related to executive separation payments, and approximately $10.5 million, approximately $1.6 million of which was a non-cash charge related to a loss on the sale of our former corporate office building, during the years ended December 31, 2012 and 2011, respectively.

Acquisition transaction expenses. During the year ended December 31, 2012, we incurred acquisition transaction costs of approximately $1.7 million related to our acquisition of assets of the 17 HFI hotels. During the year ended December 31, 2011, we incurred acquisition transaction costs of approximately $0.6 million related to our acquisition of substantially all of ESH REIT Predecessor’s businesses, assets and operations in October 2010.

Impairment of long-lived assets.Asset impairments are recorded as required based on an evaluation of property and equipment and intangible assets for impairment. During the year ended December 31, 2012, we recognized an impairment charge of approximately $1.4 million related to property and equipment. During the year ended December 31, 2011, no impairment charges were recognized.

Office building operating expenses.During the year ended December 31, 2011, we owned our former corporate office building and leased the unoccupied portion of the building to third-party tenants. We sold the office building on December 29, 2011; thus, we incurred no office building operating expenses for the year ended December 31, 2012 compared to approximately $1.0 million for the year ended December 31, 2011.

Interest expense.Interest expense increased by approximately $45.2 million, or 21.3%, to approximately $257.7 million for the year ended December 31, 2012 compared to approximately $212.5 million for the year ended December 31, 2011. In connection with our November 2012 debt refinancing, we incurred debt extinguishment and other costs of approximately $45.1 million which are included as a component of interest expense. As a result of the refinancing, our total debt increased by approximately $945.1 million and our weighted-average interest rate decreased by approximately 2.0%. This resulted in a net increase in contractual interest expense and amortization of deferred financing costs of approximately $0.1 million.

Income tax expense.ESH REIT’s effective income tax rate increased by 5.7% to 18.8% for the year ended December 31, 2012 compared to 13.1% for the year ended December 31, 2011, primarily due to the impact of ESH REIT’s November 2012 debt refinancing, as prepayment penalties and other charges generated almost no income tax benefit due to our REIT status. These rates are lower than the federal statutory rate of 35% primarily due to ESH REIT’s status as a REIT under the provisions of the Code.

Non-GAAP Financial Measures – The Company

EBITDA and Adjusted EBITDA

EBITDA is defined as net income excluding: (1) interest expense, net; (2) income tax expense (benefit); and (3) depreciation and amortization. EBITDA is a commonly used measure of performance in many industries. We believe that EBITDA provides useful information to investors regarding our operating performance as it helps us and investors evaluate the ongoing performance of our hotels after removing the impact of our capital structure, primarily interest expense, and our asset base, primarily depreciation and amortization. We believe that the use of EBITDA facilitates comparisons between us and other lodging companies, hotel owners and capital-intensive companies. Additionally, EBITDA is a measure that is widely used by management in our annual budgeting and compensation planning processes.

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We use Adjusted EBITDA when evaluating our performance because we believe the adjustment for certain additional items, described below, provides useful supplemental information to investors regarding our ongoing hotel operating performance and that the presentation of Adjusted EBITDA, when combined with the GAAP presentation of net income, net income per share and cash flow provided by operating activities, is beneficial to the overall understanding of our ongoing operating performance. We adjust EBITDA for the following items and refer to this measure as Adjusted EBITDA:

• Restructuring expenses—We exclude restructuring expenses that include employee separation payments and other restructuring costs.

• Acquisition transaction expenses—Transaction related expenses associated with the acquisition of hotels are expensed when incurred. We exclude the effect of these costs because we believe they are not reflective of ongoing or future operating performance.

• Impairment of long-lived assets—We exclude the effect of impairment losses recorded on property and equipment and intangible assets, as we believe that including them in Adjusted EBITDA is not consistent with reflecting the ongoing operating performance of our hotels.

• Non-cash equity-based compensation—We exclude non-cash charges related to the amortization of equity-based compensation awards to employees and directors.

• Other expenses (income) —We exclude the effect of other costs or income that we do not consider reflective of our ongoing or future operating performance, including: costs related to preparations for our initial public offering and public company transition fees; consulting fees related to the implementation of our new strategic initiatives, including services related to pricing and yield management projects and the loss on disposal of assets.

EBITDA and Adjusted EBITDA, as presented, may not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, net income per share, cash flow from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various real estate or hotel assets such as capital expenditures, interest expense and other items have been and will continue to be incurred and are not reflected in EBITDA or Adjusted EBITDA. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of operating performance. Our consolidated and combined statements of operations and cash flows include interest expense, net, capital expenditures and other excluded items, all of which should be considered when evaluating our performance, in addition to our non-GAAP financial measures. Additionally, EBITDA and Adjusted EBITDA should not solely be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to pay dividends.

EBITDA and Adjusted EBITDA are not meaningful or useful measures for ESH REIT on a stand-alone basis due to the fact that a Paired Share represents an investment in the Company, as a single enterprise, which is reflected in the consolidated and combined Company results; therefore, we believe these performance measures are meaningful for the Company only. The following table provides a reconciliation of our net income to EBITDA and Adjusted EBITDA for the Company for the years ended December 31, 2013, 2012 and 2011 (in thousands):

	Year Ended December 31,			Year Ended December 31,			Year Ended December 31,
	2013			2012			2011
Net income	$	82,656		$	22,281		$	46,635
Interest expense, net		234,459			257,349			211,924
Income tax (benefit) expense		(4,990	)		4,642			7,050
Depreciation and amortization		168,053			129,938			120,438
EBITDA		480,178			414,210			386,047
Restructuring expenses		605			5,763			10,491
Acquisition transaction expenses		235			1,675			593
Impairment of long-lived assets		3,330			1,420			—
Non-cash equity-based compensation		20,168			4,409			4,730
Other expenses		14,094	(1)		7,431	(2)		8,003	(3)
Adjusted EBITDA	$	518,610		$	434,908		$	409,864

(1) For the year ended December 31, 2013, includes costs related to preparations for our initial public offering, consisting primarily of the Pre-IPO Transactions, of $11.2 million and loss on disposal of assets of $2.9 million.

(2) For the year ended December 31, 2012, includes costs related to preparations for our initial public offering, consisting primarily of the Pre-IPO Transactions, of $1.6 million, consulting fees related to implementation of our new strategic initiatives, including services related to pricing and yield management projects, of $4.9 million and loss on disposal of assets of $0.9 million.

(3) For the year ended December 31, 2011, includes costs related to implementation of our new strategic initiatives, including services related to pricing and yield management projects, of $7.4 million and loss on disposal of assets of $0.6 million.

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Hotel Operating Profit and Hotel Operating Margin

Hotel operating profit and hotel operating margin measure owned hotel-level operating results prior to debt service, depreciation and amortization and general and administrative expenses and are supplemental measures of aggregate hotel-level profitability. Both measures are used by us to evaluate the operating profitability of our hotels. We define hotel operating profit as the sum of room and other hotel revenues less hotel operating expenses (excluding loss on disposal of assets) and hotel operating margin as the ratio of hotel operating profit divided by the sum of room and other hotel revenues.

Hotel operating profit and hotel operating margin are not meaningful or useful measures for ESH REIT on a stand-alone basis due to the fact that a Paired Share represents an investment in the Company, as a single enterprise, which is reflected in the consolidated and combined Company results; therefore, we believe these performance measures of are meaningful for the Company only. The following table provides a reconciliation of room revenues, other hotel revenues and hotel operating expenses to hotel operating profit and hotel operating margin for the Company for the years ended December 31, 2013, 2012 and 2011 (in thousands).

	Year Ended December 31,			Year Ended December 31,			Year Ended December 31,
	2013			2012			2011
Room revenues	$	1,113,956		$	984,273		$	912,988
Other hotel revenues		17,787			16,898			18,693
Total hotel revenues		1,131,743			1,001,171			931,681
Hotel operating expenses		537,661	(1)		492,722	(2)		462,726	(3)
Hotel operating profit	$	594,082		$	508,449		$	468,955
Hotel operating margin		52.5	%		50.8	%		50.3	%

(1) For the year ended December 31, 2013, excludes loss on disposal of assets of $2.9 million.

(2) For the year ended December 31, 2012, excludes loss on disposal of assets of $0.9 million.

(3) For the year ended December 31, 2011, excludes loss on disposal of assets of $0.6 million.

Inflation

We do not believe that inflation had a material effect on our business during the years ended December 31, 2013, 2012 or 2011. Although we believe that increases in the rate of inflation will generally result in comparable increases in hotel room rates, severe inflation could contribute to a slowing of the national economy. Such a slowdown could result in a reduction in room rates and fewer room reservations, negatively impacting our revenues and net income.

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Liquidity and Capital Resources

Company Overview

On a consolidated and combined basis, we have historically generated significant cash flow from our operations and have financed our ongoing business primarily with existing cash and cash flow generated from operations. We generated cash flow from operations of approximately $311.3 million for the year ended December 31, 2013. Our current liquidity requirements consist primarily of funds necessary to pay for operating expenses directly associated with our hotels, recurring maintenance and capital expenditures necessary to maintain our hotels, general and administrative expenses, interest expense, scheduled principal payments on ESH REIT’s outstanding indebtedness and required ESH REIT dividend payments. In addition to recurring maintenance and capital expenditures necessary to maintain our hotels, we are also performing and expect to continue to perform renovations to our hotels. See “—Capital Expenditures—Hotel Reinvestment Program.” We expect to fund this program from a combination of cash on hand, cash flow from operations and/or borrowings under our revolving credit facilities, as needed.

Assuming we exercise our options to extend the maturity for certain ESH REIT mortgage debt that is scheduled to mature in December 2014 for up to three consecutive one-year periods, which options are subject to limited conditions, our long-term liquidity requirements will include funds for principal payments on ESH REIT’s mortgage and mezzanine loans maturing between December 2017 and December 2019. The December 2014 and 2015 extension conditions include providing an adequate extension notice period, the extension or renewal of our interest rate cap and having none of the borrowing entities be in default, as defined. The 2016 extension conditions include the conditions for the 2014 and 2015 extensions, as well as the requirement of a specified minimum debt yield. Other long-term liquidity requirements may include the need to obtain funds to expand our hotel reinvestment program and to acquire additional hotels. We expect to meet our long-term liquidity requirements through various sources of capital, including future debt or equity financings by the Corporation or ESH REIT, existing working capital and cash flow from operations. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the current and future state of overall equity and credit markets, our degree of leverage, the value of our unencumbered assets and borrowing restrictions imposed by lenders, general market conditions for the lodging industry, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources. There can be no assurance that we will be able to raise any such financing on terms acceptable to us or at all.

The Company had cash and cash equivalents of approximately $60.5 million and restricted cash of approximately $47.3 million at December 31, 2013. Based upon the current level of operations, management believes that our cash flow from operations, together with our significant cash balances, available borrowings under our revolving credit facilities (as described in “—Our Indebtedness”) and our capacity for additional borrowings will be adequate to meet our anticipated funding requirements and business objectives for the foreseeable future.We intend to regularly review our capital structure and at any time may refinance or repay existing indebtedness, incur new indebtedness or issue equity securities.

Although there is not a material difference in the liquidity and capital resource requirements of the Corporation and ESH REIT for the periods presented herein, we separately review the liquidity and capital resource requirements for each of the Corporation and ESH REIT.

The Corporation

The Corporation’s primary source of liquidity will be the dividend income it expects to receive in respect of its ownership of approximately 55% of the common stock of ESH REIT. Other sources of liquidity include income from the operations of the Operating Lessees, ESA Management and ESH Strategies. The Corporation’s cash flow from operations is adequate to meet all of its funding requirements. Market pricing terms were recently negotiated in our operating leases, management agreements and trademark and license agreements.

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We anticipate that the Corporation will accumulate cash and expect that over time it will return cash to ESH REIT in order to fund the renovation, acquisition or construction of new hotels, the repayment of debt and for other corporate purposes. The Corporation may transfer cash to ESH REIT through the purchase of additional shares of Class A common stock, which would increase its ownership of ESH REIT and reduce the Company’s overall tax efficiency. The Corporation may also lend funds to ESH REIT through the execution of an unsecured intercompany credit facility. The covenants of any such unsecured intercompany credit facility would be expected to be customary for similar debt securities in light of then-prevailing market conditions. In accordance with restrictions under the ESH REIT revolving credit facility, any such credit facility would have an aggregate principal amount of no more than $200 million, a maturity date which may not be earlier than 91 days after the ESH REIT revolving credit facility maturity date (as such date may be extended) and be junior in right of payment to the ESH REIT revolving credit facility pursuant to a subordination agreement to be entered into. The entering into an unsecured intercompany credit facility and the terms of such credit facility are subject to a number of factors, and we cannot assure that we will enter into an intercompany credit facility at all. Additionally, the Corporation may pay dividends on its common stock to meet all or a portion of our expected dividend rate on our Paired Shares.

The Corporation’s board of directors has not declared any distributions on the Corporation’s common stock and currently has no intention to do so, except as described in “Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distribution Policies.” The payment of any future distributions will be at the discretion of the Corporation’s board of directors. Any such distributions will be made subject to the Corporation’s compliance with applicable law, and will depend on, among other things, the receipt by the Corporation of dividends from ESH REIT in respect of the Class A common stock, the Corporation’s results of operations and financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in any existing and future debt agreements of the Corporation and ESH REIT and in any preferred stock and other factors that the Corporation’s board of directors may deem relevant.

Based upon the current level of operations, management believes that the Corporation’s cash position, cash flow from operations and available borrowings under the Corporation revolving credit facility will be adequate to meet all of the Corporation’s funding requirements and business objectives for the foreseeable future.

ESH REIT

Subsequent to the Pre-IPO Transactions, ESH REIT’s primary source of liquidity is lease rental income it receives from the Operating Lessees. ESH REIT’s primary use of liquidity is the payment of its fixed costs of ownership of the hotel properties, including interest expense, scheduled principal payments on its outstanding indebtedness, real estate taxes, insurance expense and capital expenditures, including those capital expenditures related to our hotel reinvestment program. In order to qualify and maintain its status as a REIT, ESH REIT must distribute annually to its shareholders an amount at least equal to:

• 90% of its REIT taxable income, computed without regard to the deduction for dividends paid and excluding any net capital gain; plus

• 90% of the excess of its net income, if any, from foreclosure property over the tax imposed on such income by the Code; less

• the sum of certain items of non-cash income that exceeds a percentage of ESH REIT’s income.

ESH REIT will be subject to income tax on its taxable income that is not distributed and to an excise tax to the extent that certain percentages of its taxable income are not distributed by specified dates. ESH REIT generally expects to distribute approximately 95% of its REIT taxable income and net capital gain and may be subject to U.S. federal excise tax.

We intend to make distributions of $0.15 per Paired Share per quarter, which we intend to make in respect of the Class B common stock of ESH REIT. In the event distributions in respect of the Class B common stock of ESH REIT are not sufficient to meet our expected distributions, the expected distributions may be completed through distributions in respect of the common stock of the Corporation using funds distributed to the Corporation in respect of the Class A common stock of ESH REIT, after allowance for tax, if any, on those funds.

On February 26, 2014, the board of directors of ESH REIT declared a pro rata cash distribution of $0.08 per share for the fourth quarter of 2013 on its Class A common stock and Class B common stock with respect to the period commencing upon completion of the Offering and ending on December 31, 2013, based on our intended distribution rate of $0.15 per Paired Share for a full quarter. The dividend is payable on March 26, 2014 to shareholders of record as of March 12, 2014. See “Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distribution Policies” for a description of our distribution policies.

Due to REIT distribution requirements, ESH REIT has historically not accumulated significant amounts of cash and is not expected to do so in the future. As a result, we expect that ESH REIT will need to refinance all or a portion of its debt, including the 2012 Mortgage Loans and Mezzanine Loans, on or before maturity. We cannot assure you that ESH REIT will be able to refinance any of its debt on attractive terms on or before maturity, on commercially reasonable terms or at all.

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Based upon the current level of operations, management believes that ESH REIT’s cash position, cash flow from operations and available borrowings under the ESH REIT revolving credit facility will be adequate to meet all of ESH REIT’s funding requirements and business objectives for the foreseeable future.

Sources and Uses of Cash – The Company

The following cash flow information is provided for the Company, as there was no meaningful difference for ESH REIT on a stand-alone basis for the periods presented below.

Comparison of Years Ended December 31, 2013 and December 31, 2012

We had unrestricted cash and cash equivalents of approximately $60.5 million and $103.6 million at December 31, 2013 and 2012, respectively.

	Year Ended December 31,			Year Ended December 31,
(in thousands)	2013			2012			Change
Cash provided by (used in):
Operating activities	$	311,313		$	201,110		$	110,203
Investing activities		(165,259	)		(223,842	)		58,583
Financing activities		(188,977	)		27,594			(216,571	)
Effects of changes in exchange rate on cash and cash equivalents		(202	)		136			(338	)
Net (decrease) increase in cash and cash equivalents	$	(43,125	)	$	4,998		$	(48,123	)

Cash Flows provided by Operating Activities

Cash flows provided by operating activities totaled approximately $311.3 million for the year ended December 31, 2013 compared to approximately $201.1 million for the year ended December 31, 2012, an increase of approximately $110.2 million. Cash flow from operations was positively impacted during the year ended December 31, 2013 by additional cash generated through improved operating performance of our hotels, specifically a 10.2% increase in RevPAR. Additionally, cash flows provided by operations increased as a result of the timing of interest payments associated with ESH REIT’s mortgage and mezzanine loans.

Cash Flows used in Investing Activities

Cash flows used in investing activities totaled approximately $165.3 million for the year ended December 31, 2013, of which approximately $172.5 million related to the purchases of property and equipment and approximately $16.4 million was related to the acquisition of the two LVP hotels, offset by approximately $14.3 million related to reimbursements from loan escrow accounts and approximately $7.8 million of collateral on insurance reserves. For the year ended December 31, 2012, cash used in investing activities was approximately $223.8 million.

Cash Flows (used in) provided by Financing Activities

Cash flows used in financing activities totaled approximately $189.0 million for the year ended December 31, 2013 and consisted primarily of principal payments on ESH REIT’s 2012 Mezzanine Loans of $715.0 million and distributions to our Sponsors of approximately $78.4 million, offset by the sale of equity as a result of the Offering of approximately $602.2 million. Cash flows provided by financing activities totaled approximately $27.6 million for the year ended December 31, 2012 and included $3,600.0 million generated by new borrowings from ESH REIT’s 2012 Mortgage and Mezzanine Loans, partially offset by the repayment of approximately $2,674.5 million related to ESH REIT’s 2010 Mortgage and Mezzanine Loans, approximately $832.9 million of distributions to our Sponsors and approximately $64.6 million related to the payment of the deferred financing and other costs.

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Comparison of Years Ended December 31, 2012 and December 31, 2011

We had unrestricted cash and cash equivalents of approximately $103.6 million and $98.6 million at December 31, 2012 and 2011, respectively.

(in thousands)	Year Ended December 31, 2012			Year Ended December 31, 2011			Change
Cash provided by (used in):
Operating activities	$	201,110		$	180,605		$	20,505
Investing activities		(223,842	)		(43,389	)		(180,453	)
Financing activities		27,594			(50,074	)		77,668
Effects of changes in exchange rate on cash and cash equivalents		136			71			65
Net increase in cash and cash equivalents	$	4,998		$	87,213		$	(82,215	)

Cash Flows provided by Operating Activities

Cash flows provided by operating activities totaled approximately $201.1 million for the year ended December 31, 2012 compared to approximately $180.6 million for the year ended December 31, 2011, an increase of approximately $20.5 million. Cash flows from operations were positively impacted during the year ended December 31, 2012 by additional cash generated by the improved operating performance of our hotels, specifically a 10.1% increase in ADR, offset by a 2.4% decrease in occupancy, which resulted in increased RevPAR of approximately 7.4%.

Cash Flows used in Investing Activities

Cash flows used in investing activities totaled approximately $223.8 million for the year ended December 31, 2012, of which approximately $128.3 million was related to the acquisition of the 17 HFI hotels and approximately $271.5 million related to the purchases of property and equipment, offset by approximately $175.2 million related to reimbursements from loan escrow accounts, and proceeds from litigation and insurance settlements of approximately $0.8 million. For the year ended December 31, 2011, cash used in investing activities was approximately $43.4 million. Cash flows used in investing activities increased approximately $180.5 million from the year ended December 31, 2011 primarily due to the fact that the Company invested more with respect to its hotel reinvestment program than in 2011, and due to the acquisition of the 17 HFI hotels in December 2012.

Cash Flows provided by (used in) Financing Activities

Cash flows provided by financing activities totaled approximately $27.6 million for the year ended December 31, 2012, which included $3,600.0 million generated by new borrowings from the 2012 Mortgage and Mezzanine Loans, partially offset by the repayment of approximately $2,674.5 million related to the 2010 Mortgage and Mezzanine Loans, approximately $832.9 million in distributions to our Sponsors and approximately $64.6 million related to the payment of deferred financing and other costs. Cash flows used in financing activities totaled approximately $50.1 million for the year ended December 31, 2011, which primarily consisted of approximately $24.1 million related to principal payments on ESH REIT’s mortgage loans and approximately $26.1 million of distributions to our Sponsors.

Capital Expenditures

We maintain each of our hotels in good repair and condition and in conformity with applicable laws and regulations. The cost of all improvements and significant alterations are generally made with cash flows from operations. During the years ended December 31, 2013, 2012 and 2011, we incurred capital expenditures of approximately $172.5 million, $271.5 million and $106.1 million, respectively. These capital expenditures were primarily made as a result of our hotel reinvestment program that began in the third quarter of 2011, which remains ongoing, as well as the acquisition of the assets of the two LVP hotels on December 31, 2013 and the acquisition of the assets of the 17 HFI hotels on December 12, 2012. Funding for future capital expenditures is expected to be provided primarily from cash flow from operations or, to the extent necessary, the Corporation’s or ESH REIT’s revolving credit facilities. In 2014, we expect to incur capital expenditures between $150.0 million and $170.0 million, consisting of hotel renovations, information technology-related projects and maintenance capital expenditures.

Hotel Reinvestment Program

        Since the third quarter of 2011, we have been performing significant hotel renovations and room refreshes and have been executing a phased capital investment program across our portfolio in order to seek to drive incremental market share gains. This program is dedicated to seeking revenues through our Platinum renovation and Silver refresh programs to upgrade 633, or approximately 93%, of our hotels. We have developed a methodology for selecting specific hotels for our reinvestment program by evaluating potential returns based on multiple market and property specific variables. We created two levels of investment: the more extensive Platinum renovation package and the more limited Silver refresh package. Prior to executing either package at a hotel, management determines whether, in its view, the selected level of capital investment is likely to result in incremental revenues and profits and achieve a return on investment that would meet our return criteria.

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A Platinum renovation generally requires approximately $1.0 million in spend per hotel. Platinum renovations typically include remodeling of common areas, new paint, carpet, signage, tile or vinyl flooring and counters in bathrooms and kitchens, as well as the refurbishment of furniture, replacement of aged mattresses and installation of new flat screen televisions, artwork, lighting and bedspreads. A Silver refresh generally requires approximately $150,000 in spend per hotel. Silver refreshes typically include the replacement of aged mattresses and installation of new flat screen televisions, lighting, bedspreads and signage.

In order to incorporate the results of previous investments into our decision making process, we have undertaken the reinvestment program in phases. As of December 31, 2013, we have completed Platinum renovations at 230 hotels and are in the process of implementing Platinum renovations at 92 additional hotels. Furthermore, we have completed Silver refreshes at 311 additional hotels, none of which are currently slated for a Platinum upgrade, but we expect to decide to upgrade some of them in the future. Given the more extensive nature of a Platinum renovation, a longer ramp-up time is expected in order to reach stabilization at post-renovation performance levels for Platinum renovations than for Silver refreshes.

The following table summarizes our projects that have been completed or are in process as of December 31, 2013:

Scope of Work	Number of Hotels			Expected Timing		Total Expected Cost (in millions)		Total Expected Remaining Cost (in millions)		Cumulative Costs Incurred through December 31, 2013 (in millions)
Hotel renovation (Platinum)		322	(1)		Q3 2011– Q1 2014	$	318.5	$	42.9	$	275.6
Room refresh (Silver)		311			Q4 2011– Q3 2013		47.3		—		47.3
Total		633				$	365.8	$	42.9	$	322.9

(1) Includes 22 hotels that were part of our initial pilot program.

We are executing a phased capital investment program across our portfolio in order to drive incremental market share gains.

We believe that our capital investments are driving incremental market share at our renovated properties. We evaluate our hotel reinvestment program by calculating the ADR, occupancy, RevPAR and RevPAR Index⁽²⁾ performance of our renovated hotels. In general, it takes approximately three months to complete a Platinum hotel renovation (period from commencement to completion of renovations, the “Renovation Period”), during which we experience temporary disruption and weakened performance at the hotel. Following the Renovation Period, it typically takes an additional three months for the hotel to return to occupancy levels approximating Pre-Renovation Period levels (such three-month period, the “Ramp-Up Period”). In order to better analyze the improvements associated with our investments, we have developed a methodology that adjusts for the impact of the temporary disruption associated with both the Renovation and Ramp-Up Periods. In particular, we compare the performance over a twelve-month period starting the month after the completion of the Ramp-Up Period (the “Post-Renovation Period”) to the performance over a twelve-month period ending the month prior to the commencement of the renovations (the “Pre-Renovation Period”). As of December 31, 2013, we owned 82 hotels for which we had results for the Post-Renovation Period. These hotels demonstrated RevPAR growth of 18.2% and RevPAR Index growth of 10.6% in the Post-Renovation Period as compared to the Pre-Renovation Period. Furthermore, the majority of the growth was achieved through increases in ADR, which grew 21.7% over the time period. While we attribute this growth primarily to our capital reinvestment program, we also believe that this improvement has benefited from the implementation of our other initiatives including our re-branding, increased marketing and service initiatives. Although we have already begun to realize the benefits of these initiatives, we expect that a significant amount of the return from our capital investments will be realized in the future. In addition, we believe we will have further opportunities to expand our hotel reinvestment program as we upgrade additional hotels.

(2) “RevPAR Index” is stated as a percentage and is calculated for a hotel by comparing the hotel’s RevPAR to the aggregate RevPAR of a group of competing hotels generally in the same market. RevPAR Index is a weighted average of the individual property results. We subscribe to STR, Inc. (f/k/a “Smith Travel Research, Inc.”) (“STR”), an independent, third party service, which collects and compiles the data used to calculate RevPAR Index. We select the competing hotels included in the RevPAR Index, subject to STR’s guidelines. STR, Inc. does not endorse Extended Stay America, Inc. or any other company, and STR data should not be viewed as investment advice or as a recommendation to take a particular course of action.

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The following table shows a summary of results of the 82 hotels for which we had results for the Post-Renovation Period as of December 31, 2013:

	Pre-Renovation Period			Post-Renovation Period			Post-Renovation Change (%)
Occupancy		73.4	%		71.4	%		(2.7	)%
ADR	$	54.65		$	66.52			21.7	%
RevPAR	$	40.15		$	47.45			18.2	%
RevPAR Index		85.7			94.8			10.6	%

Beyond capital expenditures associated with customary renovation cycles, we will consider additional renovation capital expenditures that we believe will provide an attractive return on investment. We will continue to evaluate the opportunity to upgrade hotels that have received a room refresh by spending additional capital expenditures to provide a hotel renovation. In addition to the approximately $42.9 million of expected costs remaining for our current 92 hotel renovations, we expect to spend in excess of an additional $30.0 million on further renovation phases during 2014.

Rebranding

We spent approximately $9.4 million and $10.0 million on rebranding during the years ended December 31, 2013 and 2012, respectively. Costs associated with rebranding are recorded as general and administrative expenses.

Our Indebtedness

Corporation Revolving Credit Facility

The Corporation entered into a revolving credit facility on November 18, 2013. The Corporation revolving credit facility permits borrowings up to $75.0 million by the Corporation until November 18, 2014, at which time the borrowing availability under the facility will be reduced to $50.0 million. The facility provides for the issuance of up to $50.0 million of letters of credit as well as borrowings on same day notice, referred to as swingline loans, in an amount up to $20.0 million. Borrowings under the facility bear interest at a rate equal to an adjusted LIBOR rate or a base rate determined by reference to the highest of (1) the prime lending rate, (2) the overnight federal funds rate plus 0.5% or (3) the one-month adjusted LIBOR rate plus 1.0%, plus an applicable margin of 2.75% for base rate loans and 3.75% for LIBOR loans. There is no scheduled amortization under the facility; the principal amount outstanding is due and payable in full at maturity, November 18, 2016, subject to a one-year extension option.

As of December 31, 2013, the outstanding balance drawn on the Corporation revolving credit facility was $0 and the amount of borrowing capacity under the Corporation revolving credit facility was $50.1 million, reduced from $75.0 million due to $24.9 million of letters of credit outstanding.

In addition to paying interest on any outstanding principal under the Corporation revolving credit facility, the Corporation is required to pay a commitment fee in respect of unutilized commitments. If 50.0% or more of the facility is drawn, the commitment fee is 0.175%, while if less than 50.0% of the facility is drawn, such fee is 0.35%. The Corporation is also required to pay customary letters of credit fees and agency fees.

If at any time outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Corporation revolving credit facility exceed the lenders’ commitments at such time, the Corporation will be required to repay outstanding loans or cash collateralize letters of credit at 105% in an aggregate amount equal to such excess, with no reduction of the commitment amount.

The Corporation’s obligations under the Corporation revolving credit facility is guaranteed by its existing and future direct and indirect domestic subsidiaries (with certain exceptions, including, but not limited to, ESH REIT and its subsidiaries and certain other entities that may not provide guarantees pursuant to the 2012 Mortgage Loan and 2012 Mezzanine Loans). The Corporation revolving credit facility is secured by a first-priority security interest in substantially all of the assets of the Corporation and the guarantors under the facility (with certain exceptions).

The Corporation revolving credit facility contains a number of covenants that, among other things and subject to certain exceptions, restrict the Corporation’s ability and the ability of its subsidiaries (other than, with certain exceptions, ESH REIT and its subsidiaries) to incur additional indebtedness, pay dividends and make other restricted payments, engage in transactions with the Corporation’s affiliates, sell all or substantially all of their assets, merge and create liens. The Corporation revolving credit facility also contains certain customary affirmative covenants and events of default.

        If any loans or obligations are outstanding during any fiscal quarter, the Corporation revolving credit facility requires that the Consolidated Leverage Ratio, calculated as of the end of such fiscal quarter, be less than or equal to 9.0 to 1.0 for fiscal quarters ended on or before December 31, 2015 and 8.75 to 1.0 for fiscal quarters ended on or after January 1, 2016. Further, if loans or obligations are outstanding during any calendar month, the Corporation revolving credit facility requires that the Debt Yield not be less than 9.0% as at the last day of such calendar month.

In order to avoid a Trigger Event, as defined, the Corporation revolving credit facility requires a Debt Yield, as defined, of at least 11.5% during the first year of the facility, increasing to 12.0% on and after November 18, 2014. The occurrence of a Trigger Event would require the Corporation to repay the outstanding facility balance and would restrict its ability to make additional borrowings. As of December 31, 2013, the Debt Yield was 16.8% and no Trigger Event had occurred.

Corporation Mandatorily Redeemable Preferred Stock

The Corporation has authorized 350.0 million shares of preferred stock, par value $0.01 per share, of which 21,202 shares of mandatorily redeemable voting preferred stock were issued and outstanding as of December 31, 2013. Dividends on the preferred shares are payable quarterly in arrears at a rate of 8.0% per year. With respect to dividend, distribution and liquidation rights, the 8.0% voting preferred stock ranks senior to the Corporation’s common stock. Holders of the 8.0% voting preferred stock are generally entitled to one vote for each share and will vote together with the Corporation common stock as a single class on all matters that the Corporation’s common shareholders are entitled to vote upon. On or after November 15, 2018, a holder of the 8.0% voting preferred stock has the right to require the Corporation to redeem in cash the 8.0% voting preferred stock at $1,000 per share plus any accumulated but unpaid dividends. On November 15, 2020, the Corporation shall mandatorily redeem all of the 8.0% voting preferred stock at $1,000 per share plus any accumulated but unpaid dividends.

ESH REIT Mortgage Loans

        2012 Mortgage Loan—On November 30, 2012, ESA P Portfolio LLC, ESA P Portfolio MD Borrower LLC, ESA Canada Properties Borrower LLC, ESH/TN Properties LLC (each a subsidiary of ESH REIT and collectively, the “Mortgage Borrower”) entered into an approximately $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”), which is governed by that certain Loan Agreement, dated as of November 30, 2012, by and among the Mortgage Borrower, certain affiliates of the Mortgage Borrower, JPMorgan Chase Bank, National Association, German American Capital Corporation, Citigroup Global Markets Realty Corp., Bank of America, N.A. and Goldman Sachs Mortgage Company (as amended, the “MLA”). Component A is comprised of five subcomponents, each with varying floating interest rates and a collective weighted average interest rate of LIBOR plus approximately 2.1% and a total balance of $349.8 million and a maturity date of December 1, 2014, with three one-year extension options. Components B and C have fixed interest rates of approximately 3.4% and 4.1% and total balances of $350.0 million and $1,820.0 million and maturity dates of December 1, 2017 and December 1, 2019, respectively.

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As of December 31, 2013, the outstanding balance on the 2012 Mortgage Loan was $2,519.8 million. The 2012 Mortgage Loan requires interest-only payments of approximately $7.8 million due on the first day of each calendar month. Each component of the 2012 Mortgage Loan has amounts that are freely prepayable. The below table shows freely prepayable amounts and prepayment penalties under the 2012 Mortgage Loan.

	Mortgage Loan ($ in millions)
	Component A					Component B			Component C
	Freely Prepayable		Prepayment Penalty(1)			Freely Prepayable		Prepayment Penalty(1)(2)	Freely Prepayable		Prepayment Penalty(1)(2)
Prior to January 2, 2014	$	52.5		3.0	%	$	157.5	N/A(3)	$	157.5	N/A(3)
January 2, 2014 to July 1, 2014		52.5		1.0	%		157.5	Greater of 1.0% or Yield Maintenance		157.5	Greater of 1.0 % or Yield Maintenance
July 2, 2014 to January 1, 2015		349.8		0.0	%		157.5	Greater of 1.0 % or Yield Maintenance		157.5	Greater of 1.0 % or Yield Maintenance
January 2, 2015 to July 1, 2015		349.8		0.0	%		350.0	0.0%		157.5	Greater of 1.0 % or Yield Maintenance
July 2, 2015 to January 1, 2016		349.8		0.0	%		350.0	0.0%		157.5	Greater of 1.0 % or Yield Maintenance
After January 2, 2016		349.8		0.0	%		350.0	0.0%		1,820.0	0.0%

(1) Prepayment penalty applies to the amount in excess of freely prepayable amounts.

(2) Yield Maintenance, calculated as set forth in the 2012 Mortgage Loan, means the excess of (i) the sum of the present values of the scheduled payments of interest and principal to be made with respect to the portion of the Component being prepaid (in excess of the freely payable portion) over (ii) the principal amount of the Component being prepaid (in excess of the freely prepayable portion).

(3) Voluntary prepayment in excess of the freely payable amount not permitted prior to January 2, 2014.

Substantially all of ESH REIT’s hotel properties (680 of the 684 hotel properties) serve as collateral for the 2012 Mortgage Loan.

On November 18, 2013, the Corporation assumed the obligations of the guarantor under a customary recourse carveout guaranty pursuant to which the Corporation guaranteed (a) under certain limited circumstances, losses related to the 2012 Mortgage Loan plus enforcement costs incurred by the lenders, and (b) under certain other limited circumstances, repayment of the 2012 Mortgage Loan up to an aggregate liability under this clause (b) of $252.0 million plus enforcement costs.

In connection with the 2012 Mortgage Loan, the Loan Parties (as defined in the MLA) made certain representations, warranties and covenants customary in mortgage loan transactions, including, without limitation, regarding the ownership and operation of the hotels and standard special purpose bankruptcy remote entity provisions that are provided in order to make certain that each loan party (and certain specified affiliates) will maintain a prescribed level of separateness to forestall a substantive consolidation of such entities in the event of a bankruptcy action.

The occurrence of an Event of Default, a Mezzanine Loan Event of Default, a Debt Yield Trigger Event (a Debt Yield, as defined, of less than 9.0%) or a Guarantor Bankruptcy Event triggers a Cash Trap Event, as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) are fully funded, is held by the loan service agent as additional collateral for the 2012 Mortgage Loan. As of December 31, 2013 and December 31, 2012, no notice of a Cash Trap Event having been triggered had been received as the Mortgage Borrower’s Debt Yield was 17.0% and 11.9%, respectively.

A right of contribution agreement provides that if any funds of the Corporation are needed and used to service ESH REIT’s obligations under the 2012 Mortgage Loan or the 2012 Mezzanine Loans, such as in the case of a Cash Trap Event, ESH REIT shall be obligated to reimburse the Corporation, with interest, for the amount of any such funds that were applied for this purpose as soon as permitted under the 2012 Mortgage Loan and 2012 Mezzanine Loans. Interest shall accrue on ESH REIT’s reimbursement obligation at the relevant applicable federal rate as determined under Section 1274(d) of the Code. In lieu of cash payment, the Corporation may elect, at its option, to receive payment in the form of additional shares of Class A common stock of ESH REIT of an equivalent value.

The 2012 Mortgage Loan is subject to certain customary events of default under the Loan Documents (as defined in the MLA, hereinafter, the “Mortgage Loan Documents”).

        Upon the occurrence of an Event of Default, as defined, Lender, as defined, may, among other things, take the following actions: (i) accelerate the maturity date of the 2012 Mortgage Loan, (ii) foreclose on any or all of the mortgages securing the mortgage loan or (iii) apply amounts on deposit in the reserve accounts to pay the debt service on the 2012 Mortgage Loan.

ESH REIT Mezzanine Loans

2012 Mezzanine Loans—On November 30, 2012, Mezzanine A Borrower, Mezzanine B Borrower and Mezzanine C Borrower (as defined in the MLA, each a subsidiary of ESH REIT, and collectively, the “Mezzanine Borrowers”) entered into three mezzanine loans totaling approximately $1.08 billion (the “2012 Mezzanine Loans”).

On November 26, 2013, ESH REIT repaid $270.0 million of the 2012 Mezzanine Loans. Repayment consisted of $125.0 million of the 2012 Mezzanine A Loan, $82.5 million of the 2012 Mezzanine B Loan and $62.5 million of the 2012 Mezzanine C Loan. On December 27, 2013, ESH REIT repaid $445.0 million of the 2012 Mezzanine Loans. Repayment consisted of approximately $206.0 million of the 2012 Mezzanine A Loan, approximately $136.0 million of the 2012 Mezzanine B Loan and approximately $103.0 million of the 2012 Mezzanine C Loan. ESH

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REIT incurred approximately $25.2 million of debt extinguishment and other costs in connection with these prepayments, composed of prepayment penalties of approximately $13.4 million, the write-off of unamortized deferred financing costs of approximately $10.9 million and other costs of approximately $0.9 million. Debt extinguishment costs are included as a component of interest expense in the Company’s and ESH REIT’s consolidated statements of operations for the year ended December 31, 2013.

As of December 31, 2013, the Mezzanine A Loan had a fixed interest rate per annum of approximately 8.3%, a total balance of approximately $169.0 million and a maturity date of December 1, 2019; the Mezzanine B Loan had a fixed interest rate per annum of approximately 9.6%, a total balance of approximately $111.5 million and a maturity date of December 1, 2019; and the Mezzanine C Loan had a fixed interest rate per annum of approximately 11.5%, a total balance of approximately $84.5 million and a maturity date of December 1, 2019.

As of December 31, 2013, interest-only payments for the 2012 Mezzanine Loans total approximately $2.9 million and are due on the first day of each calendar month. Each of the 2012 Mezzanine Loans are subject to similar cash management account requirements and loan covenants generally as described above for the 2012 Mortgage Loan. The terms of the 2012 Mezzanine Loans track, in all material respects, those set forth in the 2012 Mortgage Loan Documents with the exception of typical distinctions made between mortgage loans and mezzanine loans. The relationships vis-à-vis each of the three 2012 Mezzanine Loans and the 2012 Mortgage Loan are governed by the terms of the intercreditor agreement. These include such rights of Mezzanine Lenders (as defined in the MLA) to cure defaults under the Mortgage Loan Documents and the ability to acquire all or part of the outstanding mezzanine and/or mortgage loans during the continuance of an Event of Default under the 2012 Mezzanine Loans. Certain investment funds of the Sponsors were the holders of $37.2 million of the 2012 Mezzanine Loans as of December 31, 2013.

Amounts outstanding under each of the 2012 Mezzanine Loans are prepayable. Prior to June 1, 2014, amounts prepaid incur a prepayment penalty of 3.0%. Between June 2, 2014 and December 1, 2014, amounts prepaid incur a prepayment penalty of 1.0%. After December 1, 2014, no prepayment penalty exists.

Any voluntary prepayment by a Mezzanine Borrower creates an obligation of the other Mezzanine Borrowers to make corresponding pro rata prepayments on their respective Mezzanine Loans. On November 18, 2013, the Corporation assumed the obligations of the guarantor under a customary recourse carveout guaranty pursuant to which the Corporation guaranteed (a) under certain limited circumstances, losses related to the 2012 Mezzanine Loans plus enforcement costs incurred by the mezzanine lenders and (b) under certain other limited circumstances, repayment of the 2012 Mezzanine Loans up to an aggregate liability under this clause (b) of $108.0 million plus enforcement costs.

The 2012 Mezzanine Loans are subject to certain customary events of default under the Mezzanine Loan Documents. Upon the occurrence of an Event of Default under the 2012 Mezzanine Loans, the applicable Mezzanine Lender may, among other things, take the following actions: (i) accelerate the maturity date of the applicable 2012 Mezzanine Loan or (ii) exercise all the rights and remedies of a secured party under the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Mezzanine Collateral (as defined in the MLA) is located, against the Mezzanine Borrowers and the Mezzanine Collateral.

ESH REIT Revolving Credit Facility

ESH REIT entered into a revolving credit facility on November 18, 2013. The ESH REIT revolving credit facility permits borrowings up to $250.0 million by ESH REIT. Subject to the satisfaction of certain criteria, ESH REIT will be able to request to increase the facility to an amount up to $350.0 million. The facility provides for the issuance of up to $50.0 million of letters of credit as well as borrowings on same-day notice, referred to as swingline loans, in an amount up to $20.0 million. Borrowings under the facility bear interest at a rate equal to an adjusted LIBOR rate or a base rate determined by reference to the highest of (1) the prime lending rate, (2) the overnight federal funds rate plus 0.5% or (3) the one-month adjusted LIBOR rate plus 1.0%, plus an applicable margin of 2.00% for base rate loans and 3.00% for LIBOR loans. There is no scheduled amortization under the facility; the principal amount is due and payable on November 18, 2016.

As of December 31, 2013, the outstanding balance drawn on the ESH REIT revolving credit facility was $20.0 million and the amount of borrowing capacity under the ESH REIT revolving credit facility was $230.0 million.

In addition to paying interest on any outstanding principal under the ESH REIT revolving credit facility, ESH REIT is required to pay a commitment fee in respect of unutilized commitments. If 50.0% or more of the facility is drawn, the commitment fee is 0.175%, while if less than 50.0% of the facility is drawn, such fee will be 0.35%. ESH REIT is also required to pay customary letters of credit fees and agency fees.

If at any time outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the ESH REIT revolving credit facility exceed the lenders’ commitments at such time, ESH REIT will be required to repay outstanding loans or cash collateralize letters of credit at 105% in an aggregate amount equal to such excess, with no reduction of the commitment amount.

        ESH REIT’s obligations under the ESH REIT revolving credit facility is guaranteed by its existing and future direct and indirect domestic subsidiaries (with certain exceptions, including certain entities that may not provide guarantees pursuant to the 2012 Mortgage Loan and 2012 Mezzanine Loans). The ESH REIT revolving credit facility is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility (with certain exceptions, including certain entities that may not be pledged of pursuant to the 2012 Mortgage Loan and 2012 Mezzanine Loans).

The ESH REIT revolving credit facility contains a number of covenants that, among other things and subject to certain exceptions, restrict ESH REIT’s ability and the ability of its subsidiaries to incur additional indebtedness, pay dividends and make other restricted payments, engage in transactions with ESH REIT’s affiliates, sell all or substantially all of their assets, merge and create liens. The ESH REIT revolving credit facility also contains certain customary affirmative covenants and events of default.

If any loans or obligations are outstanding during any fiscal quarter, the ESH REIT revolving credit facility requires that the Consolidated Leverage Ratio, calculated as of the end of such fiscal quarter, be less than or equal to 9.25 to 1.0 for fiscal quarters ended on or before December 31, 2015 and 9.00 to 1.0 for fiscal quarters ended on or after January 1, 2016. Further, if loans or obligations are outstanding during any calendar month, the ESH REIT revolving credit facility requires that the Debt Yield not be less than 9.0% as of the last day of such calendar month.

In order to avoid a Trigger Event, as defined, the ESH REIT revolving credit facility requires a Debt Yield, as defined, of at least 11.0% during the first year of the facility, increasing to 11.5% on and after November 18, 2014. The occurrence of a Trigger Event would require ESH REIT to repay the outstanding facility balance and would restrict its ability to make additional borrowings. As of December 31, 2013, the Debt Yield was 16.9% and no Trigger Event had occurred.

Extended Stay LLC Revolving Credit Facility

On November 30, 2012, Extended Stay LLC, a subsidiary of ESH REIT, entered into a revolving credit facility of $100.0 million. The Extended Stay LLC revolving credit facility terminated on November 18, 2013, in connection with the Offering.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2013:

	Payments Due by Period
(Dollars in thousands)	Total		2014			2015		2016		2017		2018		Thereafter
Mortgage loans	$	2,519,843	$	349,843	(3)	$	—	$	—	$	350,000	$	—	$	1,820,000
Mezzanine loans		365,000		—			—		—		—		—		365,000
Reedemable preferred stock		21,202		—			—		—		—		—		21,202
Revolving credit facility		20,000		—			—		20,000		—		—		—
Interest payments on outstanding debt obligations(1)		713,538		127,263			122,405		122,718		121,772		109,690		109,690
Operating lease obligations		99,769		2,224			2,309		2,366		2,428		2,491		87,951
Purchase obligations(2)		10,600		10,600			—		—		—		—		—
Other commitments(4)		5,682		272			292		299		299		299		4,221
Total contractual obligations	$	3,755,634	$	490,202		$	125,006	$	145,383	$	474,499	$	112,480	$	2,408,064

(1) Floating rate interest calculated using the one-month LIBOR at December 31, 2013.

(2) Our purchase obligations consist of commitments for hotel capital expenditures.

(3) The 2012 Mortgage Loan Component A December 2014 maturity is subject to three one-year extensions.

(4) The Company has a commitment to make quarterly payments in lieu of taxes to the owner of the land on which one of the properties is located. The initial term of the agreement terminates in 2031.

Off-Balance Sheet Arrangements

Neither the Corporation nor ESH REIT have off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Critical Accounting Policies

Our discussion and analysis of our historical financial condition and results of operations is based on the Company’s historical consolidated and combined financial statements and ESH REIT’s historical consolidated financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts may differ significantly from these estimates and assumptions.

We have provided a summary of significant accounting policies in the notes to the Company’s historical consolidated and combined financial statements and ESH REIT’s historical consolidated financial statements, each included elsewhere in this combined annual report on Form 10-K. We have set forth below those accounting policies that we believe require material subjective or complex judgments and have the most significant impact on the Company’s and ESH REIT’s financial condition and results of operations. We evaluate estimates, assumptions and judgments on an ongoing basis, based on information that is then available to us, our experience and various matters that we believe are reasonable and appropriate for consideration under the circumstances.

Investment in Property and Equipment

Property and equipment additions are recorded at cost. Major improvements that extend the life or utility of property or equipment are capitalized and depreciated over a period equal to the shorter of the life of the improvement or the estimated remaining useful life of the asset. Ordinary repairs and maintenance are charged to expense as incurred. Depreciation and amortization are recorded on a straight-line basis over estimated useful lives, which range from 1 to 49 years.

Management assesses whether there has been impairment of the value of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is measured by a comparison of the carrying amount of a hotel property to the estimated future undiscounted cash flows expected to be generated by the hotel property. Impairment is recognized when estimated future undiscounted cash flows, including estimated proceeds from disposition, are less than the carrying value of the hotel property. We use internally developed undiscounted cash flow models that include the following assumptions, among others: projections of revenues, expenses and related cash flows based on assumed long-term growth rates, demand trends and expected future capital expenditures. We base these assumptions on our historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections and our expectations. The estimation of future undiscounted cash flows is inherently uncertain and relies upon assumptions regarding current and future economic and market conditions. If such conditions change, then an adjustment reducing the carrying value of the hotel property could occur in the future period in which conditions change.

To the extent that a hotel property is impaired, the excess carrying amount of the hotel property over its estimated fair value is charged to operating earnings. Fair value is determined based upon the discounted cash flows of the hotel property, quoted market prices or independent appraisals, as considered necessary. We use internally developed discounted cash flow models that include assumptions similar to those used in our undiscounted cash flow models, as well as assumptions related to estimated discount rates.

Income Taxes

Subsequent to the Pre-IPO Transactions, the Corporation’s taxable income includes the taxable income of its wholly-owned subsidiaries, ESA Management, ESH Strategies and the Operating Lessees, and, beginning in 2014, will include dividend income related to its approximately 55% ownership of ESH REIT. Prior to the Pre-IPO Transactions, all of ESH REIT’s distributions were made to its owners and ESH REIT generally incurred no federal income tax. However, as a result of the Pre-IPO Transactions, including the contribution of ESH REIT’s Class A common stock to the Corporation, approximately 55% of ESH REIT’s future distributions will be subject to corporate income tax.

The Company recognizes deferred tax assets and liabilities using the asset and liability method, under which deferred tax assets and liabilities are calculated based upon the temporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized in future periods. The realization of deferred tax assets, net of any valuation allowance, is primarily dependent on estimated future taxable income. A change in the estimate of future taxable income may require an addition to, or a reduction of, the valuation allowance.

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ESH REIT has elected to be taxed and expects to continue to qualify as a REIT under the provisions of the Code. A REIT is generally not subject to federal income tax on its separately filed federal tax return as long as the REIT complies with various requirements to maintain its status, including the distribution of at least 90% of its taxable income, excluding capital gains. During 2013, consistent with prior years, ESH REIT distributed 100% or more of its taxable income and therefore incurred no federal income tax. Beginning in 2014, ESH REIT intends to distribute 95% of its taxable income and therefore will incur federal and state income tax on the taxable income not distributed. As a result, deferred tax balances were adjusted in 2013 to reflect the fact that an estimated 5% of ESH REIT’s future taxable income will be subject to tax. This change in policy resulted in the recognition of a deferred tax asset during 2013 of approximately $7.8 million related to net operating loss carryforwards that existed as of December 31, 2012. In addition, net deferred tax liabilities of approximately $1.2 million were recorded during 2013 related to temporary differences that are expected to be included in taxable income in the future. Additionally, ESH REIT may be subject to certain state and local income taxes where REIT status is not recognized.

Prior to the Pre-IPO Transactions, the Operating Lessees, which were subsidiaries of ESH REIT, elected to be treated as taxable REIT subsidiaries. As such, the Operating Lessees were generally subject to federal, state, local and/or foreign income taxes on their separate tax returns. The Operating Lessees recognized deferred tax assets and liabilities using the asset and liability method. Also prior to the Pre-IPO Transactions, ESH Strategies’ and HVM’s operating results were reportable by their members, or members of their ultimate parent. Thus, income taxes were not recognized for these entities in the Company’s historical consolidated and combined financial statements or in ESH REIT’s historical consolidated financial statements. ESH Strategies and HVM were also subject to state and local taxes in certain jurisdictions.

Equity-Based Compensation

The Corporation and ESH REIT each maintain a Long-Term Incentive Plan (“LTIP”) under which the Corporation and ESH REIT may issue awards to eligible employees or directors consisting of restricted stock awards, restricted stock units or other share-based awards. The Corporation and ESH REIT recognize costs resulting from equity-based awards over their vesting periods. The Corporation and ESH REIT classify equity-based awards granted in exchange for employee services as either equity awards or as liability awards. The classification of restricted stock awards or restricted stock units either as an equity award or a liability award is based upon cash settlement options. Equity awards are measured based on their fair value on the date of grant. Liability awards are re-measured to fair value each reporting period. The value of all equity-based awards, less estimated forfeitures, is recognized over the period during which an employee or director is required to provide services in exchange for the award – the requisite service period (usually the vesting period). No compensation cost is recognized for awards for which employees or directors do not render the requisite services. Costs related to equity classified awards issued by ESH REIT are re-measured to fair value each period in the Company’s consolidated and combined financial statements due to the fact that ESH REIT employees and directors are not employees or directors of the Corporation. The fair value of equity-based awards on the date of grant is based on the closing price of a Paired Share on the date of grant.

For awards granted under the Corporation LTIP, ESH REIT will receive compensation from the Corporation generally in cash for its issuance of its component of the Paired Share for the fair market value at the time of issuance. In some cases, the Corporation may have to pay more for a share of the ESH REIT Class B common stock than it would have otherwise paid at the time of grant as the result of an increase in the value of a Paired Share between the time of grant and the time of exercise or settlement. This would result in no additional compensation expense. In addition, for awards granted under the ESH REIT LTIP, ESH REIT will compensate the Corporation generally in cash for its issuance of its component of the Paired Share for the fair market value at the time of issuance. In some cases, ESH REIT may have to pay more for a share of the Corporation common stock than it would have otherwise paid at the time of grant as the result of an increase in the value of a Paired Share between the time of grant and the time of exercise or settlement.

Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan, which provided for HVM employees and members of the boards of managers of ESH Hospitality Holdings, LLC (“Holdings”) and ESH Strategies Holdings, LLC (“Strategies Holdings”) awards of restricted limited liability company interests (“Profit Units”) in Holdings and Strategies Holdings. The fair value of equity-based awards on the date of grant was estimated using the Black-Scholes Merton model, using various assumptions regarding (a) the expected holding period, (b) the risk-free rate of return, (c) expected dividend yield on the underlying units, (d) the expected volatility in the fair value of the Company’s equity, and (e) a discount for lack of marketability, and was calculated based on the grant agreement terms, which included thresholds for internal rate of return and recovery of Holdings’ and Strategies Holdings’ members’ initial equity investments.

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The expected holding period represented the period of time that the Profit Units were expected to be outstanding. The units were assumed to remain outstanding until ESH REIT and ESH Strategies experienced a change in control of ownership or an initial public offering. The risk-free rate of return for periods approximating the expected holding period of the units was based on the U.S. constant maturity treasuries yield in effect at the grant date. A dividend yield was assumed based on the ESH REIT and ESH Strategies’ historical dividend rates. Because our equity was privately held and was not traded in an active market, we used the historical volatility of the share values of publicly traded companies within similar industries as a surrogate for the expected volatility of ESH REIT’s and ESH Strategies’ equity. The discount for lack of marketability was calculated for each expected holding period using a put-option Black-Scholes Merton model. The key assumptions used for the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011 were as follows:

	Period from January 1, 2013 through the Pre-IPO Transactions			Year Ended December 31, 2012			Year Ended December 31, 2011
Expected holding period		0.25 years			3 years			2 – 4 years
Risk–free rate of return		0.2	%		0.4	%		0.3% – 0.6%
Expected dividend yield		0.0	%		0.0	%		0.9%
Expected volatility		30.0	%		55.0	%		47.9	%
Discount for lack of marketability		20. 0	%		20.0	%		20.0	%

The assumptions that had the most significant impact on the grant-date fair value of Profit Units were the ESH REIT’s and ESH Strategies’ total enterprise value, the expected holding period and expected volatility. Changes in total enterprise value of $100.0 million impacted the grant-date fair value of Profit Units by up to 10.0%. Changes in the expected holding period assumption of one-year impacted the grant-date fair value of Profit Units by up to 20.0%. Changes in the expected volatility assumption of 10.0% impacted the grant-date fair value of Profit Units by up to 10.0%. Each of these changes in the grant-date fair value of Profit Units would be amortized on a straight-line basis over the requisite service period of each grant.

In connection with the Pre-IPO Transactions, the holders of outstanding Profit Units received an aggregate distribution of cash of approximately $2.4 million from Holdings and all remaining outstanding Profit Units were converted into Paired Shares. Profit Units that were subject to time-based vesting were converted into restricted Paired Shares that vest according to the same time-based vesting schedule that applied to such Profit Units, such that for each grant, 20% of such grant continues to vest annually. Additionally, each of the grantees (including the named executive officers) received accelerated vesting of the remaining 20% that was scheduled to vest only upon a Change of Control Transaction at the time of such conversion. Each of the grantees is subject to a requirement of continued ownership with respect to the Paired Shares received as a result of the 20% acceleration through the fourth applicable annual vesting date. In connection with this accelerated vesting, the Company and ESH REIT recognized $14.6 million and $2.3 million, respectively, as incremental compensation cost at the time of the conversion.

Revenue Recognition – ESH REIT

ESH REIT’s primary source of income is derived from contractual lease obligations. ESH REIT records rental revenues on a straight-line basis as they are earned during the lease term. With respect to contingent rental revenues, specifically percentage rental revenue related to lessee hotel revenue, rental revenues are recognized once services have been rendered (i.e., percentage rental thresholds have been achieved) and such amounts are fixed and determinable. Subsequent to the Pre-IPO Transactions, since the Operating Lessees are no longer subsidiaries of ESH REIT, ESH REIT’s rental revenues are not eliminated in consolidation as they were prior to the Pre-IPO Transactions and, as such, represent the sole source of revenues in ESH REIT’s consolidated statements of operations.

Consolidation Policies

Judgment is required with respect to the consolidation of partnership and joint venture entities in terms of the evaluation of control, including assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests that are not controllable through voting interests. The Corporation and ESH REIT consolidate subsidiaries when they have the ability to direct the activities that most significantly impact the economic performance of the subsidiary.

The Corporation and ESH REIT also evaluate subsidiaries and affiliates, as well as other entities to determine if they are variable interest entities (“VIEs”). If a subsidiary is a VIE, it is subject to the consolidation framework specifically for VIEs. We consider an entity a VIE if equity investors own an interest therein that does not have the characteristics of a controlling financial

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interest or if such investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. In accordance with FASB ASC 810, “Consolidations,” the Corporation and ESH REIT review subsidiaries and affiliates, as well as other entities, to determine if (i) they should be considered VIEs, and (ii) whether they should change their consolidation determinations based on changes in their characteristics.

Prior to the Pre-IPO Transactions, ESH REIT held a variable interest in HVM. ESH REIT’s maximum exposure to loss as a result of its involvement with HVM was related to the need to secure alternative hotel management services and systems support if HVM were ever unable to fulfill its management agreements with ESH REIT. ESH REIT concluded that it was the primary beneficiary of HVM and, as a result, consolidated the financial position, results of operations, comprehensive income and cash flows of HVM with those of ESH REIT through the Pre-IPO Transactions. Subsequent to the Pre-IPO Transactions, HVM no longer met the definition of a variable interest entity.

Third party equity interests in consolidated subsidiaries or consolidated variable interest entities are presented as noncontrolling interests.

Recent Accounting Pronouncements

Income Taxes—In July 2013, the FASB issued an accounting standards update which provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. This updated accounting standard is effective for fiscal and interim reporting periods beginning after December 15, 2013 and should be applied prospectively to all unrecognized tax benefits that exist at the effective date, and retrospective application is permitted. We are currently evaluating the impact of adopting the updated accounting standard, but do not expect the adoption to have a material effect on our historical consolidated and combined financial statements.

Cumulative Translation Adjustment—In March 2013, the FASB issued an accounting standards update that indicates when the cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released to earnings. The CTA should be released when an entity sells a foreign subsidiary or a group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in a foreign entity. The CTA should also be released when an entity no longer has a controlling financial interest in an investment in a foreign entity. This updated accounting standard is effective for fiscal and interim reporting periods beginning after December 15, 2013 and shall be applied prospectively. We are currently evaluating the impact of adopting the updated accounting standard, but do not expect the adoption to have a material effect on our historical consolidated and combined financial statements.

Other Comprehensive Income—In February 2013, the FASB issued guidance requiring companies to present either in a single note or parenthetically on the face of the financial statements the effect of significant amounts reclassified from each component of comprehensive income based on its source and the income statement line items affected by the reclassification. This guidance is effective for fiscal and interim reporting periods beginning after December 15, 2012. The adoption of this guidance did not have a material effect on our historical consolidated and combined financial statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Corporation

The Corporation has minimal exposure to market risk from changes in interest rates because the Corporation had no outstanding variable rate indebtedness as of December 31, 2013. The Corporation’s exposure to market risk from changes in interest rates may increase in future periods should the Corporation incur variable rate indebtedness in those periods, including drawing on the Corporation revolving credit facility.

ESH REIT

ESH REIT has limited exposure to market risk from changes in interest rates because as of December 31, 2013, approximately $369.8 million of ESH REIT’s outstanding indebtedness of approximately $2.9 billion had a variable rate of interest. As a result, when market rates of interest change, there is generally not a material impact on ESH REIT’s interest expense, future earnings or cash flows. As of December 31, 2013, subsidiaries of ESH REIT are counterparties to an interest rate cap on one-month LIBOR at 3.0% with a $350.0 million notional amount and a maturity date the same as that of 2012 Mortgage Loan Component A.

If market rates of interest on ESH REIT’s variable rate debt fluctuate by 1.0%, interest cost would increase or decrease, depending on the rate movement, ESH REIT’s future earnings and cash flows by approximately $3.7 million annually, assuming that the amount outstanding under ESH REIT’s variable rate debt remains at approximately $369.8 million, the balance as of December 31, 2013.

ESH REIT has limited exposure to market risk from changes in foreign currency exchange rates, since as of December 31, 2013, less than 2.0% of the value of ESH REIT’s hotels were owned outside the United States.

Both the Corporation and ESH REIT may continue to seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements to provide a hedge against a portion of the risks associated with such volatility, when applicable. We may continue to have exposure to such risks to the extent they are not hedged. We may enter into derivative financial arrangements to the extent they meet the objectives described above and do not use derivatives for trading or speculative purposes.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

	Page Number
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm		76
Consolidated and Combined Balance Sheets as of December 31, 2013 and 2012		77
Consolidated and Combined Statements of Operations for the Years ended December 31, 2013, 2012 and 2011		78
Consolidated and Combined Statements of Comprehensive Income for the Years ended December  31, 2013, 2012 and 2011		79
Consolidated and Combined Statements of Changes in Equity for the Years ended December  31, 2013, 2012 and 2011		80
Consolidated and Combined Statements of Cash Flows for the Years ended December 31, 2013, 2012 and 2011		81
Notes to Consolidated and Combined Financial Statements		83
ESH HOSPITALITY, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm		108
Consolidated Balance Sheets as of December 31, 2013 and 2012		109
Consolidated Statements of Operations for the Years ended December 31, 2013, 2012 and 2011		110
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2013, 2012 and 2011		111
Consolidated Statements of Changes in Equity for the Years ended December 31, 2013, 2012 and 2011		112
Consolidated Statements of Cash Flows for the Years ended December 31, 2013, 2012 and 2011		113
Notes to Consolidated Financial Statements		115
FINANCIAL STATEMENT SCHEDULES
Schedule III—Real Estate and Accumulated Depreciation		139

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Extended Stay America, Inc.

Charlotte, North Carolina

We have audited the accompanying consolidated and combined balance sheets of Extended Stay America, Inc. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated and combined statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated and combined financial statements present fairly, in all material respects, the financial position of Extended Stay America, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated and combined financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

March 20, 2014

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND 2012

(In thousands, except per share amounts)

	December 31, 2013			December 31, 2012
ASSETS
PROPERTY AND EQUIPMENT—Net of accumulated depreciation of $439,371 and $275,342	$	4,127,317		$	4,110,622
RESTRICTED CASH		47,339			61,613
CASH AND CASH EQUIVALENTS		60,457			103,582
INTANGIBLE ASSETS—Net of accumulated amortization of $4,440 and $3,066		33,030			34,404
GOODWILL		55,633			55,633
DEFERRED FINANCING COSTS—Net of accumulated amortization of $11,313 and $1,027		51,251			65,592
ACCOUNTS RECEIVABLE—Net of allowance for doubtful accounts of $1,404 and $975		21,566			18,549
OTHER ASSETS		53,094			41,739
TOTAL ASSETS	$	4,449,687		$	4,491,734
LIABILITIES AND EQUITY
LIABILITIES:
Mortgage loans payable	$	2,519,843		$	2,525,708
Mezzanine loans payable		365,000			1,080,000
Other debt		41,202			—
Accounts payable and accrued liabilities		175,122			124,362
Deferred tax liabilities		7,312			8,849
Total liabilities		3,108,479			3,738,919
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY:
Members’ capital		—			744,524
Common stock—$0.01 par value, 3,500,000 shares authorized, 204,788 shares issued and outstanding as of December 31, 2013		2,048			—
Additional paid in capital		772,359			—
(Accumulated deficit) retained earnings		(25,763	)		5,010
Accumulated foreign currency translation		(4,068	)		124
Total Extended Stay America, Inc. shareholders’ and members’ equity		744,576			749,658
Noncontrolling interests		596,632			3,157
Total equity		1,341,208			752,815
TOTAL LIABILITIES AND EQUITY	$	4,449,687		$	4,491,734

See accompanying notes to consolidated and combined financial statements.

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands, except per share data)

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
REVENUES:
Room revenues	$	1,113,956		$	984,273		$	912,988
Other hotel revenues		17,787			16,898			18,693
Management fees, license fees and other revenues		1,075			10,291			11,047
Total revenues		1,132,818			1,011,462			942,728
OPERATING EXPENSES:
Hotel operating expenses		540,551			493,635			463,369
General and administrative expenses		108,325			88,543			75,041
Depreciation and amortization		168,053			129,938			120,438
Managed property payroll expenses		728			6,600			6,409
Restructuring expenses		605			5,763			10,491
Acquisition transaction expenses		235			1,675			593
Impairment of long-lived assets		3,330			1,420			—
Office building operating expenses		—			—			1,010
Total operating expenses		821,827			727,574			677,351
OTHER INCOME		1,134			384			232
INCOME FROM OPERATIONS		312,125			284,272			265,609
INTEREST EXPENSE		234,593			257,656			212,474
INTEREST INCOME		(134	)		(307	)		(550	)
INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		77,666			26,923			53,685
INCOME TAX (BENEFIT) EXPENSE		(4,990	)		4,642			7,050
NET INCOME		82,656			22,281			46,635
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		3,575			(1,549	)		(1,062	)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS OR MEMBERS	$	86,231		$	20,732		$	45,573
NET INCOME PER SHARE—BASIC	$	0.49		$	0.12		$	0.27
NET INCOME PER SHARE—DILUTED	$	0.49		$	0.12		$	0.26
WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC		174,894			169,816			168,813
WEIGHTED AVERAGE SHARES OUTSTANDING—DILUTED		176,268			171,796			171,345

See accompanying notes to consolidated and combined financial statements.

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
NET INCOME	$	82,656		$	22,281		$	46,635
FOREIGN CURRENCY TRANSLATION		(3,980	)		87			71
COMPREHENSIVE INCOME		78,676			22,368			46,706
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		3,575			(1,554	)		(1,091	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS OR MEMBERS	$	82,251		$	20,814		$	45,615

See accompanying notes to consolidated and combined financial statements.

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Members’ Capital			Common Stock		Additional Paid in Capital		(Accumulated Deficit) Retained Earnings			Accumulated Foreign Currency Translation			Total Shareholders’ and Members’ Equity			Non- controlling Interests			Total Equity
BALANCE—January 1, 2011	$	1,547,336		$	—	$	—	$	(22,519	)	$	—		$	1,524,817		$	2,725		$	1,527,542
Net income		—			—		—		45,573			—			45,573			1,062			46,635
Foreign currency translation		—			—		—		—			42			42			29			71
Issuance of ESH REIT preferred units		73			—		—		—			—			73			—			73
Member distributions		—			—		—		(26,064	)		—			(26,064	)		—			(26,064	)
Preferred distributions		—			—		—		(16	)		—			(16	)		—			(16	)
Equity-based compensation		5,020			—		—		—			—			5,020			(290	)		4,730
Other		—			—		—		—			—			—			(1,601	)		(1,601	)
BALANCE—December 31, 2011		1,552,429			—		—		(3,026	)		42			1,549,445			1,925			1,551,370
Net income		—			—		—		20,732			—			20,732			1,549			22,281
Foreign currency translation		—			—		—		—			82			82			5			87
Member contributions		5,925			—		—		—			—			5,925			75			6,000
Member distributions		(820,258	)		—		—		(12,680	)		—			(832,938	)		(397	)		(833,335	)
Preferred distributions		—			—		—		(16	)		—			(16	)		—			(16	)
Equity-based compensation		6,428			—		—		—			—			6,428			—			6,428
BALANCE—December 31, 2012		744,524			—		—		5,010			124			749,658			3,157			752,815
Net income (loss)		—			—		—		86,231			—			86,231			(3,575	)		82,656
Foreign currency translation		—			—		—		—			(3,980	)		(3,980	)		—			(3,980	)
Member distributions		—			—		—		(78,400	)		—			(78,400	)		(2,011	)		(80,411	)
Preferred distributions		—			—		—		(16	)		—			(16	)		—			(16	)
Equity-based compensation		4,094			—		14,712		—			—			18,806			1,362			20,168
Company reorganization		(748,618	)		1,723		424,233		(38,588	)		(212	)		(361,462	)		329,273			(32,189	)
Sale of equity, net of issuance costs		—			325		333,414		—			—			333,739			268,426			602,165
BALANCE—December 31, 2013	$	—		$	2,048	$	772,359	$	(25,763	)	$	(4,068	)	$	744,576		$	596,632		$	1,341,208

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
OPERATING ACTIVITIES:
Net income	$	82,656		$	22,281		$	46,635
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		166,679			128,564			119,064
Amortization and write-off of deferred financing costs		24,191			45,365			10,428
Amortization of intangible assets		1,374			1,374			1,374
Amortization of above-market ground leases		(136	)		(136	)		(111	)
Loss on disposal of property and equipment		3,493			3,499			643
Loss on sale of office building		—			—			1,553
Impairment of long-lived assets		3,330			1,420			—
Equity-based compensation		20,168			6,428			4,730
Deferred income tax (benefit) expense		(11,554	)		2,387			(2,499	)
Changes in assets and liabilities:
Accounts receivable, net		(2,909	)		(2,879	)		(1,901	)
Other assets		(2,464	)		(5,098	)		725
Accounts payable and accrued liabilities		26,485			(2,095	)		(36	)
Net cash provided by operating activities		311,313			201,110			180,605
INVESTING ACTIVITIES:
Purchases of property and equipment		(172,540	)		(271,464	)		(106,064	)
Acquisition of hotels, property and equipment		(16,368	)		(128,299	)		—
Purchase of HVM noncontrolling interests		(544	)		—			—
Decrease in restricted cash		14,324			175,167			16,469
Proceeds from insurance recoveries		2,020			754			—
Proceeds from sale of office building		—			—			11,586
Proceeds from litigation settlement		—			—			26,994
Decrease in cash collateral for insurance reserves		7,849			—			7,626
Net cash used in investing activities		(165,259	)		(223,842	)		(43,389	)
FINANCING ACTIVITIES:
Proceeds from mortgage loans		—			2,520,000			—
Principal payments on mortgage loans		(5,865	)		(1,974,511	)		(24,067	)
Proceeds from mezzanine loans		—			1,080,000			—
Principal payments on mezzanine loans		(715,000	)		(700,000	)		—
Proceeds from revolving credit facility		20,000			—			—
Payment of deferred financing costs		(9,850	)		(64,619	)		—
Sale of equity		649,750			—			125
Equity issuance costs		(47,585	)		—			(52	)
Preferred distributions		(16	)		(16	)		(16	)
Member distributions		(78,400	)		(832,938	)		(26,064	)
Contributions from noncontrolling interests		—			75			—
Distributions to noncontrolling interests		(2,011	)		(397	)		—
Net cash (used in) provided by financing activities		(188,977	)		27,594			(50,074	)

(Continued)

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Year Ended December 31, 2013			Year Ended December 31, 2012		Year Ended December 31, 2011
CHANGES IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN FOREIGN CURRENCY EXCHANGE RATES	$	(202	)	$	136	$	71
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(43,125	)		4,998		87,213
CASH AND CASH EQUIVALENTS—Beginning of period		103,582			98,584		11,371
CASH AND CASH EQUIVALENTS—End of period	$	60,457		$	103,582	$	98,584
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest, excluding prepayment and other penalties	$	201,227		$	196,350	$	219,239
Income tax payments—net of refunds of $941, $66 and $118	$	233		$	11,349	$	1,161
NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures included in accounts payable and accrued liabilities	$	21,241		$	13,625	$	13,867
Acquisition of hotels, property and equipment paid by Sponsors	$	—		$	3,925	$	—
Payment of deferred financing costs paid by Sponsors	$	—		$	2,000	$	—
Issuance of mandatorily redeemable preferred stock	$	21,202		$	—	$	—

See accompanying notes to consolidated and combined financial statements. (Concluded)

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATEDAND COMBINED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. BUSINESS, ORGANIZATION AND BASIS OF CONSOLIDATION AND COMBINATION

Extended Stay America, Inc. (the “Corporation”) was incorporated in the state of Delaware on July 8, 2013. Prior to November 2013, the Corporation had no operations. ESH Hospitality, Inc. (“ESH REIT”) was formed as a limited liability company in the state of Delaware on September 16, 2010 and was converted to a corporation on November 5, 2013. The formation of the Corporation and the conversion of ESH REIT into a Delaware corporation were completed as part of the Pre-IPO Transactions, defined and discussed below, and in contemplation of the Corporation’s and ESH REIT’s initial public offering. Subsequent to the Pre-IPO Transactions, defined and discussed below, the Corporation holds all of the issued and outstanding Class A common stock of ESH REIT, which represents approximately 55% of the outstanding common stock of ESH REIT. Due to its controlling interest in ESH REIT, the Corporation consolidates the financial position, results of operations, comprehensive income and cash flows of ESH REIT. The term, “the Company,” as used herein refers to the Corporation and ESH REIT and their subsidiaries presented on a consolidated and combined basis.

As of December 31, 2013 and 2012, the Company, ESH REIT or their predecessor entities owned and operated 681 and 679 hotel properties, respectively, in operation in 44 U.S. states consisting of approximately 75,700 and 75,400 rooms, respectively, and three hotels in operation in Canada consisting of approximately 500 rooms. On December 31, 2013, ESH REIT completed the acquisition of two hotels which, through the date of acquisition, were previously managed by the Company or its predecessor entity (see Notes 4 and 11). The majority of hotels are operated under the core brand name Extended Stay America. Three Canadian hotels operate under the brand name Extended Stay Canada; 47 hotels are operated under the brand name Crossland Economy Studios and two hotels are operated under the brand name Hometown Inn.

Organization Prior to the Pre-IPO Transactions and Initial Public Offering

ESH REIT’s predecessor, ESH Hospitality LLC, was directly owned by ESH Hospitality Holdings LLC (“Holdings”), a Delaware limited liability company, whose members were investment funds sponsored and managed by Centerbridge Partners L.P., Paulson & Co. Inc. and The Blackstone Group L.P. and their affiliates (collectively, the “Sponsors”).

The hotels were leased by ESH Hospitality LLC’s taxable REIT subsidiaries (the “Operating Lessees”) who contracted with HVM L.L.C. (“HVM”), a separate, independently owned hotel management and administrative services company, to manage the hotels and provide certain other administrative services. HVM was indirectly owned by individuals who were each active in the business of HVM and was managed by an entity indirectly owned by employees of the Sponsors. The brand names are owned by a subsidiary of ESH Strategies LLC (“ESH Strategies”), a Delaware limited liability company, that licensed the brand names to the Operating Lessees. ESH Strategies (together with ESH Hospitality LLC, the Company’s predecessor) was directly owned by ESH Hospitality Strategies Holdings LLC (“Strategies Holdings”), a Delaware limited liability company, whose members were substantially the same investment funds as those that owned Holdings.

The Pre-IPO Transactions

The Pre-IPO Transactions, which were completed in November 2013, restructured and reorganized the then-existing businesses and entities prior to the Corporation’s and ESH REIT’s initial public offering, and consisted primarily of the following:

• Holdings distributed 96.5% of the common stock of ESH REIT to the holders of Class A Units in Holdings and retained the remaining shares, which were subsequently paired with Corporation common stock and distributed as described below; the common stock of ESH REIT was recapitalized into two classes of common stock: Class A common stock and Class B common stock.

• The Sponsors acquired the Corporation for a nominal fee.

• ESH REIT transferred the Operating Lessees to newly-formed, wholly-owned subsidiaries of the Corporation; in connection with the transfer of 1.0% of the Operating Lessees, the Corporation paid ESH REIT approximately $1.6 million and the operating leases were amended to reflect current fair market value terms.

• A newly-formed, wholly-owned subsidiary of the Corporation, ESA Management LLC (“ESA Management”), acquired all of the assets and assumed all of the liabilities of HVM for approximately $0.8 million; the existing management agreements were terminated and ESA Management entered into new management agreements with the Operating Lessees. ESA Management assumed sponsorship of HVM’s savings plan that qualifies under Section 401(k) of the Code (see Note 15).

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• The shareholders of ESH REIT contributed the Class A common stock of ESH REIT, representing approximately 55% of the outstanding common stock of ESH REIT, to the Corporation in exchange for common stock of the Corporation; the common stock of the Corporation was stapled to, or paired with, the Class B common stock of ESH REIT on a one-for-one basis, forming the Paired Shares offered pursuant to the Corporation’s and ESH REIT’s initial public offering.

• The Corporation acquired all of the interests in ESH Strategies in exchange for $21.2 million of mandatorily redeemable preferred stock of the Corporation, which pays preferred dividends at 8.0% per annum.

• Holdings distributed its remaining Paired Shares.

Because the Sponsors owned the same percentages of the Company subsequent to the Pre-IPO Transactions as they owned of Holdings and Strategies Holdings prior to the Pre-IPO Transactions, a non-substantive exchange occurred. Accordingly, the transfer of net assets that occurred in connection with the Pre-IPO Transactions was recognized at historical cost basis.

Following the Pre-IPO Transactions, the Corporation, through its direct wholly-owned subsidiaries, leases the hotel properties from ESH REIT, owns the trademarks related to the business and self-manages the hotel properties. ESH REIT owns all of the hotel properties. The Corporation owns, and is expected to continue to own, all of the Class A common stock of ESH REIT, which represents approximately 55% of the outstanding common stock of ESH REIT.

Initial Public Offering

On November 18, 2013, the Corporation and ESH REIT completed an initial public offering (the “Offering”) of 32,487,500 Paired Shares for cash consideration of $20.00 per Paired Share, each Paired Share consisting of one share of common stock, par value $0.01 per share, of the Corporation, that is attached to and trades as a single unit with one share of Class B common stock, par value $0.01 per share, of ESH REIT. The Offering included 4,237,500 Paired Shares purchased by the underwriters in connection with the exercise in full of their option to purchase additional Paired Shares and raised gross proceeds to the Corporation and ESH REIT of approximately $649.8 million.

After deducting underwriting discounts, commissions and other transaction costs, the Offering raised proceeds to the Corporation and ESH REIT of approximately $602.2 million. The proceeds were divided among the Corporation and ESH REIT based on their relative valuations. The Corporation used the majority of the proceeds it received to purchase shares of Class A common stock of ESH REIT to maintain its ownership of approximately 55% of the outstanding common stock of ESH REIT. ESH REIT used its proceeds from the Offering, including proceeds received pursuant to the sale of Class A common stock to the Corporation, in addition to cash on hand, to repay approximately $331.0 million of its Mezzanine A Loan, approximately $218.5 million of its Mezzanine B Loan and approximately $165.5 million of its Mezzanine C Loan (see Note 7).

As of December 31, 2013, the public owns approximately 15.9% of the outstanding Paired Shares, while the Sponsors and current and former management own approximately 84.1% of the outstanding Paired Shares.

Basis of Consolidation and Combination

The accompanying consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). References to the Company, its financial position, results of operations, comprehensive income, changes in equity and cash flows mean the Corporation and its consolidated subsidiaries, including the Operating Lessees, ESH Strategies, ESA Management and ESH REIT, for the period from the Pre-IPO Transactions through December 31, 2013, and to the Company’s predecessor, which includes ESH REIT’s predecessor, ESH Strategies and HVM (see Notes 2 and 11), for periods through the Pre-IPO Transactions.

For periods through the Pre-IPO Transactions, third party equity interests in HVM, which represented all of HVM’s equity, were not owned by the Company and are presented as noncontrolling interests (see Notes 10 and 11). ESH REIT’s predecessor and ESH Strategies were entities under common ownership of substantially the same investment funds of the Sponsors and common management. The Sponsors reorganized ESH REIT’s predecessor and ESH Strategies as part of the Pre-IPO Transactions to effect the Offering. Since the Pre-IPO Transactions, which resulted in the entities’ becoming a consolidated group, were accounted for at historical cost, the Company’s predecessor financial information combines ESH REIT’s predecessor financial information with that of ESH Strategies.

For the period from the Pre-IPO Transactions through December 31, 2013, third party equity interests in ESH REIT consist of the shares of Class B common stock of ESH REIT, which represent approximately 45% of ESH REIT’s total common equity, and 125 shares of preferred stock of ESH REIT. These interests, which are not owned by the Corporation, are presented as noncontrolling interests.

All intercompany accounts and transactions have been eliminated.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates—The preparation of the accompanying consolidated and combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management used significant estimates to determine the allocation of purchase price to assets that were acquired in 2013 and 2012 (see Note 4). Significant estimates also include the estimated useful lives of tangible assets as well as the assessment of tangible and intangible assets, including goodwill, for impairment, estimated liabilities for insurance reserves and the grant-date fair value per Profit Unit (as defined in Note 14) related to equity-based compensation. Actual results could differ from those estimates.

Cash and Cash Equivalents—The Company considers all cash on hand, demand deposits with financial institutions, credit card receivables, and short-term, highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has deposits in excess of $250,000 with financial institutions that are not insured by the Federal Deposit Insurance Corporation. The Company does not believe cash and cash equivalents expose it to significant credit risk.

Accounts Receivable and Allowance for Doubtful Accounts—Provision for doubtful accounts is made when collection of receivables is considered doubtful. Balances are considered past due when payment is not received by the contractual due date. When management determines that receivables are uncollectible, they are written off against the allowance for doubtful accounts.

Restricted Cash—Restricted cash consists of amounts held in cash management accounts and in escrows for the payment of hotel occupancy/sales taxes, property taxes and insurance, capital improvements, ground leases, operating expenses (including management fees and reimbursements) and mortgage and mezzanine debt service, all as required by ESH REIT’s mortgage and mezzanine loan agreements (see Note 7).

Property and Equipment—Property and equipment additions are recorded at cost. Major improvements that extend the life or utility of property or equipment are capitalized and depreciated over a period equal to the shorter of the estimated useful life of the improvement or the remaining estimated useful life of the asset. Ordinary repairs and maintenance are charged to expense as incurred.

Depreciation and amortization are recorded on a straight-line basis over the following estimated useful lives:

Hotel buildings	20–49 years
Hotel building improvements	3–39 years
Hotel site improvements	2–15 years
Hotel furniture, fixtures and equipment	1–10 years
Office furniture, fixtures and equipment	1–7 years

Management assesses whether there has been impairment of the value of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is measured by a comparison of the carrying amount of a hotel property to the estimated future undiscounted cash flows expected to be generated by the hotel property. Impairment is recognized when estimated future undiscounted cash flows, including proceeds from disposition, are less than the carrying value of the hotel property. The estimation of future undiscounted cash flows is inherently uncertain and relies upon assumptions regarding current and future economic and market conditions. If such conditions change, then an impairment charge to reduce the carrying value of the hotel property could occur in a future period in which conditions change.

To the extent that a hotel property is impaired, the excess carrying amount of the hotel property over its estimated fair value is charged to operating earnings. Fair value is determined based upon the discounted cash flows of the hotel property, quoted market prices, or independent appraisals, as considered necessary. The Company recognized impairment charges related to property and equipment of approximately $3.3 million, $1.4 million and $0 for the years ended December 31, 2013, 2012 and 2011, respectively (see Note 5).

Intangible Assets and Liabilities—Intangible assets and liabilities include trademarks, above-market contracts, corporate customer relationships and customer databases. Above-market contracts, corporate customer relationships and customer databases are amortized using the straight-line method over their estimated remaining useful lives, which in the case of contracts is typically the remaining non-cancelable term. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. Trademarks are not amortized. Indefinite-lived intangible assets are reviewed for impairment at least annually. At such time their classification as indefinite-lived intangible assets is reassessed. Effective in the fourth quarter of 2012, the Company adopted accounting guidance in which it first assesses qualitative factors to determine if it is not more likely than not that the fair value of its indefinite-lived intangible assets is less than its carrying amount. No impairment charges related to intangible assets were recognized during the years ended December 31, 2013, 2012 or 2011.

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Goodwill—Goodwill represents the excess purchase price over the fair value of net assets acquired. The Company tests goodwill for impairment at least annually in the fourth quarter. The Company tests for impairment more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has one operating segment, which is its reporting unit; therefore, management analyzes consolidated goodwill associated with all hotels when analyzing for potential impairment. Effective in the fourth quarter of 2011, the Company adopted accounting guidance in which it first assesses qualitative factors to determine if it is not more likely than not that the fair value of its reporting unit is less than its carrying amount. No impairment charges related to goodwill were recognized during the years ended December 31, 2013, 2012 or 2011.

Property Acquisitions—The purchase price of net tangible and identified intangible assets and liabilities are recorded based on their relative fair values on the date of acquisition. The fair value of the acquired land and site improvements, building and improvements, and furniture, fixtures and equipment were determined on an “if-vacant” basis considering a variety of factors, including the physical condition and quality of the hotels, estimated rates and valuation assumptions consistent with current market conditions, based on independent appraisals and other relevant market data obtained in connection with the acquisition of the hotels. The results of operations of acquired hotel properties are included in the accompanying consolidated and combined statements of operations since their respective dates of acquisition.

Deferred Financing Costs—Costs incurred in obtaining financing are amortized over the terms of the related loans using the effective interest method. Upon repayment of, or in conjunction with a material change in the terms of, the underlying debt agreement, remaining unamortized costs are charged to earnings. During the years ended December 31, 2013 and 2012, approximately $11.7 million and $34.4 million of unamortized deferred financing costs, primarily related to the prepayment of mortgage and mezzanine loans, were charged to earnings and are included in interest expense in the accompanying consolidated and combined statements of operations. Amortization of deferred financing costs unrelated to the prepayment of mortgage and mezzanine loans, which is also included in interest expense in the accompanying consolidated and combined statements of operations, was approximately $12.5 million, $11.0 million and $10.4 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Revenue Recognition—Room and other hotel revenues are recognized when services are provided. Amounts paid in advance by customers are recorded as deferred revenues and included in accounts payable and accrued liabilities in the accompanying consolidated and combined balance sheets. Other hotel revenues primarily consist of revenues derived from guest laundry, pet fees, internet fees, additional housekeeping, telephone and other miscellaneous fees or services. Occupancy, hotel and sales taxes collected from customers and remitted to the taxing authorities are excluded from revenues in the accompanying consolidated and combined statements of operations.

Advertising Costs—Advertising costs are expensed as incurred. Internet advertising costs are included in hotel operating expenses and all other advertising costs are included in general and administrative expenses. For the years ended December 31, 2013 and 2012, advertising costs were approximately $28.2 million and $25.2 million, approximately $18.8 million and $15.2 million of which are classified in hotel operating expenses and approximately $9.4 million and $10.0 million of which are classified in general and administrative expenses, respectively. For the year ended December 31, 2011, advertising costs were approximately $7.7 million and were classified in hotel operating expenses in the accompanying consolidated and combined statements of operations.

Operating Leases—Operating lease expense is recognized on a straight-line basis over the terms of the related leases.

Fair Value of Financial Instruments—U.S. GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:

Level 1—Observable inputs, such as quoted prices in active markets at the measurement date for identical assets or liabilities

Level 2—Significant inputs that are observable, directly or indirectly, such as other quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability

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Level 3—Significant unobservable inputs for which there is little to no market data and for which the Company makes its own assumptions about how market participants would price the asset or liability

Fair value is defined as the price that would be received when selling an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest-level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, mortgage loans, mezzanine loans, mandatorily redeemable preferred stock and revolving credit facilities. The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities and revolving credit facilities are representative of their fair value due to the short-term nature or frequent settlement of these instruments. The fair value of mortgage loans, mezzanine loans and mandatorily redeemable preferred stock was determined by comparing current borrowing rates and risk spreads offered in the market to the stated interest rates and spreads on the Company’s current mortgage loans, mezzanine loans and mandatorily redeemable preferred stock or quoted market prices, when available (see Note 7).

Derivative Instruments—Derivative instruments, including certain derivative instruments embedded in other contracts, are recorded in the accompanying consolidated and combined balance sheets as either assets or liabilities measured at fair value. Changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not enter into derivative financial instruments for trading or speculative purposes.

Insurance Reserves—The Company utilizes various high-deductible insurance programs for general liability and health insurance claims. In October 2012, the Company entered into a high-deductible insurance program for workers’ compensation claims. Such retained losses require estimates in determining the liability for claims arising under these programs. Workers’ compensation, general liability and health insurance liabilities are estimated using independent actuarial evaluations based on historical and projected claims and medical cost trends. As of December 31, 2013 and 2012, approximately $36.2 million and $13.9 million, respectively, of liabilities for such high-deductible insurance programs are included in accounts payable and accrued liabilities in the accompanying consolidated and combined balance sheets.

Variable Interest Entity—Prior to the Pre-IPO Transactions, the Company held a variable interest in HVM, a separate, independently owned hotel management and administrative services company (see Note 11). The Company’s maximum exposure to loss as a result of its involvement with HVM was related to the need to secure alternative hotel management services and systems support if HVM were ever unable to fulfill its obligations under its management agreements with ESH REIT. The assets of HVM could not be used to settle obligations of the Company and the Company’s assets could not be used to settle obligations of HVM. For the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011, the Company represented approximately 99%, 97% and 97%, respectively, of the business conducted by HVM. The Company concluded that it was the primary beneficiary of HVM and, as a result, consolidated the financial position, results of operations, comprehensive income and cash flows of HVM for periods prior to the Pre-IPO Transactions. Since the Company had no equity interest in HVM, the results of operations and members’ capital of HVM are reported as noncontrolling interests in the accompanying consolidated and combined financial statements for periods through the Pre-IPO Transactions. Subsequent to the Pre-IPO Transactions, HVM no longer meets the definition of a variable interest entity.

HVM provided hotel management and administrative services, including the supervision, direction, and control of the operations, management, and promotion of the hotel properties in a manner associated with extended-stay hotels of similar size, type, or usage in similar locations. See summarized financial information of HVM in Note 11.

Income Taxes—Subsequent to the Pre-IPO Transactions, the Company’s taxable income includes the taxable income of its wholly-owned subsidiaries, ESA Management, ESH Strategies and the Operating Lessees, and will include dividend income related to its ownership of approximately 55% of ESH REIT. For the period from the Pre-IPO Transactions through December 31, 2013, the Corporation received no dividend income with respect to its ownership interest in ESH REIT. Prior to the Pre-IPO Transactions, all of ESH REIT’s distributions were made to its owners and ESH REIT generally incurred no federal income tax. However, as a result of the Pre-IPO Transactions, including the contribution of ESH REIT’s Class A common stock to the Corporation, approximately 55% of ESH REIT’s future dividends will be subject to corporate income tax.

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The Company recognizes deferred tax assets and liabilities using the asset and liability method, under which deferred tax assets and liabilities are calculated based upon the temporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized in future periods. The realization of deferred tax assets is primarily dependent on estimated future taxable income. A change in the estimate of future taxable income may require an addition to, or a reduction of, the valuation allowance.

ESH REIT has elected to be taxed as and expects to continue to qualify as a REIT under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”). A REIT is generally not subject to federal income tax on its separately filed federal tax return as long as the REIT complies with various requirements to maintain its status, including the distribution of at least 90% of its taxable income, excluding capital gains. During 2013, consistent with prior years, ESH REIT distributed 100% or more of its taxable income and therefore incurred no federal income tax. Beginning in 2014, ESH REIT intends to distribute 95% of its taxable income and therefore will incur federal and state income tax on the taxable income not distributed. ESH REIT may be subject to certain additional state and local income taxes where REIT status is not recognized.

Prior to the Pre-IPO Transactions, the Operating Lessees, subsidiaries of ESH REIT, elected to be treated as taxable REIT subsidiaries. As such, the Operating Lessees were generally subject to federal, state, local, and/or foreign income taxes on their separate tax returns. The Operating Lessees recognized deferred tax assets and liabilities using the asset and liability method. Valuation allowances were provided if, based upon the weight of available evidence, it was more likely than not that some or all of the deferred tax assets would not be realized in future periods.

Also prior to the Pre-IPO Transactions, ESH Strategies’ and HVM’s operating results were reportable by their members or members of their ultimate parent. Thus, income taxes were not recognized for these entities in the accompanying consolidated and combined financial statements prior to the Pre-IPO Transactions. ESH Strategies and HVM were also subject to state and local taxes in certain jurisdictions.

Foreign Currency Translation—The financial statements of certain of the Company’s subsidiaries and its investments therein are maintained in their functional currency, the Canadian dollar (“C$”), and their income and expenses are translated into U.S. dollars using the average exchange rate for the period. The assets and liabilities related to the Company’s Canadian investments are translated into U.S. dollars using the exchange rate in effect at the balance sheet date. The resulting translation adjustments are reflected in accumulated foreign currency translation in the accompanying consolidated and combined balance sheets. Foreign currency transaction gains and losses are included in the determination of income from operations. Foreign currency transaction losses of $0.1 million, $0.1 million and $0.2 million are included in general and administrative expenses in the accompanying consolidated and combined statements of operations for the years ended December 31, 2013, 2012 and 2011, respectively.

Comprehensive Income—Comprehensive income includes net income and other comprehensive income, which consists of foreign currency translation adjustments. Comprehensive income is presented in the accompanying consolidated and combined statements of comprehensive income, and accumulated foreign currency translation is displayed as a separate component of consolidated and combined equity.

Equity-Based Compensation—As of December 31, 2013, the Corporation and ESH REIT each maintain a Long-Term Incentive Plan (“LTIP”) under which the Corporation and ESH REIT may issue awards to eligible employees or directors consisting of restricted stock awards, restricted stock units or other share-based awards. The Company recognizes costs related to equity-based awards over their vesting periods. The Company classifies equity-based awards granted in exchange for employee services as either equity-based awards or as liability awards. The classification of restricted stock awards or restricted stock units either as an equity award or a liability award is based upon cash settlement options. Equity awards are measured based on their fair value on the date of grant. Liability awards are re-measured to fair value each reporting period. The value of all restricted stock awards or restricted stock units, less estimated forfeitures, is recognized over the period during which an employee or director is required to provide services in exchange for the award – the requisite service period (usually the vesting period). No compensation cost is recognized for awards for which employees or directors do not render the requisite services. Costs related to equity classified awards issued by ESH REIT to its board of directors are re-measured to fair value each period in the Company’s consolidated and combined financial statements.

Segments—The Company’s hotel operations represent a single operating segment based on the way the Company manages its business. The Company’s hotels provide similar services, use similar processes to sell those services and sell their services to similar classes of customers. The amounts of long-lived assets and net sales outside the U.S. are not significant for any of the periods presented.

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Recently Issued Accounting Standards

Income Taxes —In July 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. This updated accounting standard is effective for fiscal and interim reporting periods beginning after December 15, 2013 and should be applied prospectively to all unrecognized tax benefits that exist at the effective date, and retrospective application is permitted. The Company is currently evaluating the impact of adopting the updated accounting standard, but it does not expect the adoption to have a material effect on the Company’s consolidated and combined financial statements.

Cumulative Translation Adjustment—In March 2013, the FASB issued an accounting standards update that indicates when the cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released to earnings. The CTA should be released when an entity sells a foreign subsidiary or a group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in a foreign entity. The CTA should also be released when an entity no longer has a controlling financial interest in an investment in a foreign entity. This updated accounting standard is effective for fiscal and interim reporting periods beginning after December 15, 2013, and shall be applied prospectively. The Company is currently evaluating the impact of adopting the updated accounting standard, but it does not expect the adoption to have a material effect on the Company’s consolidated and combined financial statements.

Other Comprehensive Income—In February 2013, the FASB issued guidance requiring companies to present either in a single note or parenthetically on the face of the financial statements the effect of significant amounts reclassified from each component of comprehensive income based on its source and the income statement line items affected by the reclassification. This guidance is effective for fiscal and interim reporting periods beginning after December 15, 2012. The adoption of this guidance did not have a material effect on the Company’s accompanying consolidated and combined financial statements.

In June 2011, the FASB issued guidance eliminating the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The guidance requires that all nonowner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance did not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company adopted this new accounting guidance on January 1, 2012, and added an additional financial statement, a consolidated and combined statement of comprehensive income, to display comprehensive income in its consolidated and combined financial statements for all periods presented to comply with this guidance.

Indefinite-lived intangible assets—In July 2012, the FASB issued an accounting standards update that permits an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, then a quantitative impairment test is not required. The Company early adopted this new accounting guidance during the fourth quarter of 2012 and used the qualitative assessment for its impairment analysis for trademarks in 2013 and 2012. The adoption of this guidance did not have a material impact on the Company’s accompanying consolidated and combined financial statements.

Goodwill—In September 2011, the FASB issued guidance that permits an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step quantitative goodwill impairment test is not required. The Company adopted this accounting guidance during the fourth quarter of 2011 and used the qualitative assessment for its impairment analysis for goodwill in 2013, 2012 and 2011. The adoption of this guidance did not have a material impact on the Company’s accompanying consolidated and combined financial statements.

3. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of shares of the Corporation’s unrestricted common stock outstanding. Diluted net income per share is computed by dividing net income available to common shareholders, as adjusted for potentially dilutive securities, by the weighted average number of shares of the Corporation’s unrestricted common stock outstanding plus other potentially dilutive securities. Dilutive securities include equity-based awards issued under long-term incentive plans.

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As discussed in Note 1, in November 2013, the Company completed the Pre-IPO Transactions. For purposes of computing net income per share, it is assumed that the recapitalization of the Company had occurred for all periods presented and therefore the outstanding shares have been adjusted to reflect the conversion of shares that took place in contemplation of the Offering. Accordingly, the denominators in the computations of basic and diluted net income per share reflect the Corporation’s capitalization as of December 31, 2013 for all periods presented.

The calculations of basic and diluted net income per share, including a reconciliation of the numerators and denominators, are as follows:

(in thousands, except per share data)	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Numerator:
Net income available to common shareholders—basic	$	86,231		$	20,732		$	45,573
Net loss available to controlling interests assuming conversion		(166	)		(53	)		(167	)
Net income available to common shareholders—diluted	$	86,065		$	20,679		$	45,406
Denominator:
Weighted average number of shares outstanding—basic		174,894			169,816			168,813
Dilutive securities		1,374			1,980			2,532
Weighted average number of shares outstanding—diluted		176,268			171,796			171,345
Basic net income per share	$	0.49		$	0.12		$	0.27
Diluted net income per share	$	0.49		$	0.12		$	0.26

4. ACQUISITIONS

2013 LVP Acquisition –On December 31, 2013, the Company acquired the assets and assumed the liabilities of two hotels from LVP Acquisition Corporation for cash consideration of approximately $16.5 million. The acquisition was accounted for as a business combination in accordance with FASB Accounting Standards Codification 805,Business Combinations, which requires that the consideration be allocated to the acquired assets and assumed liabilities based on their acquisition date fair values. The vast majority of the purchase price was allocated to property and equipment.

2012 HFI Acquisition—On December 13, 2012, the Company acquired the assets and assumed the liabilities of 17 hotels from HFI Acquisitions Company LLC for cash consideration of approximately $131.8 million. The acquisition was accounted for as a business combination in accordance with FASB Accounting Standards Codification 805,Business Combinations.

The consideration transferred to acquire the 17 HFI hotels, which HVM previously managed, and the purchase price allocation among the assets acquired and liabilities assumed is as follows (dollars in thousands):

	Amount			Estimated Useful Life
Land and site improvements	$	61,686			5–11 years
Building and improvements		59,547			19–40 years
Furniture, fixtures and equipment		10,598			3–10 years
Other assets and liabilities—net		(41	)
Total purchase price	$	131,790

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The following table sets forth our room revenues, other hotel revenues, hotel operating expenses, depreciation and amortization, interest expense and net income assuming the 17 HFI hotels had been acquired on January 1, 2011 (in thousands and unaudited):

	Year Ended December 31, 2012		Year Ended December 31, 2011
Room revenues	$	1,014,335	$	942,069
Other hotel revenues		17,266		19,135
Hotel operating expenses		506,399		476,293
Depreciation and amortization		136,386		127,120
Interest expense		264,691		219,867
Net income		26,816		49,159

The 17 HFI acquired hotels contributed total revenues of approximately $30.5 million and income from operations of approximately $14.5 million for the year ended December 31, 2013, as compared to total revenues of approximately $1.3 million and income from operations of approximately $0.6 million for the period from December 13, 2012 through December 31, 2012.

Acquisition related expenses—Legal, professional and other fees and costs directly related to the acquisitions described above totaled approximately $0.2 million and $1.7 million for the years ended December 31, 2013 and 2012. For the year ended December 31, 2011, acquisition expenses related to an acquisition completed in 2010 totaled approximately $0.6 million. These costs are recorded in acquisition transaction expenses in the accompanying consolidated and combined statements of operations.

5. PROPERTY AND EQUIPMENT

Net investment in property and equipment as of December 31, 2013 and 2012, consists of the following (in thousands):

	December 31, 2013			December 31, 2012
Hotel properties:
Land and site improvements	$	1,347,260		$	1,325,970
Building and improvements		2,839,454			2,773,117
Furniture, fixtures and equipment		362,022			271,547
Total hotel properties		4,548,736			4,370,634
Corporate furniture, fixtures and equipment		16,131			13,509
Undeveloped land parcel		1,821			1,821
Total cost		4,566,688			4,385,964
Less accumulated depreciation:
Hotel properties		(427,533	)		(265,401	)
Corporate furniture, fixtures and equipment		(11,838	)		(9,941	)
Total accumulated depreciation		(439,371	)		(275,342	)
Property and equipment—net	$	4,127,317		$	4,110,622

Substantially all of the hotel properties (680 of 684 hotel properties) are pledged as security for ESH REIT’s 2012 Mortgage Loan (see Note 7).

During the years ended December 31, 2013 and 2012, the Company, using Level 3 unobservable inputs, recognized impairment charges of approximately $3.3 million and $1.4 million, respectively, in the accompanying consolidated and combined statements of operations. Quantitative information with respect to unobservable inputs consists of internally developed cash flow models that include the following assumptions, among others: projections of revenues, expenses and related cash flows based on assumed long-term growth rates, demand trends, expected future capital expenditures and estimated discount rates. These assumptions were based on the Company’s historical data and experience, third-party appraisals, industry projections and micro and macro general economic condition projections.

The Company’s office building was sold to a third party on December 29, 2011 for $12.0 million, resulting in net proceeds of approximately $11.6 million and the recognition of a loss on sale of approximately $1.6 million, which is included in restructuring expenses in the accompanying consolidated and combined statement of operations for the year ended December 31, 2011 (see Note 13).

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6. INTANGIBLE ASSETS AND GOODWILL

The Company’s intangible assets and goodwill as of December 31, 2013 and 2012, consist of the following (dollars in thousands):

	December 31, 2013
	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Definite-lived intangible assets:
Customer relationships		20 years	$	26,800	$	(4,330	)	$	22,470
Customer email database		5 years		170		(110	)		60
Total definite-lived intangible assets				26,970		(4,440	)		22,530
Indefinite-lived intangible assets—trademarks				10,500		—			10,500
Total intangible assets				37,470		(4,440	)		33,030
Goodwill				55,633		—			55,633
Total intangible assets and goodwill			$	93,103	$	(4,440	)	$	88,663
	December 31, 2012
	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Definite-lived intangible assets:
Customer relationships		20 years	$	26,800	$	(2,990	)	$	23,810
Customer email database		5 years		170		(76	)		94
Total definite-lived intangible assets				26,970		(3,066	)		23,904
Indefinite-lived intangible assets—trademarks				10,500		—			10,500
Total intangible assets				37,470		(3,066	)		34,404
Goodwill				55,633		—			55,633
Total intangible assets and goodwill			$	93,103	$	(3,066	)	$	90,037

The weighted-average amortization period remaining for definite-lived intangible assets was approximately 17 years as of December 31, 2013. Estimated future amortization expense for intangible assets is as follows (in thousands):

Years Ending December 31,
2014	$	1,374
2015		1,366
2016		1,340
2017		1,340
2018		1.340
Thereafter		15,770
Total	$	22,530

7. DEBT

Summary—The Company’s outstanding debt as of December 31, 2013 and 2012, is as follows (in thousands):

	December 31, 2013		December 31, 2012
Mortgage loans	$	2,519,843	$	2,525,708
Mezzanine loans		365,000		1,080,000
Redeemable preferred stock		21,202		—
Revolving credit facility		20,000		—
Total debt	$	2,926,045	$	3,605,708

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During the years ended December 31, 2013 and 2012, the following transactions occurred (in thousands):

	December 31, 2013			December 31, 2012
Debt—beginning of year	$	3,605,708		$	2,680,219
Additions:
Proceeds from mortgage loans		—			2,520,000
Proceeds from mezzanine loans		—			1,080,000
Proceeds from revolving credit facility		20,000			—
Issuance of redeemable preferred stock		21,202			—
Deductions:
Payments on mortgage loans		(5,865	)		(1,974,511	)
Payments on mezzanine loans		(715,000	)		(700,000	)
Debt—end of year	$	2,926,045		$	3,605,708

The Company’s debt as of December 31, 2013 and 2012, consisted of the following (in thousands):

Loan	Stated Amount		Outstanding Principal— December 31, 2013		Outstanding Principal— December 31, 2012		Stated Interest Rate(2)	Interest Rate— December 31, 2013(4)			Interest Rate— December 31, 2012			Maturity Date			Amortization
Mortgage loans:
2012 Mortgage Loan:
Component A	$	350,000	$	349,843	$	350,000	LIBOR(1) + 2.0547%		2.2227	%		2.2687	%		12/1/2014	(3)	Interest  only
Component B		350,000		350,000		350,000	3.4047%		3.4047	%		3.4047	%		12/1/2017		Interest only
Component C		1,820,000		1,820,000		1,820,000	4.0547%		4.0547	%		4.0547	%		12/1/2019		Interest only
Assumed Mortgage Loan		6,250		—		5,708	Greater of LIBOR(1) + 4.0% or 5.0%		N/A			5.00	%		10/8/2014		Amortizing
Mezzanine loans:
2012 Mezzanine A Loan		500,000		168,981		500,000	8.25%		8.25	%		8.25	%		12/1/2019		Interest only
2012 Mezzanine B Loan		330,000		111,528		330,000	9.625%		9.625	%		9.625	%		12/1/2019		Interest only
2012 Mezzanine C Loan		250,000		84,491		250,000	11.50%		11.50	%		11.50	%		12/1/2019		Interest  only
Other debt:
Corporation Mandatorily Redeemable Preferred Stock		21,202		21,202		N/A	8.0%		8.0	%		N/A			11/15/2020		Interest only
Corporation Revolving Credit Facility		75,000		—		N/A	N/A		N/A			N/A			11/18/2016		Interest only
ESH REIT Revolving Credit Facility		250,000		20,000		N/A	LIBOR(1) + 3.0%		3.1646	%		N/A			11/18/2016		Interest only
Total				$2,926,045		$3,605,708

(1) London Interbank Offering Rate.

(2) The Company is a counterparty to an interest rate cap on one-month LIBOR at 3.0% with a notional amount and maturity date the same as those of 2012 Mortgage Loan Component A.

(3) ESH REIT has the option to extend the maturity date of Component A of the 2012 Mortgage Loan for up to three consecutive one-year periods, subject to limited conditions.

(4) The Company’s weighted-average interest rate for the years ended December 31, 2013 and 2012 was approximately 5.46% and 5.43%, respectively.

In the fourth quarter of 2013 and subsequent to the Offering, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans. Repayment consisted of approximately $331.0 million of the 2012 Mezzanine A Loan, approximately $218.5 million of the 2012 Mezzanine B Loan and approximately $165.5 million of the 2012 Mezzanine C Loan. Prior to the partial repayment of the 2012 Mezzanine Loans, interest only payments of approximately $8.5 million were due on the first day of each calendar month. Subsequent to the partial repayment of the 2012 Mezzanine Loans, interest only payments of approximately $2.9 million are due on the first day of each calendar month.

During 2013, ESH REIT incurred approximately $25.2 million of debt extinguishment and other costs in connection with the mezzanine loan prepayments, composed of prepayment penalties of approximately $13.4 million, the write-off of unamortized deferred financing costs of approximately $10.9 million and other costs of approximately $0.9 million. Debt extinguishment costs are included as a component of interest expense in the Company’s accompanying consolidated and combined statements of operations for the year ended December 31, 2013.

On November 30, 2012, ESH REIT refinanced its then-outstanding mortgage and mezzanine loans of approximately $2.7 billion. ESH REIT entered into new mortgage and mezzanine loans totaling $3.6 billion and one of its subsidiaries entered into an unsecured revolving credit facility of $100.0 million. ESH REIT used the proceeds from the new mortgage and mezzanine loans to pay the outstanding

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principal and interest balances on the then-outstanding mortgage and mezzanine loans of approximately $2.7 billion, prepayment penalties and other costs of approximately $10.7 million, deferred financing costs of approximately $64.6 million, establish new escrows of approximately $124.3 million, and distributed approximately $723.2 million to the Sponsors. ESH REIT’s monthly debt service obligation totaled approximately $18.5 million and $16.3 million prior to and subsequent to the debt refinancing, respectively.

During 2012, ESH REIT incurred approximately $45.1 million of debt extinguishment and other costs in connection with the 2012 debt refinancing, composed of prepayment penalties of approximately $10.5 million, the write-off of unamortized deferred financing costs of approximately $34.4 million and other costs of approximately $0.2 million. Debt extinguishment costs are included as a component of interest expense in the Company’s accompanying consolidated and combined statement of operations.

ESH REIT Mortgage Loans

2012 Mortgage Loan—On November 30, 2012, ESH REIT entered into a $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”). The 2012 Mortgage Loan requires interest-only payments of approximately $7.8 million due on the first day of each calendar month.

Up to $367.5 million ($52.5 million of Component A, $157.5 million of Component B, and $157.5 million of Component C of the 2012 Mortgage Loan) may be voluntarily prepaid at any time without incurring a prepayment premium or penalty. ESH REIT could prepay Component A for a premium of 3.0% of the amount greater than $52.5 million from July 2, 2013 through January 1, 2014, and 1.0% from January 2, 2014 through July 1, 2014. After July 1, 2014, Component A may be prepaid without incurring a prepayment premium or penalty. Through January 1, 2015, Component B prepayments greater than $157.5 million will incur a yield maintenance premium of the greater of (i) 1.0% of the outstanding principal balance of Component B and (ii) the excess of the sum of the present values of the scheduled payments of interest and principal to be made with respect to the portion of Component B being prepaid, over the principal amount being prepaid. After January 1, 2015, Component B may be prepaid without incurring a prepayment penalty or premium. Through January 1, 2016, Component C prepayments greater than $157.5 million will incur a yield maintenance premium of the greater of (i) 1.0% of the outstanding principal balance of Component C and (ii) the excess of the sum of the present values of the scheduled payments of interest and principal to be made with respect to the portion of Component C being prepaid, over the principal amount being prepaid. After January 1, 2016, Component C may be prepaid without incurring a prepayment penalty or premium.

Substantially all of ESH REIT’s hotel properties (680 of 684 hotel properties) serve as collateral for the 2012 Mortgage Loan. Under certain limited circumstances, losses related to the 2012 Mortgage Loan and costs incurred by the lenders are guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $252.0 million.

The occurrence of a Mortgage Loan Event of Default, a Mezzanine Loan Default, a Debt Yield Trigger Event (a Debt Yield, as defined, of less than 9.0%), or a Guarantor Bankruptcy triggers a Cash Trap Event, as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) are fully funded, is held by the loan service agent as additional collateral for the 2012 Mortgage Loan. As of December 31, 2013, none of these events had occurred.

All receipts from the 680 mortgaged properties are required to be deposited into a domestic cash management account (“CMA”) for hotels in the U.S. and a Canadian CMA for hotels in Canada. Such CMAs are under the control of the loan service agent as specified by the terms of the mortgage loan agreement, mezzanine loan agreements and cash management agreements and are therefore classified as restricted cash. Receipts are allocated to CMA subaccounts for hotel occupancy/goods and services sales taxes, property taxes, insurance, ground leases, operating expenses (including management fees and reimbursements), capital improvements, and mortgage and mezzanine debt service. Funds in excess of a month’s Canadian waterfall requirements are converted to U.S. dollars and transferred to the domestic CMA. Funds in excess of a month’s domestic waterfall requirements are distributed tothe Corporation and/or ESH REIT so long as no Cash Trap Event has occurred.

2010 Mortgage Loan—On October 8, 2010, (the “Acquisition Date”) ESH REIT entered into a $2.0 billion mortgage loan secured by 663 hotel properties (the “2010 Mortgage Loan”). The 2010 Mortgage Loan required constant monthly payments of $12.2 million due on the first day of each calendar month, consisting of principal amortization and interest. The 2010 Mortgage Loan was set to mature on November 1, 2015; however, ESH REIT prepaid the mortgage loan on November 30, 2012, without premium or penalty. In addition to 663 hotel properties, an undeveloped land parcel, trademarks and trademark license agreements owned by ESH Strategies, and the ownership of certain subsidiaries served as collateral for the 2010 Mortgage Loan. Under limited circumstances, losses related to the 2010 Mortgage Loan were guaranteed by certain of the Sponsors’ investment funds up to an aggregate of $200.0 million.

The occurrence of a Mortgage Loan Event of Default, a Mezzanine Loan Default, a Debt Service Coverage Ratio, as defined, below 1.20, or a bankruptcy or certain other liquidity events of one of the Sponsors’ guarantors would trigger a Cash Trap Event, as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) were fully funded, was held by the loan service agent as additional collateral for the 2010 Mortgage Loan. As of the date of the refinancing, none of these events had occurred.

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Assumed Mortgage Loan—Two of ESH REIT’s hotel properties were subject to a mortgage loan that was assumed on the Acquisition Date when the hotels were acquired (the “Assumed Mortgage Loan”). The assumed mortgage loan was secured by the two hotel properties. On October 23, 2013, ESH REIT prepaid the assumed mortgage loan, which had an outstanding principal balance of approximately $5.5 million.

ESH REIT Mezzanine Loans

2012 Mezzanine Loans—On November 30, 2012, ESH REIT entered into three mezzanine loans totaling $1.08 billion (the “2012 Mezzanine Loans”). Interest-only payments for the 2012 Mezzanine Loans total approximately $8.5 million and $2.9 million prior to and subsequent to the partial debt repayment, respectively, and are due on the first day of each calendar month. Each of the 2012 Mezzanine Loans are subject to similar CMA requirements and loan covenants generally as described above for the 2012 Mortgage Loan.

Up to $75.0 million of the Mezzanine A loan, $49.5 million of the Mezzanine B loan, and $37.5 million of the Mezzanine C loan could be voluntarily prepaid between December 1, 2012 and June 1, 2013, without prepayment premium or penalty. Up to an aggregate of $125.0 million of the Mezzanine A loan, $82.5 million of the Mezzanine B loan, and $62.5 million of the Mezzanine C loan (collectively, the Free Prepayment Amount) could be voluntarily prepaid without incurring prepayment premium or penalty between June 1, 2013 and December 1, 2013. The Free Prepayment Amount, which totaled $270.0 million, was voluntarily prepaid on November 26, 2013, as part of the fourth quarter 2012 Mezzanine Loan partial repayment discussed above. After December 1, 2013, and through June 1, 2014, the prepayment amount will incur a 3.0% prepayment premium. On December 27, 2013, ESH REIT prepaid $445.0 million and incurred a prepayment penalty of approximately $13.4 million. After June 1, 2014, and through December 1, 2014, the prepayment amount will incur a 1.0% prepayment premium. The 2012 Mezzanine Loans may be prepaid in whole or in part after December 1, 2014, without prepayment premium or penalty. Voluntary prepayment of the 2012 Mezzanine Loans may be made without an obligation of the 2012 Mortgage Loan borrowers to make a corresponding prepayment on the 2012 Mortgage Loan. However, prepaying one of the 2012 Mezzanine Loans creates an obligation of the other 2012 Mezzanine Loan borrowers to make corresponding pro rata prepayments on their respective mezzanine loans.

Under certain limited circumstances, losses related to the 2012 Mezzanine Loans and costs incurred by the lenders are guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $108.0 million.

2010 Mezzanine Loans—On the Acquisition Date, ESH REIT entered into mezzanine loans totaling $700.0 million, consisting of $350.0 million of senior mezzanine debt that bore interest at 9.75% and $350.0 million of junior mezzanine debt that bore interest at 12.0% (the “2010 Mezzanine Loans”). Interest-only payments totaling approximately $6.3 million were due monthly on the first day of each calendar month. The 2010 Mezzanine Loans would have matured on November 1, 2015, with all outstanding principal and unpaid interest due on that date; however, on November 30, 2012, ESH REIT voluntarily prepaid the 2010 Mezzanine Loans and incurred a prepayment premium of $10.5 million.

ESH Strategies fully guaranteed the junior mezzanine principal and interest and pledged its ownership interests in certain of its subsidiaries as security. Under limited circumstances, losses related to the 2010 Mezzanine Loans were guaranteed by certain of the Sponsors’ investment funds up to an aggregate of $25.0 million.

Mandatorily Redeemable Preferred Stock

The Corporation has authorized 350.0 million shares of preferred stock, par value $0.01 per share, of which 21,202 shares of mandatorily redeemable voting preferred stock were issued and outstanding as of December 31, 2013. Dividends on the preferred shares are payable quarterly in arrears at a rate of 8.0% per year. With respect to dividend, distribution and liquidation rights, the 8.0% voting preferred stock ranks senior to the Corporation’s common stock. Holders of the 8.0% voting preferred stock are generally entitled to one vote for each share and will vote together with the Corporation common stock as a single class on all matters that the Corporation’s common shareholders are entitled to vote upon. On or after November 15, 2018, a holder of the 8.0% voting preferred stock has the right to require the Corporation to redeem in cash the 8.0% voting preferred stock at $1,000 per share plus any accumulated but unpaid dividends. On November 15, 2020, the Corporation shall mandatorily redeem all of the 8.0% voting preferred stock at $1,000 per share plus any accumulated but unpaid dividends and therefore the preferred stock is classified as debt on the accompanying consolidated and combined balance sheet as of December 31, 2013.

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Revolving Credit Facilities

Corporation Revolving Credit Facility –On November 18, 2013, the Corporation entered into a revolving credit facility of $75.0 million. On November 18, 2014, the borrowing availability under the facility will be reduced to $50.0 million. The facility provides for the issuance of up to $50.0 million letters of credit as well as borrowings on same day notice, referred to as swingline loans, in an amount up to $20.0 million. The Corporation incurs a fee of 0.35% or 0.175% on the unutilized revolver balance, based on the outstanding amount under the facility, and a fee of 3.875% on outstanding letters of credit due on the last day of each quarter. Borrowings under the facility bear interest at a rate equal to an adjusted LIBOR rate or a base rate determined by reference to the highest of (i) the prime lending rate, (ii) the overnight federal funds rate plus 0.5% or (iii) the one-month adjusted LIBOR rate plus 1.0%, plus an applicable margin of 2.75% for the base rate loans and 3.75% for LIBOR loans. There is no scheduled amortization under the facility and the facility matures on November 18, 2016. As of December 31, 2013, the Corporation had three letters of credit totaling approximately $24.9 million outstanding under this credit facility, the outstanding balance drawn was $0 and the amount of borrowing capacity available was approximately $50.1 million. The Corporation incurred approximately $0.2 million of fees in connection with the Corporation revolving credit facility, which are included as a component of interest expense in the Company’s accompanying consolidated and combined statement of operations for the year ended December 31, 2013.

In order to avoid a Trigger Event, as defined, the revolving credit facility requires a Debt Yield, as defined, of at least 11.5% (with the requirement increasing to 12.0% on and after November 18, 2014), and a Consolidated Leverage Ratio, as defined, of no more than 9.0 to 1 (with the requirement decreasing to no more than 8.75 to 1 over the life of the facility). The occurrence of a Trigger Event requires the Corporation to repay the outstanding facility balance and restricts its ability to draw additional proceeds. As of December 31, 2013, none of these events had occurred.

ESH REIT Revolving Credit Facility – On November 18, 2013, ESH REIT entered into a revolving a credit facility of $250.0 million. Subject to the satisfaction of certain criteria, ESH REIT will be able to request to increase the facility to an amount up to $350.0 million. The facility provides for the issuance of up to $50.0 million of letters of credit as well as borrowings on same day notice, referred to as swingline loans, in an amount up to $20.0 million. ESH REIT incurs a fee of 0.35% or 0.175% on the unutilized revolver balance, based on the outstanding amount under the facility, and a fee of 3.125% on outstanding letters of credit due on the last day of each quarter. Borrowings under the facility bear interest at a rate equal to an adjusted LIBOR rate or a base rate determined by reference to the highest of (i) the prime lending rate, (ii) the overnight federal funds rate plus 0.5% or (iii) the one-month adjusted LIBOR rate plus 1.0%, plus an applicable margin of 2.00% for base rate loans and 3.00% for LIBOR loans. There is no scheduled amortization under the facility and the facility matures on November 18, 2016. As of December 31, 2013, ESH REIT had no letters of credit outstanding under this credit facility, the outstanding balance drawn was $20.0 million and the amount of borrowing capacity available was $230.0 million. ESH REIT incurred approximately $0.1 million of fees in connection with the ESH REIT revolving credit facility, which are included as a component of interest expense in the Company’s accompanying consolidated and combined statement of operations for the year ended December 31, 2013.

In order to avoid a Trigger Event, as defined, the revolving credit facility requires a Debt Yield, as defined, of at least 11.0% (with the requirement increasing to 11.5% on and after November 18, 2014), and a Consolidated Leverage Ratio, as defined, of no more than 9.25 to 1 (with the requirement decreasing to no more than 9.0 to 1 over the life of the facility). The occurrence of a Trigger Event requires ESH REIT to repay the outstanding facility balance and restricts its ability to draw additional proceeds. As of December 31, 2013, none of these events had occurred.

Extended Stay LLC Revolving Credit Facility—On November 30, 2012, Extended Stay LLC, a subsidiary of ESH REIT, entered into a revolving credit facility of $100.0 million. Extended Stay LLC incurred a fee of 0.5% on the undrawn revolver balance due on the first day of each calendar quarter. Extended Stay LLC incurred approximately $0.9 million of fees in connection with the Extended Stay LLC revolving credit facility, which are included as a component of interest expense in the Company’s accompanying consolidated and combined statement of operations for the year ended December 31, 2013.

On November 18, 2013, the Extended Stay LLC revolving credit facility terminated in connection with the Offering and the Company wrote off approximately $0.7 million in unamortized deferred financing costs, which are included as a component of interest expense in the Company’s accompanying consolidated and combined statement of operations for the year ended December 31, 2013.

Interest Expense—The components of interest expense for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Contractual interest	$	194,980	$	201,518	$	201,976
Amortization of deferred financing costs		12,537		10,988		10,428
Debt extinguishment and other costs		27,076		45,150		70
Total	$	234,593	$	257,656	$	212,474

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Future Maturities of Debt—The future maturities of debt as of December 31, 2013, are as follows (in thousands):

Years Ending December 31
2014	$	349,843	(1)
2015		—
2016		20,000
2017		350,000
2018		—
Thereafter		2,206,202
Total	$	2,926,045

(1) Debt maturity includes three one-year extension options, subject to limited conditions. The December 2014 and 2015 extension conditions include providing an adequate extension notice period, the extension or renewal of the interest rate cap and having none of the borrowing entities be in default, as defined. The 2016 extension conditions include the conditions for the 2014 and 2015 extensions, as well as the requirement of a specified minimum Debt Yield.

Fair Value of Debt—As of December 31, 2013 and 2012, the estimated fair value of ESH REIT’s mortgage loans, mezzanine loans and the Corporation’s mandatorily redeemable preferred stock was approximately $2.9 billion and $3.6 billion, respectively. The estimated fair values of mortgage loans, mezzanine loans and mandatorily redeemable preferred stock are determined by comparing current borrowing rates and risk spreads offered in the market to the stated interest rates and spreads on current mortgage loans (Level 2 fair value measures), mezzanine loans (Level 2 fair value measures), and mandatorily redeemable preferred stock (Level 3 fair value measures) or quoted market prices (Level 1 fair value measures), when available.

8. INCOME TAXES

The Company

Income before income tax expense for the years ended December 31, 2013, 2012 and 2011 consists of the following (in thousands):

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
U.S.	$	76,501	$	23,597	$	51,440
Canada		1,165		3,326		2,245
Total	$	77,666	$	26,923	$	53,685

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The components of the income tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Year Ended December 31, 2013			Year Ended December 31, 2012		Year Ended December 31, 2011
Federal (including foreign):
Current	$	3,520		$	1,583	$	7,317
Deferred		(10,131	)		1,719		(2,262	)
State:
Current		3,044			672		2,232
Deferred		(1,423	)		668		(237	)
Total	$	(4,990	)	$	4,642	$	7,050

The differences between the income tax (benefit) expense at the effective tax rate and the statutory U.S. federal income tax rate for the years ended December 31, 2013, 2012 and 2011are as follows (in thousands):

	Year Ended December 31, 2013					Year Ended December 31, 2012					Year Ended December 31, 2011
Tax at statutory rate	$	27,183		35.0	%	$	9,424		35.0	%	$	18,790		35.0	%
State income tax—net		357		0.4			996		3.7			1,330		2.5
Foreign income tax rate differential		203		0.3			269		1.0			327		0.5
Nondeductible (nontaxable):
REIT income		(33,798	)	(43.5	)		(6,632	)	(24.6	)		(15,271	)	(28.4	)
Pass-through entity income		(1,182	)	(1.5	)		(1,317	)	(4.9	)		(386	)	(0.7	)
Change in expected distribution policy		(5,561	)	(7.2	)		—		—			—		—
Equity-based compensation		6,598		8.5			2,100		7.8			—		—
Other permanent differences		1,678		2.2			121		0.4			1,757		3.3
Other—net		(684	)	(0.9	)		(340	)	(1.3	)		72		0.1
Valuation allowance		216		0.3			21		0.1			431		0.8
Income tax (benefit) expense—net	$	(4,990	)	(6.4	)%	$	4,642		17.2	%	$	7,050		13.1	%

The significant components of deferred tax assets and deferred tax liabilities as of December 31, 2013 and 2012, consist of the following (in thousands):

	December 31,			December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	7,851		$	1,089
Accruals and allowances		5,227			2,387
Intangible assets		4,156			268
Impairment and other		4,151			62
Total deferred tax assets		21,385			3,806
Valuation allowance		(773	)		(577	)

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	December 31, 2013			December 31, 2012
Net deferred tax assets		20,612			3,229
Deferred tax liabilities:
Basis difference in ESH REIT stock held by the Corporation		(16,334	)		—
Intangible assets		(7,157	)		(7,469	)
Prepaid expenses		(683	)		(790	)
Depreciable property		(3,750	)		(3,819	)
Total net deferred tax liabilities	$	(7,312	)	$	(8,849	)

The deferred income tax impacts of the Pre-IPO Transactions of approximately $10.0 million were recorded as a reduction to additional paid in capital. Additionally, as described below, a net deferred tax asset of approximately $6.6 million was recorded as a benefit to the income tax provision for the year ended December 31, 2013.

As of December 31, 2013 and 2012, the Company recorded a valuation allowance related to the net operating loss carryforwards of its Canadian Operating Lessee. The Company has concluded that, in light of available evidence, it is more likely than not that these net operating loss carryforwards will not be realized.

The Company evaluates its open tax positions using the criteria established by FASB ASC 740, “Income Taxes.” The Company has concluded that it has not taken any tax positions that are not more likely than not to be sustained upon examination and has therefore not recorded any reserves for uncertain tax positions. The Company’s (and predecessor entities’) income tax returns for the years 2010 to present are subject to examination by the Internal Revenue Service and other taxing authorities.

ESH REIT

ESH REIT has elected to be taxed and expects to continue to qualify as a REIT under Sections 856 through 860 of the Code. A REIT is a legal entity that holds real estate assets and is generally not subject to federal and state income taxes. In order to maintain qualification as a REIT, ESH REIT is required to distribute at least 90% of its taxable income, excluding capital gains, to its shareholders each year. In addition, ESH REIT must meet a number of complex organizational and operational requirements. If ESH REIT were to fail to qualify as a REIT in any taxable year, it would be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and generally would be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which it lost its REIT qualification. Even in qualifying as a REIT, ESH REIT may be subject to state and local taxes in certain jurisdictions and may be subject to federal income and excise taxes on undistributed income.

While ESH REIT has historically distributed 100% of its taxable income, beginning in 2014, it intends to distribute approximately 95% of its taxable income. Accordingly, ESH REIT will be subject to income taxes on approximately 5% of its taxable income. As a result, deferred tax balances have been adjusted during the year to reflect the fact that an estimated 5% of ESH REIT’s future taxable income will be subject to tax. This change in distribution policy resulted in the recognition of a deferred tax asset during 2013 of approximately $7.8 million related to net operating loss carryforwards that existed as of December 31, 2012. These net operating losses expire in 2032. In addition, net deferred tax liabilities of approximately $1.2 million were recorded during 2013 related to temporary differences that are now expected to be included in taxable income in the future.

As of December 31, 2013, the book basis of ESH REIT’s assets was approximately $63.7 million greater than the tax basis of its assets.

9. QUARTERLY RESULTS (Unaudited)

Below includes quarterly financial data for the years ended December 31, 2013 and 2012 (in thousands, except per share data):

	Three Months Ended March 31,				Three Months Ended June 30,				Three Months Ended September 30,				Three Months Ended December 31,
	2013		2012		2013		2012		2013		2012		2013			2012
Total revenues	$	256,798	$	223,092	$	293,595	$	256,442	$	313,653	$	281,373	$	268,772		$	250,555
Income from operations		66,668		54,450		92,172		76,791		100,035		89,505		53,250	(1)		63,526
Net income (loss)		13,917		1,507		37,539		20,531		46,578		33,277		(15,378	)(2)		(33,034	)(3)

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Net (income) loss attributable to noncontrolling interests		(471	)		(293	)		33		527		(422	)		(141	)		4,435			(1,642	)
Net income attributable to common shareholders or members		13,446			1,214			37,572		21,058		46,156			33,136			(10,943	)		(34,676	)
Basic net income per share(4)	$	0.08		$	0.01		$	0.22	$	0.12	$	0.27		$	0.20		$	(0.06	)	$	(0.20	)
Diluted net income per share(4)	$	0.08		$	0.01		$	0.22	$	0.12	$	0.27		$	0.19		$	(0.06	)	$	(0.20	)

(1) Includes a charge of approximately $14.6 million related to incremental compensation cost associated with modification of equity-based awards.

(2) Includes charges of: (1) approximately $14.6 million related to incremental compensation cost associated with modification of equity-based awards; and (2) approximately $25.2 million related to the write-off of unamortized deferred financing costs and loan prepayment penalties and related costs.

(3) Includes a charge of approximately $45.1 million related to the write-off of unamortized deferred financing costs and loan prepayment penalties and related costs.

(4) The sum of basic net income per share and diluted net income per share for the four quarters may differ from the annual basic net income per share and annual diluted net income per share due to rounding.

10. EQUITY

The Corporation

The Corporation has authorized 3,500.0 million shares of common stock, par value $0.01 per share, of which approximately 204.8 million shares were issued and outstanding as of December 31, 2013. Each share of the Corporation’s outstanding common stock is attached to and trades as a single unit with one share of Class B common stock, par value $0.01 per share, of ESH REIT.

The Corporation has authorized 350.0 million shares of preferred stock, $0.01 par value, of which 21,202 shares of mandatorily redeemable preferred stock were issued and outstanding as of December 31, 2013. Dividends on the preferred shares are payable quarterly in arrears at a rate of 8.0% per year. The outstanding preferred shares are included in other debt on the accompanying consolidated and combined balance sheet as of December 31, 2013 and are further described in Note 7.

ESH REIT

ESH REIT has authorized 4,300.0 million shares of Class A common stock, par value $0.01 per share, of which approximately 250.3 million shares were issued and outstanding as of December 31, 2013. All of the issued and outstanding shares of ESH REIT Class A common stock as of December 31, 2013 is held by the Corporation. ESH REIT has authorized 7,800.0 million shares of Class B common stock, par value $0.01 per share, of which approximately 204.8 million shares were issued and outstanding as of December 31, 2013.

ESH REIT has authorized 350.0 million shares of preferred stock, par value $0.01 per share, of which no shares were issued or outstanding as of December 31, 2013. Additionally, ESH REIT has authorized 125 shares of preferred stock, no par value, of which 125 shares of preferred stock were issued and outstanding as of December 31, 2013. The preferred stock pays dividends at a rate of 12.5% per year. With respect to dividends and distributions upon ESH REIT’s liquidation, winding-up or dissolution, the 12.5% preferred stock ranks senior to the Class A and Class B common stock. The liquidation preference of the 12.5% preferred stock is $1,000 per share plus any accumulated but unpaid dividends and a redemption premium if redeemed prior to December 31, 2015. Shares of 12.5% preferred stock may be redeemed, in whole or in part, at any time for a per share amount equal to the liquidation preference plus all accumulated but unpaid dividends.

Prior to the Pre-IPO Transactions, ESH REIT had three classes of member interests authorized: preferred units (125 units authorized), common units (1,000 units authorized), and excess units (1,000 units authorized). All common units were issued to Holdings on the Acquisition Date, representing a capital investment of approximately $1.5 billion. These units were outstanding as of December 31, 2012. On January 3, 2011, ESH REIT issued all of the preferred units for consideration of $73,000, net of issuance costs. These units were outstanding as of December 31, 2012. Preferred units were entitled to a cumulative preferential cash distribution at the rate of 12.5% per annum on the $1,000 liquidation preference per unit and the liquidation preference amount upon dissolution or winding up of the affairs of ESH REIT. No excess units were issued or outstanding as of December 31, 2012.

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Cash and property distributions of approximately $78.4 million and $161.4 million, respectively, were made to the outstanding common units during the year ended December 31, 2013. Cash distributions totaling approximately $826.2 million and $26.1 million were made to the outstanding common units during the years ended December 31, 2012 and 2011, respectively. For the year ended December 31, 2011, ESH REIT treated its taxable income in excess of cash distributions as a consent dividend.

ESH Strategies

ESH Strategies’ sole member made an initial capital investment of approximately $10.6 million on the Acquisition Date. No cash distributions were made or declared during the year ended December 31, 2013. ESH Strategies made distributions of approximately $6.7 million during the year ended December 31, 2012. No distributions were made or declared during the year ended December 31, 2011.

Noncontrolling Interests

Subsequent to the Pre-IPO Transactions, third party equity interests in ESH REIT consist of the shares of the Class B common stock of ESH REIT, which represent approximately 45% of ESH REIT’s total common equity, and 125 shares of 12.5% preferred stock of ESH REIT. As of December 31, 2013, these interests, which are not owned by the Corporation, are presented as noncontrolling interests. Prior to the Pre-IPO Transactions, noncontrolling interests consisted of all of the equity of HVM, a consolidated variable interest entity.

11. VARIABLE INTEREST ENTITY (HVM)

As discussed in Notes 1 and 2, the financial position, results of operations, other comprehensive income and cash flows of HVM are consolidated in the Company’s accompanying consolidated and combined financial statements through the Pre-IPO Transactions. As part of the Pre-IPO Transactions, ESA Management acquired all of the assets and assumed all of the liabilities of HVM for approximately $0.8 million; at that time, the existing management agreements were terminated and ESA Management entered into new management and service agreements with the Operating Lessees, ESH REIT and ESH Strategies. The following describes HVM’s financial activity prior to the Pre-IPO Transactions, the majority of which is eliminated in consolidation and combination.

Hotel Management Agreements with the Company—On the Acquisition Date, ESH REIT’s hotel operating subsidiaries, the Operating Lessees, executed management agreements with HVM with respect to all of the hotels under lease. Under the terms of these agreements, HVM provided management services to the hotels, including supervision, direction, control of the operation, and management and promotion of the hotel properties in a manner consistent with extended stay hotels of similar size, type, or usage in similar locations.

The following table sets forth a summary of the fees provided under the hotel management agreements between HVM and the Operating Lessees through the Pre-IPO Transactions:

	Fees as Percentage of Revenue—First Threshold	First Revenue Threshold	Fees as Percentage of Revenue—Second Threshold	Second Revenue Threshold
U.S. 660 hotel operators	2.5%	Up to $500 million	0.5%	> $500 million
Canadian 3 hotel operators	2.5%	Up to C$12 million	0.5%	> C$12 million
U.S. 2 hotel operators under assumed mortgage loan	2.5%	Up to $1.8 million	0.5%	> $1.8 million
U.S. 17 hotel operators acquired in December 2012	8.0%	N/A	N/A	N/A

Excluding the agreements with the U.S. 17 hotel operators assumed by the Company in December 2012, under each of these agreements, HVM was also reimbursed, without markup, for costs incurred by HVM for providing services for accounting, financial analysis, operations supervision, sales, revenue management, training, technology, marketing, advertising, reservation services and travel agent commissions.

Administrative Services Agreements with the Company—On the Acquisition Date, ESH REIT and ESH Strategies executed service agreements with HVM, whereby HVM provided services for certain administrative, legal, financial, accounting, and related services, including services related to property acquisitions and oversight and procurement of capital assets. Fees consisted of HVM’s cost of providing the services plus 6%. In connection with the Pre-IPO Transactions, the Company acquired the net assets of HVM; therefore, all of the administrative services agreements were terminated at that time.

Third Party Management Agreements—Through December 12, 2012, HVM managed 17 hotels for a third-party hotel owner-operator under a separate management agreement with each hotel. The Company acquired these hotels on December 13, 2012 (see Note 4) and these management agreements were assumed by the Company upon acquisition. In addition, HVM had two additional hotel management agreements to manage hotels owned by a third-party hotel owner-operator. The Company acquired these hotels on December 31, 2013 (see Note 4).

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The following tables set forth a summary of the hotel management fees, administrative services fees, G&A expense reimbursement fees, third party management fees and reimbursements to HVM for these activities for the period from January 1, 2013 through the Pre-IPO Transactions and each of the years ended December 31, 2012 and 2011 (in thousands). Where appropriate, such amounts have been eliminated in the accompanying consolidated and combined financial statements.

	Period from January 1, 2013 through the Pre-IPO Transactions
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursement		Total fees
Hotel Management Agreements:
U.S. 660 hotel operators	$	13,456	$	40,466	$	—	$	53,922	$	176,572	$	230,494
Canadian hotel operators		101		176		—		277		2,630		2,907
U.S. 2 hotel operators under assumed mortgage loan		40		—		—		40		493		533
U.S. 17 hotel operators acquired in December 2012		1,331		—		—		1,331		—		1,331
Administrative Services Agreements:
U.S. and Canadian 680 hotel owners		—		—		6,130		6,130		—		6,130
ESH Strategies		—		—		178		178		—		178
Third Party Management Agreements:
U.S. 2 third party hotel operators		295		—		—		295		640		935
	$	15,223	$	40,642	$	6,308	$	62,173	$	180,335	$	242,508

	Year Ended December 31, 2012
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursement		Total fees
Hotel Management Agreements:
U.S. 660 hotel operators	$	14,852	$	78,732	$	—	$	93,584	$	197,315	$	290,899
Canadian hotel operators		41		331		—		372		2,983		3,355
U.S. 2 hotel operators under assumed mortgage loan		46		—		—		46		561		607
U.S. 17 hotel operators acquired in December 2012(1)		78		—		—		78		270		348
Administrative Services Agreements:
U.S. and Canadian 680 hotel owners		—		—		6,745		6,745		—		6,745
ESH Strategies		—		—		357		357		—		357
Third Party Management Agreements:
U.S. 17 hotel operators acquired in December 2012(2)		2,354		—		—		2,354		5,807		8,161
U.S. 2 third party hotel operators		280		—		—		280		793		1,073
	$	17,651	$	79,063	$	7,102	$	103,816	$	207,729	$	311,545

(1) Fees earned by HVM subsequent to the Company’s acquisition of the 17 HFI hotels.

(2) Fees earned by HVM prior to the Company’s acquisition of the 17 HFI hotels.

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	Year Ended December 31, 2011
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursements		Total fees
Hotel Management Agreements:
U.S. 660 hotel operators	$	14,581	$	62,391	$	—	$	76,972	$	186,906	$	263,878
Canadian hotel operators		59		245		—		304		2,847		3,151
U.S. 2 hotel operators under assumed mortgage loan		46		—		—		46		490		536
U.S. 17 hotel operators acquired in December 2012		—		—		—		—		—		—
Administrative Services Agreements:
U.S. and Canadian 680 hotel owners		—		—		4,313		4,313		—		4,313
ESH Strategies		—		—		424		424		—		424
Third Party Management Agreements:
U.S. 17 hotel operators acquired in December 2012		2,341		—		—		2,341		5,697		8,038
U.S. 2 third party hotel operators		246		—		—		246		712		958
	$	17,273	$	62,636	$	4,737	$	84,646	$	196,652	$	281,298

Condensed Consolidated Financial Information—The condensed consolidated balance sheet of HVM as of December 31, 2012, was as follows (in thousands):

	December 31, 2012
Assets:
Cash and cash equivalents	$	3,004
Accounts receivable from the Company		34,277
Accounts receivable from third parties		157
Furniture, fixtures and equipment—net of accumulated depreciation of $9,941		3,568
Other assets		6,510
Total assets	$	47,516
Liabilities and members’ equity:
Accounts payable and accrued liabilities	$	44,359
Members’ equity		3,157
Total liabilities and members’ equity	$	47,516

The condensed consolidated statements of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011 are as follows (in thousands):

	Period from January 1, 2013 through the Pre-IPO Transactions		Year Ended December 31, 2012		Year Ended December 31, 2011
Revenues:
Management fee revenues	$	62,173	$	103,816	$	84,646
Reimbursement of payroll from managed properties		180,335		207,729		196,652
Total revenues		242,508		311,545		281,298
Operating expenses:
Hotel operating expenses		—		27,280		17,274
General and administrative expenses		58,049		65,795		54,956
Restructuring expenses		605		5,763		8,938

103

	Period from January 1, 2013 through the Pre-IPO Transactions		Year Ended December 31, 2012		Year Ended December 31, 2011
Managed property payroll expenses		180,335		207,729		196,652
Depreciation and amortization		1,300		1,429		1,100
Total operating expenses		240,289		307,996		278,920
Other income		120		68		60
Net income	$	2,339	$	3,617	$	2,438

12. COMMITMENTS AND CONTINGENCIES

Lease Commitments—In May 2011, HVM executed a lease for office space in Charlotte, North Carolina, in conjunction with the relocation of its corporate headquarters (see Note 13). The lease is an operating lease with an initial term through August 2021. After the initial term, the Company has the option to renew the lease for two additional terms of five years each at the then-fair market annual base rental rate.

The Company is a tenant under long-term ground leases at four of its hotel properties. The initial terms of the ground lease agreements terminate at various dates between 2016 and 2096, and most leases include multiple renewal options for generally five or 10 year periods.

Rent expense on office and ground leases is recognized on a straight-line basis and was approximately $3.3 million, $3.3 million and $2.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. Ground lease expense is included in hotel operating expenses and office lease expense is included in general and administrative expenses in the accompanying consolidated and combined statements of operations.

Future minimum lease payments under operating leases as of December 31, 2013, are as follows (in thousands):

Years Ending December 31
2014	$	2,224
2015		2,309
2016		2,366
2017		2,428
2018		2,491
Thereafter		87,951
Total	$	99,769

Other Commitments—The Company has a commitment to make quarterly payments in lieu of taxes to the owner of the land on which one of its properties is located. The initial term of the agreement terminates in 2031. The cost related to this commitment was approximately $0.3 million for each of the three years ended December 31, 2013, 2012 and 2011, and is included in hotel operating expenses in the accompanying consolidated and combined statements of operations.

Letter of Credit—As of December 31, 2013, the Company had three outstanding letters of credit, issued by the Corporation, that totaled approximately $24.9 million that were collateralized by the Corporation’s revolving credit facility.

Legal Contingencies—The Company is not a party to any other litigation or claims, other than routine matters arising in the ordinary course of business, that are incidental to the operation of the business of the Company. The Company believes that the results of all claims and litigation, individually or in the aggregate, will not have a material adverse effect on its business or consolidated and combined financial statements.

Purchase Commitments—As of December 31, 2013, the Company had purchase commitments related to certain continuing refurbishments to its hotel properties of approximately $10.6 million.

Executive Employment Agreements—Five members of senior management have employment agreements. These agreements generally provide for a two-year employment term that are subject thereafter to one-year extensions and specify the executive’s current compensation, benefits and perquisites, the executive’s entitlements upon termination of employment and other employment rights and responsibilities.

104

13. RESTRUCTURING

In 2013, the Company and HVM initiated an operations restructuring which changed certain aspects of its property staffing model. In 2011, the Company and HVM initiated a corporate restructuring that included, among other things, the relocation of the corporate headquarters to Charlotte, North Carolina. The corporate relocation was completed during the first half of 2012. Total expenses incurred during the years ended December 31, 2013, 2012 and 2011, were approximately $0.6 million, $5.8 million and $10.5 million, respectively, and consisted of the following (in thousands):

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Personnel relocation, recruitment, and separation payments	$	605	$	3,729	$	3,789
Executive separation payments		—		2,019		5,000
Relocation of furniture, fixtures and equipment		—		15		149
Loss on sale of office building		—		—		1,553
Total restructuring expenses	$	605	$	5,763	$	10,491

Amounts accrued and paid related to the corporate restructuring during the years ended December 31, 2013 and 2012, are summarized as follows (in thousands):

	December 31, 2013			December 31, 2012
Balance—beginning of year	$	213		$	5,205
Expense incurred		605			5,763
Cash payments		(810	)		(8,736	)
Equity awards		—			(2,019	)
Balance—end of year	$	8		$	213

As of December 31, 2013 and 2012, amounts accrued are included in accounts payable and accrued liabilities on the accompanying consolidated and combined balance sheets.

14. EQUITY-BASED COMPENSATION

As of December 31, 2013, the Corporation and ESH REIT each maintain a long-term incentive plan (“LTIP”) under which the Corporation and ESH REIT may issue to eligible employees or directors restricted stock (i.e., Paired Share) awards, restricted stock (i.e., Paired Share) units or other share-based awards. The aggregate number of Paired Shares that may be made as awards under the LTIP’s shall not exceed 8.0 million, no more of which 4.0 million may be granted as incentive stock options. Each of the Corporation’s and ESH REIT’s LTIP has a share reserve of an equivalent number of shares of Corporation common stock and Class B common stock of ESH REIT, respectively. Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan which provided for HVM employees and members of Holdings’ and Strategies Holdings’ boards of managers awards of restricted limited liability interests (“Profit Units”) in Holdings and Strategies Holdings.

On November 12, 2013, holders of outstanding Profit Units received an aggregate distribution of cash of approximately $2.4 million from Holdings and all remaining outstanding Profit Units were converted into restricted stock (i.e., Paired Share) awards. 80% of the restricted stock awards received in respect of the Profit Units were received with the same vesting schedules as the Profit Units and at their fair values. 20% of the restricted stock awards received in respect of the Profit Units were received with acceleration to their existing vesting schedules. As a result of this acceleration, the Company and ESH REIT incurred additional compensation cost of approximately $14.6 million and $2.3 million, respectively.

Subsequent to the Offering, the fair value of equity-based awards on the date of grant is based on the closing price of a Paired Share on the date of grant. A portion of the grant date fair value is allocated to a share of common stock of the Corporation and a portion of the price allocated to a share of Class B common stock of ESH REIT.

Prior to the Offering, the fair value of equity-based awards on the date of grant was estimated using the Black-Scholes Merton model, using various assumptions regarding (a) the expected holding period, (b) the risk-free rate of return, (c) expected dividend yield on the underlying units, (d) the expected volatility in the fair value of the Company’s equity, and (e) a discount for lack of marketability, and was calculated based on the grant agreement terms, which included thresholds for internal rate of return and recovery of Holdings’ and Strategies Holdings’ members’ initial equity investments.

The expected holding period represents the period of time that the Profit Units are expected to be outstanding. The units were assumed to remain outstanding until the Company experienced a change in control of ownership or an initial public offering. The risk-free rate of return for periods approximating the expected holding period of the units was based on the U.S. constant maturity treasuries yield in effect at the grant date. A dividend yield was assumed based on the Company’s historical dividend rate. Because the Company’s equity was privately held and was not traded in an active market, the Company used the historical volatility of the share values of publicly traded companies within similar industries as the Company as a surrogate for the expected volatility of the Company’s equity. The discount for lack of marketability was calculated for each expected holding period using a put-option Black-Scholes Merton model. The key assumptions used for the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011 were as follows:

	Period from January 1, 2013 through the Pre-IPO Transactions			Year Ended December 31, 2012			Year Ended December 31, 2011
Expected holding period		0.25 years			3 years			2 – 4 years
Risk–free rate of return		0.2	%		0.4	%		0.3% – 0.6	%
Expected dividend yield		0.0	%		0.0	%		0.9	%
Expected volatility		30.0	%		55.0	%		47.9	%
Discount for lack of marketability		20.0	%		20.0	%		20.0	%

105

Equity-based compensation cost is recognized by amortizing the grant-date fair value of the equity-based awards, less estimated forfeitures, on a straight-line basis over the requisite service period of each award. During the years ended December 31, 2013, 2012 and 2011, approximately $20.2 million, $6.4 million, and $4.7 million, respectively, of compensation cost was recognized. During the years ended December 31, 2013, 2012 and 2011, approximately $20.2 million, $4.4 million, and $4.7 million, respectively, of compensation cost is included in general and administrative expenses in the accompanying consolidated and combined statements of operations. During the year ended December 31, 2012, approximately $2.0 million of compensation cost is included in restructuring expenses in the accompanying consolidated and combined statement of operations, as this cost related to an executive separation payment as a result of the Company’s and HVM’s restructuring (see Note 13).

As of December 31, 2013, there was $19.6 million of unrecognized compensation cost related to outstanding equity-based awards, which is expected to be recognized subsequent to December 31, 2013 over a weighted-average period of approximately 2.0 years. Total unrecognized compensation cost will be adjusted for future forfeitures.

Restricted stock award and restricted stock unit (collectively, “RSA/RSU”) activity during the years ended December 31, 2013, 2012 and 2011, after taking into account the conversion of Profit Units issued under HVM’s management incentive plan on November 12, 2013, was as follows:

		Number of RSAs/RSUs (in thousands)			Weighted- Average Grant-Date Fair Value per RSA/RSU(1)
Outstanding RSAs/RSUs—January 1, 2011			4,203		$	5.52
RSAs/RSUs granted in 2011			1,064		$	6.90
RSAs/RSUs forfeited in 2011			(456	)	$	5.52
Outstanding RSAs/RSUs—December 31, 2011			4,811		$	5.83
RSAs/RSUs granted in 2012			1,349		$	9.47
RSAs/RSUs forfeited in 2012			(1,248	)	$	5.62
RSAs/RSUs redeemed in 2012	��		(96	)	$	5.52
Outstanding RSAs/RSUs—December 31, 2012			4,816		$	6.96
RSAs/RSUs granted in 2013			535		$	21.89
RSAs/RSUs converted or accelerated in 2013			(2,802	)	$	6.67
RSAs/RSUs forfeited in 2013			(520	)	$	5.76
RSAs/RSUs redeemed in 2013			(96	)	$	6.67
Outstanding RSAs/RSUs—December 31, 2013			1,933		$	12.02
Vested RSAs/RSUs—December 31, 2013			—		$	—
Nonvested RSAs/RSUs—December 31, 2013			1,933		$	12.02
Vested RSAs/RSUs—December 31, 2012			1,532		$	5.79
Nonvested RSAs/RSUs—December 31, 2012			3,284		$	7.65

(1) Valuation was performed contemporaneously with grants.

In December 2010, HVM entered into agreements designed to incentivize and retain certain operations personnel whose duties include the oversight of multiple hotel properties. The agreements provide participants future payment upon a change of control transaction, generally defined as a sale of the Company or a substantial portion of its assets or operations. In March 2011, HVM allowed participants to elect to receive a one-time payment of a portion of the amount due under the agreements. Remaining payments prescribed by the agreements require that the participant remain employed upon a change of control transaction. In connection with the Pre-IPO Transactions, the Corporation assumed this liability upon its purchase of HVM’s net assets. As of December 31, 2013 and 2012, $4.2 million and $4.5 million, respectively, are included in accounts payable and accrued liabilities on the accompanying consolidated and combined balance sheets related to these agreements.

106

15. DEFINED CONTRIBUTION BENEFIT PLAN

HVM had a savings plan that qualified under Section 401(k) of the Code for all employees meeting the eligibility requirements of the plan, and the plan was transferred to ESA Management as part of the Pre-IPO Transactions. The plan has an employer-matching contribution of 50% of the first 6% of an employee’s contribution, which vests over an employee’s initial five-year service period. The plan also provides for contributions up to 100% of eligible employee pretax salary, subject to the Code’s annual deferral limit of $17,500 and $17,000 during 2013 and 2012, respectively. Employer contributions, net of forfeitures, totaled approximately $1.4 million, $0.9 million and $1.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

16. RELATED PARTY TRANSACTIONS

An affiliate of the Company’s Sponsors purchased approximately 794,000 Paired Shares as an underwriter in connection with the Offering and earned approximately $1.0 million in fees related to the transaction.

Investment funds of the Sponsors held 21,105 shares of the Corporation’s outstanding mandatorily redeemable preferred stock as of December 31, 2013. Additionally, investment funds of the Sponsors held approximately $37.2 million and approximately $110.0 million of the 2012 Mezzanine loans as of December 31, 2013 and 2012, respectively.

17. SUBSEQUENT EVENTS

On February 26, 2014, the board of directors of ESH REIT declared a pro rata cash distribution of $0.08 per share on its Class A common stock and Class B common stock with respect to the period commencing upon the completion of the Offering and ending on December 31, 2013, based on a distribution rate of $0.15 per Paired Share for a full quarter. The dividend is payable on March 26, 2014 to shareholders of record as of March 12, 2014.

107

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

ESH Hospitality, Inc.

Charlotte, North Carolina

We have audited the accompanying consolidated balance sheets of ESH Hospitality, Inc. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ESH Hospitality, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

March 20, 2014

108

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND 2012

(In thousands, except per share amounts)

	December 31, 2013			December 31, 2012
ASSETS
PROPERTY AND EQUIPMENT—Net of accumulated depreciation of $426,479 and $275,342	$	4,119,939		$	4,110,622
RESTRICTED CASH		45,903			61,613
CASH AND CASH EQUIVALENTS		18,597			103,303
INTANGIBLE ASSETS—Net of accumulated amortization of $0 and $3,066		—			23,904
GOODWILL		54,297			55,633
DEFERRED FINANCING COSTS—Net of accumulated amortization of $11,120 and $1,027		46,572			65,592
ACCOUNTS RECEIVABLE—Net of allowance for doubtful accounts of $0 and $975		—			18,549
DEFERRED RENT RECEIVABLE		3,631			—
DEFERRED TAX ASSETS		3,207			—
OTHER ASSETS		36,186			48,226
TOTAL ASSETS	$	4,328,332		$	4,487,442
LIABILITIES AND EQUITY
LIABILITIES:
Mortgage loans payable	$	2,519,843		$	2,525,708
Mezzanine loans payable		365,000			1,080,000
Revolving credit facility		20,000			—
Accounts payable and accrued liabilities		95,988			126,689
Deferred tax liabilities		—			8,849
Total liabilities		3,000,831			3,741,246
COMMITMENTS AND CONTINGENCIES (Note 13)
EQUITY:
Members’ capital		—			740,576
Common stock – Class A: $0.01 par value, 4,300,000 shares authorized, 250,296 shares issued and outstanding as of December 31, 2013; Class B: $0.01 par value, 7,800,000 shares authorized, 204,788 shares issued and outstanding as of December 31, 2013		4,551			—
Additional paid in capital		1,336,154			—
Preferred stock – no par value, 125 shares authorized, issued and outstanding as of December 31, 2013		73			73
(Accumulated deficit) retained earnings		(9,617	)		2,266
Accumulated foreign currency translation		(3,660	)		124
Total ESH Hospitality, Inc. shareholders’ and members’ equity		1,327,501			743,039
Noncontrolling interests		—			3,157
Total equity		1,327,501			746,196
TOTAL LIABILITIES AND EQUITY	$	4,328,332		$	4,487,442

See accompanying notes to consolidated financial statements.

109

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands, except per share data)

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
REVENUES:
Rental revenues	$	71,900		$	—		$	—
Hotel room revenues		983,950			984,273			912,988
Other hotel revenues		15,576			16,898			18,693
Management fees and other revenues		1,113			10,346			11,172
Total revenues		1,072,539			1,011,517			942,853
OPERATING EXPENSES:
Hotel operating expenses		478,727			493,635			463,369
General and administrative expenses		86,676			87,807			72,413
Depreciation and amortization		167,185			129,938			120,438
Managed property payroll expenses		639			6,600			6,409
Trademark license fees		2,998			3,004			2,795
Restructuring expenses		605			5,763			10,491
Acquisition transaction expenses		235			1,675			593
Impairment of long-lived assets		3,330			1,420			—
Office building operating expenses		—			—			1,010
Total operating expenses		740,395			729,842			677,518
OTHER INCOME		1,075			384			232
INCOME FROM OPERATIONS		333,219			282,059			265,567
INTEREST EXPENSE		234,258			257,656			212,474
INTEREST INCOME		(629	)		(307	)		(550	)
INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		99,590			24,710			53,643
INCOME TAX (BENEFIT) EXPENSE		(876	)		4,642			7,050
NET INCOME		100,466			20,068			46,593
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(730	)		(1,549	)		(1,062	)
NET INCOME ATTRIBUTABLE TO SHAREHOLDERS OR MEMBERS	$	99,736		$	18,519		$	45,531
NET INCOME PER SHARE:
Class A—Basic	$	0.26		$	0.05		$	0.12
Class A—Diluted	$	0.26		$	0.05		$	0.12
Class B—Basic	$	0.26		$	0.05		$	0.12
Class B—Diluted	$	0.25		$	0.05		$	0.12
WEIGHTED AVERAGE SHARES OUTSTANDING:
Class A—Basic		213,759			207,553			206,327
Class A—Diluted		213,759			207,553			206,327
Class B—Basic		174,894			169,816			168,813
Class B—Diluted		176,268			171,796			171,345

See accompanying notes to consolidated financial statements.

110

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
NET INCOME	$	100,466		$	20,068		$	46,593
FOREIGN CURRENCY TRANSLATION		(3,980	)		87			71
COMPREHENSIVE INCOME		96,486			20,155			46,664
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(730	)		(1,554	)		(1,091	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREHOLDERS OR MEMBERS	$	95,756		$	18,601		$	45,573

See accompanying notes to consolidated financial statements.

111

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Members’ Capital			Common Stock		Additional Paid in Capital		Preferred Stock		(Accumulated Deficit) Retained Earnings			Accumulated Foreign Currency Translation			Total Shareholders’ and Members’ Equity			Noncontrolling Interests			Total Equity
BALANCE—January 1, 2011	$	1,536,715		$	—	$	—	$	—	$	(23,008	)	$	—		$	1,513,707		$	2,725		$	1,516,432
Net income		—			—		—		—		45,531			—			45,531			1,062			46,593
Foreign currency translation		—			—		—		—		—			42			42			29			71
Issuance of preferred units		—			—		—		73		—			—			73			—			73
Member distributions		—			—		—		—		(26,064	)		—			(26,064	)		—			(26,064	)
Preferred distributions		—			—		—		—		(16	)		—			(16	)		—			(16	)
Equity–based compensation		5,020			—		—		—		—			—			5,020			(290	)		4,730
Other		—			—		—		—		—			—			—			(1,601	)		(1,601	)
BALANCE—December 31, 2011		1,541,735			—		—		73		(3,557	)		42			1,538,293			1,925			1,540,218
Net income		—			—		—		—		18,519			—			18,519			1,549			20,068
Foreign currency translation		—			—		—		—		—			82			82			5			87
Member contributions		5,925			—		—		—		—			—			5,925			75			6,000
Member distributions		(813,512	)		—		—		—		(12,680	)		—			(826,192	)		(397	)		(826,589	)
Preferred distributions		—			—		—		—		(16	)		—			(16	)		—			(16	)
Equity-based compensation		6,428			—		—		—		—			—			6,428			—			6,428
BALANCE—December 31, 2012		740,576			—		—		73		2,266			124			743,039			3,157			746,196
Net income		—			—		—		—		99,736			—			99,736			730			100,466
Foreign currency translation		—			—		—		—		—			(3,980	)		(3,980	)		—			(3,980	)
Member distributions		—			—		—		—		(78,400	)		—			(78,400	)		(2,011	)		(80,411	)
Preferred distributions		—			—		—		—		(16	)		—			(16	)		—			(16	)
Equity-based compensation		4,094			—		2,460		—		—			—			6,554			—			6,554
ESH REIT reorganization		(744,670	)		3,828		734,475		—		(33,203	)		196			(39,374	)		(1,876	)		(41,250	)
Sale of equity, net of issuance costs		—			723		599,219		—		—			—			599,942			—			599,942
BALANCE—December 31, 2013	$	—		$	4,551	$	1,336,154	$	73	$	(9,617	)	$	(3,660	)	$	1,327,501		$	—		$	1,327,501

See accompanying notes to consolidated financial statements.

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ESH HOSPITALITY, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
OPERATING ACTIVITIES:
Net income	$	100,466		$	20,068		$	46,593
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		165,998			128,564			119,064
Amortization and write-off of deferred financing costs		23,998			45,365			10,428
Amortization of intangible assets		1,187			1,374			1,374
Amortization of above- market ground leases		(136	)		(136	)		(111	)
Loss on disposal of property and equipment		3,493			3,499			643
Loss on sale of office building		—			—			1,553
Impairment of long-lived assets		3,330			1,420			—
Equity-based compensation		6,643			6,428			4,730
Deferred income tax (benefit) expense		(7,440	)		2,387			(2,499	)
Deferred straight-line rental revenue		(3,631	)		—			—
Changes in assets and liabilities:
Accounts receivable, net		(9,821	)		(2,879	)		(1,901	)
Due from affiliates		(39,810	)		—			—
Other assets		13,699			(11,634	)		726
Accounts payable and accrued liabilities		37,222			(287	)		(54	)
Net cash provided by operating activities		295,198			194,169			180,546
INVESTING ACTIVITIES:
Purchases of property and equipment		(171,931	)		(271,464	)		(106,064	)
Acquisition of hotels, property and equipment		(16,241	)		(128,299	)		—
Decrease in restricted cash		14,225			175,167			16,463
Decrease in cash collateral for insurance reserves		7,849			—			7,626
Proceeds from insurance recoveries		2,020			754			—
Proceeds from sale of office building		—			—			11,586
Proceeds from litigation settlement		—			—			26,994
Net cash used in investing activities		(164,078	)		(223,842	)		(43,395	)
FINANCING ACTIVITIES:
Proceeds from mortgage loans		—			2,520,000			—
Principal payments on mortgage loans		(5,865	)		(1,974,511	)		(24,067	)
Proceeds from mezzanine loans		—			1,080,000			—
Principal payments on mezzanine loans		(715,000	)		(700,000	)		—
Proceeds from revolving credit facility		20,000			—			—
Payment of deferred financing costs		(4,978	)		(64,619	)		—
Company reorganization		(29,351	)		—			—
Sale of equity		619,933			—			125
Equity issuance costs		(19,991	)		—			(52	)
Preferred distributions		(16	)		(16	)		(16	)
Member distributions		(78,400	)		(826,192	)		(26,064	)
Contributions from noncontrolling interests		—			75			—
Distributions to noncontrolling interests		(2,011	)		(397	)		—
Net cash (used in) provided by financing activities	$	(215,679	)	$	34,340		$	(50,074	)

(Continued)

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ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

	Year Ended December 31, 2013			Year Ended December 31, 2012		Year Ended December 31, 2011
CHANGES IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN FOREIGN CURRENCY EXCHANGE RATES	$	(147	)	$	136	$	71
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(84,706	)		4,803		87,148
CASH AND CASH EQUIVALENTS—Beginning of period		103,303			98,500		11,352
CASH AND CASH EQUIVALENTS—End of period	$	18,597		$	103,303	$	98,500
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest, excluding prepayment and other penalties	$	201,089		$	196,350	$	219,239
Income tax payments—net of refunds of $935, $66 and $118	$	239		$	11,349	$	1,161
NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures included in other assets and accounts payable and accrued liabilities	$	20,103		$	13,625	$	13,867
Acquisition of hotels, property and equipment paid by Sponsors	$	—		$	3,925	$	—
Payment of deferred financing costs paid by Sponsors	$	—		$	2,000	$	—

See accompanying notes to consolidated financial statements. (Concluded)

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ESH HOSPITALITY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. BUSINESS, ORGANIZATION AND BASIS OF CONSOLIDATION AND COMBINATION

ESH Hospitality, Inc. (“ESH REIT”) was formed as a limited liability company in the state of Delaware on September 16, 2010 and was converted to a corporation on November 5, 2013. Extended Stay America, Inc. (the “Corporation”) was incorporated in the state of Delaware on July 8, 2013. The formation of the Corporation and the conversion of ESH REIT into a Delaware corporation were completed as part of the Pre-IPO Transactions, defined and discussed below, and in contemplation of the Corporation’s and ESH REIT’s initial public offering.

As of December 31, 2013 and 2012, ESH REIT, its subsidiaries or their predecessor entities owned 681 and 679 hotel properties, respectively, in operation in 44 U.S. states consisting of approximately 75,700 and 75,400 rooms, respectively, and three hotels in operation in Canada consisting of approximately 500 rooms. For the period from the Pre-IPO Transactions through December 31, 2013, the hotels are operated by subsidiaries of the Corporation (the “Operating Lessees”) pursuant to leases between ESH REIT and the Operating Lessees. For periods through the Pre-IPO Transactions, the Operating Lessees were subsidiaries of ESH REIT, referred to as taxable REIT subsidiaries. On December 31, 2013, ESH REIT completed the acquisition of two hotels which, through the date of acquisition, were previously managed by HVM (as defined below) (see Notes 4 and 11).

The majority of hotels are operated under the core brand name Extended Stay America. Three Canadian hotels operate under the brand name Extended Stay Canada; 47 hotels are operated under the brand name Crossland Studio Suites and two hotels are operated under the brand name Hometown Inn. The brand names are owned by ESH Hospitality Strategies LLC (“ESH Strategies”) whose subsidiary licenses the brand names to the Operating Lessees.

Organization Prior to the Pre-IPO Transactions and Initial Public Offering

ESH REIT’s predecessor, ESH Hospitality LLC, was directly owned by ESH Hospitality Holdings LLC (“Holdings”), a Delaware limited liability company, whose members were investment funds sponsored and managed by Centerbridge Partners L.P., Paulson & Co. Inc. and The Blackstone Group L.P. and their affiliates (collectively, the “Sponsors”).

The hotels were leased by ESH Hospitality LLC’s taxable REIT subsidiaries, the “Operating Lessees,” who contracted with HVM L.L.C. (“HVM”), a separate, independently owned hotel management and administrative services company, to manage the hotels and provide certain other administrative services. HVM was indirectly owned by individuals who were each active in the business of HVM and was managed by an entity indirectly owned by employees of the Sponsors.

The Pre-IPO Transactions

The Pre-IPO Transactions, which were completed in November 2013, restructured and reorganized the then-existing businesses and entities prior to the Corporation’s and ESH REIT’s initial public offering, and consisted primarily of the following:

• Holdings distributed 96.5% of the common stock of ESH REIT to the holders of Class A Units in Holdings and retained the remaining shares, which were subsequently paired with Corporation common stock and distributed as described below; the common stock of ESH REIT was recapitalized into two classes of common stock: Class A common stock and Class B common stock.

• The Sponsors acquired the Corporation for a nominal fee.

• ESH REIT transferred the Operating Lessees to newly-formed, wholly-owned subsidiaries of the Corporation; in connection with the transfer of 1.0% of the Operating Lessees, the Corporation paid ESH REIT approximately $1.6 million and the operating leases were amended to reflect current fair market value terms.

• A newly-formed, wholly-owned subsidiary of the Corporation, ESA Management LLC (“ESA Management”), acquired all of the assets and assumed all of the liabilities of HVM for approximately $0.8 million; the existing management agreements were terminated and ESA Management entered into new management agreements with the Operating Lessees. ESA Management assumed sponsorship of HVM’s savings plan that qualifies under Section 401(k) of the Code (see Note 16).

• The shareholders of ESH REIT contributed the Class A common stock of ESH REIT, representing approximately 55% of the outstanding common stock of ESH REIT, to the Corporation in exchange for common stock of the Corporation; the common stock of the Corporation was stapled to, or paired with, the Class B common stock of ESH REIT on a one-for-one basis, forming the Paired Shares offered pursuant to the Corporation’s and ESH REIT’s initial public offering.

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• The Corporation acquired all of the interests in ESH Strategies in exchange for $21.2 million of mandatorily redeemable preferred stock of the Corporation, which pays preferred dividends at 8.0% per annum.

• Holdings distributed its remaining Paired Shares.

Following the Pre-IPO Transactions, the Corporation, through its direct wholly-owned subsidiaries, leases the hotel properties from ESH REIT, owns the trademarks related to the business and self-manages the hotel properties. ESH REIT owns all of the hotel properties. The Corporation owns, and is expected to continue to own, all of the Class A common stock of ESH REIT, which represents approximately 55% of the outstanding common stock of ESH REIT.

Initial Public Offering

On November 18, 2013, the Corporation and ESH REIT completed an initial public offering (the “Offering”) of 32,487,500 Paired Shares for cash consideration of $20.00 per Paired Share, each Paired Share consisting of one share of common stock, par value $0.01 per share, of the Corporation, that is attached to and trades as a single unit with one share of Class B common stock, par value $0.01 per share, of ESH REIT. The Offering included 4,237,500 Paired Shares purchased by the underwriters in connection with the exercise in full of their option to purchase additional Paired Shares and raised total gross proceeds to the Corporation and ESH REIT of approximately $649.8 million.

The proceeds were divided among the Corporation and ESH REIT based on their relative valuations. The Corporation used the majority of the proceeds it received to purchase shares of Class A common stock of ESH REIT to maintain its ownership of approximately 55% of the outstanding common stock of ESH REIT. After deducting underwriting discounts, commissions and other transaction costs, the Offering, including ESH REIT’s sale of shares of Class A common stock to the Corporation, raised proceeds to ESH REIT of approximately $599.9 million. ESH REIT used its proceeds from the Offering, including proceeds received pursuant to the sale of Class A common stock to the Corporation, in addition to cash on hand, to repay approximately $331.0 million of its Mezzanine A Loan, approximately $218.5 million of its Mezzanine B Loan and approximately $165.5 million of its Mezzanine C Loan.

As of December 31, 2013, the public owns approximately 15.9% of the outstanding Paired Shares, while the Sponsors and current and former management own approximately 84.1% of the outstanding Paired Shares. As of December 31, 2013, the Corporation owns 250,295,833 shares of ESH REIT’s Class A common stock; the Sponsors and current and former management own 172,300,000 shares of ESH REIT’s Class B common stock, which are attached to and trade as a single unit with shares of the Corporation’s common stock, and the public owns 32,487,500 shares of ESH REIT’s Class B common stock, which are attached to and trade as a single unit with shares of the Corporation’s common stock.

Basis of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For the periods through the Pre-IPO Transactions, the consolidated results of operations of ESH REIT include the results of operations of ESH REIT’s predecessor, ESH Hospitality LLC, and its subsidiaries, which included the Operating Lessees. Additionally, for the period through the Pre-IPO Transactions, ESH REIT’s consolidated results of operations included the results of operations of HVM, a consolidated variable interest entity (see Notes 2 and 11). Third party equity interests in HVM, which represented all of HVM’s equity, were not owned by ESH REIT and are presented as noncontrolling interests.

For the period from the Pre-IPO Transactions through December 31, 2013, the consolidated results of operations of ESH REIT include the results of operations of ESH REIT and its subsidiaries, which do not include the Operating Lessees. Further, the results of operations of ESA Management, which now performs the management and administrative services previously performed by HVM, are not consolidated within ESH REIT’s results, as ESA Management is owned by the Corporation.

All intercompany accounts and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates—The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management used significant estimates to determine the allocation of purchase price to assets that were acquired in

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2013 and 2012 (see Note 4). Significant estimates also include the estimated useful lives of tangible assets as well as the assessment of tangible and intangible assets, including goodwill, for impairment, estimated liabilities for insurance reserves and the grant-date fair value per Profit Unit (as defined in Note 15) related to equity-based compensation. Actual results could differ from those estimates.

Cash and Cash Equivalents—ESH REIT considers all cash on hand, demand deposits with financial institutions, credit card receivables, and short-term, highly liquid investments with original maturities of three months or less to be cash equivalents. ESH REIT has deposits in excess of $250,000 with financial institutions that are not insured by the Federal Deposit Insurance Corporation. ESH REIT does not believe cash and cash equivalents expose it to significant credit risk.

Restricted Cash—Restricted cash consists of amounts held in cash management accounts and in escrows for the payment of hotel occupancy/sales taxes, property taxes and insurance, capital improvements, ground leases, operating expenses (including management fees and reimbursements) and mortgage and mezzanine debt service, all as required by ESH REIT’s mortgage and mezzanine loan agreements (see Note 7).

Property and Equipment—Property and equipment additions are recorded at cost. Major improvements that extend the life or utility of property or equipment are capitalized and depreciated over a period equal to the shorter of the estimated useful life of the improvement or the remaining estimated useful life of the asset. Ordinary repairs and maintenance are charged to expense as incurred.

Depreciation and amortization are recorded on a straight-line basis over the following estimated useful lives:

Hotel buildings	20–49 years
Hotel building improvements	3–39 years
Hotel site improvements	2–15 years
Hotel furniture, fixtures and equipment	1–10 years
Office furniture, fixtures and equipment	1–7 years

Management assesses whether there has been impairment of the value of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is measured by a comparison of the carrying amount of a hotel property to the estimated future undiscounted cash flows expected to be generated by the hotel property. Impairment is recognized when estimated future undiscounted cash flows, including proceeds from disposition, are less than the carrying value of the hotel property. The estimation of future undiscounted cash flows is inherently uncertain and relies upon assumptions regarding current and future economic and market conditions. If such conditions change, then an impairment charge to reduce the carrying value of the hotel property could occur in a future period in which conditions change.

To the extent that a hotel property is impaired, the excess carrying amount of the hotel property over its estimated fair value is charged to operating earnings. Fair value is determined based upon the discounted cash flows of the hotel property, quoted market prices, or independent appraisals, as considered necessary. ESH REIT recognized impairment charges related to property and equipment of approximately $3.3 million, $1.4 million and $0 for the years ended December 31, 2013, 2012 and 2011, respectively (see Note 5).

Intangible Assets and Liabilities— Subsequent to the Pre-IPO Transactions and as of December 31, 2013, ESH REIT has no intangible assets or liabilities. Prior to the Pre-IPO Transactions, intangible assets and liabilities related to the Operating Lessees and included above-market contracts, corporate customer relationships and customer databases. Above-market contracts, corporate customer relationships and customer databases were amortized using the straight-line method over their estimated remaining useful lives, which in the case of contracts was typically the remaining non-cancelable term. Intangible assets were reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of the intangible asset may not have been recoverable. No impairment charges related to intangible assets were recognized during the period from January 1, 2013 through the Pre-IPO Transactions or for the years ended December 31, 2012 or 2011.

Goodwill—Goodwill represents the excess purchase price over the fair value of net assets acquired. ESH REIT tests goodwill for impairment at least annually in the fourth quarter. ESH REIT tests for impairment more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ESH REIT has one operating segment, which is its reporting unit; therefore, management aggregates goodwill associated with all hotels when analyzing for potential impairment. Effective in the fourth quarter of 2011, ESH REIT adopted accounting guidance in which it first assesses qualitative factors to determine if it is not more likely than not that the fair value of its reporting unit is less than its carrying amount. No impairment charges related to goodwill were recognized during the years ended December 31, 2013, 2012 or 2011.

In connection with the Pre-IPO Transactions, ESH REIT transferred its ownership of the Operating Lessees to wholly-owned subsidiaries of the Corporation. Approximately $1.3 million of ESH REIT’s goodwill was allocated to the Operating Lessees and was therefore included as part of the transfer of the ownership in these entities.

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Property Acquisitions—The purchase price of net tangible and identified intangible assets and liabilities are recorded based on their relative fair values on the date of acquisition. The fair value of the acquired land and site improvements, building and improvements, and furniture, fixtures and equipment were determined on an “if-vacant” basis considering a variety of factors, including the physical condition and quality of the hotels, estimated rates and valuation assumptions consistent with current market conditions, based on independent appraisals and other relevant market data obtained in connection with the acquisition of the hotels. The results of operations of acquired hotel properties are included in the accompanying consolidated statements of operations since their respective dates of acquisition.

Deferred Financing Costs—Costs incurred in obtaining financing are amortized over the terms of the related loans using the effective interest method. Upon repayment of, or in conjunction with a material change in the terms of, the underlying debt agreement, remaining unamortized costs are charged to earnings. During the years ended December 31, 2013 and 2012, approximately $11.7 million and $34.4 million of unamortized deferred financing costs, primarily related to the prepayment of mortgage and mezzanine loans, were charged to earnings and are included in interest expense in the accompanying consolidated and statements of operations. Amortization of deferred financing costs unrelated to the prepayment of mortgage and mezzanine loans, which is also included in interest expense in the accompanying consolidated statements of operations, was approximately $12.3 million, $11.0 million and $10.4 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Revenue Recognition—Subsequent to the Pre-IPO Transactions, ESH REIT’s primary source of revenue is derived from contractual lease obligations. ESH REIT records rental revenue on a straight-line basis as it is earned during the lease term. As of December 31, 2013, deferred rent receivable on the accompanying consolidated balance sheet represents the cumulative difference between straight-line rental revenue and rental revenue that is contractually due from lessees. This amount, approximately $3.6 million as of December 31, 2013, is expected to be received in cash by October 2018. With respect to contingent rental revenue, specifically percentage rental revenue related to lessee hotel revenue, rental revenue is recognized once services have been rendered (i.e., percentage rental revenue thresholds have been achieved) and such amounts are fixed and determinable.

Prior to the Pre-IPO Transactions, ESH REIT’s primary source of revenues was hotel room revenues. Hotel room revenues and other hotel revenues were recognized when services were provided. Amounts paid in advance by customers were recorded as deferred revenues and included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. Other hotel revenues primarily consisted of revenues derived from guest laundry, pet fees, internet fees, additional housekeeping, telephone and other miscellaneous fees or services. Occupancy, hotel and sales taxes collected from customers and remitted to the taxing authorities were excluded from revenues.

Accounts Receivable and Allowance for Doubtful Accounts— Subsequent to the Pre-IPO Transactions, ESH REIT has no non-lease related accounts receivable and therefore, no allowance for doubtful accounts. Prior to the Pre-IPO Transactions, provision for doubtful accounts was made when collection of receivables was considered doubtful. Balances were considered past due when payment was not received by the contractual due date. When management determined that receivables were uncollectible, they were written off against the allowance for doubtful accounts.

Advertising Costs—Advertising costs are expensed as incurred. Internet advertising costs are included in hotel operating expenses and all other advertising costs are included in general and administrative expenses. For the years ended December 31, 2013 and 2012, advertising costs were approximately $26.3 million and $25.2 million, approximately $16.9 million and $15.2 million of which are classified in hotel operating expenses and approximately $9.4 million and $10.0 million of which are classified in general and administrative expenses, respectively. For the year ended December 31, 2011, advertising costs were approximately $7.7 million and were classified in hotel operating expenses in the accompanying consolidated statements of operations.

Operating Leases—Operating lease expense is recognized on a straight-line basis over the terms of the related leases.

Fair Value of Financial Instruments—U.S. GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:

Level 1—Observable inputs, such as quoted prices in active markets at the measurement date for identical assets or liabilities

Level 2—Significant inputs that are observable, directly or indirectly, such as other quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability

Level 3—Significant unobservable inputs for which there is little to no market data and for which ESH REIT makes its own assumptions about how market participants would price the asset or liability

Fair value is defined as the price that would be received when selling an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest-level input significant to the fair value measurement in its entirety. ESH REIT’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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ESH REIT’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, mortgage and mezzanine loans and ESH REIT’s revolving credit facility. The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities and ESH REIT’s revolving credit facility are representative of their fair value due to the short-term nature or frequent settlement of these instruments. The fair value of mortgage and mezzanine loans was determined by comparing current borrowing rates and risk spreads offered in the market to the stated interest rates and spreads on the ESH REIT’s current mortgage and mezzanine loans or quoted market prices, when available (see Note 7).

Derivative Instruments—Derivative instruments, including certain derivative instruments embedded in other contracts, are recorded in the accompanying consolidated balance sheets as either assets or liabilities measured at fair value. Changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. ESH REIT does not enter into derivative financial instruments for trading or speculative purposes.

Insurance Reserves— The Operating Lessees, which were subsidiaries of ESH REIT prior to the Pre-IPO Transactions, utilize high-deductible insurance programs for general liability claims. HVM, a variable interest entity which was consolidated with ESH REIT prior to the Pre-IPO Transactions, and ESA Management, which is a subsidiary of the Corporation subsequent to the Pre-IPO Transactions, also utilize high deductible insurance programs for workers’ compensation and health insurance claims. Such retained losses require estimates in determining the liability for claims arising under these programs. Workers’ compensation, general liability and health insurance liabilities are estimated using independent actuarial evaluations based on historical and projected claims and medical cost trends. As of December 31, 2013 and 2012, approximately $0 and $13.9 million, respectively, of liabilities for such high-deductible insurance programs are included in accounts payable and accrued liabilities in ESH REIT’s accompanying consolidated balance sheets.

Variable Interest Entity—Prior to the Pre-IPO Transactions, ESH REIT held a variable interest in HVM, a separate, independently owned hotel management and administrative services company (see Note 11). ESH REIT’s maximum exposure to loss as a result of its involvement with HVM was related to the need to secure alternative hotel management services and systems support if HVM were ever unable to fulfill its obligations under its management agreements with ESH REIT. The assets of HVM could not be used to settle obligations of ESH REIT and ESH REIT’s assets could not be used to settle obligations of HVM. For the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011, ESH REIT represented approximately 99%, 97% and 97%, respectively, of the business conducted by HVM. ESH REIT concluded that it was the primary beneficiary of HVM and, as a result, has consolidated the financial position, results of operations, comprehensive income, and cash flows of HVM for periods prior to the Pre-IPO Transactions. Since ESH REIT had no equity interest in HVM, the results of operations and members’ capital of HVM are reported as noncontrolling interests in the accompanying consolidated financial statements for periods through the Pre-IPO Transactions. Subsequent to the Pre-IPO Transactions, HVM no longer meets the definition of a variable interest entity.

HVM provided hotel management and administrative services, including the supervision, direction, and control of the operations, management, and promotion of the hotel properties in a manner associated with extended-stay hotels of similar size, type, or usage in similar locations. See summarized financial information of HVM in Note 11.

Income Taxes—ESH REIT has elected to be taxed as and expects to continue to qualify as a REIT under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”). A REIT is generally not subject to federal income tax on its separately filed federal tax return as long as the REIT complies with various requirements to maintain its status, including the distribution of at least 90% of its taxable income, excluding capital gains. During 2013, consistent with prior years, ESH REIT distributed 100% or more of its taxable income and therefore incurred no federal income tax. Beginning in 2014, ESH REIT intends to distribute 95% of its taxable income and therefore will incur federal and state income tax on the taxable income not distributed. ESH REIT may be subject to certain additional state and local income taxes where REIT status is not recognized.

Prior to the Pre-IPO Transactions, the Operating Lessees, which were subsidiaries of ESH REIT, elected to be treated as taxable REIT subsidiaries. As such, the Operating Lessees were generally subject to federal, state, local, and/or foreign income taxes on their separate tax returns. The Operating Lessees recognized deferred tax assets and liabilities using the asset and liability method. Valuation allowances were provided if, based upon the weight of available evidence, it was more likely than not that some or all of the deferred tax assets would not be realized in future periods. The realization of deferred tax assets is primarily dependent on estimated future taxable income. A change in the estimate of future taxable income may require an addition to, or a reduction of, the valuation allowance.

Also prior to the Pre-IPO Transactions, HVM’s operating results were reportable by its members or members of their ultimate parent. Thus, income taxes were not recognized for HVM prior to the Pre-IPO Transactions in ESH REIT’s consolidated financial statements. HVM was also subject to state and local taxes in certain jurisdictions.

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Foreign Currency Translation—The financial statements of certain of ESH REIT’s subsidiaries and its investments therein are maintained in their functional currency, the Canadian dollar (“C$”), and their income and expenses are translated into U.S. dollars using the average exchange rate for the period. The assets and liabilities related to ESH REIT’s Canadian investments are translated into U.S. dollars using the exchange rate in effect at the balance sheet date. The resulting translation adjustments are reflected in accumulated foreign currency translation in the accompanying consolidated balance sheets. Foreign currency transaction gains and losses are included in the determination of income from operations. Foreign currency transaction losses of $0.1 million, $0.1 million and $0.2 million are included in general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011, respectively.

Comprehensive Income—Comprehensive income includes net income and other comprehensive income, which consists of foreign currency translation adjustments. Comprehensive income is presented in the accompanying consolidated statements of comprehensive income, and accumulated foreign currency translation is displayed as a separate component of consolidated equity.

Equity-Based Compensation— As of December 31, 2013, ESH REIT maintains a Long-Term Incentive Plan (“LTIP”) under which ESH REIT may issue awards to eligible employees or directors consisting of restricted stock (i.e., Paired Share) awards, restricted stock (i.e., Paired Share) units or other share-based awards. ESH REIT classifies equity-based awards granted in exchange for employee services as either equity awards or as liability awards. The classification of restricted stock awards or restricted stock units either as an equity award or a liability award is based upon cash settlement options. Equity awards are measured based on their fair value on the date of grant. Liability awards are re-measured to fair value each reporting period. The value of all restricted stock awards or restricted stock units, less estimated forfeitures, is recognized over the period during which an employee or director is required to provide services in exchange for the award – the requisite service period (usually the vesting period). No compensation cost is recognized for awards for which employees or directors do not render the requisite services.

ESH REIT recognizes costs related to equity-based payment awards over their vesting periods. The fair value of equity-based awards on the date of grant is based on the closing price of a Paired Share on the grant date. A portion of the grant date fair value is allocated to a share of common stock of the Corporation and a portion of the grant date fair value is allocated to a share of Class B common stock of ESH REIT. ESH REIT is required to compensate the Corporation, generally in cash, for its issuance of its component of the Paired Share for the fair market value at the time of settlement. ESH REIT will have to pay more or less for a share of the Corporation common stock than it would have otherwise paid at the time of grant as the result of regular market changes in the value of a Paired Share between the time of grant and the time of settlement.

Although share-based compensation expense is recognized based on the closing price of a Paired Share on the grant date, the expense related to the portion of the grant date fair value with respect to a share of common stock of the Corporation is recorded as a payable due to the Corporation. Expense related to the portion of the grant date fair value with respect to a share of Class B common stock of ESH REIT is recorded as an increase to additional paid in capital within ESH REIT’s consolidated shareholders’ equity. An increase in the value allocated to a share of common stock of the Corporation due to market changes in the value of a Paired Share between the time of grant and the time of settlement is recorded as a distribution to the Corporation. A decrease in the value allocated to a share of common stock of the Corporation due to market changes in the value of a Paired Share between the time of grant and the time of settlement is recorded as additional paid in capital from the Corporation.

The Corporation also maintains an LTIP and accounts for awards issued under its LTIP in a manner similar to that of ESH REIT. For all LTIP awards granted by the Corporation after the Pre-IPO Transactions, ESH REIT will receive compensation for the fair value of the Class B shares on the date of issuance of such Class B shares by ESH REIT. As prescribed by the services agreement described in Notes 11 and 12, ESH REIT and its subsidiaries reimburse the Corporation for expenses related to applicable employees or directors that participate in the Corporation’s LTIP. Such charges are included in general and administrative expenses in the accompanying consolidated statements of operations.

Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan as further described in Note 15. Equity-based compensation related to this plan is recorded as general and administrative expense in the accompanying consolidated statements of operations due to the fact that HVM was a consolidated variable interest entity.

Segments—ESH REIT’s hotel operations represent a single operating segment based on the way ESH REIT manages its business. ESH REIT’s hotels provide similar services, use similar processes to sell those services and sell their services to similar classes of customers. The amounts of long-lived assets and net sales outside the U.S. are not significant for any of the periods presented.

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Recently Issued Accounting Standards

Income Taxes —In July 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. This updated accounting standard is effective for fiscal and interim reporting periods beginning after December 15, 2013 and should be applied prospectively to all unrecognized tax benefits that exist at the effective date, and retrospective application is permitted. ESH REIT is currently evaluating the impact of adopting the updated accounting standard, but it does not expect the adoption to have a material effect on ESH REIT’s consolidated financial statements.

Cumulative Translation Adjustment—In March 2013, the FASB issued an accounting standards update that indicates when the cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released to earnings. The CTA should be released when an entity sells a foreign subsidiary or a group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in a foreign entity. The CTA should also be released when an entity no longer has a controlling financial interest in an investment in a foreign entity. This updated accounting standard is effective for fiscal and interim reporting periods beginning after December 15, 2013, and shall be applied prospectively. ESH REIT is currently evaluating the impact of adopting the updated accounting standard, but it does not expect the adoption to have a material effect on ESH REIT’s consolidated financial statements.

Other Comprehensive Income—In February 2013, the FASB issued guidance requiring companies to present either in a single note or parenthetically on the face of the financial statements the effect of significant amounts reclassified from each component of comprehensive income based on its source and the income statement line items affected by the reclassification. This guidance is effective for fiscal and interim reporting periods beginning after December 15, 2012. The adoption of this guidance did not have a material effect on ESH REIT’s accompanying consolidated financial statements.

In June 2011, the FASB issued guidance eliminating the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The guidance requires that all nonowner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance did not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ESH REIT adopted this new accounting guidance on January 1, 2012, and added an additional financial statement, a consolidated statement of comprehensive income, to display comprehensive income in its consolidated financial statements for all periods presented to comply with this guidance.

Goodwill—In September 2011, the FASB issued guidance that permits an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step quantitative goodwill impairment test is not required. ESH REIT adopted this accounting guidance during the fourth quarter of 2011 and used the qualitative assessment for its impairment analysis for goodwill in 2013, 2012 and 2011. The adoption of this guidance did not have a material impact on ESH REIT’s accompanying consolidated financial statements.

3. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income available to Class A and Class B common shareholders by the weighted average number of shares of ESH REIT’s Class A and Class B unrestricted common stock outstanding. Diluted net income per share is computed by dividing net income available to Class A and Class B common shareholders, as adjusted for potentially dilutive securities, by the weighted average number of shares of ESH REIT’s unrestricted common stock outstanding plus other potentially dilutive securities. Dilutive securities include equity-based awards issued under long-term incentive plans.

As discussed in Note 1, in November 2013, ESH REIT completed the Pre-IPO Transactions. For purposes of computing net income per share, it is assumed that the recapitalization of ESH REIT had occurred for all periods presented and therefore the outstanding shares have been adjusted to reflect the conversion of shares that took place in contemplation of the Offering. Accordingly, the denominators in the computations of basic and diluted net income per share reflect ESH REIT’s capitalization as of December 31, 2013 for all periods presented.

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The calculations of basic and diluted net income per share, including a reconciliation of the numerators and denominators, are as follows:

	Year Ended December 31,
(in thousands, except per share data)	2013			2012			2011
Numerator:
Class A:
Net income available to common shareholders—basic	$	55,046		$	10,262		$	25,268
Net loss available to controlling interests assuming conversion		(166	)		(53	)		(167	)
Net income available to common shareholders—diluted	$	54,880		$	10,209		$	25,101
Class B:
Net income available to common shareholders—basic	$	44,690		$	8,257		$	20,263
Net income available to controlling interests assuming conversion		166			53			167
Net income available to common shareholders—diluted	$	44,856		$	8,310		$	20,430
Denominator:
Class A:
Weighted average number of shares outstanding—basic and diluted		213,759			207,553			206,327
Class B:
Weighted average number of shares outstanding—basic		174,894			169,816			168,813
Dilutive securities		1,374			1,980			2,532
Weighted average number of shares outstanding—diluted		176,268			171,796			171,345
Basic net income per share—Class A	$	0.26		$	0.05		$	0.12
Diluted net income per share—Class A	$	0.26		$	0.05		$	0.12
Basic net income per share—Class B	$	0.26		$	0.05		$	0.12
Diluted net income per share—Class B	$	0.25		$	0.05		$	0.12

4. ACQUISITIONS

2013 LVP Acquisition –On December 31, 2013, ESH REIT acquired the assets and assumed the liabilities of two hotels from LVP Acquisition Corporation for cash consideration of approximately $16.5 million. The acquisition was accounted for as a business combination in accordance with FASB Accounting Standards Codification 805,Business Combinations, which requires that the consideration be allocated to the acquired assets and assumed liabilities based on their acquisition date fair values. The vast majority of the purchase price was allocated to property and equipment.

2012 HFI Acquisition—On December 13, 2012, ESH REIT acquired the assets and assumed the liabilities of 17 hotels from HFI Acquisitions Company LLC for cash consideration of approximately $131.8 million. The acquisition was accounted for as a business combination in accordance with FASB Accounting Standards Codification 805,Business Combinations.

The consideration transferred to acquire the 17 HFI hotels, which HVM previously managed, and the purchase price allocation among the assets acquired and liabilities assumed is as follows (in thousands):

	Amount			Estimated Useful Life
Land and site improvements	$	61,686			5–11 years
Building and improvements		59,547			19–40 years
Furniture, fixtures and equipment		10,598			3–10 years
Other assets and liabilities—net		(41	)
Total purchase price	$	131,790

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The following table sets forth room revenues, other hotel revenues, hotel operating expenses, depreciation and amortization, interest expense and net income assuming the 17 HFI hotels had been acquired on January 1, 2011 (in thousands and unaudited):

	Year Ended December 31, 2012		Year Ended December 31, 2011
Room revenues	$	1,014,335	$	942,069
Other hotel revenues		17,266		19,135
Hotel operating expenses		506,399		476,293
Depreciation and amortization		136,386		127,120
Interest expense		264,691		219,867
Net income		24,603		49,117

The 17 HFI acquired hotels contributed total revenues of approximately $26.6 million and income from operations of approximately $13.2 million for the year ended December 31, 2013, as compared to total revenues of approximately $1.3 million and income from operations of approximately $0.6 million for the period from December 13, 2012 through December 31, 2012.

Acquisition related expenses—Legal, professional and other fees and costs directly related to the acquisitions described above totaled approximately $0.2 million and $1.7 million for the years ended December 31, 2013 and 2012. For the year ended December 31, 2011 acquisition expenses related to an acquisition completed in 2010 totaled approximately $0.6 million. These costs are recorded in acquisition transaction expenses in the accompanying consolidated statements of operations.

5. PROPERTY AND EQUIPMENT

Net investment in property and equipment as of December 31, 2013 and 2012, consists of the following (in thousands):

	December 31, 2013			December 31, 2012
Hotel properties:
Land and site improvements	$	1,347,170		$	1,325,970
Building and improvements		2,839,452			2,773,117
Furniture, fixtures and equipment		357,975			271,547
Total hotel properties		4,544,597			4,370,634
Corporate furniture, fixtures and equipment		—			13,509
Undeveloped land parcel		1,821			1,821
Total cost		4,546,418			4,385,964
Less accumulated depreciation:
Hotel properties		(426,479	)		(265,401	)
Corporate furniture, fixtures and equipment		—			(9,941	)
Total accumulated depreciation		(426,479	)		(275,342	)
Property and equipment—net	$	4,119,939		$	4,110,622

Substantially all of the hotel properties (680 out of 684 hotel properties) are pledged as security for ESH REIT’s 2012 Mortgage Loan (see Note 7).

During the years ended December 31, 2013 and 2012, ESH REIT, using Level 3 unobservable inputs, recognized impairment charges of approximately $3.3 million and $1.4 million, respectively, in the accompanying consolidated statements of operations. Quantitative information with respect to unobservable inputs consists of internally developed cash flow models that include the following assumptions, among others: projections of revenues, expenses and related cash flows based on assumed long-term growth rates, demand trends, expected future capital expenditures and estimated discount rates. These assumptions were based on the Company’s historical data and experience, third-party appraisals, industry projections and micro and macro general economic condition projections.

ESH REIT’s office building was sold to a third party on December 29, 2011 for $12.0 million, resulting in net proceeds of approximately $11.6 million and the recognition of a loss on sale of approximately $1.6 million, which is included in restructuring expenses in the accompanying consolidated statement of operations for the year ended December 31, 2011 (see Note 14).

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6. INTANGIBLE ASSETS AND GOODWILL

Subsequent to the Pre-IPO Transactions and as of December 31, 2013, ESH REIT had approximately $54.3 million of goodwill and no other intangible assets. In connection with the transfer of the Operating Lessees to the Corporation as part of the Pre-IPO Transactions, ESH REIT transferred approximately $1.3 million in goodwill.

As of December 31, 2012, ESH REIT had definite-lived intangible assets related to the Operating Lessees and goodwill, which consisted of the following:

	December 31, 2012
	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Definite-lived intangible assets:
Customer relationships		20 years	$	26,800	$	(2,990	)	$	23,810
Customer email database		5 years		170		(76	)		94
Total intangible assets				26,970		(3,066	)		23,904
Goodwill				55,633		—			55,633
Total definite-lived intangible assets and goodwill			$	82,603	$	(3,066	)	$	79,537

7. DEBT

Summary—ESH REIT’s outstanding debt as of December 31, 2013 and 2012, is as follows (in thousands):

	December 31, 2013		December 31, 2012
Mortgage loans	$	2,519,843	$	2,525,708
Mezzanine loans		365,000		1,080,000
Revolving credit facility		20,000		—
Total debt	$	2,904,843	$	3,605,708

During the years ended December 31, 2013 and 2012, the following transactions occurred (in thousands):

	December 31, 2013			December 31, 2012
Debt—beginning of year	$	3,605,708		$	2,680,219
Additions:
Proceeds from mortgage loans		—			2,520,000
Proceeds from mezzanine loans		—			1,080,000
Proceeds from credit facility		20,000			—
Deductions:
Payments on mortgage loans		(5,865	)		(1,974,511	)
Payments on mezzanine loans		(715,000	)		(700,000	)
Debt—end of year	$	2,904,843		$	3,605,708

ESH REIT’s debt as of December 31, 2013 and 2012, consisted of the following (in thousands):

Loan	Stated Amount		Outstanding Principal— December 31, 2013		Outstanding Principal— December 31, 2012		Stated Interest Rate(2)	Interest Rate— December 31, 2013(4)			Interest Rate— December 31, 2012			Maturity Date			Amortization
Mortgage loans:
2012 Mortgage Loan:
Component A	$	350,000	$	349,843	$	350,000	LIBOR(1) + 2.0547%		2.2227	%		2.2687	%		12/1/2014	(3)	Interest only
Component B		350,000		350,000		350,000	3.4047%		3.4047	%		3.4047	%		12/1/2017		Interest only
Component C		1,820,000		1,820,000		1,820,000	4.0547%		4.0547	%		4.0547	%		12/1/2019		Interest only
Assumed Mortgage Loan		6,250		—		5,708	Greater of LIBOR(1) + 4.0% or 5.0%		N/A			5.00	%		10/8/2014		Amortizing
Mezzanine loans:
2012 Mezzanine A Loan		500,000		168,981		500,000	8.25%		8.25	%		8.25	%		12/1/2019		Interest only

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Loan	Stated Amount		Outstanding Principal— December 31, 2013		Outstanding Principal— December 31, 2012		Stated Interest Rate(2)	Interest Rate— December 31, 2013(4)			Interest Rate— December 31, 2012			Maturity Date		Amortization
2012 Mezzanine B Loan		330,000		111,528		330,000	9.625%		9.625	%		9.625	%		12/1/2019		Interest only
2012 Mezzanine C Loan		250,000		84,491		250,000	11.50%		11.50	%		11.50	%		12/1/2019		Interest only
Other debt:
ESH REIT Revolving Credit Facility		250,000		20,000		N/A	LIBOR(1) + 3.0%		3.1646	%		N/A			11/18/2016		Interest only
Total			$	2,904,843	$	3,605,708

(1) London Interbank Offering Rate.

(2) ESH REIT is a counterparty to an interest rate cap on one-month LIBOR at 3.0% with a notional amount and maturity date the same as those of 2012 Mortgage Loan Component A.

(3) ESH REIT has the option to extend the maturity date of Component A of the 2012 Mortgage Loan for up to three consecutive one-year periods, subject to limited conditions.

(4) ESH REIT’s weighted-average interest rate for the years ended December 31, 2013 and 2012 was approximately 5.46% and 5.43%, respectively.

In the fourth quarter of 2013 and subsequent to the Offering, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans. Repayment consisted of approximately $331.0 million of the 2012 Mezzanine A Loan, approximately $218.5 million of the 2012 Mezzanine B Loan and approximately $165.5 million of the 2012 Mezzanine C Loan. Prior to the partial repayment of the 2012 Mezzanine Loans, interest only payments of approximately $8.5 million were due on the first day of each calendar month. Subsequent to the partial repayment of the 2012 Mezzanine Loans, interest only payments of approximately $2.9 million are due on the first day of each calendar month.

During 2013, ESH REIT incurred approximately $25.2 million of debt extinguishment and other costs in connection with the mezzanine loan prepayments, composed of prepayment penalties of approximately $13.4 million, the write-off of unamortized deferred financing costs of approximately $10.9 million and other costs of approximately $0.9 million. Debt extinguishment costs are included as a component of interest expense in the accompanying consolidated statements of operations.

On November 30, 2012, ESH REIT refinanced its then-outstanding mortgage and mezzanine loans of approximately $2.7 billion. ESH REIT entered into new mortgage and mezzanine loans totaling $3.6 billion and one of its subsidiaries entered into an unsecured revolving credit facility of $100.0 million. ESH REIT used the proceeds from the new mortgage and mezzanine loans to pay the outstanding principal and interest balances on the then-outstanding mortgage and mezzanine loans of approximately $2.7 billion, prepayment penalties and other costs of approximately $10.7 million, deferred financing costs of approximately $64.6 million, establish new escrows of approximately $124.3 million, and distributed approximately $723.2 million to the Sponsors. ESH REIT’s monthly debt service obligation totaled approximately $18.5 million and $16.3 million prior to and subsequent to the debt refinancing, respectively.

During 2012, ESH REIT incurred approximately $45.1 million of debt extinguishment and other costs in connection with the 2012 debt refinancing, composed of prepayment penalties of approximately $10.5 million, the write-off of unamortized deferred financing costs related to the old mortgage and mezzanine loans of approximately $34.4 million and other costs of approximately $0.2 million. Debt extinguishment costs are included as a component of interest expense in the accompanying consolidated statement of operations.

Mortgage Loans

2012 Mortgage Loan—On November 30, 2012, ESH REIT entered into a $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”). The 2012 Mortgage Loan requires interest-only payments of approximately $7.8 million due on the first day of each calendar month.

Up to $367.5 million ($52.5 million of Component A, $157.5 million of Component B, and $157.5 million of Component C of the 2012 Mortgage Loan) may be voluntarily prepaid at any time without incurring a prepayment premium or penalty. ESH REIT could prepay Component A for a premium of 3.0% of the amount greater than $52.5 million from July 2, 2013 through January 1, 2014, and 1.0% from January 2, 2014 through July 1, 2014. After July 1, 2014, Component A may be prepaid without incurring a prepayment premium or penalty. Through January 1, 2015, Component B prepayments greater than $157.5 million will incur a yield maintenance premium of the greater of (i) 1.0% of the outstanding principal balance of Component B and (ii) the excess of the sum of the present values of the scheduled payments of interest and principal to be made with respect to the portion of Component B being prepaid, over the principal amount being prepaid. After January 1, 2015, Component B may be prepaid without incurring a prepayment penalty or premium. Through January 1, 2016, Component C prepayments greater than $157.5 million will incur a yield maintenance premium of the greater of (i) 1.0% of the outstanding principal balance of Component C and (ii) the excess of the sum of the present values of the scheduled payments of interest and principal to be made with respect to the portion of Component C being prepaid, over the principal amount being prepaid. After January 1, 2016, Component C may be prepaid without incurring a prepayment penalty or premium.

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Substantially all of ESH REIT’s hotel properties (680 of 684 hotel properties) serve as collateral for the 2012 Mortgage Loan. Under certain limited circumstances, losses related to the 2012 Mortgage Loan and costs incurred by the lenders are guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $252.0 million.

The occurrence of a Mortgage Loan Event of Default, a Mezzanine Loan Default, a Debt Yield Trigger Event (a Debt Yield, as defined, less than 9.0%), or a Guarantor Bankruptcy triggers a Cash Trap Event, as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) are fully funded, is held by the loan service agent as additional collateral for the 2012 Mortgage Loan. As of December 31, 2013, none of these events had occurred.

All receipts from the 680 mortgaged properties are required to be deposited into a domestic cash management account (“CMA”) for hotels in the U.S. and a Canadian CMA for hotels in Canada. Such CMAs are under the control of the loan service agent as specified by the terms of the mortgage loan agreement, mezzanine loan agreements and cash management agreements and are therefore classified as restricted cash. Receipts are allocated to CMA subaccounts for hotel occupancy/goods and services sales taxes, property taxes, insurance, ground leases, operating expenses (including management fees and reimbursements), capital improvements and mortgage and mezzanine debt service. Funds in excess of a month’s Canadian waterfall requirements are converted to U.S. dollars and transferred to the domestic CMA. Funds in excess of a month’s domestic waterfall requirements are distributed to the Corporation and/or ESH REIT so long as no Cash Trap Event has occurred.

2010 Mortgage Loan—On October 8, 2010, (the “Acquisition Date”) ESH REIT entered into a $2.0 billion mortgage loan secured by 663 hotel properties (the “2010 Mortgage Loan”). The 2010 Mortgage Loan required constant monthly payments of $12.2 million due on the first day of each calendar month, consisting of principal amortization and interest . The 2010 Mortgage Loan was set to mature on November 1, 2015; however, ESH REIT prepaid the mortgage loan on November 30, 2012, without premium or penalty. In addition to 663 hotel properties, an undeveloped land parcel, trademarks and trademark license agreements owned by ESH Strategies, and the ownership of certain subsidiaries served as collateral for the 2010 Mortgage Loan. Under limited circumstances, losses related to the 2010 Mortgage Loan were guaranteed by certain of the Sponsors’ investment funds up to an aggregate of $200.0 million.

The occurrence of a Mortgage Loan Event of Default, a Mezzanine Loan Default, a Debt Service Coverage Ratio, as defined, below 1.20, or a bankruptcy or certain other liquidity events of one of the Sponsors’ guarantors would trigger a Cash Trap Event, as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) were fully funded, was held by the loan service agent as additional collateral for the 2010 Mortgage Loan. As of the date of the refinancing, none of these events had occurred.

Assumed Mortgage Loan—Two of ESH REIT’s hotel properties were subject to a mortgage loan that was assumed on the Acquisition Date when the hotels were acquired (the “Assumed Mortgage Loan”). The assumed mortgage loan was secured by the two hotel properties. On October 23, 2013, ESH REIT prepaid the assumed mortgage loan, which had an outstanding principal balance of approximately $5.5 million.

Mezzanine Loans

2012 Mezzanine Loans— On November 30, 2012, ESH REIT entered into three mezzanine loans totaling $1.08 billion (the “2012 Mezzanine Loans”). Interest-only payments for the 2012 Mezzanine Loans total approximately $8.5 million and $2.9 million prior to and subsequent to the partial debt repayment, respectively, and are due on the first day of each calendar month. Each of the 2012 Mezzanine Loans are subject to similar CMA requirements and loan covenants generally as described above for the 2012 Mortgage Loan.

Up to $75.0 million of the Mezzanine A loan, $49.5 million of the Mezzanine B loan, and $37.5 million of the Mezzanine C loan could be voluntarily prepaid between December 1, 2012 and June 1, 2013, without prepayment premium or penalty. Up to an aggregate of $125.0 million of the Mezzanine A loan, $82.5 million of the Mezzanine B loan, and $62.5 million of the Mezzanine C loan (collectively, the Free Prepayment Amount) could be voluntarily prepaid without incurring prepayment premium or penalty between June 1, 2013 and December 1, 2013. The Free Prepayment Amount, which totaled $270.0 million, was voluntarily prepaid on November 26, 2013, as part of the fourth quarter 2012 Mezzanine Loan partial prepayment discussed above. After December 1, 2013, and through June 1, 2014, the prepayment amount will incur a 3.0% prepayment premium. On December 27, 2013, ESH REIT prepaid $445.0 million and incurred a prepayment penalty of approximately $13.4 million. After June 1, 2014, and through December 1, 2014, the prepayment amount will incur a 1.0% prepayment premium. The 2012 Mezzanine Loans may be prepaid in whole or in part after December 1, 2014, without prepayment premium or penalty. Voluntary prepayment of the 2012 Mezzanine Loans may be made without an obligation of the 2012 Mortgage Loan borrowers to make a corresponding prepayment on the 2012 Mortgage Loan. However, prepaying one of the 2012 Mezzanine Loans creates an obligation of the other 2012 Mezzanine Loan borrowers to make corresponding pro rata prepayments on their respective mezzanine loans.

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Under certain limited circumstances, losses related to the 2012 Mezzanine Loans and costs incurred by the lenders are guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $108.0 million.

2010 Mezzanine Loans—On the Acquisition Date, ESH REIT entered into mezzanine loans totaling $700.0 million, consisting of $350.0 million of senior mezzanine debt that bore interest at 9.75% and $350.0 million of junior mezzanine debt that bore interest at 12.0% (the “2010 Mezzanine Loans”). Interest-only payments totaling approximately $6.3 million were due monthly on the first day of each calendar month. The 2010 Mezzanine Loans would have matured on November 1, 2015, with all outstanding principal and unpaid interest due on that date; however, on November 30, 2012, ESH REIT voluntarily prepaid the 2010 Mezzanine Loans and incurred a prepayment premium of $10.5 million.

ESH Strategies fully guaranteed the junior mezzanine principal and interest and pledged its ownership interests in certain of its subsidiaries as security. Under limited circumstances, losses related to the 2010 Mezzanine Loans were guaranteed by certain of the Sponsors’ investment funds up to an aggregate of $25.0 million.

Revolving Credit Facilities

ESH REIT Revolving Credit Facility – On November 18, 2013, ESH REIT entered into a revolving credit facility of $250.0 million. Subject to the satisfaction of certain criteria, ESH REIT will be able to request to increase the facility to an amount up to $350.0 million. The facility provides for the issuance of up to $50.0 million letters of credit as well as borrowings on same day notice, referred to as swingline loans, in an amount up to $20.0 million. ESH REIT incurs fee of 0.35% or 0.175% on the unutilized revolver balance, based on the outstanding amount under the facility, and a fee of 3.125% on outstanding letters of credit due on the last day of each quarter. Borrowings under the facility bear interest at a rate equal to an adjusted LIBOR rate or a base rate determined by reference to the highest of (i) the prime lending rate, (ii) the overnight federal funds rate plus 0.5% or (iii) the one-month adjusted LIBOR rate plus 1.0%, plus an applicable margin of 2.00% for base rate loans and 3.00% for LIBOR loans. There is no scheduled amortization under the facility and the facility matures on November 18, 2016. As of December 31, 2013, ESH REIT had no letters of credit outstanding under this credit facility, the outstanding balance drawn was $20.0 million and the amount of borrowing capacity available was $230.0 million. ESH REIT incurred approximately $0.1 million of fees in connection with the ESH REIT revolving credit facility, which are included as a component of interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2013.

In order to avoid a Trigger Event, as defined, the revolving credit facility requires a Debt Yield, as defined, of at least 11.0% (with the requirement increasing to 11.5% on and after November 18, 2014), and a Consolidated Leverage Ratio, as defined, of no more than 9.25 to 1 (with the requirement decreasing to no more than 9.0 to 1 over the life of the facility). The occurrence of a Trigger Event requires ESH REIT to repay the outstanding facility balance and restricts its ability to draw additional proceeds. As of December 31, 2013, none of these events had occurred.

Extended Stay LLC Revolving Credit Facility—On November 30, 2012, Extended Stay LLC, a subsidiary of ESH REIT, entered into a revolving credit facility of $100.0 million. Extended Stay LLC incurred a fee of 0.5% on the undrawn revolver balance due on the first day of each calendar quarter. Extended Stay LLC incurred approximately $0.9 million of fees in connection with the Extended Stay LLC revolving credit facility, which are included as a component of interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2013.

On November 18, 2013, the Extended Stay LLC revolving credit facility terminated in connection with the Offering and ESH REIT wrote off approximately $0.7 million in unamortized deferred financing costs, which are included as a component of interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2013.

Interest Expense— The components of interest expense for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Contractual interest	$	194,980	$	201,518	$	201,976
Amortization of deferred financing costs		12,345		10,988		10,428
Debt extinguishment and other costs		26,933		45,150		70
Total	$	234,258	$	257,656	$	212,474

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Future Maturities of Debt—The future maturities of debt as of December 31, 2013, are as follows (in thousands):

Years Ending December 31
2014	$	349,843	(1)
2015		—
2016		20,000
2017		350,000
2018		—
Thereafter		2,185,000
Total	$	2,904,843

(1) Debt maturity includes three one-year extension options, subject to limited conditions. The December 2014 and 2015 extension conditions include providing an adequate extension notice period, the extension or renewal of the interest rate cap and having none of the borrowing entities be in default, as defined. The 2016 extension conditions include the conditions for the 2014 and 2015 extensions, as well as the requirement of a specified minimum Debt Yield.

Fair Value of Debt—As of December 31, 2013 and 2012, the estimated fair value of ESH REIT’s mortgage and mezzanine loans was approximately $2.8 billion and $3.6 billion, respectively. The estimated fair values of mortgage and mezzanine loans are determined by comparing current borrowing rates and risk spreads offered in the market to the stated interest rates and spreads on ESH REIT’s current mortgage and mezzanine loans (Level 2 fair value measures) or quoted market prices (Level 1 fair value measures), when available.

8. INCOME TAXES

Income before income tax (benefit) expense for the years ended December 31, 2013, 2012 and 2011 consists of the following (in thousands):

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
U.S.	$	97,878	$	21,384	$	51,398
Canada		1,712		3,326		2,245
Total	$	99,590	$	24,710	$	53,643

The components of the income tax (benefit) expense for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Year Ended December 31, 2013			Year Ended December 31, 2012		Year Ended December 31, 2011
Federal (including foreign):
Current	$	3,520		$	1,583	$	7,317
Deferred		(6,666	)		1,719		(2,262	)
State:
Current		3,044			672		2,232
Deferred		(774	)		668		(237	)
Total	$	(876	)	$	4,642	$	7,050

The differences between the income tax (benefit) expense at the effective tax rate and the statutory U.S. federal income tax rate for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Year Ended December 31, 2013				Year Ended December 31, 2012				Year Ended December 31, 2011
Tax at statutory rate	$	34,857	35.0	%	$	8,649	35.0	%	$	18,775	35.0	%
State income tax—net		910	0.9			996	4.0			1,330	2.5
Foreign income tax rate differential		162	0.2			269	1.1			327	0.6

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	Year Ended December 31, 2013					Year Ended December 31, 2012					Year Ended December 31, 2011
Nondeductible (nontaxable):
REIT income		(33,798	)	(34.0	)		(6,632	)	(26.8	)		(15,271	)	(28.5	)
Pass-through entity income		(255	)	(0.3	)		(542	)	(2.2	)		(371	)	(0.7	)
Change in expected distribution policy		(5,561	)	(5.6	)		—		—			—		—
Equity-based compensation		1,865		1.9			2,100		8.5			—		—
Other permanent differences		1,294		1.3			121		0.5			1,757		3.3
Other—net		(516	)	(0.5	)		(340	)	(1.4	)		72		0.1
Valuation allowance		166		0.2			21		0.1			431		0.8
Income tax (benefit) expense —net	$	(876	)	(0.9	)%	$	4,642		18.8	%	$	7,050		13.1	%

The significant components of deferred tax assets and deferred tax liabilities as of December 31, 2013 and 2012, consist of the following (in thousands):

	December 31, 2013			December 31, 2012
Deferred tax assets:
Net operating loss carryforwards	$	7,851		$	1,089
Accruals and allowances		36			2,387
Intangible assets		101			268
Impairment and other		66			62
Total deferred tax assets		8,054			3,806
Valuation allowance		—			(577	)
Net deferred tax assets		8,054			3,229
Deferred tax liabilities:
Intangible assets		—			(7,469	)
Prepaid expenses		(31	)		(790	)
Depreciable property		(4,806	)		(3,819	)
Other		(10	)		—
Total net deferred tax assets (liabilities)	$	3,207		$	(8,849	)

ESH REIT has elected to be taxed and expects to continue to qualify as a REIT under Sections 856 through 860 of the Code. A REIT is a legal entity that holds real estate assets and is generally not subject to federal and state income taxes. In order to maintain qualification as a REIT, ESH REIT is required to distribute at least 90% of its taxable income, excluding capital gains, to its shareholders each year. In addition, ESH REIT must meet a number of complex organizational and operational requirements. If ESH REIT were to fail to qualify as a REIT in any taxable year, it would be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and generally would be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which it lost its REIT qualification. Even in qualifying as a REIT, ESH REIT may be subject to state and local taxes in certain jurisdictions and may be subject to federal income and excise taxes on undistributed income.

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While ESH REIT has historically distributed 100% of its taxable income, beginning in 2014, it intends to distribute 95% of its taxable income. Accordingly, ESH REIT will be subject to income taxes on approximately 5% of its taxable income. As a result, deferred tax balances have been adjusted during the year to reflect that an estimated 5% of ESH REIT’s future taxable income will be subject to tax. This change in distribution policy resulted in the recognition of a deferred tax asset during 2013 of approximately $7.8 million related to ESH REIT’s net operating loss carryforwards that existed as of December 31, 2012. These net operating losses expire in 2032. In addition, net deferred tax liabilities of $1.2 million were recorded during 2013 related to temporary differences that will now be expected to be included in taxable income in the future.

ESH REIT had taxable income before a REIT dividend of approximately $192.1 million for the year ended December 31, 2013, a taxable loss for the year ended December 31, 2012 and taxable income before a REIT dividend of approximately $50.2 million for the year ended December 31, 2011. In 2013, ESH REIT made approximately $239.8 million in distributions to its shareholders, which consisted of a cash dividend of approximately $78.4 million and a dividend of property of approximately $161.4 million. The total amount of the 2013 distributions was considered a taxable dividend. In 2012, ESH REIT made $826.2 million in distributions to its shareholders. Approximately $45.1 million of this amount was considered a taxable dividend and the balance was considered a return of capital for tax purposes. In 2011, ESH REIT distributed $26.1 million as a cash dividend, which was considered a taxable distribution to members, and $24.1 million, which was filed as a consent dividend to meet REIT requirements.

As of December 31, 2013, the book basis of ESH REIT’s assets was approximately $63.7 million greater than the tax basis of its assets.

As of December 31, 2012, ESH REIT recorded a valuation allowance related to the net operating loss carryforwards of its Canadian Operating Lessee subsidiary. ESH REIT concluded that, in light of available evidence, it was more likely than not that these net operating loss carryforwards would not be realized.

ESH REIT evaluates its open tax positions using the criteria established by FASB ASC 740, “Income Taxes.” ESH REIT has concluded that it has not taken any tax positions that are not more likely than not to be sustained upon examination and has therefore not recorded any reserves for uncertain tax positions. ESH REIT’s income tax returns for the years 2010 to present are subject to examination by the Internal Revenue Service and other taxing authorities.

9. QUARTERLY RESULTS (Unaudited)

Below includes quarterly financial data for the years ended December 31, 2013 and 2012 (in thousands, except per share data):

	Three Months Ended March 31,						Three Months Ended June 30,				Three Months Ended September 30,						Three Months Ended December 31,
	2013			2012			2013		2012		2013			2012			2013			2012
Total revenues	$	256,846		$	223,093		$	293,650	$	256,443	$	313,701		$	281,397		$	208,342		$	250,584
Income from operations		65,976			54,194			91,465		76,223		99,160			88,796			76,618	(1)		62,846
Net income (loss)		13,225			1,251			36,832		19,963		45,703			32,568			4,706	(2)		(33,714	)(3)
Net (income) loss attributable to noncontrolling interests		(471	)		(293	)		33		527		(422	)		(141	)		130			(1,642	)
Net income attributable to common shareholders or members		12,754			958			36,865		20,490		45,281			32,427			4,836			(35,356	)
Basic net income per share -Class A(4)	$	0.03		$	0.00		$	0.10	$	0.05	$	0.12		$	0.09		$	0.01		$	(0.09	)
Diluted net income per share-Class A(4)	$	0.03		$	0.00		$	0.10	$	0.05	$	0.12		$	0.08		$	0.01		$	(0.09	)
Basic net income per share-Class B(4)	$	0.03		$	0.00		$	0.10	$	0.05	$	0.12		$	0.09		$	0.01		$	(0.09	)
Diluted net income per share-Class B(4)	$	0.03		$	0.00		$	0.10	$	0.05	$	0.12		$	0.09		$	0.01		$	(0.09	)

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(1) Includes a charge of approximately $2.3 million related to incremental compensation cost associated with modification ofequity-based awards.

(2) Includes charges of: (1) approximately $2.3 million related to incremental compensation cost associated with modification of equity-based awards, and (2) approximately $25.2 million related to the write-off of unamortized deferred financing costs and loan prepayment penalties and related costs.

(3) Includes a charge of approximately $45.1 million related to the write-off of unamortized deferred financing costs and loan prepayment penalties and related costs.

(4) The sum of basic net income per share and diluted net income per share for the four quarters may differ from the annual basic net income per share and annual diluted net income per share due to rounding.

10. EQUITY

Controlling Interests

ESH REIT has authorized 4,300.0 million shares of Class A common stock, par value $0.01 per share, of which approximately 250.3 million shares were issued and outstanding as of December 31, 2013. All of the issued and outstanding shares of ESH REIT Class A common stock as of December 31, 2013 is held by the Corporation. ESH REIT has authorized 7,800.0 million shares of Class B common stock, par value $0.01 per share, of which approximately 204.8 million shares were issued and outstanding as of December 31, 2013.

ESH REIT has authorized 350.0 million shares of preferred stock, par value $0.01 per share, of which no shares were issued or outstanding as of December 31, 2013. Additionally, ESH REIT has authorized 125 shares of preferred stock, no par value, of which 125 shares of preferred stock were issued and outstanding as of December 31, 2013. The preferred stock pays dividends at a rate of 12.5% per year. With respect to dividends and distributions upon ESH REIT’s liquidation, winding-up or dissolution, the 12.5% preferred stock ranks senior to the Class A and Class B common stock. The liquidation preference of the 12.5% preferred stock is $1,000 per share plus any accumulated but unpaid dividends and a redemption premium if redeemed prior to December 31, 2015. Shares of 12.5% preferred stock may be redeemed, in whole or in part, at any time for a per share amount equal to the liquidation preference plus all accumulated but unpaid dividends.

Prior to the Pre-IPO Transactions, ESH REIT had three classes of member interests authorized: preferred units (125 units authorized), common units (1,000 units authorized), and excess units (1,000 units authorized). All common units were issued to Holdings on the Acquisition Date, representing a capital investment of approximately $1.5 billion. These units were outstanding as of December 31, 2012. On January 3, 2011, ESH REIT issued all of the preferred units for consideration of $73,000, net of issuance costs. These units were outstanding as of December 31, 2012. Preferred units were entitled to a cumulative preferential cash distribution at the rate of 12.5% per annum on the $1,000 liquidation preference per unit and the liquidation preference amount upon dissolution or winding up of the affairs of ESH REIT. No excess units were issued or outstanding as of December 31, 2012.

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Noncontrolling Interests

Prior to the Pre-IPO Transactions, noncontrolling interests consisted of all of the equity in HVM, a consolidated variable interest entity.

11. VARIABLE INTEREST ENTITY (HVM)

As discussed in Note 2, the financial position, results of operations, other comprehensive income and cash flows of HVM are consolidated in ESH REIT’s accompanying consolidated financial statements through the Pre-IPO Transactions. As part of the Pre-IPO Transactions, ESA Management acquired all of the assets and assumed all of the liabilities of HVM for approximately $0.8 million; at that time, the existing management agreements were terminated. The following describes HVM’s financial activity prior to the Pre-IPO Transactions, including activity between HVM and ESH REIT, the majority of which is eliminated in consolidation.

Hotel Management Agreements with ESH REIT—On the Acquisition Date, ESH REIT’s hotel operating subsidiaries, the Operating Lessees, executed management agreements with HVM with respect to all of the hotels under lease. Under the terms of these agreements, HVM provided management services to the hotels, including supervision, direction, control of the operation, and management and promotion of the hotel properties in a manner consistent with extended stay hotels of similar size, type, or usage in similar locations.

The following table sets forth a summary of the fees provided under the hotel management agreements between HVM and the Operating Lessees through the Pre-IPO Transactions:

	Fees as Percentage of Revenue—First Threshold	First Revenue Threshold	Fees as Percentage of Revenue—Second Threshold	Second Revenue Threshold
U.S. 660 hotel operators	2.5%	Up to $500 million	0.5%	> $500 million
Canadian 3 hotel operators	2.5%	Up to C$12 million	0.5%	> C$12 million
U.S. 2 hotel operators under assumed mortgage loan	2.5%	Up to $1.8 million	0.5%	> $1.8 million
U.S. 17 hotel operators acquired in December 2012	8.0%	N/A	N/A	N/A

Excluding the agreements with the U.S. 17 hotel operators assumed by ESH REIT in December 2012, under each of these agreements, HVM was also reimbursed, without markup, for costs incurred by HVM for providing services for accounting, financial analysis, operations supervision, sales, revenue management, training, technology, marketing, advertising, reservation services and travel agent commissions.

Administrative Services Agreements with ESH REIT—On the Acquisition Date, ESH REIT executed a service agreement with HVM, whereby HVM provided services for certain administrative, legal, financial, accounting, and related services, including services related to property acquisitions and oversight and procurement of capital assets. Fees consisted of HVM’s cost of providing the services plus 6%. In connection with the Pre-IPO Transactions, the Corporation acquired the net assets of HVM; therefore, the administrative services agreement was terminated at that time.

Third Party Management Agreements—Through December 12, 2012, HVM managed 17 hotels for a third-party hotel owner-operator under a separate management agreement with each hotel. ESH REIT acquired these hotels on December 13, 2012 (see Note 4) and these management agreements were assumed by ESH REIT upon acquisition. In addition, HVM had two additional hotel management agreements to manage hotels owned by a third-party hotel owner-operator. ESH REIT acquired these hotels on December 31, 2013 (see Note 4).

The following tables set forth a summary of the hotel management fees, administrative services fees, G&A expense reimbursement fees, third party management fees and reimbursements to HVM for these activities for the period from January 1, 2013 through the Pre-IPO Transactions and each of the years ended December 31, 2012 and 2011 (in thousands). Where appropriate, such amounts have been eliminated in the accompanying consolidated financial statements.

	Period from January 1, 2013 through the Pre-IPO Transactions
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursement		Total fees
Hotel Management Agreements:
U.S. 660 hotel operators	$	13,456	$	40,466	$	—	$	53,922	$	176,572	$	230,494
Canadian hotel operators		101		176		—		277		2,630		2,907
U.S. 2 hotel operators under assumed mortgage loan		40		—		—		40		493		533

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	Period from January 1, 2013 through the Pre-IPO Transactions
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursement		Total fees
U.S. 17 hotel operators acquired in December 2012		1,331		—		—		1,331		—		1,331
Administrative Services Agreements:
U.S. and Canadian 680 hotel owners		—		—		6,130		6,130		—		6,130
ESH Strategies		—		—		178		178		—		178
Third Party Management Agreements:
U.S. 2 third party hotel operators		295		—		—		295		640		935
	$	15,223	$	40,642	$	6,308	$	62,173	$	180,335	$	242,508

	Year Ended December 31, 2012
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursement		Total fees
Hotel Management Agreements:
U.S. 660 hotel operators	$	14,852	$	78,732	$	—	$	93,584	$	197,315	$	290,899
Canadian hotel operators		41		331		—		372		2,983		3,355
U.S. 2 hotel operators under assumed mortgage loan		46		—		—		46		561		607
U.S. 17 hotel operators acquired in December 2012(1)		78		—		—		78		270		348
Administrative Services Agreements:
U.S. and Canadian 680 hotel owners		—		—		6,745		6,745		—		6,745
ESH Strategies		—		—		357		357		—		357
Third Party Management Agreements:
U.S. 17 hotel operators acquired in December 2012(2)		2,354		—		—		2,354		5,807		8,161
U.S. 2 third party hotel operators		280		—		—		280		793		1,073
	$	17,651	$	79,063	$	7,102	$	103,816	$	207,729	$	311,545

(1) Fees earned by HVM subsequent to ESH REIT’s acquisition of the 17 HFI hotels.

(2) Fees earned by HVM prior to ESH REIT’s acquisition of the 17 HFI hotels.

	Year Ended December 31, 2011
	Management fees		Cost reimbursements		Administrative service fees		Total fees		On-site personnel reimbursements		Total fees
Hotel Management Agreements:
U.S. 660 hotel operators	$	14,581	$	62,391	$	—	$	76,972	$	186,906	$	263,878
Canadian hotel operators		59		245		—		304		2,847		3,151
U.S. 2 hotel operators under assumed mortgage loan		46		—		—		46		490		536
U.S. 17 hotel operators acquired in December 2012		—		—		—		—		—		—
Administrative Services Agreements:
U.S. and Canadian 680 hotel owners		—		—		4,313		4,313		—		4,313
ESH Strategies		—		—		424		424		—		424
Third Party Management Agreements:
U.S. 17 hotel operators acquired in December 2012(2)		2,341		—		—		2,341		5,697		8,038
U.S. 2 third party hotel operators		246		—		—		246		712		958
	$	17,273	$	62,636	$	4,737	$	84,646	$	196,652	$	281,298

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Condensed Consolidated Financial Information—The condensed consolidated balance sheet of HVM as of December 31, 2012, was as follows (in thousands):

	December 31, 2012
Assets:
Cash and cash equivalents	$	3,004
Accounts receivable from the Company and related parties		34,277
Accounts receivable from third parties		157
Furniture, fixtures and equipment—net of accumulated depreciation of $9,941		3,568
Other assets		6,510
Total assets	$	47,516
Liabilities and members’ equity:
Accounts payable and accrued liabilities	$	44,359
Members’ equity		3,157
Total liabilities and members’ equity	$	47,516

The condensed consolidated statements of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011 are as follows (in thousands):

	Period from January 1, 2013 through the Pre-IPO Transactions		Year Ended December 31, 2012		Year Ended December 31, 2011
Revenues:
Management fee revenues	$	62,173	$	103,816	$	84,646
Reimbursement of payroll from managed properties		180,335		207,729		196,652
Total revenues		242,508		311,545		281,298
Operating expenses:
Hotel operating expenses		—		27,280		17,274
General and administrative expenses		58,049		65,795		54,956
Restructuring expenses		605		5,763		8,938
Managed property payroll expenses		180,335		207,729		196,652
Depreciation and amortization		1,300		1,429		1,100
Total operating expenses		240,289		307,996		278,920
Other income		120		68		60
Net income	$	2,339	$	3,617	$	2,438

12. RELATED PARTY TRANSACTIONS

Subsequent to the Pre-IPO Transactions, ESA Management, a subsidiary of the Corporation, incurs costs under a services agreement with ESH REIT for certain overhead services performed on ESH REIT’s behalf. The services relate to executive management (including the Chief Executive Officer, the Chief Financial Officer and the Chief Legal Officer), accounting, financial analysis, training and technology. For the period from the Pre-IPO Transactions through December 31, 2013, ESH REIT incurred expenses of approximately $1.1 million related to these shared costs, which are included in general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2013.

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ESH Strategies is the owner of the trademarks, “Extended Stay America, “Extended Stay Deluxe,” “Homestead Studio Suites,” “Studio Plus,” “Crossland,” “Extended Stay” and “Extended Stay Hotels” and prior to the Pre-IPO Transactions, licensed the use of the trademarks to ESH REIT’s subsidiaries, the Operating Lessees. The Operating Lessees licensed the trademarks under agreements with ESH Strategies, which provided for a trademark fee of 0.3% of revenues. Trademark fees under these agreements were approximately $3.0 million, $3.0 million and $2.8 million for the period from January 1, 2013 through the Pre-IPO Transactions, and for the years ended December 31, 2012 and 2011, respectively.

As of December 31, 2013, ESH REIT had an outstanding net receivable of approximately $25.8 million due from the Corporation and its subsidiaries, which is included in other assets in the accompanying consolidated balance sheet as of December 31, 2013. This amount includes receivables due from the Corporation and its subsidiaries outstanding at the time of the Pre-IPO Transactions, which accrue interest at 5.0% per annum, offset by payables due to the Corporation and its subsidiaries which occurred subsequent to the Pre-IPO Transactions. Additionally, ESH REIT has deferred rental revenue related to the operating lease agreements between ESH REIT and the Operating Lessees of approximately $38.8 million, which is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2013, and deferred rent receivable also related to the operating lease agreements between ESH REIT and the Operating Lessees of approximately $3.6 million.

An affiliate of one of ESH REIT’s Sponsors purchased approximately 794,000 Paired Shares as an underwriter in connection with the Offering and earned approximately $1.0 million in fees related to the transaction.

Investment funds of the Sponsors held approximately $37.2 million and approximately $110.0 million of the 2012 Mezzanine Loans as of December 31, 2013 and 2012, respectively.

13. COMMITMENTS AND CONTINGENCIES

Lease Commitments—Prior to the Pre-IPO Transactions, HVM executed a lease for office space in Charlotte, North Carolina, in conjunction with the relocation of its corporate headquarters (see Note 14.) The lease is an operating lease with an initial term through August 2021. After the initial term, the Company has the option to renew the lease for two additional terms of five years each at the then-fair market annual base rental rate. Office rent expense is included in general and administrative expenses in the accompanying consolidated statements of operations for periods through the Pre-IPO Transactions, due to the fact that HVM was a consolidated variable interest entity.

ESH REIT is a tenant under long-term ground leases at four of its hotel properties. The initial terms of the ground lease agreements terminate at various dates between 2016 and 2096, and most leases include multiple renewal options for generally five or 10 year periods. Ground lease expense is included in hotel operating expenses in the accompanying consolidated statements of operations.

Rent expense on office and ground leases is recognized on a straight-line basis and was approximately $3.0 million, $3.3 million and $2.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Future minimum lease payments under operating leases as of December 31, 2013, are as follows (in thousands):

Years Ending December 31
2014	$	665
2015		712
2016		729
2017		750
2018		771
Thereafter		83,156
Total	$	86,783

Other Commitments—ESH REIT has a commitment to make quarterly payments in lieu of taxes to the owner of the land on which one of its properties is located. The initial term of the agreement terminates in 2031. The cost related to this commitment was approximately $0.3 million for each of the three years ended December 31, 2013, 2012 and 2011, and is included in hotel operating expenses in the accompanying consolidated statements of operations.

Legal Contingencies—ESH REIT is not a party to any other litigation or claims, other than routine matters arising in the ordinary course of business, that are incidental to the operation of the business of ESH REIT. ESH REIT believes that the results of all claims and litigation, individually or in the aggregate, will not have a material adverse effect on its business or consolidated financial statements.

Purchase Commitments—As of December 31, 2013, ESH REIT had purchase commitments related to certain continuing refurbishments to its hotel properties of approximately $10.6 million.

14. RESTRUCTURING

In 2013, prior to the Pre-IPO Transactions, the Operating Lessees and HVM initiated an operations restructuring which changed certain aspects of the Operating Lessees’ property staffing model. In 2011, ESH REIT and HVM initiated a corporate restructuring that included, among other things, the relocation of the corporate headquarters to Charlotte, North Carolina. The corporate relocation

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was completed during the first half of 2012. Total expenses incurred during the years ended December 31, 2013, 2012 and 2011, were approximately $0.6 million, $5.8 million and $10.5 million, respectively, and consisted of the following (in thousands):

	Year Ended December 31,		Year Ended December 31,		Year Ended December 31,
	2013		2012		2011
Personnel relocation, recruitment and separation payments	$	605	$	3,729	$	3,789
Executive separation payments		—		2,019		5,000
Relocation of furniture, fixtures and equipment		—		15		149
Loss on sale of office building		—		—		1,553
Total restructuring expenses	$	605	$	5,763	$	10,491

Amounts accrued and paid related to the corporate restructuring during the years ended December 31, 2013 and 2012, are summarized as follows (in thousands):

	December 31, 2013			December 31, 2012
Balance—beginning of year	$	213		$	5,205
Expense incurred		605			5,763
Cash payments		(810	)		(8,736	)
Equity awards		—			(2,019	)
Company reorganization		(8	)		—
Balance—end of year	$	—		$	213

As of December 31, 2013 and 2012, amounts accrued are included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

15. EQUITY-BASED COMPENSATION

As of December 31, 2013, the Corporation and ESH REIT each maintain a long-term incentive plan (“LTIP”) under which the Corporation and ESH REIT may issue to eligible employees or directors restricted stock (i.e., Paired Share) awards, restricted stock (i.e., Paired Share) units or other share-based awards. The aggregate number of Paired Shares that may be made as awards under the LTIP’s shall not exceed 8.0 million, no more of which 4.0 million may be granted as incentive stock options. Each of the Corporation’s and ESH REIT’s LTIP has a share reserve of an equivalent number of shares of Corporation common stock and Class B common stock of ESH REIT, respectively. Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan which provided for HVM employees and members of Holdings’ and Strategies Holdings’ boards of managers awards of restricted limited liability interests (“Profit Units”) in Holdings and Strategies Holdings.

On November 12, 2013, holders of outstanding Profit Units received an aggregate distribution of cash of approximately $2.4 million from Holdings and all remaining outstanding Profit Units were converted into restricted stock (i.e., Paired Share) awards. 80% of the restricted stock awards received in respect of the Profit Units were received with the same vesting schedules as the Profit Units and at their fair values. 20% of the restricted stock awards received in respect of the Profit Units were received with acceleration to their existing vesting schedules. As a result of this acceleration, ESH REIT incurred additional compensation cost of approximately $2.3 million.

Subsequent to the Offering, the fair value of equity-based awards on the date of grant is based on the closing price of a Paired Share on the date of grant. A portion of the grant date fair value is allocated to a share of common stock of the Corporation and a portion of the price allocated to a share of Class B common stock of ESH REIT.

Prior to the Offering, the fair value of equity-based awards on the date of grant was estimated using the Black-Scholes Merton model, using various assumptions regarding (a) the expected holding period, (b) the risk-free rate of return, (c) expected dividend yield on the underlying units, (d) the expected volatility in the fair value of ESH REIT’s and ESH Strategies’ equity, and (e) a discount for lack of marketability, and was calculated based on the grant agreement terms, which included thresholds for internal rate of return and recovery of Holdings’ and Strategies Holdings’ members’ initial equity investments.

The expected holding period represents the period of time that the Profit Units are expected to be outstanding. The units were assumed to remain outstanding until ESH REIT and ESH Strategies experienced a change in control of ownership or an initial public offering. The risk-free rate of return for periods approximating the expected holding period of the units was based on the U.S. constant maturity treasuries yield in effect at the grant date. A dividend yield was assumed based on ESH REIT’s and ESH Strategies’ historical dividend rate. Because ESH REIT’s and ESH Strategies’ equity was privately held and was not traded in an active market, ESH REIT and ESH Strategies used the historical volatility of the share values of publicly traded companies within similar industries as ESH REIT and ESH Strategies as a surrogate for the expected volatility of equity. The discount for lack of marketability was calculated for each expected holding period using a put-option Black-Scholes Merton model. The key assumptions used for the period from January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011 were as follows:

	Period from January 1, 2013 through the Pre-IPO Transactions			Year Ended December 31, 2012			Year Ended December 31, 2011
Expected holding period		0.25 years			3 years			2 – 4 years
Risk–free rate of return		0.2	%		0.4	%		0.3% –0.6	%
Expected dividend yield		0.0	%		0.0	%		0.9	%
Expected volatility		30.0	%		55.0	%		47.9	%
Discount for lack of marketability		20.0	%		20.0	%		20.0	%

136

Equity-based compensation cost is recognized by amortizing the grant-date fair value of the equity-based awards, less estimated forfeitures, on a straight-line basis over the requisite service period of each award. During the years ended December 31, 2013, 2012 and 2011, approximately $6.6 million, $6.4 million, and $4.7 million, respectively, of compensation cost was recognized. During the years ended December 31, 2013, 2012 and 2011, approximately $6.6 million, $4.4 million, and $4.7 million, respectively, of compensation cost is included in general and administrative expenses in the accompanying consolidated statements of operations. During the year ended December 31, 2012, approximately $2.0 million of compensation cost is included in restructuring expenses in the accompanying consolidated statement of operations, as this cost related to an executive separation payment as a result of ESH REIT’s and HVM’s restructuring (see Note 14).

As of December 31, 2013, there was $2.3 million of unrecognized compensation cost related to outstanding equity-based awards, which is expected to be recognized subsequent to December 31, 2013 over a weighted-average period of approximately 1.9 years. Total unrecognized compensation cost will be adjusted for future forfeitures.

Restricted stock award and restricted stock unit (collectively, “RSA/RSU”) activity during the years ended December 31, 2013, 2012 and 2011, after taking into account the conversion of Profit Units issued under HVM’s management incentive plan on November 12, 2013, was as follows:

	Number of RSAs/ RSUs (in thousands)			Weighted- Average Grant-Date Fair Value per RSA/ RSU(1)
Outstanding RSAs/RSUs—January 1, 2011		4,203		$	5.52
RSAs/RSUs granted in 2011		1,064		$	6.90
RSAs/RSUs forfeited in 2011		(456	)	$	5.52
Outstanding RSAs/RSUs—December 31, 2011		4,811		$	5.83
RSAs/RSUs granted in 2012		1,349		$	9.47
RSAs/RSUs forfeited in 2012		(1,248	)	$	5.62
RSAs/RSUs redeemed in 2012		(96	)	$	5.52
Outstanding RSAs/RSUs—December 31, 2012		4,816		$	6.96
RSAs/RSUs granted in 2013(2)		185		$	17.75
RSAs/RSUs converted or accelerated in 2013		(2,802	)	$	6.67
RSAs/RSUs forfeited in 2013		(520	)	$	5.76
RSAs/RSUs redeemed in 2013		(96	)	$	6.67
Outstanding RSAs/RSUs—December 31, 2013(2)		1,583		$	9.35
Vested RSAs/RSUs—December 31, 2013		—		$	—
Nonvested RSAs/RSUs—December 31, 2013		1,583		$	9.35
Vested RSAs/RSUs—December 31, 2012		1,532		$	5.79
Nonvested RSAs/RSUs—December 31, 2012		3,284		$	7.65

(1) Valuation was performed contemporaneously with grants.

(2) For the period from the Pre-IPO Transactions through December 31, 2013, the Corporation issued 349,850 restricted stock (i.e., Paired Share) units under which ESH REIT is a counterparty and will issue, and be compensated in cash for, 349,850 shares of Class B common stock of ESH REIT in future periods.

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In December 2010, HVM entered into agreements designed to incentivize and retain certain operations personnel whose duties include the oversight of multiple hotel properties. The agreements provide participants future payment upon a change of control transaction, generally defined as a sale of ESH REIT and ESH Strategies or a substantial portion of their assets or operations. In March 2011, HVM allowed participants to elect to receive a one-time payment of a portion of the amount due under the agreements. Remaining payments prescribed by the agreements require that the participant remain employed upon a change of control transaction. As of December 31, 2013 and 2012, $0 and $4.5 million, respectively, are included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these agreements; amounts owed are obligations of ESA Management and therefore are no longer recorded by ESH REIT subsequent to the Pre-IPO Transactions.

16. DEFINED CONTRIBUTION BENEFIT PLAN

HVM had a savings plan that qualified under Section 401(k) of the Code for all employees meeting the eligibility requirements of the plan, and the plan was transferred to ESA Management as part of the Pre-IPO Transactions. The plan has an employer-matching contribution of 50% of the first 6% of an employee’s contribution, which vests over an employee’s initial five-year service period. The plan also provides for contributions up to 100% of eligible employee pretax salary, subject to the Code’s annual deferral limit of $17,500 and $17,000 during 2013 and 2012, respectively. Employer contributions, net of forfeitures, totaled approximately $1.3 million, $0.9 million and $1.0 million for the period January 1, 2013 through the Pre-IPO Transactions and the years ended December 31, 2012 and 2011, respectively.

17. SUBSEQUENT EVENTS

On February 26, 2014, the board of directors of ESH REIT declared a pro rata cash distribution of $0.08 per share on its Class A common stock and Class B common stock with respect to the period commencing upon the completion of the Offering and ending on December 31, 2013, based on a distribution rate of $0.15 per Paired Share for a full quarter. The dividend is payable on March 26, 2014 to shareholders of record as of March 12, 2014.

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Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Consolidated

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2013

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Hotel Properties:
Anchorage—Downtown	Anchorage, AK		(1	)		723		8,791		137		54		609			771		777		9,400		908		11,085		(1,092	)		10/8/2010		2003		43
Anchorage—Midtown	Anchorage, AK		(1	)		2,600		20,740		240		45		625			1,235		2,645		21,365		1,475		25,485		(2,156	)		10/8/2010		2004		45
Fairbanks—Old Airport Way	Fairbanks , AK		(1	)		2,978		12,016		98		78		462			761		3,056		12,478		859		16,393		(1,443	)		10/8/2010		2001		40
Juneau—Shell Simmons Drive	Juneau, AK		(1	)		2,979		12,135		132		68		538			770		3,047		12,673		902		16,622		(1,435	)		10/8/2010		2001		41
Birmingham—Inverness	Birmingham, AL		(1	)		359		688		33		27		43			250		386		731		283		1,400		(220	)		10/8/2010		1996		26
Birmingham—Perimeter Park South	Birmingham, AL		(1	)		1,737		3,218		53		44		65			359		1,781		3,283		412		5,476		(550	)		10/8/2010		1998		33
Birmingham—Wildwood	Birmingham, AL		(1	)		385		1,890		33		41		(98	)		274		426		1,792		307		2,525		(347	)		10/8/2010		1996		26
Huntsville—U.S. Space and Rocket Center	Huntsville, AL		(1	)		770		5,385		39		56		143			247		826		5,528		286		6,640		(749	)		10/8/2010		1997		32
Mobile—Spring Hill	Mobile, AL		(1	)		1,185		7,479		41		53		194			193		1,238		7,673		234		9,145		(971	)		10/8/2010		1997		32
Montgomery—Carmichael Rd.	Montgomery, AL		(1	)		1,045		—		35		74		27			180		1,119		27		215		1,361		(213	)		10/8/2010		1996		(3	)
Montgomery—Eastern Blvd.	Montgomery, AL		(1	)		600		4,231		44		59		288			599		659		4,519		643		5,821		(844	)		10/8/2010		1997		32
Little Rock—West	Little Rock, AR		(1	)		1,630		2,916		46		47		74			220		1,677		2,990		266		4,933		(456	)		10/8/2010		1996		31
Little Rock—West Little Rock	Little Rock, AR		(1	)		1,708		1,931		39		55		60			238		1,763		1,991		277		4,031		(377	)		10/8/2010		1997		27
Fayetteville—Springdale	Springdale, AR		(1	)		1,460		—		55		90		245			250		1,550		245		305		2,100		(195	)		10/8/2010		2001		(3	)
Phoenix—Mesa	Mesa, AZ		(1	)		1,098		2,347		38		42		94			345		1,140		2,441		383		3,964		(393	)		10/8/2010		1997		37
Phoenix—Mesa	Mesa, AZ		(1	)		1,305		2,589		44		8		96			400		1,313		2,685		444		4,442		(461	)		10/8/2010		1997		32
Phoenix—Peoria	Peoria, AZ		(1	)		1,229		3,741		38		32		53			201		1,261		3,794		239		5,294		(472	)		10/8/2010		1998		39
Phoenix—Airport	Phoenix, AZ		(1	)		1,764		408		38		52		445			524		1,816		853		562		3,231		(491	)		10/8/2010		1998		40
Phoenix—Airport—E. Oak St.	Phoenix, AZ		(1	)		1,623		1,109		57		40		79			391		1,663		1,188		448		3,299		(375	)		10/8/2010		1997		36
Phoenix—Biltmore	Phoenix, AZ		(1	)		1,191		1,372		50		64		98			373		1,255		1,470		423		3,148		(325	)		10/8/2010		1997		37
Phoenix—Chandler	Phoenix, AZ		(1	)		1,130		2,983		39		30		78			226		1,160		3,061		265		4,486		(435	)		10/8/2010		1998		38
Phoenix—Chandler—E. Chandler Blvd.	Phoenix, AZ		(1	)		1,745		3,307		49		61		115			388		1,806		3,422		437		5,665		(534	)		10/8/2010		1998		34
Phoenix—Deer Valley	Phoenix, AZ		(1	)		945		2,092		39		48		92			296		993		2,184		335		3,512		(387	)		10/8/2010		1998		38
Phoenix—Metro—Black Canyon Highway	Phoenix, AZ		(1	)		1,378		1,610		49		77		109			464		1,455		1,719		513		3,687		(452	)		10/8/2010		1998		34
Phoenix—Metro—Dunlap Ave.	Phoenix, AZ		(1	)		2,071		—		44		47		55			183		2,118		55		227		2,400		(172	)		10/8/2010		1996		(3	)
Phoenix—Midtown	Phoenix, AZ		(1	)		1,195		3,918		59		30		243			504		1,225		4,161		563		5,949		(632	)		10/8/2010		1998		39
Phoenix—West	Phoenix, AZ		(1	)		1,951		—		44		37		123			170		1,988		123		214		2,325		(269	)		10/8/2010		1998		(4	)
Phoenix—Scottsdale	Scottsdale, AZ		(1	)		1,655		3,691		46		66		266			277		1,721		3,957		323		6,001		(516	)		10/8/2010		1997		37
Phoenix—Scottsdale—North	Scottsdale, AZ		(1	)		1,476		4,266		43		23		76			272		1,499		4,342		315		6,156		(607	)		10/8/2010		1997		32
Phoenix—Scottsdale—Old Town	Scottsdale, AZ		(1	)		1,605		2,564		43		35		479			709		1,640		3,043		752		5,435		(794	)		10/8/2010		1995		30
Phoenix—Airport—Tempe	Tempe, AZ		(1	)		1,228		3,249		46		43		197			340		1,271		3,446		386		5,103		(505	)		10/8/2010		1999		39
Tucson—Butterfield Drive	Tucson, AZ		(1	)		1,133		1,098		39		19		39			184		1,152		1,137		223		2,512		(320	)		10/8/2010		1998		23
Tucson—Grant Road	Tucson, AZ		(1	)		1,780		5,364		43		40		90			280		1,820		5,454		323		7,597		(749	)		10/8/2010		1997		32
Oakland—Alameda	Alameda, CA		(1	)		5,165		9,134		57		61		546			703		5,226		9,680		760		15,666		(1,235	)		10/8/2010		2000		40
Oakland—Alameda Airport	Alameda, CA		(1	)		3,197		3,067		55		31		487			792		3,228		3,554		847		7,629		(542	)		10/8/2010		1999		40
San Jose—Santa Clara	Alviso, CA		(1	)		5,036		2,681		64		109		396			497		5,145		3,077		561		8,783		(616	)		10/8/2010		2001		41
Orange County—Anaheim Convention Center	Anaheim, CA		(1	)		4,439		3,574		73		49		556			768		4,488		4,130		841		9,459		(815	)		10/8/2010		2001		41
Orange County—Anaheim Hills	Anaheim, CA		(1	)		4,779		2,040		98		38		558			558		4,817		2,598		656		8,071		(591	)		10/8/2010		2002		42
Los Angeles – Arcadia	Arcadia, CA		(1	)		4,577		3,647		45		59		508			788		4,636		4,155		833		9,624		(650	)		10/8/2010		1998		38
Bakersfield—California Avenue	Bakersfield, CA		(1	)		1,186		2,153		43		74		535			699		1,260		2,688		742		4,690		(587	)		10/8/2010		1996		31
Bakersfield—Chester Lane	Bakersfield, CA		(1	)		1,002		4,514		142		34		259			509		1,036		4,773		651		6,460		(570	)		10/8/2010		2005		45
San Francisco—Belmont	Belmont, CA		(1	)		2,910		7,236		103		47		348			509		2,957		7,584		612		11,153		(952	)		10/8/2010		2003		43
Orange County—Brea	Brea, CA		(1	)		5,199		4,778		50		75		774			919		5,274		5,552		969		11,795		(1,099	)		10/8/2010		1998		33
Los Angeles—Burbank Airport	Burbank, CA		(1	)		6,120		9,690		106		50		619			807		6,170		10,309		913		17,392		(1,141	)		10/8/2010		2001		41
San Diego—Carlsbad Village by the Sea	Carlsbad, CA		(1	)		4,783		7,618		96		63		351			564		4,846		7,969		660		13,475		(1,043	)		10/8/2010		2002		42
Los Angeles—Carson	Carson, CA		(1	)		5,430		2,173		138		82		324			436		5,512		2,497		574		8,583		(558	)		10/8/2010		2004		44

					Initial Cost						Cost Capitalized Subsequent to Acquisition						Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Los Angeles—Chino Valley	Chino, CA		(1	)		1,288		3,297		108		34		365		697		1,322		3,662		805		5,789		(690	)		10/8/2010		2004		44
Orange County—Cypress	Cypress, CA		(1	)		5,543		4,484		59		53		590		879		5,596		5,074		938		11,608		(748	)		10/8/2010		1998		38
Dublin—Hacienda Dr.	Dublin, CA		(1	)		3,377		4,243		52		46		402		573		3,423		4,645		625		8,693		(747	)		10/8/2010		2000		40
Los Angeles—LAX Airport—El Segundo	El Segundo, CA		(1	)		9,922		5,598		68		122		655		903		10,044		6,253		971		17,268		(969	)		10/8/2010		1998		33
Sacramento—Elk Grove	Elk Grove, CA		(1	)		941		2,290		89		42		108		318		983		2,398		407		3,788		(370	)		10/8/2010		2003		43
Fairfield—Napa Valley	Fairfield, CA		(1	)		1,490		6,066		135		38		159		482		1,528		6,225		617		8,370		(687	)		10/8/2010		2004		44
Fremont—Fremont Blvd. South	Fremont, CA		(1	)		2,928		5,364		56		87		451		853		3,015		5,815		909		9,739		(1,025	)		10/8/2010		1999		39
Fremont—Newark	Fremont, CA		(1	)		7,370		6,048		101		266		987		1,247		7,636		7,035		1,348		16,019		(1,158	)		10/8/2010		1999		38-41
Fremont—Warm Springs	Fremont, CA		(1	)		5,114		1,271		58		64		461		562		5,178		1,732		620		7,530		(503	)		10/8/2010		2001		41
Fresno—North	Fresno, CA		(1	)		1,988		6,753		43		58		493		566		2,046		7,246		609		9,901		(1,003	)		10/8/2010		1997		32
Fresno—West	Fresno, CA		(1	)		1,231		1,867		42		3		64		160		1,234		1,931		202		3,367		(434	)		10/8/2010		1998		23
Los Angeles—South	Gardena, CA		(1	)		3,977		3,909		51		73		545		799		4,050		4,454		850		9,354		(843	)		10/8/2010		1998		28
Los Angeles—Glendale	Glendale, CA		(1	)		4,689		5,746		55		22		355		647		4,711		6,101		702		11,514		(759	)		10/8/2010		1999		39
Orange County—Huntington Beach	Huntington Beach, CA		(1	)		4,499		5,131		38		41		313		588		4,540		5,444		626		10,610		(643	)		10/8/2010		1998		38
Orange County—Irvine Spectrum	Irvine, CA		(1	)		7,355		5,703		54		90		644		885		7,445		6,347		939		14,731		(922	)		10/8/2010		1997		32
Los Angeles—La Mirada	La Mirada, CA		(1	)		3,681		2,557		39		56		359		648		3,737		2,916		687		7,340		(449	)		10/8/2010		1998		38
Orange County—Lake Forest	Lake Forest, CA		(1	)		5,530		2,182		43		73		515		591		5,603		2,697		634		8,934		(608	)		10/8/2010		1997		37
Livermore—Airway Blvd.	Livermore, CA		(1	)		2,553		3,576		44		30		184		489		2,583		3,760		533		6,876		(512	)		10/8/2010		1998		38
Los Angeles—Long Beach Airport	Long Beach, CA		(1	)		5,626		6,872		47		77		545		664		5,703		7,417		711		13,831		(1,027	)		10/8/2010		1997		37
Los Angeles—LAX Airport	Los Angeles, CA		(1	)		4,770		7,879		56		42		582		789		4,812		8,461		845		14,118		(988	)		10/8/2010		1999		39
San Jose—Milpitas	Milpitas, CA		(1	)		6,602		4,064		51		180		547		871		6,782		4,611		922		12,315		(705	)		10/8/2010		1998		38
San Jose—Milpitas—McCarthy Ranch	Milpitas, CA		(1	)		6,844		7,392		57		86		688		1,144		6,930		8,080		1,201		16,211		(1,434	)		10/8/2010		1997		32
Los Angeles—Monrovia	Monrovia, CA		(1	)		3,884		4,929		57		73		630		822		3,957		5,559		879		10,395		(746	)		10/8/2010		1998		38
San Jose—Morgan Hill	Morgan Hill, CA		(1	)		4,283		2,018		36		41		226		458		4,324		2,244		494		7,062		(377	)		10/8/2010		1998		38
San Jose—Mountain View	Mountain View, CA		(1	)		6,657		4,458		47		58		435		869		6,715		4,893		916		12,524		(974	)		10/8/2010		1997		32
Orange County—John Wayne Airport	Newport Beach, CA		(1	)		6,881		10,663		98		34		531		702		6,915		11,194		800		18,909		(1,372	)		10/8/2010		2001		41
Los Angeles—Northridge	Northridge, CA		(1	)		5,167		5,391		163		97		402		621		5,264		5,793		784		11,841		(703	)		10/8/2010		2005		45
Oakland—Emeryville	Oakland, CA		(1	)		3,927		9,132		117		104		431		661		4,031		9,563		778		14,372		(1,224	)		10/8/2010		2001		41
San Diego—Oceanside	Oceanside, CA		(1	)		4,271		5,999		43		75		356		599		4,346		6,355		642		11,343		(756	)		10/8/2010		1999		39
Los Angeles—Ontario Airport	Ontario, CA		(1	)		1,639		6,138		46		51		620		659		1,690		6,758		705		9,153		(989	)		10/8/2010		1997		37
Orange County—Katella Ave.	Orange, CA		(1	)		3,976		5,704		74		43		634		644		4,019		6,338		718		11,075		(952	)		10/8/2010		2001		41
Palm Springs—Airport	Palm Springs, CA		(1	)		1,955		3,506		98		51		364		593		2,006		3,870		691		6,567		(649	)		10/8/2010		2003		43
Pleasant Hill—Buskirk Ave.	Pleasant Hill, CA		(1	)		3,786		7,754		44		66		413		607		3,852		8,167		651		12,670		(1,066	)		10/8/2010		1997		37
Pleasanton—Chabot Dr.	Pleasanton, CA		(1	)		3,039		5,910		55		32		561		762		3,071		6,471		817		10,359		(1,034	)		10/8/2010		1998		38
Sacramento—Point East Dr.	Rancho Cordova, CA		(1	)		1,313		577		45		13		147		210		1,326		724		255		2,305		(288	)		10/8/2010		1998		23
Sacramento—White Rock Rd.	Rancho Cordova, CA		(1	)		1,301		2,717		47		44		324		624		1,345		3,041		671		5,057		(515	)		10/8/2010		1997		32
Richmond—Hilltop Mall	Richmond, CA		(1	)		2,232		4,124		51		52		250		558		2,284		4,374		609		7,267		(696	)		10/8/2010		2000		40
Sacramento—Roseville	Roseville, CA		(1	)		1,125		5,233		45		54		263		585		1,179		5,496		630		7,305		(639	)		10/8/2010		1998		38
Sacramento—Arden Way	Sacramento, CA		(1	)		888		2,349		45		101		265		553		989		2,614		598		4,201		(633	)		10/8/2010		1997		32
Sacramento—Northgate	Sacramento, CA		(1	)		932		2,359		44		166		406		564		1,098		2,765		608		4,471		(628	)		10/8/2010		1997		32
Sacramento—South Natomas	Sacramento, CA		(1	)		1,460		823		51		38		385		823		1,498		1,208		874		3,580		(291	)		10/8/2010		1998		33
San Francisco—San Carlos	San Carlos, CA		(1	)		4,233		5,299		49		62		445		755		4,295		5,744		804		10,843		(941	)		10/8/2010		1998		38
San Diego—Hotel Circle	San Diego, CA		(1	)		6,893		9,935		68		110		804		1,179		7,003		10,739		1,247		18,989		(1,444	)		10/8/2010		1999		39
San Diego—Mission Valley—Stadium	San Diego, CA		(1	)		6,978		1,797		85		33		448		576		7,011		2,245		661		9,917		(575	)		10/8/2010		2002		42
San Diego/Mission Valley	San Diego, CA		(1	)		5,371		5,639		49		61		644		1,050		5,432		6,283		1,099		12,814		(1,207	)		10/8/2010		1997		32
Los Angeles—San Dimas	San Dimas, CA		(1	)		4,736		991		42		46		499		584		4,782		1,490		626		6,898		(527	)		10/8/2010		1999		39
San Jose—Airport	San Jose, CA		(1	)		8,118		5,912		75		85		704		992		8,203		6,616		1,067		15,886		(1,155	)		10/8/2010		2000		40
San Jose—Downtown	San Jose, CA		(1	)		6,480		6,070		53		82		725		999		6,562		6,795		1,052		14,409		(1,174	)		10/8/2010		1998		38
San Jose Edenvale- North	San Jose, CA		(1	)		5,087		3,649		56		26		432		632		5,113		4,081		688		9,882		(750	)		10/8/2010		2000		40
San Jose Edenvale- South	San Jose, CA		(1	)		5,359		3,832		83		59		468		737		5,418		4,300		820		10,538		(607	)		10/8/2010		2000		41
San Francisco—San Mateo—SFO	San Mateo, CA		(1	)		7,369		6,704		50		50		498		828		7,419		7,202		878		15,499		(1,219	)		10/8/2010		1997		32
San Rafael—Francisco Blvd. East	San Rafael, CA		(1	)		3,129		13,822		378		50		309		496		3,179		14,131		874		18,184		(1,264	)		10/8/2010		2007		47
San Ramon—Bishop Ranch—East	San Ramon, CA		(1	)		3,721		5,226		59		57		395		635		3,778		5,621		694		10,093		(876	)		10/8/2010		2000		40
San Ramon—Bishop Ranch – West	San Ramon, CA		(1	)		3,098		2,886		55		63		527		900		3,161		3,413		955		7,529		(856	)		10/8/2010		1998		33
Santa Barbara—Calle Real	Santa Barbara, CA		(1	)		3,301		8,709		41		91		524		506		3,392		9,233		547		13,172		(1,173	)		10/8/2010		1998		38
Santa Rosa—North	Santa Rosa, CA		(1	)		3,053		6,086		46		53		264		441		3,106		6,350		487		9,943		(772	)		10/8/2010		2000		40
Santa Rosa—South	Santa Rosa, CA		(1	)		1,592		4,998		41		41		334		649		1,633		5,332		690		7,655		(835	)		10/8/2010		1997		32

					Initial Cost						Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Los Angeles—Simi Valley	Simi Valley, CA		(1	)		3,088		7,175		113		40		469			561		3,128		7,644		674		11,446		(994	)		10/8/2010		2004		44
San Diego—Sorrento Mesa	Sorrento Mesa, CA		(1	)		6,441		6,020		49		169		409			826		6,610		6,429		875		13,914		(1,154	)		10/8/2010		1998		33
Los Angeles—Valencia	Stevenson Ranch, CA		(1	)		9,414		—		20		58		459			601		9,472		459		621		10,552		(333	)		10/8/2010		2000		(3	)
Stockton—March Lane	Stockton, CA		(1	)		2,299		3,558		55		69		306			525		2,368		3,864		580		6,812		(600	)		10/8/2010		2001		41
San Jose—Sunnyvale	Sunnyvale, CA		(1	)		6,051		5,019		50		35		562			902		6,086		5,581		952		12,619		(1,066	)		10/8/2010		1997		32
Temecula—Wine Country	Temecula, CA		(1	)		1,489		8,153		79		42		467			648		1,531		8,620		727		10,878		(1,099	)		10/8/2010		2002		42
Los Angeles—Torrance—Del Amo Circle	Torrance , CA		(1	)		5,953		4,361		78		72		549			973		6,025		4,910		1,051		11,986		(766	)		10/8/2010		1999		39
Los Angeles—Torrance	Torrance, CA		(1	)		3,761		6,296		43		52		633			646		3,813		6,929		689		11,431		(1,004	)		10/8/2010		1997		37
Los Angeles—Torrance Harbor Gateway	Torrance, CA		(1	)		4,625		4,747		49		47		520			596		4,672		5,267		645		10,584		(833	)		10/8/2010		1999		39
Stockton—Tracy	Tracy, CA		(1	)		2,344		3,434		96		68		284			519		2,412		3,718		615		6,745		(600	)		10/8/2010		2003		43
Union City—Dyer St.	Union City, CA		(1	)		2,907		6,359		51		142		573			772		3,049		6,932		823		10,804		(897	)		10/8/2010		1999		39
Sacramento—Vacaville	Vacaville, CA		(1	)		809		3,179		76		62		159			306		871		3,338		382		4,591		(449	)		10/8/2010		2002		42
Sacramento—West Sacramento	West Sacramento, CA		(1	)		1,292		3,395		134		47		20			354		1,339		3,415		488		5,242		(491	)		10/8/2010		2004		44
Los Angeles—Woodland Hills	Woodland Hills , CA		(1	)		5,452		7,561		69		52		569			882		5,504		8,130		951		14,585		(992	)		10/8/2010		2000		40
Orange County—Yorba Linda	Yorba Linda, CA		(1	)		3,443		2,020		106		50		373			553		3,493		2,393		659		6,545		(566	)		10/8/2010		2003		43
Denver—Airport—Aurora	Aurora, CO		(1	)		1,645		917		43		10		67			97		1,655		984		140		2,779		(284	)		10/8/2010		1998		23
Denver—Aurora	Aurora, CO		(1	)		2,415		2,958		48		36		115			342		2,451		3,073		390		5,914		(485	)		10/8/2010		1996		31
Denver—Aurora	Aurora, CO		(1	)		2,706		6,047		65		93		356			345		2,799		6,403		410		9,612		(795	)		10/8/2010		1997		39
Colorado Springs—Airport	Colorado Springs, CO		(1	)		2,134		1,870		43		66		98			210		2,200		1,968		253		4,421		(465	)		10/8/2010		1998		23
Colorado Springs—West	Colorado Springs, CO		(1	)		3,338		1,325		41		90		60			219		3,428		1,385		260		5,073		(294	)		10/8/2010		1998		39
Denver—Tech Center—North	Denver, CO		(1	)		2,365		649		49		63		358			754		2,428		1,007		803		4,238		(335	)		10/8/2010		1996		31
Denver—Tech Center South	Englewood, CO		(1	)		1,714		978		46		89		65			175		1,803		1,043		221		3,067		(266	)		10/8/2010		1998		40
Denver—Tech Center South—Inverness	Englewood, CO		(1	)		2,941		1,340		46		134		97			285		3,075		1,437		331		4,843		(364	)		10/8/2010		1997		32
Denver—Cherry Creek	Glendale, CO		(1	)		1,619		2,410		42		15		99			156		1,634		2,509		198		4,341		(509	)		10/8/2010		1998		23
Denver—Cherry Creek	Glendale, CO		(1	)		1,856		2,713		40		111		259			454		1,967		2,972		494		5,433		(467	)		10/8/2010		1997		32
Denver—Tech Center—Central	Greenwood Village, CO		(1	)		2,392		1,286		51		54		516			785		2,446		1,802		836		5,084		(411	)		10/8/2010		1997		34
Denver—Tech Center South—Greenwood Village	Greenwood Village, CO		(1	)		1,767		2,278		110		93		105			265		1,860		2,383		375		4,618		(427	)		10/8/2010		2003		44
Denver—Lakewood South	Lakewood, CO		(1	)		2,338		3,348		43		54		400			630		2,392		3,748		673		6,813		(546	)		10/8/2010		1996		31
Denver—Lakewood West	Lakewood, CO		(1	)		1,939		1,031		46		75		268			197		2,014		1,299		243		3,556		(325	)		10/8/2010		1997		32
Denver—Park Meadows	Lone Tree, CO		(1	)		1,578		3,467		78		76		127			406		1,654		3,594		484		5,732		(492	)		10/8/2010		2002		42
Denver—Thornton	Thornton, CO		(1	)		1,874		1,238		46		18		73			274		1,892		1,311		320		3,523		(388	)		10/8/2010		1999		24
Denver—Westminster	Westminster, CO		(1	)		2,779		4,683		49		124		217			525		2,903		4,900		574		8,377		(589	)		10/8/2010		2000		40
Hartford—Farmington	Farmington, CT		(1	)		1,080		6,003		65		64		63			279		1,144		6,066		344		7,554		(720	)		10/8/2010		1998		39
Hartford—Manchester	Manchester, CT		(1	)		1,002		6,723		67		57		503			659		1,059		7,226		726		9,011		(902	)		10/8/2010		2001		41
Hartford—Meriden	Meriden, CT		(1	)		687		6,207		81		65		408			694		752		6,615		775		8,142		(876	)		10/8/2010		2002		42
Norwalk—Stamford	Norwalk, CT		(1	)		2,866		12,533		64		71		740			997		2,937		13,273		1,061		17,271		(1,659	)		10/8/2010		1999		39
Shelton—Fairfield County	Shelton, CT		(1	)		2,001		11,314		60		61		815			988		2,062		12,129		1,048		15,239		(1,593	)		10/8/2010		1998		38
Ottawa	Ottawa, Ontario, Canada		(1	)		993		34,014		—		27		(1,821	)		63		1,020		32,193		63		33,276		(2,450	)		10/8/2010		1959		49
St. John’s—Downtown	St. John’s, Newfoundland , Canada		(1	)		672		9,636		—		2		140			3		674		9,776		3		10,453		(851	)		10/8/2010		1966		44
Toronto—Vaughan	Vaughan, Ontario, Canada		(1	)		11,047		16,011		—		141		215			62		11,188		16,226		62		27,476		(2,159	)		10/8/2010		1990		30
Newark—Christiana—Wilmington	Newark, DE		(1	)		1,473		7,617		61		96		319			691		1,569		7,936		752		10,257		(951	)		10/8/2010		1998		38
Orlando—Altamonte Springs	Altamonte Springs, FL		(1	)		5,421		—		25		73		151			278		5,494		151		303		5,948		(164	)		10/8/2010		1998		(3	)
Boca Raton—Commerce	Boca Raton, FL		(1	)		5,920		3,219		56		64		530			693		5,984		3,749		749		10,482		(577	)		10/8/2010		1998		33
Tampa—Brandon	Brandon, FL		(1	)		3,709		3,540		696		186		303			544		3,895		3,843		1,240		8,978		(366	)		12/13/2012		1997		26
St. Petersburg—Clearwater—Airport	Clearwater , FL		(1	)		1,951		3,062		39		54		523			588		2,005		3,585		627		6,217		(642	)		10/8/2010		1998		38
St. Petersburg—Clearwater	Clearwater, FL		(1	)		1,679		2,926		489		106		296			466		1,785		3,222		955		5,962		(313	)		12/13/2012		1997		22
Fort Lauderdale—Plantation	Davie, FL		(1	)		5,014		3,117		492		95		43			231		5,109		3,160		723		8,992		(294	)		12/13/2012		1997		23
Daytona Beach—International Speedway	Daytona Beach, FL		(1	)		987		3,972		45		64		78			192		1,051		4,050		237		5,338		(494	)		10/8/2010		1998		41
Fort Lauderdale—Deerfield Beach	Deerfield Beach, FL		(1	)		2,885		3,421		38		72		466			566		2,957		3,887		604		7,448		(626	)		10/8/2010		1997		37
Destin—US 98—Emerald Coast Pkwy.	Destin, FL		(1	)		1,149		2,528		96		86		1,201			291		1,235		3,729		387		5,351		(559	)		10/8/2010		2001		48
Fort Lauderdale—Commercial Blvd.	Fort Lauderdale, FL		(1	)		2,465		997		54		22		102			228		2,487		1,099		282		3,868		(355	)		10/8/2010		1999		24
Fort Lauderdale—Cruiseport—Airport	Fort Lauderdale, FL		(1	)		3,441		7,008		71		69		627			740		3,510		7,635		811		11,956		(956	)		10/8/2010		1999		39
Fort Lauderdale—Cypress Creek—Andrews Ave.	Fort Lauderdale, FL		(1	)		2,761		2,685		41		82		157			332		2,843		2,842		373		6,058		(505	)		10/8/2010		1998		33
Fort Lauderdale—Cypress Creek—NW 6th Way	Fort Lauderdale, FL		(1	)		2,480		751		62		57		76			291		2,537		827		353		3,717		(289	)		10/8/2010		1999		42
Fort Lauderdale—Plantation	Fort Lauderdale, FL		(1	)		6,352		2,252		61		43		412			546		6,395		2,664		607		9,666		(520	)		10/8/2010		2000		40
Gainesville—I-75	Gainesville, FL		(1	)		846		6,416		44		43		79			238		889		6,495		282		7,666		(852	)		10/8/2010		1997		32
Jacksonville—Baymeadows	Jacksonville, FL		(1	)		1,163		2,662		48		86		95			377		1,249		2,757		425		4,431		(491	)		10/8/2010		1998		38

					Initial Cost						Cost Capitalized Subsequent to Acquisition						Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Jacksonville—Butler Blvd.	Jacksonville, FL		(1	)		969		1,057		63		56		71		334		1,025		1,128		397		2,550		(328	)		10/8/2010		1997		37
Jacksonville—Deerwood Park	Jacksonville, FL		(1	)		943		3,910		66		62		113		258		1,005		4,023		324		5,352		(553	)		10/8/2010		1999		40
Jacksonville—Lenoir Avenue South	Jacksonville, FL		(1	)		842		1,862		47		48		34		193		890		1,896		240		3,026		(333	)		10/8/2010		1998		44
Jacksonville—Riverwalk	Jacksonville, FL		(1	)		593		3,693		52		83		468		702		676		4,161		754		5,591		(651	)		10/8/2010		2000		40
Jacksonville—Salisbury Rd.—Southpoint	Jacksonville, FL		(1	)		727		720		52		97		1,439		407		824		2,159		459		3,442		(394	)		10/8/2010		1999		39
Jacksonville—Southside—St. Johns Towne Center	Jacksonville, FL		(1	)		925		2,679		47		68		203		475		993		2,882		522		4,397		(529	)		10/8/2010		1997		32
Orlando—Lake Mary—1036 Greenwood Blvd	Lake Mary, FL		(1	)		2,229		—		19		37		308		522		2,266		308		541		3,115		(323	)		10/8/2010		2000		(3	)
Orlando—Lake Mary—1040 Greenwood Blvd	Lake Mary, FL		(1	)		2,685		—		25		44		229		313		2,729		229		338		3,296		(141	)		10/8/2010		1998		(3	)
Melbourne—Airport	Melbourne, FL		(1	)		1,423		4,160		53		45		42		231		1,468		4,202		284		5,954		(572	)		10/8/2010		1998		39
Miami—Airport—Blue Lagoon	Miami, FL		(1	)		9,702		4,910		70		62		803		1,090		9,764		5,713		1,160		16,637		(943	)		10/8/2010		1998		33
Miami—Airport—Doral	Miami, FL		(1	)		10,164		4,188		1,131		226		1,016		346		10,390		5,204		1,477		17,071		(482	)		12/13/2012		1997		26
Miami—Airport—Doral—87th Avenue South	Miami, FL		(1	)		4,451		7,542		92		50		605		706		4,501		8,147		798		13,446		(987	)		10/8/2010		2001		41
Miami—Airport—Doral -25th Street	Miami, FL		(1	)		4,135		5,307		125		47		540		863		4,182		5,847		988		11,017		(796	)		10/8/2010		2002		42
Miami—Airport—Miami Springs	Miami, FL		(1	)		8,014		3,657		71		81		1,680		748		8,095		5,337		819		14,251		(755	)		10/8/2010		1998		40
Miami—Brickell—Port of Miami	Miami, FL		(1	)		3,323		7,312		85		77		653		705		3,400		7,965		790		12,155		(948	)		10/8/2010		2001		41
Miami—Coral Gables	Miami, FL		(1	)		2,866		7,211		76		69		563		686		2,935		7,774		762		11,471		(952	)		10/8/2010		2001		41
Orlando—Convention Center—6443 Westwood	Orlando, FL		(1	)		2,472		2,071		68		102		297		624		2,574		2,368		692		5,634		(408	)		10/8/2010		1999		43
Orlando—Convention Center—Pointe Orlando	Orlando, FL		(1	)		3,326		3,097		58		127		754		1,310		3,453		3,851		1,368		8,672		(616	)		10/8/2010		1998		38
Orlando—Convention Center—Westwood Blvd.	Orlando, FL		(1	)		2,767		1,466		43		86		665		778		2,853		2,131		821		5,805		(393	)		10/8/2010		1997		37
Orlando—Lake Buena Vista	Orlando, FL		(1	)		4,137		—		30		109		799		1,272		4,246		799		1,302		6,347		(294	)		10/8/2010		1998		(3	)
Orlando—Maitland—1776 Pembrook Dr.	Orlando, FL		(1	)		2,103		807		74		43		89		180		2,146		896		254		3,296		(271	)		10/8/2010		2000		45
Orlando—Maitland—Summit Tower Blvd	Orlando, FL		(1	)		3,577		—		65		55		139		346		3,632		139		411		4,182		(278	)		10/8/2010		1998		(3	)
Orlando—Maitland - 1760 Pembrook Dr.	Orlando, FL		(1	)		2,133		1,347		41		33		276		552		2,166		1,623		593		4,382		(515	)		10/8/2010		1999		39
Orlando—Southpark—Commodity Circle	Orlando, FL		(1	)		3,483		2,051		64		76		174		360		3,559		2,225		424		6,208		(478	)		10/8/2010		1999		40
Orlando—Southpark—Equity Row	Orlando, FL		(1	)		2,854		432		49		54		147		309		2,908		579		358		3,845		(310	)		10/8/2010		1998		38
Orlando—UCF Area	Orlando, FL		(1	)		2,677		—		23		32		246		147		2,709		246		170		3,125		(106	)		10/8/2010		1999		(4	)
Orlando—Universal Studios	Orlando, FL		(1	)		2,813		2,874		66		113		441		859		2,926		3,315		925		7,166		(502	)		10/8/2010		1998		42
Orlando—Universal Studios	Orlando, FL		(1	)		3,349		3,190		52		90		640		736		3,439		3,830		788		8,057		(563	)		10/8/2010		1999		39
Pensacola—University Mall	Pensacola, FL		(1	)		934		4,059		38		52		196		199		986		4,255		237		5,478		(573	)		10/8/2010		1997		37
Fort Lauderdale—Cypress Creek—Park North	Pompano Beach, FL		(1	)		3,567		2,828		65		77		1,088		942		3,644		3,916		1,007		8,567		(674	)		10/8/2010		1998		38
Tallahassee—Killearn	Tallahassee, FL		(1	)		356		1,769		29		74		69		170		430		1,838		199		2,467		(344	)		10/8/2010		1998		28
Fort Lauderdale—Tamarac	Tamarac, FL		(1	)		3,709		3,054		712		103		497		186		3,812		3,551		898		8,261		(396	)		12/13/2012		1997		21
Tampa—Airport—Memorial Hwy.	Tampa, FL		(1	)		2,513		1,342		69		60		148		579		2,573		1,490		648		4,711		(383	)		10/8/2010		1999		42
Tampa—Airport—N. Westshore Blvd.	Tampa, FL		(1	)		2,564		3,918		64		44		405		794	��	2,608		4,323		858		7,789		(655	)		10/8/2010		1998		38
Tampa—Airport—Spruce Street	Tampa, FL		(1	)		2,437		3,066		102		60		346		484		2,497		3,412		586		6,495		(580	)		10/8/2010		2003		43
Tampa—North—USF/Attractions	Tampa, FL		(1	)		2,028		845		37		49		432		541		2,077		1,277		578		3,932		(394	)		10/8/2010		1997		37
Tampa—North Airport	Tampa, FL		(1	)		1,294		2,236		490		115		20		124		1,409		2,256		614		4,279		(277	)		12/13/2012		1997		20
West Palm Beach—Northpoint Corporate Park	West Palm Beach, FL		(1	)		2,723		3,326		49		61		69		235		2,784		3,395		284		6,463		(474	)		10/8/2010		1998		38
Atlanta—Alpharetta—Northpoint – East	Alpharetta, GA		(1	)		717		591		42		45		52		224		762		643		266		1,671		(225	)		10/8/2010		1997		27
Atlanta—Alpharetta—Northpoint—West	Alpharetta, GA		(1	)		1,218		1,673		58		62		64		239		1,280		1,737		297		3,314		(340	)		10/8/2010		1999		42
Atlanta—Alpharetta—Rock Mill Rd.	Alpharetta, GA		(1	)		1,391		1,101		40		40		338		556		1,431		1,439		596		3,466		(519	)		10/8/2010		1999		39
Atlanta—Clairmont	Atlanta, GA		(1	)		1,142		3,284		40		56		215		257		1,198		3,499		297		4,994		(518	)		10/8/2010		1998		38
Atlanta—Lenox	Atlanta, GA		(1	)		1,183		4,086		42		58		83		264		1,241		4,169		306		5,716		(550	)		10/8/2010		1997		37
Atlanta—Marietta—Interstate N. Pkwy	Atlanta, GA		(1	)		1,766		3,023		72		44		75		246		1,810		3,098		318		5,226		(471	)		10/8/2010		1999		41
Atlanta—Marietta—Wildwood	Atlanta, GA		(1	)		852		2,881		40		56		70		301		908		2,951		341		4,200		(442	)		10/8/2010		1996		36
Atlanta—Perimeter	Atlanta, GA		(1	)		1,921		3,398		45		23		145		418		1,944		3,543		463		5,950		(569	)		10/8/2010		1997		32
Atlanta—Perimeter—Crestline	Atlanta, GA		(1	)		1,562		1,581		46		60		64		293		1,622		1,645		339		3,606		(332	)		10/8/2010		2000		40
Atlanta—Perimeter—Peachtree Dunwoody	Atlanta, GA		(1	)		1,203		2,928		44		95		94		262		1,298		3,022		306		4,626		(448	)		10/8/2010		1997		37
Atlanta—Vinings	Atlanta, GA		(1	)		1,924		5,785		57		54		102		190		1,978		5,887		247		8,112		(660	)		10/8/2010		1997		40
Columbus—Airport	Columbus, GA		(1	)		967		4,566		40		60		134		263		1,027		4,700		303		6,030		(669	)		10/8/2010		1997		32
Columbus—Bradley Park	Columbus, GA		(1	)		763		5,083		45		50		50		242		813		5,133		287		6,233		(626	)		10/8/2010		2000		40
Atlanta—Duluth	Duluth, GA		(1	)		1,177		1,252		61		39		55		97		1,216		1,307		158		2,681		(247	)		10/8/2010		1997		49
Atlanta—Gwinnett Place	Duluth, GA		(1	)		1,269		3,234		48		77		127		231		1,346		3,361		279		4,986		(527	)		10/8/2010		1990		30
Atlanta—Kennesaw Chastain Rd	Kennesaw, GA		(1	)		1,092		1,560		38		74		99		277		1,166		1,659		315		3,140		(392	)		10/8/2010		1997		27
Atlanta—Kennesaw Town Center	Kennesaw, GA		(1	)		1,122		2,213		38		65		264		222		1,187		2,477		260		3,924		(408	)		10/8/2010		1998		38
Atlanta—Lawrenceville	Lawrenceville, GA		(1	)		1,253		1,871		43		38		83		307		1,291		1,954		350		3,595		(442	)		10/8/2010		1996		22
Macon—North	Macon, GA		(1	)		537		4,151		46		54		22		149		591		4,173		195		4,959		(511	)		10/8/2010		1998		42

					Initial Cost						Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements			Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Atlanta - Marietta - Canton Road	Marietta, GA		(1	)		1,164		611		40		(1	)		201		126		1,163		812		166		2,141		(222	)		10/8/2010		1995		31
Atlanta—Marietta—Powers Ferry Rd.	Marietta, GA		(1	)		2,718		1,891		58		58			288		345		2,776		2,179		403		5,358		(452	)		10/8/2010		1998		38
Atlanta—Marietta—Windy Hill	Marietta, GA		(1	)		1,645		2,192		41		69			241		286		1,714		2,433		327		4,474		(425	)		10/8/2010		1998		39
Atlanta—Morrow	Morrow, GA		(1	)		1,713		2,276		41		64			146		281		1,777		2,422		322		4,521		(394	)		10/8/2010		1998		39
Atlanta—Jimmy Carter Blvd.	Norcross, GA		(1	)		1,974		890		61		41			184		298		2,015		1,074		359		3,448		(395	)		10/8/2010		1996		22
Atlanta—Norcross	Norcross, GA		(1	)		1,937		—		44		54			112		130		1,991		112		174		2,277		(161	)		10/8/2010		1996		(3	)
Atlanta—Peachtree Corners	Norcross, GA		(1	)		1,256		—		19		57			49		207		1,313		49		226		1,588		(87	)		10/8/2010		1997		(3	)
Atlanta—Peachtree Corners	Norcross, GA		(1	)		1,219		2,509		291		62			33		79		1,281		2,542		370		4,193		(280	)		12/13/2012		1996		20
Atlanta—Riverdale	Riverdale, GA		(1	)		2,130		—		46		(1,989	)(5)		155		147		141		155		193		489		(228	)		10/8/2010		1996		(4	)
Savannah—Midtown	Savannah, GA		(1	)		564		5,079		66		58			272		521		622		5,351		587		6,560		(630	)		10/8/2010		2001		41
Atlanta—Cumberland Mall	Smyrna, GA		(1	)		1,631		2,038		45		44			111		273		1,675		2,149		318		4,142		(410	)		10/8/2010		1997		32
Des Moines—Urbandale	Urbandale, IA		(1	)		1,119		2,684		41		53			56		246		1,172		2,740		287		4,199		(404	)		10/8/2010		1999		39
Des Moines—West Des Moines	West Des Moines, IA		(1	)		1,089		2,742		39		105			138		256		1,194		2,880		295		4,369		(516	)		10/8/2010		1997		27
Boise—Airport	Boise, ID		(1	)		862		1,647		39		32			102		262		894		1,749		301		2,944		(302	)		10/8/2010		1997		37
Chicago—Midway	Bedford Park, IL		(1	)		2,028		2,261		130		77			503		693		2,105		2,764		823		5,692		(564	)		10/8/2010		2003		43
Bloomington—Normal	Bloomington, IL		(1	)		941		3,404		61		63			74		228		1,004		3,478		289		4,771		(476	)		10/8/2010		2001		41
Chicago—Buffalo Grove—Deerfield	Buffalo Grove, IL		(1	)		2,264		4,986		44		69			240		495		2,333		5,226		539		8,098		(664	)		10/8/2010		1998		38
Chicago—Burr Ridge	Burr Ridge , IL		(1	)		2,033		4,406		43		73			633		730		2,106		5,039		773		7,918		(721	)		10/8/2010		1996		36
Champaign—Urbana	Champaign, IL		(1	)		1,221		4,043		35		86			139		195		1,307		4,182		230		5,719		(531	)		10/8/2010		1998		38
Chicago—Darien	Darien, IL		(1	)		1,754		4,286		42		90			418		595		1,844		4,704		637		7,185		(659	)		10/8/2010		1999		39
Chicago—O’Hare—North	Des Plaines, IL		(1	)		1,946		3,737		44		88			357		566		2,034		4,094		610		6,738		(594	)		10/8/2010		1998		38
Chicago—O’Hare – South	Des Plaines, IL		(1	)		2,122		1,434		71		70			164		353		2,192		1,598		424		4,214		(375	)		10/8/2010		1999		40
Chicago—Downers Grove	Downers Grove, IL		(1	)		2,592		3,321		53		112			919		1,086		2,704		4,240		1,139		8,083		(761	)		10/8/2010		1996		36
Chicago—Elmhurst—O’Hare	Elmhurst, IL		(1	)		1,728		2,769		42		111			378		672		1,839		3,147		714		5,700		(545	)		10/8/2010		1997		37
Chicago—Gurnee	Gurnee, IL		(1	)		1,557		2,759		37		122			19		196		1,679		2,778		233		4,690		(424	)		10/8/2010		1997		37
Chicago—Hanover Park	Hanover Park, IL		(1	)		4,217		1,081		38		40			424		568		4,257		1,505		606		6,368		(356	)		10/8/2010		1999		39
Chicago—Hillside	Hillside, IL		(1	)		1,661		1,134		49		63			370		629		1,724		1,504		678		3,906		(330	)		10/8/2010		1999		39
Chicago—Itasca	Itasca, IL		(1	)		1,419		2,764		46		88			73		283		1,507		2,837		329		4,673		(422	)		10/8/2010		1996		36
Chicago—Lansing	Lansing, IL		(1	)		1,778		2,399		44		91			326		592		1,869		2,725		636		5,230		(456	)		10/8/2010		1998		38
Chicago—Lisle	Lisle, IL		(1	)		1,908		2,176		42		71			400		537		1,979		2,576		579		5,134		(457	)		10/8/2010		2000		40
Chicago—Lombard—Oak Brook	Lombard, IL		(1	)		3,692		1,060		59		87			585		985		3,779		1,645		1,044		6,468		(505	)		10/8/2010		1999		39
Chicago—Lombard—Yorktown Center	Lombard, IL		(1	)		2,029		3,367		58		109			39		313		2,138		3,406		371		5,915		(531	)		10/8/2010		1998		40
Chicago—Naperville—East	Naperville, IL		(1	)		1,686		4,231		48		130			687		842		1,816		4,918		890		7,624		(762	)		10/8/2010		1997		37
Chicago—Naperville—West	Naperville, IL		(1	)		3,084		2,386		44		123			558		693		3,207		2,944		737		6,888		(550	)		10/8/2010		1996		36
St. Louis—O’ Fallon, IL	O’Fallon, IL		(1	)		1,099		2,897		34		48			171		233		1,147		3,068		267		4,482		(438	)		10/8/2010		1998		38
Peoria—North	Peoria, IL		(1	)		1,063		3,528		63		61			238		572		1,124		3,766		635		5,525		(503	)		10/8/2010		2001		41
Rockford—I-90	Rockford, IL		(1	)		1,046		1,989		38		55			94		238		1,101		2,083		276		3,460		(309	)		10/8/2010		1997		47
Rockford—State Street	Rockford, IL		(1	)		971		293		34		98			445		727		1,069		738		761		2,568		(341	)		10/8/2010		1997		27
Chicago—Rolling Meadows	Rolling Meadows, IL		(1	)		1,643		640		44		51			226		252		1,694		866		296		2,856		(259	)		10/8/2010		1996		36
Chicago—Romeoville—Bollingbrook	Romeoville, IL		(1	)		1,741		3,612		38		106			436		568		1,847		4,048		606		6,501		(613	)		10/8/2010		1998		38
Chicago—Schaumburg	Schaumburg, IL		(1	)		3,507		703		98		36			381		610		3,543		1,084		708		5,335		(366	)		10/8/2010		2002		42
Chicago—Schaumburg—Convention Center	Schaumburg, IL		(1	)		2,016		1,190		49		91			189		379		2,107		1,379		428		3,914		(350	)		10/8/2010		1997		37
Chicago—Woodfield Mall	Schaumburg, IL		(1	)		1,649		2,501		43		109			402		574		1,758		2,903		617		5,278		(494	)		10/8/2010		1999		39
Chicago—Skokie	Skokie, IL		(1	)		2,305		8,355		65		55			481		913		2,360		8,836		978		12,174		(1,064	)		10/8/2010		2000		40
Chicago—Vernon Hills—Lake Forest	Vernon Hills, IL		(1	)		2,471		4,030		60		27			291		653		2,498		4,321		713		7,532		(610	)		10/8/2010		2000		40
Chicago—Vernon Hills—Lincolnshire	Vernon Hills, IL		(1	)		2,467		1,053		66		75			541		898		2,542		1,594		964		5,100		(480	)		10/8/2010		1999		39
Chicago—Waukegan	Waukegan, IL		(1	)		1,230		680		41		41			113		189		1,271		793		230		2,294		(319	)		10/8/2010		1997		22
Chicago—Westmont—Oak Brook	Westmont, IL		(1	)		3,510		587		52		92			605		960		3,602		1,192		1,012		5,806		(449	)		10/8/2010		1998		38
Evansville—East	Evansville, IN		(1	)		387		2,295		34		73			92		242		460		2,387		276		3,123		(451	)		10/8/2010		1997		27
Fort Wayne—North	Ft. Wayne, IN		(1	)		402		1,755		34		70			59		199		472		1,814		233		2,519		(357	)		10/8/2010		1996		26
Fort Wayne—South	Ft. Wayne, IN		(1	)		937		3,992		37		77			265		247		1,014		4,257		284		5,555		(552	)		10/8/2010		1997		37
Indianapolis—Airport	Indianapolis, IN		(1	)		1,566		—		39		(7	)		222		317		1,559		222		356		2,137		(249	)		10/8/2010		1998		(3	)
Indianapolis—Airport—W. Southern Ave.	Indianapolis, IN		(1	)		1,505		1,103		77		113			92		438		1,618		1,195		515		3,328		(404	)		10/8/2010		1998		40
Indianapolis—Castleton	Indianapolis, IN		(1	)		558		2,108		40		59			216		318		617		2,324		358		3,299		(415	)		10/8/2010		1999		39
Indianapolis—North—Carmel	Indianapolis, IN		(1	)		812		851		29		40			47		204		852		898		233		1,983		(220	)		10/8/2010		1990		30
Indianapolis—Northwest—College Park	Indianapolis, IN		(1	)		363		945		28		36			105		271		399		1,050		299		1,748		(246	)		10/8/2010		1991		32
Indianapolis—Northwest—I-465	Indianapolis, IN		(1	)		1,385		4,782		66		89			269		386		1,474		5,051		452		6,977		(710	)		10/8/2010		1998		41

					Initial Cost							Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E			Land and Improvements			Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Indianapolis - West 86th St.	Indianapolis, IN		(1	)		581		2,330		40			116			216		322		697		2,546		362		3,605		(413	)		10/8/2010		1998		39
Merrillville—US Rte. 30	Merrillville, IN		(1	)		693		3,923		39			105			380		627		798		4,303		666		5,767		(522	)		10/8/2010		1996		36
South Bend – Mishawaka – North	Mishawaka, IN		(1	)		497		1,929		62			63			57		298		560		1,986		360		2,906		(384	)		10/8/2010		2001		41
South Bend—Mishawaka—South	Mishawaka, IN		(1	)		457		1,146		34			76			26		237		533		1,172		271		1,976		(284	)		10/8/2010		1997		27
Kansas City—Lenexa—87th St.	Lenexa, KS		(1	)		1,413		1,161		47			273			472		273		1,686		1,633		320		3,639		(438	)		10/8/2010		1997		35
Kansas City—Lenexa—95th St.	Lenexa, KS		(1	)		2,489		—		12			(1,292	)(5)		96		130		1,197		96		142		1,435		(84	)		10/8/2010		1996		(3	)
Kansas City—Shawnee Mission	Merriam, KS		(1	)		1,255		2,489		49			64			164		347		1,319		2,653		396		4,368		(489	)		10/8/2010		1997		32
Kansas City – Overland Park – Metcalf Ave	Overland Park, KS		(1	)		1,103		4,652		61			73			256		261		1,176		4,908		322		6,406		(657	)		10/8/2010		1997		41
Kansas City—Overland Park—Nall Ave.	Overland Park, KS		(1	)		603		2,291		45			24			26		386		627		2,317		431		3,375		(429	)		10/8/2010		1998		38
Kansas City—Overland Park—Quivira Rd.	Overland Park, KS		(1	)		1,120		959		43			99			356		606		1,219		1,315		649		3,183		(539	)		10/8/2010		1997		37
Wichita—East	Wichita, KS		(1	)		809		1,375		35			45			38		226		854		1,413		261		2,528		(308	)		10/8/2010		1997		27
Cincinnati—Covington	Covington, KY		(1	)		880		5,352		38			41			62		236		921		5,414		274		6,609		(642	)		10/8/2010		1997		37
Cincinnati—Florence	Florence, KY		(1	)		549		1,850		33			100			46		216		649		1,896		249		2,794		(371	)		10/8/2010		1996		26
Cincinnati—Florence	Florence, KY		(1	)		827		2,575		37			90			85		229		917		2,660		266		3,843		(420	)		10/8/2010		1997		37
Lexington—Nicholasville Road	Lexington, KY		(1	)		1,415		4,119		45			77			168		249		1,492		4,287		294		6,073		(608	)		10/8/2010		1996		31
Lexington—Patchen Village	Lexington, KY		(1	)		860		—		25			123			127		169		983		127		194		1,304		(123	)		10/8/2010		1986		(3	)
Lexington—Tates Creek	Lexington, KY		(1	)		910		1,692		29			191			249		229		1,101		1,941		258		3,300		(360	)		10/8/2010		1987		27
Louisville—Alliant Avenue	Louisville, KY		(1	)		812		2,628		48			47			60		242		859		2,688		290		3,837		(405	)		10/8/2010		1998		39
Louisville—Dutchman	Louisville, KY		(1	)		662		2,540		45			26			243		298		688		2,783		343		3,814		(477	)		10/8/2010		1996		31
Louisville—Hurstbourne	Louisville, KY		(1	)		656		439		30			164			107		153		820		546		183		1,549		(186	)		10/8/2010		1988		28
Louisville—St. Matthews	Louisville, KY		(1	)		949		—		26			(565	)(5)		272		224		384		272		250		906		(147	)		10/8/2010		1989		(3	)
Baton Rouge—Citiplace	Baton Rouge, LA		(1	)		1,029		5,875		66			73			408		619		1,102		6,283		685		8,070		(983	)		10/8/2010		2001		41
Baton Rouge—Sherwood Forest	Baton Rouge, LA		(1	)		531		2,802		43			30			113		214		561		2,915		257		3,733		(581	)		10/8/2010		1998		23
Shreveport—Bossier City	Bossier City, LA		(1	)		1,130		4,480		41			47			48		148		1,177		4,528		189		5,894		(834	)		10/8/2010		1997		22
New Orleans—Kenner	Kenner, LA		(1	)		1,028		6,843		79			63			409		541		1,091		7,252		620		8,963		(1,019	)		10/8/2010		2001		41
Lafayette—Airport	Lafayette, LA		(1	)		436		2,212		38			66			62		325		502		2,274		363		3,139		(393	)		10/8/2010		1998		38
New Orleans—Metairie	Metairie, LA		(1	)		559		5,559		41			48			391		715		607		5,950		756		7,313		(701	)		10/8/2010		1998		38
Lake Charles—Sulphur	Sulphur, LA		(1	)		310		1,784		39			14			231		181		324		2,015		220		2,559		(404	)		10/8/2010		1997		22
Boston—Braintree	Braintree, MA		(1	)		2,599		9,110		90			57			402		580		2,656		9,512		670		12,838		(1,015	)		10/8/2010		2002		42
Boston—Burlington	Burlington, MA		(1	)		2,533		6,944		58			61			712		998		2,594		7,656		1,056		11,306		(1,065	)		10/8/2010		1998		38
Boston—Danvers	Danvers, MA		(1	)		1,334		5,659		38			53			111		293		1,387		5,770		331		7,488		(572	)		10/8/2010		1998		47
Boston—Marlborough	Marlborough, MA		(1	)		2,137		3,464		48			69			573		992		2,206		4,037		1,040		7,283		(674	)		10/8/2010		1998		38
Foxboro—Norton	Norton, MA		(1	)		2,153		4,729		98			40			387		480		2,193		5,116		578		7,887		(616	)		10/8/2010		2003		43
Boston—Peabody	Peabody, MA		(1	)		1,649		5,178		110			85			450		851		1,734		5,628		961		8,323		(748	)		10/8/2010		1999		43
Boston—Tewksbury	Tewksbury, MA		(1	)		1,547		4,378		58			57			322		542		1,604		4,700		600		6,904		(604	)		10/8/2010		2001		41
Boston—Waltham	Waltham, MA		(1	)		2,025		6,620		58			61			249		362		2,086		6,869		420		9,375		(860	)		10/8/2010		1998		38
Boston—Waltham	Waltham, MA		(1	)		1,851		7,411		72			93			569		1,080		1,944		7,980		1,152		11,076		(1,086	)		10/8/2010		1999		39
Boston—Westborough—Computer Dr.	Westborough, MA		(1	)		2,747		2,788		48			119			598		872		2,866		3,386		920		7,172		(619	)		10/8/2010		1998		38
Boston—Westborough—Connector Road	Westborough, MA		(1	)		3,154		1,519		57			45			303		512		3,199		1,822		569		5,590		(368	)		10/8/2010		2001		41
Boston—Westborough—East Main Street	Westborough, MA		(1	)		2,366		2,763		81			82			164		219		2,448		2,927		300		5,675		(448	)		10/8/2010		2001		42
Boston—Woburn	Woburn, MA		(1	)		1,879		4,426		48			71			412		821		1,950		4,838		869		7,657		(699	)		10/8/2010		1998		39
Annapolis—Admiral Cochrane Drive	Annapolis, MD		(1	)		2,121		5,919		52			55			367		806		2,176		6,286		858		9,320		(775	)		10/8/2010		1999		39
Annapolis—Womack Drive	Annapolis, MD		(1	)		1,376		4,684		131			44			330		469		1,420		5,014		600		7,034		(686	)		10/8/2010		2004		45
Baltimore—Bel Air – Aberdeen	Bel Air, MD		(1	)		1,768		5,344		110			31			2		228		1,799		5,346		338		7,483		(630	)		10/8/2010		2004		44
Columbia—Columbia 100 Parkway	Columbia, MD		(1	)		1,785		6,287		38			72			423		576		1,857		6,710		614		9,181		(910	)		10/8/2010		1997		37
Columbia—Columbia Corporate Park	Columbia, MD		(1	)		3,056		10,874		81	��		91			769		1,023		3,147		11,643		1,104		15,894		(1,349	)		10/8/2010		1998		39
Columbia—Gateway Drive	Columbia, MD		(1	)		2,241		5,038		42			67			681		865		2,308		5,719		907		8,934		(1,096	)		10/8/2010		1997		27
Frederick—Westview Dr.	Frederick , MD		(1	)		1,891		5,522		41			44			390		518		1,935		5,912		559		8,406		(822	)		10/8/2010		1999		39
Washington, D.C.—Gaithersburg – North	Gaithersburg, MD		(1	)		2,088		3,973		42			44			354		507		2,132		4,327		549		7,008		(663	)		10/8/2010		1999		39
Washington, D.C.—Gaithersburg—South	Gaithersburg, MD		(1	)		2,233		4,128		59			80			185		309		2,313		4,313		368		6,994		(560	)		10/8/2010		1999		40
Washington, D.C.—Germantown	Germantown, MD		(1	)		1,413		4,673		44			66			325		465		1,479		4,998		509		6,986		(781	)		10/8/2010		1999		39
Washington, D.C.—Germantown	Germantown, MD		(1	)		5,541		2,269		698			149			431		580		5,690		2,700		1,278		9,668		(386	)		12/13/2012		1997		19
Baltimore—Glen Burnie	Glen Burnie, MD		(1	)		2,374		9,428		132			51			319		419		2,425		9,747		551		12,723		(1,088	)		10/8/2010		2004		44
Columbia—Laurel—Ft. Meade	Jessup, MD		(1	)		1,505		5,910		112			57			320		630		1,562		6,230		742		8,534		(718	)		10/8/2010		2004		44
Washington, D.C.—Landover	Landover, MD		(1	)		3,119		5,378		39			42			260		397		3,161		5,638		436		9,235		(681	)		10/8/2010		1998		38
Lexington Park—Pax River	Lexington Park, MD		(1	)		1,206		5,140		48			53			324		544		1,259		5,464		592		7,315		(784	)		10/8/2010		2000		40
Baltimore—BWl Airport	Linthicum Heights, MD		(1	)		3,801		5,663		1,003			224			259		261		4,025		5,922		1,264		11,211		(468	)		12/13/2012		1997		32

					Initial Cost						Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements			FF&E		Land and Improvements		Building and Improvements			FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Baltimore—BWI Airport	Linthicum, MD		(1	)		2,316		8,515		43		108		530			915		2,424		9,045			958		12,427		(1,161	)		10/8/2010		1997		37
Washington, D.C.—Rockville	Rockville, MD		(1	)		5,800		9,696		64		75		302			779		5,875		9,998			843		16,716		(1,202	)		10/8/2010		1999		39
Baltimore—Timonium	Timonium, MD		(1	)		2,004		6,358		39		76		428			655		2,080		6,786			694		9,560		(844	)		10/8/2010		1998		38
Portland—Scarborough	Scarborough, ME		(1	)		828		4,601		52		64		157			355		892		4,758			407		6,057		(602	)		10/8/2010		2001		41
Detroit—Ann Arbor—Briarwood Mall	Ann Arbor, MI		(1	)		3,416		—		41		142		91			265		3,558		91			306		3,955		(212	)		10/8/2010		1997		(4	)
Detroit—Ann Arbor – University South	Ann Arbor, MI		(1	)		955		1,139		42		111		35			207		1,066		1,174			249		2,489		(250	)		10/8/2010		1997		41
Auburn Hills—University Drive	Auburn Hills, MI		(1	)		1,363		588		59		94		140			304		1,457		728			363		2,548		(301	)		10/8/2010		1999		39
Detroit—Auburn Hills—Featherstone Rd.	Auburn Hills, MI		(1	)		1,226		3,584		75		131		340			295		1,357		3,924			370		5,651		(594	)		10/8/2010		1999		41
Detroit—Auburn Hills—I -75	Auburn Hills, MI		(1	)		1,948		—		47		137		460			755		2,085		460			802		3,347		(621	)		10/8/2010		1997		(3	)
Detroit—Canton	Canton, MI		(1	)		1,501		—		59		107		68			211		1,608		68			270		1,946		(263	)		10/8/2010		2001		(3	)
Detroit—Dearborn	Dearborn, MI		(1	)		1,018		2,051		77		71		86			232		1,089		2,137			309		3,535		(400	)		10/8/2010		2002		42
Detroit—Farmington Hills	Farmington Hills, MI		(1	)		1,084		570		41		114		(108	)		245		1,198		462			286		1,946		(241	)		10/8/2010		1997		37
Grand Rapids—Kentwood	Kentwood, MI		(1	)		1,297		1,644		38		75		126			287		1,372		1,770			325		3,467		(328	)		10/8/2010		1998		38
Detroit—Livonia	Livonia, MI		(1	)		1,863		—		42		150		22			126		2,013		22			168		2,203		(256	)		10/8/2010		1998		(4	)
Detroit—Madison Heights	Madison Heights, MI		(1	)		1,787		—		43		58		66			344		1,845		66			387		2,298		(215	)		10/8/2010		1997		(4	)
Detroit—Novi—Haggerty Road	Novi, MI		(1	)		1,102		1,620		44		77		473			686		1,179		2,093			730		4,002		(675	)		10/8/2010		1997		37
Detroit—Novi—Orchard Hill Place	Novi, MI		(1	)		1,237		421		78		88		45			169		1,325		466			247		2,038		(249	)		10/8/2010		2000		42
Detroit—Metropolitan Airport	Romulus, MI		(1	)		1,161		2,462		83		58		38			234		1,219		2,500			317		4,036		(437	)		10/8/2010		2001		41
Detroit—Roseville	Roseville, MI		(1	)		1,204		2,742		71		52		188			304		1,256		2,930			375		4,561		(444	)		10/8/2010		2001		41
Detroit—Southfield—I-696	Southfield, MI		(1	)		1,746		—		84		75		138			255		1,821		138			339		2,298		(304	)		10/8/2010		2002		(3	)
Detroit—Southfield—Northwestern Hwy.	Southfield, MI		(1	)		1,952		—		58		66		76			281		2,018		76			339		2,433		(295	)		10/8/2010		1999		(3	)
Detroit—Sterling Heights	Sterling Heights, MI		(1	)		998		1,550		42		60		87			276		1,058		1,637			318		3,013		(300	)		10/8/2010		1997		37
Detroit—Warren	Warren, MI		(1	)		1,448		—		37		84		(227	)		115		1,532		(227	)		152		1,457		(142	)		10/8/2010		1997		(3	)
Minneapolis—Bloomington	Bloomington, MN		(1	)		1,440		3,092		39		53		103			441		1,493		3,195			480		5,168		(449	)		10/8/2010		1998		38
Minneapolis—Brooklyn Center	Brooklyn Center, MN		(1	)		1,367		2,491		38		44		95			294		1,411		2,586			332		4,329		(425	)		10/8/2010		1998		38
Minneapolis—Airport—Eagan	Eagan , MN		(1	)		1,517		2,133		51		43		174			448		1,560		2,307			499		4,366		(353	)		10/8/2010		1997		37
Minneapolis—Airport—Eagan	Eagan, MN		(1	)		1,888		2,331		60		94		341			309		1,982		2,672			369		5,023		(457	)		10/8/2010		1998		38
Minneapolis—Eden Prairie—Technology Drive	Eden Prairie, MN		(1	)		1,199		2,289		36		37		353			531		1,236		2,642			567		4,445		(353	)		10/8/2010		1998		38
Minneapolis—Eden Prairie—Valley View R	Eden Prairie, MN		(1	)		1,614		3,658		39		67		272			393		1,681		3,930			432		6,043		(480	)		10/8/2010		1998		38
Minneapolis—Maple Grove	Maple Grove, MN		(1	)		2,543		560		38		50		76			182		2,593		636			220		3,449		(215	)		10/8/2010		1998		38
Rochester—North	Rochester, MN		(1	)		1,146		1,797		48		52		83			207		1,198		1,880			255		3,333		(320	)		10/8/2010		2001		41
Rochester—South	Rochester, MN		(1	)		1,119		1,439		50		57		38			196		1,176		1,477			246		2,899		(291	)		10/8/2010		2001		41
Minneapolis—Woodbury	Woodbury, MN		(1	)		1,805		2,559		43		34		313			657		1,839		2,872			700		5,411		(689	)		10/8/2010		1999		39
St. Louis—Airport—Central	Bridgeton, MO		(1	)		1,743		1,010		57		71		63			391		1,814		1,073			448		3,335		(343	)		10/8/2010		1998		39
Columbia—Stadium Blvd.	Columbia, MO		(1	)		734		2,511		91		62		164			182		796		2,675			273		3,744		(431	)		10/8/2010		2003		43
St. Louis—Earth City	Earth City, MO		(1	)		1,394		721		34		78		117			268		1,472		838			302		2,612		(266	)		10/8/2010		1997		27
St. Louis—Airport—Chapel Ridge Road	Hazelwood, MO		(1	)		1,047		—		33		72		90			221		1,119		90			254		1,463		(135	)		10/8/2010		1992		(3	)
St. Louis—Airport—N. Lindbergh Blvd.	Hazelwood, MO		(1	)		1,096		1,583		44		48		209			349		1,144		1,792			393		3,329		(365	)		10/8/2010		1996		36
Kansas City—Independence	Independence, MO		(1	)		467		2,387		39		65		144			171		532		2,531			210		3,273		(566	)		10/8/2010		1997		22
Kansas City—Airport—Plaza Circle	Kansas City, MO		(1	)		603		992		40		101		155			264		704		1,147			304		2,155		(311	)		10/8/2010		1997		37
Kansas City—Airport—Tiffany Springs	Kansas City, MO		(1	)		811		3,292		52		72		98			298		883		3,390			350		4,623		(490	)		10/8/2010		1998		38
Kansas City—Country Club Plaza	Kansas City, MO		(1	)		1,028		5,114		46		48		259			513		1,076		5,373			559		7,008		(640	)		10/8/2010		1998		38
Kansas City—Northeast—Worlds of Fun	Kansas City, MO		(1	)		519		1,538		46		41		130			199		560		1,668			245		2,473		(428	)		10/8/2010		1999		24
Kansas City—South	Kansas City, MO		(1	)		1,742		—		44		50		232			260		1,792		232			304		2,328		(410	)		10/8/2010		1997		(3	)
St. Louis—Westport—Central	Maryland Heights, MO		(1	)		829		2,112		48		47		154			227		876		2,266			275		3,417		(385	)		10/8/2010		1999		39
St. Louis—Westport—East Lackland Rd.	Maryland Heights, MO		(1	)		1,334		2,692		53		98		146			303		1,432		2,838			356		4,626		(521	)		10/8/2010		1996		31
Springfield—South	Springfield, MO		(1	)		777		3,170		40		72		11			241		849		3,181			281		4,311		(455	)		10/8/2010		1997		37
St. Louis—Westport—Craig Road	St. Louis, MO		(1	)		982		220		33		70		150			244		1,052		370			277		1,699		(195	)		10/8/2010		1994		24
St. Louis—St. Peters	St. Peters, MO		(1	)		1,165		3,797		44		49		134			255		1,214		3,931			299		5,444		(570	)		10/8/2010		1997		37
Jackson—East Beasley Road	Jackson, MS		(1	)		265		3,884		49		49		39			246		314		3,923			295		4,532		(514	)		10/8/2010		1999		39
Jackson—North	Jackson, MS		(1	)		256		3,381		40		119		88			276		375		3,469			316		4,160		(518	)		10/8/2010		1997		32
Jackson—Ridgeland	Ridgeland, MS		(1	)		345		3,103		33		80		14			194		425		3,117			227		3,769		(515	)		10/8/2010		1996		26
Billings—West End	Billings, MT		(1	)		936		3,915		97		86		24			154		1,022		3,939			251		5,212		(507	)		10/8/2010		2003		43
Great Falls—Missouri River	Great Falls, MT		(1	)		834		5,105		70		64		41			194		898		5,146			264		6,308		(600	)		10/8/2010		2002		42
Asheville—Tunnel Rd.	Asheville, NC		(1	)		2,216		2,559		38		57		64			201		2,273		2,623			239		5,135		(384	)		10/8/2010		1998		38
Raleigh—Cary—Harrison Ave.	Cary, NC		(1	)		791		1,353		33		39		33			195		830		1,386			228		2,444		(291	)		10/8/2010		1996		26
Raleigh—Cary—Regency Parkway North	Cary, NC		(1	)		903		4,357		44		22		80			250		925		4,437			294		5,656		(562	)		10/8/2010		1998		38

					Initial Cost						Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements			Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Raleigh—Cary—Regency Parkway South	Cary, NC		(1	)		1,018		4,505		53		79			74		206		1,097		4,579		259		5,935		(559	)		10/8/2010		1998		43
Charlotte—Airport	Charlotte, NC		(1	)		1,982		636		67		92			681		802		2,074		1,317		869		4,260		(569	)		10/8/2010		1998		33
Charlotte—Pineville—Park Rd	Charlotte, NC		(1	)		1,111		3,250		60		55			461		630		1,166		3,711		690		5,567		(659	)		10/8/2010		1999		39
Charlotte—Pineville—Pineville Matthews Rd.	Charlotte, NC		(1	)		1,859		3,965		52		72			242		283		1,931		4,207		335		6,473		(570	)		10/8/2010		1999		43
Charlotte—Tyvola Rd.	Charlotte, NC		(1	)		1,563		727		54		44			372		572		1,607		1,099		626		3,332		(419	)		10/8/2010		1998		38
Charlotte—Tyvola Rd.—Executive Park	Charlotte, NC		(1	)		1,232		—		19		55			427		606		1,287		427		625		2,339		(293	)		10/8/2010		1995		(3	)
Charlotte—University Place	Charlotte, NC		(1	)		1,208		2,903		44		(38	)		407		636		1,170		3,310		680		5,160		(616	)		10/8/2010		1998		39
Charlotte—University Place—E. McCullough Dr.	Charlotte, NC		(1	)		1,045		—		35		56			475		602		1,101		475		637		2,213		(362	)		10/8/2010		1996		(4	)
Durham—Research Triangle Park	Durham, NC					603		1,556		292		64			19		170		667		1,575		462		2,704		(176	)		12/13/2012		1997		19
Durham—Research Triangle Park	Durham, NC		(1	)		63		984		33		62			79		254		125		1,063		287		1,475		(748	)		10/8/2010		1996		26
Durham—Research Triangle Park	Durham, NC		(1	)		2,519		351		42		22			23		191		2,541		374		233		3,148		(208	)		10/8/2010		1998		26
Durham—RTP—Miami Blvd.—North	Durham, NC		(1	)		1,215		2,397		54		57			122		167		1,272		2,519		221		4,012		(385	)		10/8/2010		1998		40
Durham—RTP—Miami Blvd.—South	Durham, NC		(1	)		1,405		2,370		107		76			134		375		1,481		2,504		482		4,467		(513	)		10/8/2010		1998		42
Durham—University	Durham, NC		(1	)		1,208		3,006		43		24			306		570		1,232		3,312		613		5,157		(680	)		10/8/2010		1997		33
Durham—University—Ivy Creek Blvd.	Durham, NC		(1	)		1,684		3,947		57		61			30		286		1,745		3,977		343		6,065		(621	)		10/8/2010		1998		33
Fayetteville—Cross Creek Mall	Fayetteville, NC		(1	)		3,725		9,586		56		77			189		580		3,802		9,775		636		14,213		(1,131	)		10/8/2010		1999		39
Fayetteville—Owen Dr.	Fayetteville, NC		(1	)		4,253		7,164		43		53			458		556		4,306		7,622		599		12,527		(1,029	)		10/8/2010		1997		32
Greensboro—Airport	Greensboro, NC		(1	)		1,017		1,618		56		51			59		146		1,068		1,677		202		2,947		(325	)		10/8/2010		1999		42
Greensboro—Wendover Ave.	Greensboro, NC		(1	)		1,047		—		33		89			73		232		1,136		73		265		1,474		(201	)		10/8/2010		1995		(3	)
Greensboro—Wendover Ave.—Big Tree Way	Greensboro, NC		(1	)		1,220		1,866		46		97			390		622		1,317		2,256		668		4,241		(619	)		10/8/2010		1996		31
Jacksonville—Camp Lejeune	Jacksonville, NC		(1	)		4,815		10,609		38		58			304		204		4,873		10,913		242		16,028		(1,229	)		10/8/2010		1998		38
Raleigh—RDU Airport	Morrisville, NC		(1	)		833		3,939		43		27			105		250		860		4,044		293		5,197		(575	)		10/8/2010		1997		32
Raleigh—Crabtree Valley	Raleigh, NC					1,276		2,350		493		92			10		186		1,368		2,360		679		4,407		(310	)		12/13/2012		1998		20
Raleigh—North Raleigh	Raleigh, NC		(1	)		634		1,414		34		36			119		266		670		1,533		300		2,503		(356	)		10/8/2010		1996		26
Raleigh—North Raleigh	Raleigh, NC		(1	)		1,120		4,043		38		43			323		492		1,163		4,366		530		6,059		(713	)		10/8/2010		1997		37
Raleigh—North Raleigh	Raleigh, NC		(1	)		956		2,771		43		64			152		298		1,020		2,923		341		4,284		(473	)		10/8/2010		1997		32
Raleigh—Northeast	Raleigh, NC		(1	)		1,219		2,471		40		41			84		214		1,260		2,555		254		4,069		(361	)		10/8/2010		1999		38
Wilmington—New Centre Drive	Wilmington, NC		(1	)		713		3,123		39		57			59		217		770		3,182		256		4,208		(414	)		10/8/2010		1998		44
Winston-Salem—Hanes Mall Blvd.	Winston- Salem, NC		(1	)		776		2,573		40		65			80		217		841		2,653		257		3,751		(402	)		10/8/2010		1996		32
Winston-Salem—University Parkway	Winston- Salem, NC		(1	)		1,003		1,531		44		11			26		165		1,014		1,557		209		2,780		(384	)		10/8/2010		1998		24
Omaha—West	Omaha, NE		(1	)		1,117		2,601		39		68			117		218		1,185		2,718		257		4,160		(494	)		10/8/2010		1997		27
Nashua—Manchester	Nashua, NH		(1	)		2,526		1,771		58		43			350		602		2,569		2,121		660		5,350		(410	)		10/8/2010		2001		41
Mt. Olive—Budd Lake	Budd Lake, NJ		(1	)		835		3,898		103		107			397		575		942		4,295		678		5,915		(701	)		10/8/2010		2003		43
Philadelphia—Cherry Hill	Cherry Hill, NJ		(1	)		337		2,660		32		29			156		296		366		2,816		328		3,510		(387	)		10/8/2010		1998		38
Meadowlands—East Rutherford	E.Rutherford, NJ		(1	)		957		6,141		61		81			925		965		1,038		7,066		1,026		9,130		(1,098	)		10/8/2010		1999		39
Edison—Raritan Center	Edison, NJ		(1	)		1,363		8,976		48		108			594		904		1,471		9,570		952		11,993		(1,254	)		10/8/2010		1997		37
Elizabeth—Newark Airport	Elizabeth, NJ		(1	)		202		11,175		119		61			751		835		263		11,926		954		13,143		(2,333	)		10/8/2010		2002		42
Somerset—Franklin	Franklin, NJ		(1	)		761		4,096		63		53			412		565		814		4,508		628		5,950		(785	)		10/8/2010		2001		41
Philadelphia—Maple Shade	Maple Shade, NJ		(1	)		464		2,987		43		20			238		183		484		3,225		226		3,935		(604	)		10/8/2010		1998		23
Philadelphia—Mt. Laurel—Pacilli Place	Mt Laurel, NJ		(1	)		455		4,318		58		42			39		424		497		4,357		482		5,336		(534	)		10/8/2010		1999		39
Philadelphia—Mt. Laurel -Crawford Place	Mt Laurel, NJ		(1	)		313		2,632		31		32			180		308		345		2,812		339		3,496		(397	)		10/8/2010		1998		38
Piscataway—Rutgers University	Piscataway, NJ		(1	)		907		6,348		62		168			591		775		1,075		6,939		837		8,851		(1,041	)		10/8/2010		1998		38
Princeton—West Windsor	Princeton, NJ		(1	)		3,758		2,042		45		38			438		635		3,796		2,480		680		6,956		(486	)		10/8/2010		2000		40
Ramsey—Upper Saddle River	Ramsey, NJ		(1	)		704		5,013		64		40			525		640		744		5,538		704		6,986		(790	)		10/8/2010		2001		41
Red Bank—Middletown	Red Bank, NJ		(1	)		2,846		2,652		52		46			540		708		2,892		3,192		760		6,844		(570	)		10/8/2010		2000		40
Meadowlands—Rutherford	Rutherford, NJ		(1	)		1,972		4,661		49		75			602		798		2,047		5,263		847		8,157		(878	)		10/8/2010		1999		39
Princeton—South Brunswick	S. Brunswick, NJ		(1	)		761		3,728		50		108			453		791		869		4,181		841		5,891		(904	)		10/8/2010		1999		39
Secaucus—Meadowlands	Secaucus, NJ		(1	)		1,644		13,946		122		97			651		789		1,741		14,597		911		17,249		(1,658	)		10/8/2010		2002		42
Secaucus—New York City Area	Secaucus, NJ		(1	)		307		20,368		73		76			1,042		1,242		383		21,410		1,315		23,108		(6,151	)		10/8/2010		2000		40
Hanover—Parsippany	Whippany, NJ		(1	)		3,549		6,181		60		80			773		927		3,629		6,954		987		11,570		(1,084	)		10/8/2010		1998		38
Newark—Woodbridge	Woodbridge, NJ		(1	)		1,814		9,316		61		123			867		1,090		1,937		10,183		1,151		13,271		(1,468	)		10/8/2010		1999		39
Albuquerque—Airport	Albuquerque, NM		(1	)		747		2,314		47		60			84		241		807		2,398		288		3,493		(534	)		10/8/2010		1999		24
Albuquerque—Northeast	Albuquerque, NM		(1	)		1,012		1,233		42		42			103		182		1,054		1,336		224		2,614		(402	)		10/8/2010		1998		23
Albuquerque—Rio Rancho	Albuquerque, NM		(1	)		1,051		4,453		38		28			66		215		1,079		4,519		253		5,851		(544	)		10/8/2010		1998		38
Albuquerque—Rio Rancho Blvd.	Rio Rancho, NM		(1	)		1,561		5,734		51		46			149		267		1,607		5,883		318		7,808		(710	)		10/8/2010		1998		39
Las Vegas—Boulder Highway	Las Vegas, NV		(1	)		1,804		—		41		48			149		300		1,852		149		341		2,342		(208	)		10/8/2010		1992		(4	)
Las Vegas—East Flamingo	Las Vegas, NV		(1	)		1,914		3,649		56		39			196		365		1,953		3,845		421		6,219		(614	)		10/8/2010		1998		38

					Initial Cost						Cost Capitalized Subsequent to Acquisition								Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements			Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Las Vegas—Midtown	Las Vegas, NV		(1	)		1,782		3,495		45		42			71			292		1,824		3,566		337		5,727		(502	)		10/8/2010		1998		38
Las Vegas—Valley View	Las Vegas, NV		(1	)		2,230		7,604		64		42			209			452		2,272		7,813		516		10,601		(1,022	)		10/8/2010		1995		32
Reno—South Meadows	Reno, NV		(1	)		1,771		4,821		84		41			125			161		1,812		4,946		245		7,003		(586	)		10/8/2010		2002		42
Albany – SUNY	Albany, NY		(1	)		1,246		6,462		47		48			659			883		1,294		7,121		930		9,345		(952	)		10/8/2010		1996		36
Buffalo—Amherst	Amherst, NY		(1	)		665		5,464		43		65			380			785		730		5,844		828		7,402		(816	)		10/8/2010		1997		37
Long Island—Bethpage	Bethpage, NY		(1	)		4,024		7,727		44		70			204			458		4,094		7,931		502		12,527		(897	)		10/8/2010		1999		39
Syracuse—Dewitt	East Syracuse, NY		(1	)		669		4,692		43		154			537			727		823		5,229		770		6,822		(832	)		10/8/2010		1996		36
White Plains—Elmsford	Elmsford, NY		(1	)		1,124		12,986		74		110			751			941		1,234		13,737		1,015		15,986		(1,535	)		10/8/2010		2000		40
Fishkill—Route 9	Fishkill, NY		(1	)		1,616		6,316		47		46			92			223		1,662		6,408		270		8,340		(754	)		10/8/2010		1998		38
Fishkill—Westage Center	Fishkill, NY		(1	)		946		5,653		111		72			380			561		1,018		6,033		672		7,723		(749	)		10/8/2010		2004		44
Long Island—Melville	Melville, NY		(1	)		7,498		10,315		73		75			193			568		7,573		10,508		641		18,722		(1,171	)		10/8/2010		2000		40
Rochester—Greece	Rochester, NY		(1	)		1,005		4,662		45		36			535			816		1,041		5,197		861		7,099		(766	)		10/8/2010		1996		36
Rochester—Henrietta	Rochester, NY		(1	)		1,061		7,451		45		41			260			743		1,102		7,711		788		9,601		(977	)		10/8/2010		1996		36
New York City—LaGuardia Airport	Whitestone, NY		(1	)		8,634		14,468		84		100			460			820		8,734		14,928		904		24,566		(1,558	)		10/8/2010		2001		41
Cincinnati—Blue Ash	Blue Ash, OH		(1	)		956		697		46		73			56			296		1,029		753		342		2,124		(272	)		10/8/2010		1997		38
Cincinnati – Blue Ash – Kenwood Road	Blue Ash, OH		(1	)		928		2,223		50		43			66			248		971		2,289		298		3,558		(444	)		10/8/2010		1998		29
Cincinnati – Blue Ash – Reagan Highway	Blue Ash, OH		(1	)		535		651		28		73			32			184		608		683		212		1,503		(183	)		10/8/2010		1991		31
Cleveland—Brooklyn	Brooklyn, OH		(1	)		1,006		3,280		42		61			50			315		1,067		3,330		357		4,754		(484	)		10/8/2010		1999		39
Columbus—East	Columbus, OH		(1	)		1,036		—		29		113			48			207		1,149		48		236		1,433		(153	)		10/8/2010		1989		(3	)
Columbus—Easton	Columbus, OH		(1	)		1,185		4,416		50		110			241			375		1,295		4,657		425		6,377		(616	)		10/8/2010		1999		39
Columbus—North	Columbus, OH		(1	)		824		1,251		43		55			86			261		879		1,337		304		2,520		(304	)		10/8/2010		1997		37
Columbus—Polaris	Columbus, OH		(1	)		1,431		5,351		61		91			481			867		1,522		5,832		928		8,282		(722	)		10/8/2010		1998		39
Columbus—Worthington	Columbus, OH		(1	)		781		1,115		36		65			238			228		846		1,353		264		2,463		(326	)		10/8/2010		1998		38
Akron—Copley	Copley, OH		(1	)		795		240		44		60			62			225		855		302		269		1,426		(191	)		10/8/2010		1996		26
Akron—Copley	Copley, OH		(1	)		875		1,080		35		57			74			230		932		1,154		265		2,351		(236	)		10/8/2010		1997		37
Dayton—North	Dayton, OH		(1	)		813		3,567		49		93			150			282		906		3,717		331		4,954		(527	)		10/8/2010		2000		40
Dayton—South	Dayton, OH		(1	)		500		1,899		29		58			203			213		558		2,102		242		2,902		(360	)		10/8/2010		1989		29
Columbus—Dublin	Dublin, OH		(1	)		1,329		1,294		38		45			117			416		1,374		1,411		454		3,239		(298	)		10/8/2010		1998		38
Columbus—Sawmill Rd.	Dublin, OH		(1	)		577		460		28		57			89			206		634		549		234		1,417		(188	)		10/8/2010		1990		30
Columbus—Tuttle	Dublin, OH		(1	)		863		3,396		50		28			30			202		891		3,426		252		4,569		(450	)		10/8/2010		1998		40
Dayton—Fairborn	Fairborn, OH		(1	)		757		2,848		34		73			84			257		830		2,932		291		4,053		(529	)		10/8/2010		1997		27
Cincinnati—Fairfield	Fairfield, OH		(1	)		459		1,293		28		91			61			155		550		1,354		183		2,087		(263	)		10/8/2010		1989		29
Findlay—Tiffin Avenue	Findlay, OH					671		2,596		77		75			65			249		746		2,661		326		3,733		(419	)		10/8/2010		1999		43
Toledo—Holland	Holland, OH		(1	)		1,002		2,986		45		38			74			206		1,040		3,060		251		4,351		(421	)		10/8/2010		1997		37
Toledo—Maumee	Maumee, OH		(1	)		912		740		34		72			(100	)		178		984		640		212		1,836		(229	)		10/8/2010		1997		27
Cleveland—Middleburg Heights	Middleburg Heights, OH		(1	)		980		727		33		56			75			265		1,036		802		298		2,136		(253	)		10/8/2010		1997		27
Cleveland—Airport—North Olmsted	North Olmsted, OH		(1	)		1,169		909		45		55			123			355		1,224		1,032		400		2,656		(321	)		10/8/2010		1998		38
Cleveland—North Olmsted—Great Northern Mall	North Olmsted, OH		(1	)		1,079		563		41		70			26			312		1,149		589		353		2,091		(240	)		10/8/2010		1997		27
Cleveland—Beachwood	Orange, OH		(1	)		1,619		—		76		38			85			317		1,657		85		393		2,135		(264	)		10/8/2010		2002		(3	)
Cleveland—Beachwood	Orange, OH		(1	)		1,288		2,514		59		30			139			335		1,318		2,653		394		4,365		(438	)		10/8/2010		1999		39
Cincinnati—Sharonville	Sharonville, OH		(1	)		972		932		46		45			87			260		1,017		1,019		306		2,342		(281	)		10/8/2010		1996		31
Cincinnati – Springdale – I-275	Springdale, OH		(1	)		852		1,843		45		47			108			259		899		1,951		304		3,154		(372	)		10/8/2010		1996		31
Cincinnati – Springdale – Tri-County Mall	Springdale, OH		(1	)		1,052		—		28		(768	)(5)		108			196		284		108		224		616		(126	)		10/8/2010		1988		(3	)
Cleveland—Westlake	Westlake, OH		(1	)		1,569		1,329		36		46			109			190		1,615		1,438		226		3,279		(264	)		10/8/2010		1997		40
Oklahoma City—Airport	Oklahoma City, OK		(1	)		1,197		1,835		37		62			80			268		1,259		1,915		305		3,479		(316	)		10/8/2010		1997		37
Oklahoma City—Northwest	Oklahoma City, OK		(1	)		1,252		3,553		47		70			103			303		1,322		3,656		350		5,328		(477	)		10/8/2010		1998		41
Oklahoma City—NW Expressway	Oklahoma City, OK		(1	)		1,152		2,983		43		57			163			335		1,209		3,146		378		4,733		(462	)		10/8/2010		1999		39
Tulsa—Central	Tulsa, OK		(1	)		900		4,798		43		40			230			281		940		5,028		324		6,292		(695	)		10/8/2010		1997		32
Tulsa—Midtown	Tulsa, OK		(1	)		807		2,461		35		68			72			263		875		2,533		298		3,706		(466	)		10/8/2010		1997		27
Portland—Beaverton	Beaverton, OR		(1	)		3,210		4,410		50		53			594			887		3,263		5,004		937		9,204		(856	)		10/8/2010		1997		32
Portland—Beaverton—Eider Court	Beaverton, OR		(1	)		1,856		5,825		44		34			308			616		1,890		6,133		660		8,683		(713	)		10/8/2010		1998		38
Portland—Hillsboro	Hillsboro, OR		(1	)		4,174		8,101		63		56			497			734		4,230		8,598		797		13,625		(950	)		10/8/2010		1998		40
Portland—Gresham	Portland, OR		(1	)		2,009		2,822		38		47			171			371		2,056		2,993		409		5,458		(425	)		10/8/2010		1998		38
Salem—North	Salem, OR		(1	)		1,490		2,141		42		11			42			139		1,501		2,183		181		3,865		(456	)		10/8/2010		1998		24
Eugene—Springfield	Springfield, OR		(1	)		1,431		2,879		41		10			64			229		1,441		2,943		270		4,654		(596	)		10/8/2010		1997		22
Portland—Tigard	Tigard, OR		(1	)		3,425		4,456		48		53			571			890		3,478		5,027		938		9,443		(856	)		10/8/2010		1998		33
Philadelphia—Bensalem	Bensalem, PA		(1	)		1,408		6,689		38		65			266			466		1,473		6,955		504		8,932		(774	)		10/8/2010		1998		38

					Initial Cost						Cost Capitalized Subsequent to Acquisition							Gross Amount Carried at Close of Period December 31, 2013											��
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Allentown—Bethlehem	Bethlehem, PA		(1	)		1,054		3,922		96		36		132			354		1,090		4,054		450		5,594		(518	)		10/8/2010		2003		43
Pittsburgh—Carnegie	Carnegie, PA		(1	)		697		6,689		41		73		503			643		770		7,192		684		8,646		(928	)		10/8/2010		1997		37
Philadelphia—Exton	Exton, PA		(1	)		2,343		2,198		44		95		501			620		2,438		2,699		664		5,801		(534	)		10/8/2010		1999		39
Philadelphia—Horsham—Dresher Rd.	Horsham, PA		(1	)		1,691		5,111		49		59		742			928		1,750		5,853		977		8,580		(935	)		10/8/2010		1998		38
Philadelphia—Horsham—Welsh Rd.	Horsham, PA		(1	)		1,815		2,708		68		29		540			731		1,844		3,248		799		5,891		(614	)		10/8/2010		2001		41
Philadelphia—King of Prussia	King of Prussia, PA		(1	)		2,871		7,293		58		111		737			932		2,982		8,030		990		12,002		(1,124	)		10/8/2010		1998		38
Philadelphia—Malvern—Great Valley	Malvern, PA		(1	)		1,772		2,699		44		64		504			600		1,836		3,203		644		5,683		(578	)		10/8/2010		1999		39
Philadelphia—Malvern—Swedesford Rd.	Malvern, PA		(1	)		78		4,384		40		51		568			706		129		4,952		746		5,827		(1,047	)		10/8/2010		1999		39
Pittsburgh—Monroeville	Monroeville, PA		(1	)		1,731		10,487		42		63		442			605		1,794		10,929		647		13,370		(1,270	)		10/8/2010		1999		39
Philadelphia—Airport—Bartram Ave.	Philadelphia, PA		(1	)		1,654		7,808		52		77		169			599		1,731		7,977		651		10,359		(908	)		10/8/2010		1998		38
Philadelphia—Airport—Tinicum Blvd.	Philadelphia, PA		(1	)		1,610		9,057		57		49		363			855		1,659		9,420		912		11,991		(1,068	)		10/8/2010		1998		38
Pittsburgh—Airport	Pittsburgh, PA		(1	)		806		6,583		53		70		15			267		876		6,598		320		7,794		(778	)		10/8/2010		1998		39
Wilkes-Barre—Hwy. 315	Plains Township, PA					852		3,670		108		125		85			189		977		3,755		297		5,029		(513	)		10/8/2010		2003		43
Philadelphia—Plymouth Meeting	Plymouth Meeting, PA		(1	)		1,111		7,505		120		117		1,337			854		1,228		8,842		974		11,044		(1,149	)		10/8/2010		2003		43
Pittsburgh—West Mifflin	West Mifflin, PA		(1	)		885		7,893		95		49		386			548		934		8,279		643		9,856		(948	)		10/8/2010		2003		43
Providence—East Providence	East Providence, RI		(1	)		1,632		6,713		70		70		398			641		1,702		7,111		711		9,524		(818	)		10/8/2010		2002		42
Providence—Airport	Warwick, RI		(1	)		1,104		2,403		116		68		239			367		1,172		2,642		483		4,297		(502	)		10/8/2010		1997		44
Providence – Warwick	Warwick, RI		(1	)		1,563		4,097		69		77		74			266		1,640		4,171		335		6,146		(551	)		10/8/2010		2001		41
Providence —West Warwick	West Warwick, RI		(1	)		1,245		5,104		66		52		125			257		1,297		5,229		323		6,849		(624	)		10/8/2010		2001		41
Columbia—Ft. Jackson	Columbia, SC		(1	)		1,397		4,865		44		46		109			259		1,443		4,974		303		6,720		(685	)		10/8/2010		1997		32
Columbia—West—Interstate 126	Columbia, SC		(1	)		896		2,918		43		88		77			288		984		2,995		331		4,310		(495	)		10/8/2010		1996		31
Columbia—West—Stoneridge Dr.	Columbia, SC		(1	)		554		1,437		33		102		109			178		656		1,546		211		2,413		(331	)		10/8/2010		1995		25
Greenville—Airport	Greenville, SC		(1	)		727		3,464		40		30		49			242		757		3,513		282		4,552		(471	)		10/8/2010		1996		36
Greenville—Haywood Mall	Greenville, SC		(1	)		672		1,082		33		79		78			203		751		1,160		236		2,147		(283	)		10/8/2010		1995		25
Columbia—Harbison	Irmo, SC		(1	)		816		3,607		59		60		200			260		876		3,807		319		5,002		(495	)		10/8/2010		1999		44
Charleston—Mt. Pleasant	Mt. Pleasant, SC		(1	)		1,713		5,571		39		65		486			669		1,778		6,057		708		8,543		(816	)		10/8/2010		1998		38
Charleston—Northwoods Blvd.	N. Charleston, SC		(1	)		563		2,087		35		48		243			544		611		2,330		579		3,520		(425	)		10/8/2010		1996		26
Charleston—Airport	N. Charleston, SC		(1	)		1,580		5,652		49		68		114			343		1,648		5,766		392		7,806		(768	)		10/8/2010		1999		39
Charleston—North Charleston	N. Charleston, SC		(1	)		1,124		4,483		46		88		1,021			722		1,212		5,504		768		7,484		(859	)		10/8/2010		1996		31
Spartanburg—Asheville Hwy.	Spartanburg, SC		(1	)		708		1,721		40		36		135			162		744		1,856		202		2,802		(419	)		10/8/2010		1995		20
Nashville—Brentwood	Brentwood, TN		(1	)		668		1,588		33		34		41			200		702		1,629		233		2,564		(373	)		10/8/2010		1990		20
Nashville—Brentwood—South	Brentwood, TN		(1	)		1,271		3,746		44		41		48			256		1,312		3,794		300		5,406		(544	)		10/8/2010		1996		31
Chattanooga—Airport	Chattanooga, TN		(1	)		1,045		3,840		44		41		134			274		1,086		3,974		318		5,378		(588	)		10/8/2010		1996		31
Nashville—Franklin—Cool Springs	Franklin, TN		(1	)		1,898		3,263		46		51		74			258		1,949		3,337		304		5,590		(525	)		10/8/2010		1998		33
Knoxville—Cedar Bluff	Knoxville, TN		(1	)		768		3,224		36		37		84			169		805		3,308		205		4,318		(484	)		10/8/2010		1997		32
Knoxville—West Hills	Knoxville, TN		(1	)		570		1,826		29		44		29			186		614		1,855		215		2,684		(317	)		10/8/2010		1990		30
Memphis—Airport	Memphis, TN		(1	)		329		1,900		66		30		64			294		359		1,964		360		2,683		(379	)		10/8/2010		1998		38
Memphis—Apple Tree	Memphis, TN		(1	)		1,052		—		29		35		129			279		1,087		129		308		1,524		(151	)		10/8/2010		1990		(3	)
Memphis—Cordova	Memphis, TN		(1	)		736		1,937		34		37		98			198		773		2,035		232		3,040		(385	)		10/8/2010		1996		26
Memphis��Mt. Moriah	Memphis, TN		(1	)		827		1,670		45		150		713			287		977		2,383		332		3,692		(466	)		10/8/2010		1999		39
Memphis—Poplar Avenue	Memphis, TN		(1	)		1,445		4,416		60		52		150			245		1,497		4,566		305		6,368		(600	)		10/8/2010		1999		39
Memphis—Quail Hollow	Memphis, TN		(1	)		849		3,071		42		35		69			262		884		3,140		304		4,328		(453	)		10/8/2010		1999		39
Memphis—Sycamore View	Memphis, TN		(1	)		532		1,939		50		53		84			250		585		2,023		300		2,908		(359	)		10/8/2010		1997		33
Memphis—Wolfchase Galleria	Memphis, TN		(1	)		1,137		5,177		75		72		—			351		1,209		5,177		426		6,812		(658	)		10/8/2010		1999		41
Nashville—Airport	Nashville, TN		(1	)		1,033		3,649		42		90		121			260		1,123		3,770		302		5,195		(527	)		10/8/2010		1997		32
Nashville—Airport—Briley Pkwy.	Nashville, TN		(1	)		1,008		1,455		39		6		63			118		1,014		1,518		157		2,689		(328	)		10/8/2010		1997		22
Nashville—Airport—Elm Hill Pike	Nashville, TN		(1	)		812		1,543		33		82		29			186		894		1,572		219		2,685		(337	)		10/8/2010		1993		23
Nashville—Airport—Music City	Nashville, TN		(1	)		2,779		2,379		56		30		34			296		2,809		2,413		352		5,574		(417	)		10/8/2010		1997		32
Nashville—Vanderbilt	Nashville, TN		(1	)		1,918		9,993		78		38		321			542		1,956		10,314		620		12,890		(1,074	)		10/8/2010		2002		42
Amarillo—West	Amarillo, TX		(1	)		489		3,478		45		46		87			289		535		3,565		334		4,434		(474	)		10/8/2010		2000		40
Arlington	Arlington, TX		(1	)		1,155		871		43		54		800			804		1,209		1,671		847		3,727		(717	)		10/8/2010		1995		30
Arlington—Six Flags	Arlington, TX		(1	)		814		4,330		57		75		86			316		889		4,416		373		5,678		(759	)		10/8/2010		1997		27
Austin—Round Rock—South	Austin , TX		(1	)		676		3,755		96		55		405			667		731		4,160		763		5,654		(660	)		10/8/2010		2003		43
Austin—Arboretum—Capital of Texas Hwy.	Austin, TX		(1	)		734		4,455		43		69		454			590		803		4,909		633		6,345		(627	)		10/8/2010		1999		39
Austin—Arboretum—North	Austin, TX		(1	)		1,080		5,322		56		42		(12	)		687		1,122		5,310		743		7,175		(670	)		10/8/2010		1998		40
Austin—Arboretum—South	Austin, TX		(1	)		1,059		2,857		44		72		756			1,014		1,131		3,613		1,058		5,802		(756	)		10/8/2010		1995		30
Austin—Downtown—6th St.	Austin, TX		(1	)		1,915		12,925		50		55		244			466		1,970		13,169		516		15,655		(1,394	)		10/8/2010		2000		40

					Initial Cost						Cost Capitalized Subsequent to Acquisition								Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements			Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Austin - Downtown - Town Lake	Austin, TX		(1	)		3,043		11,933		58		55			298			809		3,098		12,231		867		16,196		(1,482	)		10/8/2010		1998		38
Austin—Metro	Austin, TX		(1	)		677		1,768		53		46			47			285		723		1,815		338		2,876		(333	)		10/8/2010		1998		41
Austin—North Central	Austin, TX		(1	)		1,711		—		58		64			290			477		1,775		290		535		2,600		(321	)		10/8/2010		1998		(3	)
Austin—Northwest—Lakeline Mall	Austin, TX		(1	)		601		2,842		75		74			403			721		675		3,245		796		4,716		(600	)		10/8/2010		2002		42
Austin—Northwest—Research Park	Austin, TX		(1	)		1,028		5,422		59		87			399			862		1,115		5,821		921		7,857		(783	)		10/8/2010		1998		41
Austin—Round Rock—North	Austin, TX		(1	)		604		3,676		50		65			59			349		669		3,735		399		4,803		(667	)		10/8/2010		1998		28
Austin—Southwest	Austin, TX		(1	)		4,628		3,811		84		49			469			764		4,677		4,280		848		9,805		(703	)		10/8/2010		2002		42
Austin—West	Austin, TX		(1	)		549		1,667		49		25			91			223		574		1,758		272		2,604		(435	)		10/8/2010		1998		23
Dallas—Bedford	Bedford, TX		(1	)		540		2,600		53		109			41			192		649		2,641		245		3,535		(396	)		10/8/2010		1998		41
Corpus Christi—Staples	Corpus, TX		(1	)		1,246		5,337		47		81			66			277		1,327		5,403		324		7,054		(710	)		10/8/2010		1998		38
Dallas—Coit Road	Dallas, TX		(1	)		555		1,430		42		59			101			282		614		1,531		324		2,469		(346	)		10/8/2010		1994		29
Dallas—Frankford Road	Dallas, TX		(1	)		891		1,301		131		65			354			355		956		1,655		486		3,097		(457	)		10/8/2010		2002		42
Dallas—Greenville Avenue	Dallas, TX		(1	)		581		3,125		42		52			125			302		633		3,250		344		4,227		(480	)		10/8/2010		1998		38
Dallas—Market Center	Dallas, TX		(1	)		748		4,625		71		63			33			248		811		4,658		319		5,788		(579	)		10/8/2010		1997		39
Dallas—North Addison—Tollway	Dallas, TX		(1	)		493		1,268		39		27			68			238		520		1,336		277		2,133		(290	)		10/8/2010		1993		31
Dallas—North Park	Dallas, TX		(1	)		581		3,317		50		54			164			380		635		3,481		430		4,546		(571	)		10/8/2010		1997		35
El Paso—Airport	El Paso, TX		(1	)		951		6,206		55		62			182			306		1,013		6,388		361		7,762		(864	)		10/8/2010		1997		32
El Paso—West	El Paso, TX		(1	)		918		3,271		34		46			93			260		964		3,364		294		4,622		(557	)		10/8/2010		1997		27
Dallas—Farmers Branch	Farmers Branch, TX		(1	)		511		1,451		38		47			27			234		558		1,478		272		2,308		(327	)		10/8/2010		1998		28
Fort Worth—City View	Fort Worth, TX		(1	)		724		2,888		43		60			208			279		784		3,096		322		4,202		(473	)		10/8/2010		1999		39
Fort Worth—Fossil Creek	Fort Worth, TX		(1	)		695		3,944		50		(10	)		79			198		685		4,023		248		4,956		(511	)		10/8/2010		1998		40
Fort Worth—Fossil Creek	Fort Worth, TX		(1	)		600		2,253		43		22			272			167		622		2,525		210		3,357		(547	)		10/8/2010		1998		23
Fort Worth—Medical Center	Fort Worth, TX		(1	)		1,811		3,954		39		39			153			258		1,850		4,107		297		6,254		(623	)		10/8/2010		1996		31
Fort Worth—Southwest	Fort Worth, TX		(1	)		1,102		3,734		46		46			90			176		1,148		3,824		222		5,194		(474	)		10/8/2010		1998		40
Houston—Galleria—Uptown	Houston, TX		(1	)		890		9,696		66		61			310			731		951		10,006		797		11,754		(1,192	)		10/8/2010		1998		38
Houston—Galleria – Westheimer	Houston, TX		(1	)		729		9,020		45		53			427			580		782		9,447		625		10,854		(1,054	)		10/8/2010		1999		39
Houston—Greenspoint	Houston, TX		(1	)		381		840		39		111			446			811		492		1,286		850		2,628		(499	)		10/8/2010		1998		28
Houston—Greenway Plaza	Houston, TX		(1	)		603		8,266		46		73			417			576		676		8,683		622		9,981		(994	)		10/8/2010		1998		38
Houston – Katy Freeway—Energy Corridor	Houston, TX					2,040		5,507		549		—			(1	)		1		2,040		5,506		550		8,096		—			12/31/2013		1998		35
Houston—Katy Frwy—Beltway 8	Houston, TX		(1	)		304		2,701		44		72			555			723		376		3,256		767		4,399		(624	)		10/8/2010		1999		39
Houston—Med. Ctr.—Braeswood Blvd.	Houston, TX		(1	)		998		10,111		122		108			422			764		1,106		10,533		886		12,525		(1,288	)		10/8/2010		1997		38
Houston—Med. Ctr.—Reliant Pk.—Fannin St.	Houston, TX		(1	)		1,311		7,833		53		141			826			1,245		1,452		8,659		1,298		11,409		(1,460	)		10/8/2010		1995		30
Houston—Med. Ctr.—Reliant Pk.—La Concha Ln.	Houston, TX		(1	)		544		5,470		60		58			23			245		602		5,493		305		6,400		(670	)		10/8/2010		1997		39
Houston—NASA—Johnson Space Center	Houston, TX		(1	)		535		4,068		44		112			889			307		647		4,957		351		5,955		(692	)		10/8/2010		1998		38
Houston—Northwest	Houston, TX		(1	)		499		4,878		50		34			150			184		533		5,028		234		5,795		(590	)		10/8/2010		1997		39
Houston—Northwest	Houston, TX		(1	)		306		2,264		48		15			59			218		321		2,323		266		2,910		(520	)		10/8/2010		1998		23
Houston—Sugar Land	Houston, TX					1,882		5,904		549		—			—			1		1,882		5,904		550		8,336		—			12/31/2013		1998		35
Houston—West Oaks	Houston, TX		(1	)		330		2,247		48		9			119			153		339		2,366		201		2,906		(487	)		10/8/2010		1998		23
Houston—Westchase—Richmond	Houston, TX		(1	)		286		3,074		38		49			68			225		335		3,142		263		3,740		(420	)		10/8/2010		1998		43
Houston—Westchase—Westheimer	Houston, TX		(1	)		646		6,571		43		53			645			1,019		699		7,216		1,062		8,977		(1,278	)		10/8/2010		1997		27
Houston—Willowbrook	Houston, TX		(1	)		836		4,187		48		83			708			1,000		919		4,895		1,048		6,862		(928	)		10/8/2010		1995		30
Houston—Willowbrook—HWY 249	Houston, TX		(1	)		329		3,432		38		67			314			238		396		3,746		276		4,418		(535	)		10/8/2010		1998		38
Dallas—DFW Airport N.	Irving, TX		(1	)		698		1,510		130		84			29			360		782		1,539		490		2,811		(416	)		10/8/2010		2003		43
Dallas—Irving	Irving, TX		(1	)		539		1,701		45		28			26			137		567		1,727		182		2,476		(389	)		10/8/2010		1998		24
Dallas—Las Colinas—Carnaby St.	Irving, TX		(1	)		1,220		3,061		51		96			42			264		1,316		3,103		315		4,734		(536	)		10/8/2010		1996		31
Dallas—Las Colinas—Green Park Dr.	Irving, TX		(1	)		875		2,338		98		62			241			316		937		2,579		414		3,930		(483	)		10/8/2010		1998		43
Laredo—Del Mar	Laredo, TX		(1	)		513		2,959		63		79			187			281		592		3,146		344		4,082		(467	)		10/8/2010		2001		41
Dallas—Las Colinas—Meadow Creek Dr.	Las Colinas, TX		(1	)		844		3,605		84		69			46			292		913		3,651		376		4,940		(542	)		10/8/2010		1998		40
Dallas—Lewisville	Lewisville, TX		(1	)		564		1,020		38		73			361			607		637		1,381		645		2,663		(545	)		10/8/2010		1998		38
Lubbock—Southwest	Lubbock, TX		(1	)		571		4,931		76		37			115			258		608		5,046		334		5,988		(620	)		10/8/2010		2002		42
Dallas—Mesquite	Mesquite, TX		(1	)		708		2,442		50		18			42			209		726		2,484		259		3,469		(518	)		10/8/2010		1998		24
Dallas—Plano	Plano, TX		(1	)		735		4,386		90		55			180			367		790		4,566		457		5,813		(635	)		10/8/2010		1999		41
Dallas—Plano—Plano Parkway	Plano, TX		(1	)		649		1,999		45		140			30			193		789		2,029		238		3,056		(333	)		10/8/2010		1997		41
Dallas—Plano Parkway	Plano, TX		(1	)		776		3,662		118		40			118			244		816		3,780		362		4,958		(530	)		10/8/2010		1996		43
Dallas—Richardson	Richardson, TX		(1	)		1,014		5,535		144		73			52			366		1,087		5,587		510		7,184		(755	)		10/8/2010		2002		42
San Antonio—Airport	San Antonio, TX		(1	)		1,443		4,710		53		71			193			276		1,514		4,903		329		6,746		(772	)		10/8/2010		1995		30
San Antonio—Colonnade	San Antonio, TX		(1	)		865		5,060		52		51			69			280		916		5,129		332		6,377		(637	)		10/8/2010		1998		40

					Initial Cost						Cost Capitalized Subsequent to Acquisition								Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements			Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Houston - The Woodlands	Spring, TX		(1	)		455		5,700		55		61			378			658		516		6,078		713		7,307		(1,007	)		10/8/2010		1998		26
Houston—Stafford	Stafford, TX		(1	)		389		1,774		35		87			82			281		476		1,856		316		2,648		(373	)		10/8/2010		1997		34
Waco—Woodway	Waco, TX		(1	)		553		4,053		47		48			39			254		601		4,092		301		4,994		(521	)		10/8/2010		2001		41
Houston—NASA—Bay Area Blvd.	Webster, TX		(1	)		516		5,301		45		52			226			250		568		5,527		295		6,390		(675	)		10/8/2010		1997		40
Salt Lake City—Union Park	Midvale, UT		(1	)		1,236		4,122		47		46			510			783		1,282		4,632		830		6,744		(626	)		10/8/2010		1997		37
Salt Lake City—Mid Valley	Salt Lake City, UT		(1	)		1,961		3,716		58		132			258			417		2,093		3,974		475		6,542		(700	)		10/8/2010		1997		32
Salt Lake City—Sugar House	Salt Lake City, UT		(1	)		2,166		7,029		39		120			315			514		2,286		7,344		553		10,183		(936	)		10/8/2010		1998		33
Salt Lake City—Sandy	Sandy, UT		(1	)		977		3,949		45		119			333			657		1,096		4,282		702		6,080		(572	)		10/8/2010		1998		38
Salt Lake City—West Valley Center	West Valley, UT		(1	)		1,183		3,592		43		100			285			694		1,283		3,877		737		5,897		(513	)		10/8/2010		1997		37
Washington, D.C.—Alexandria—Landmark	Alexandria, VA		(1	)		3,627		10,696		44		74			253			458		3,701		10,949		502		15,152		(1,203	)		10/8/2010		1999		39
Washington, DC—Alexandria—Eisenhower Ave.	Alexandria, VA		(1	)		5,147		14,424		60		71			595			908		5,218		15,019		968		21,205		(1,876	)		10/8/2010		1999		39
Washington, D.C.—Centreville—Manassas	Centerville, VA		(1	)		1,542		4,922		105		58			376			591		1,600		5,298		696		7,594		(748	)		10/8/2010		2004		44
Washington, D.C.—Chantilly	Chantilly, VA		(1	)		2,655		3,015		511		68			346			128		2,723		3,361		639		6,723		(297	)		12/13/2012		1998		22
Washington, D.C.—Chantilly—Airport	Chantilly, VA		(1	)		1,402		3,390		40		(13	)		496			650		1,389		3,886		690		5,965		(675	)		10/8/2010		1998		38
Washington, D.C.—Chantilly—Dulles South	Chantilly, VA		(1	)		1,166		5,159		46		48			437			643		1,214		5,596		689		7,499		(809	)		10/8/2010		2000		40
Chesapeake—Churchland Blvd.	Chesapeake, VA		(1	)		647		2,762		57		36			44			252		683		2,806		309		3,798		(409	)		10/8/2010		2001		42
Chesapeake—Crossways Blvd.	Chesapeake, VA		(1	)		1,171		4,773		47		64			132			260		1,235		4,905		307		6,447		(671	)		10/8/2010		1996		32
Chesapeake—Greenbrier Circle	Chesapeake, VA		(1	)		807		5,349		109		37			9			175		844		5,358		284		6,486		(619	)		10/8/2010		2005		44
Washington, D.C.—Fairfax	Fairfax, VA		(1	)		1,799		3,734		49		65			517			662		1,864		4,251		711		6,826		(717	)		10/8/2010		1999		39
Washington, D.C.—Fairfax—Fair Oaks	Fairfax, VA		(1	)		936		5,713		61		36			404			636		972		6,117		697		7,786		(848	)		10/8/2010		2000		40
Washington, D.C.—Fairfax—Fair Oaks	Fairfax, VA		(1	)		4,167		4,053		693		165			409			586		4,332		4,462		1,279		10,073		(392	)		12/13/2012		1998		26
Washington, D.C.—Falls Church—Merrifield	Fairfax, VA		(1	)		4,389		6,653		910		180			361			550		4,569		7,014		1,460		13,043		(468	)		12/13/2012		1998		33
Richmond—Innsbrook	Glen Allen, VA		(1	)		1,069		1,991		45		42			122			361		1,111		2,113		406		3,630		(443	)		10/8/2010		1997		27
Richmond—Innsbrook	Glen Allen, VA		(1	)		1,999		2,496		501		96			28			100		2,095		2,524		601		5,220		(294	)		12/13/2012		1997		19
Hampton—Coliseum	Hampton, VA		(1	)		1,049		2,120		97		61			48			273		1,110		2,168		370		3,648		(420	)		10/8/2010		2003		43
Washington, D.C.—Herndon—Dulles	Herndon, VA		(1	)		1,159		5,808		150		36			7			368		1,195		5,815		518		7,528		(694	)		10/8/2010		2005		45
Lynchburg—University Blvd.	Lynchburg, VA		(1	)		1,259		4,899		94		53			32			296		1,312		4,931		390		6,633		(619	)		10/8/2010		2003		43
Newport News—I-64—Jefferson Avenue	Newport News, VA		(1	)		982		2,655		34		43			56			245		1,025		2,711		279		4,015		(476	)		10/8/2010		1997		27
Newport News—Oyster Point	Newport News, VA		(1	)		688		2,950		44		22			280			307		710		3,230		351		4,291		(482	)		10/8/2010		1996		32
Washington, D.C.—Reston	Reston, VA		(1	)		5,766		7,250		795		147			286			547		5,913		7,536		1,342		14,791		(461	)		12/13/2012		1998		34
North Chesterfield—Arboretum	Richmond, VA		(1	)		1,368		3,745		45		24			96			345		1,392		3,841		390		5,623		(549	)		10/8/2010		1998		38
Richmond—I-64—West Broad Street	Richmond, VA		(1	)		1,008		4,037		55		49			99			183		1,057		4,136		238		5,431		(521	)		10/8/2010		1999		40
Richmond—W. Broad Street—Glenside—South	Richmond, VA		(1	)		660		1,677		39		64			1,202			370		724		2,879		409		4,012		(575	)		10/8/2010		1997		32
Roanoke—Airport	Roanoke, VA		(1	)		844		1,949		35		30			(8	)		259		874		1,941		294		3,109		(339	)		10/8/2010		1998		34
Washington, D.C.—Springfield	Springfield, VA		(1	)		3,417		15,207		134		54			413			628		3,471		15,620		762		19,853		(1,630	)		10/8/2010		2004		44
Washington, D.C.—Sterling	Sterling , VA		(1	)		1,375		5,167		39		59			342			617		1,434		5,509		656		7,599		(664	)		10/8/2010		1998		38
Washington, DC—Dulles Airport—Sterling	Sterling, VA		(1	)		4,709		2,618		707		127			6			140		4,836		2,624		847		8,307		(334	)		12/13/2012		1998		23
Washington, D.C.—Tysons Corner	Vienna, VA		(1	)		3,716		12,425		49		68			431			756		3,784		12,856		805		17,445		(1,599	)		10/8/2010		1999		39
Virginia Beach—Independence Blvd.	Virginia Beach, VA		(1	)		1,769		6,115		43		66			308			280		1,835		6,423		323		8,581		(856	)		10/8/2010		1996		31
Seattle—Bellevue—Downtown	Bellevue, WA		(1	)		3,672		9,062		55		62			310			636		3,734		9,372		691		13,797		(1,072	)		10/8/2010		1998		38
Seattle—Bellevue – Factoria	Bellevue, WA		(1	)		2,697		8,912		55		41			574			736		2,738		9,486		791		13,015		(1,196	)		10/8/2010		1997		32
Seattle—Redmond	Bellevue, WA		(1	)		6,206		16,067		71		43			369			718		6,249		16,436		789		23,474		(1,990	)		10/8/2010		1998		33
Seattle—Bothell—West	Bothell , WA		(1	)		1,236		5,978		64		47			366			525		1,283		6,344		589		8,216		(819	)		10/8/2010		2001		41
Seattle—Bothell—Canyon Park	Bothell, WA		(1	)		2,266		7,932		57		78			536			865		2,344		8,468		922		11,734		(1,193	)		10/8/2010		1998		39
Seattle—Everett – North	Everett, WA		(1	)		1,175		6,615		38		46			424			679		1,221		7,039		717		8,977		(957	)		10/8/2010		1997		37
Seattle—Everett – Silverlake	Everett, WA		(1	)		4,008		9,000		54		46			166			476		4,054		9,166		530		13,750		(999	)		10/8/2010		1999		40
Seattle—Federal Way	Federal Way, WA		(1	)		761		4,918		38		67			470			604		828		5,388		642		6,858		(783	)		10/8/2010		1999		39
Tacoma—Fife	Fife, WA		(1	)		814		4,397		38		64			470			645		878		4,867		683		6,428		(744	)		10/8/2010		1997		37
Seattle—Kent—Des Moines	Kent , WA		(1	)		869		3,865		43		16			46			146		885		3,911		189		4,985		(685	)		10/8/2010		1998		24
Seattle—Kent	Kent, WA		(1	)		923		3,724		43		40			291			487		963		4,015		530		5,508		(562	)		10/8/2010		1998		38
Seattle—Lynnwood	Lynnwood, WA		(1	)		1,829		5,408		41		44			412			656		1,873		5,820		697		8,390		(730	)		10/8/2010		1998		38
Seattle—Mukilteo	Mukilteo, WA		(1	)		1,894		8,893		84		44			263			506		1,938		9,156		590		11,684		(1,042	)		10/8/2010		2002		42
Tacoma—Puyallup	Puyallup, WA		(1	)		994		3,934		43		7			17			87		1,001		3,951		130		5,082		(697	)		10/8/2010		1998		23
Seattle—Renton	Renton, WA		(1	)		1,714		5,924		62		53			314			778		1,767		6,238		840		8,845		(764	)		10/8/2010		1998		39
Seattle—Northgate	Seattle, WA		(1	)		1,214		8,655		86		64			501			682		1,278		9,156		768		11,202		(1,120	)		10/8/2010		2002		42
Spokane—Valley	Spokane, WA		(1	)		626		2,848		38		9			88			100		635		2,936		138		3,709		(537	)		10/8/2010		1998		23
Tacoma—Hosmer	Tacoma, WA		(1	)		734		3,436		46		8			40			140		742		3,476		186		4,404		(628	)		10/8/2010		1999		24

					Initial Cost						Cost Capitalized Subsequent to Acquisition						Gross Amount Carried at Close of Period December 31, 2013
Description	Location	Encumbrances			Land		Building		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (4)		Accumulated Depreciation			Date Acquired		Date of Construction		Depreciable Lives (Years) (2)
Tacoma - South	Tacoma, WA		(1	)		1,162		6,871		40		128		323		587		1,290		7,194		627		9,111		(788	)		10/8/2010		1998		40
Seattle – Southcenter	Tukwila, WA		(1	)		1,005		4,129		35		77		539		681		1,082		4,668		716		6,466		(829	)		10/8/2010		1998		33
Seattle—Tukwila	Tukwila, WA		(1	)		1,056		4,724		38		43		471		494		1,099		5,195		532		6,826		(795	)		10/8/2010		1997		32
Olympia—Tumwater	Tumwater, WA		(1	)		1,428		5,495		70		65		392		696		1,493		5,887		766		8,146		(793	)		10/8/2010		2001		41
Portland—Vancouver	Vancouver, WA		(1	)		1,122		5,671		42		62		523		739		1,184		6,194		781		8,159		(861	)		10/8/2010		1997		37
Appleton—Fox Cities	Appleton, WI		(1	)		1,129		3,042		39		73		52		286		1,202		3,094		325		4,621		(452	)		10/8/2010		1997		37
Milwaukee—Brookfield	Brookfield, WI		(1	)		2,579		5,647		49		50		203		392		2,629		5,850		441		8,920		(748	)		10/8/2010		1998		38
Madison—Junction Court	Madison, WI		(1	)		1,197		2,790		39		44		32		258		1,241		2,822		297		4,360		(414	)		10/8/2010		1998		38
Madison—Old Sauk Rd.	Madison, WI		(1	)		1,332		2,506		46		103		25		207		1,435		2,531		253		4,219		(391	)		10/8/2010		1998		39
Milwaukee—Waukesha	Waukesha, WI		(1	)		1,311		3,215		44		55		83		332		1,366		3,298		376		5,040		(480	)		10/8/2010		1997		37
Milwaukee—Wauwatosa	Wauwatosa, WI		(1	)		1,732		5,151		44		42		79		321		1,774		5,230		365		7,369		(599	)		10/8/2010		1997		41
Land Available for Development	Bloomington, MN		—			1,821		—		—		—		—		—		1,821		—		—		1,821		—			10/8/2010
ESH Hospitality, Inc. and Subsidiaries, Investment in Real Estate						1,309,540		2,651,347		48,549		39,451		188,105		309,426		1,348,991		2,839,452		357,975		4,546,418		(426,479	)
Operating Lessees	Canada					—		—		544		90		2		3,503		90		2		4,047		4,139		(1,054	)
Management Business	Charlotte, NC					—		—		—		—		298		15,833		—		298		15,833		16,131		(11,838	)		9/1/2011
Extended Stay America, Inc. and Subsidiaries, Investment in Real Estate						1,309,540		2,651,347		49,093		39,541		188,405		328,762		1,349,081		2,839,752		377,855		4,566,688		(439,371	)

(1) Each of these properties serve as collateral for ESH REIT’s $2.52 billion Mortgage Loan.

(2) Depreciable lives are based on the largest asset—building; however, a portion of the real estate at each hotel property consists of items with a useful life less than that of the building.

(3) The majority of the depreciable real estate at this property consists of furniture, fixtures and equipment, which have a useful life of 1 to 20 years.

(4) The aggregate cost, net of accumulated tax depreciation, for Federal Income Tax purposes as of December 31, 2013 was $4,055,366.

(5) Each of these capitalized costs is net of impairment charges. The total cumulative impairment charges recognized subsequent to acquisition were $4,750.

Extended Stay America, Inc. and Subsidiaries and

ESH Hospitality, Inc. and Subsidiaries

Consolidated

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

(Dollars in thousands)

A summary of activity of investment in real estate and accumulated depreciation is as follows:

The Company’s changes in investment in real estate for the years ended December 31, 2013, 2012 and 2011 are as follows:

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Balance, beginning of the period	$	4,385,964	$	3,996,335	$	3,894,468
Additions during period:
Acquisitions		16,429		131,831		—
Capital expenditures		180,157		271,222		116,279
Deductions during period:
Dispositions and other		12,532		12,004		14,412
Impairment		3,330		1,420		—
Balance, end of period	$	4,566,688	$	4,385,964	$	3,996,335

The Company’s changes in accumulated depreciation for the years ended December 31, 2013, 2012 and 2011 are as follows:

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Balance, beginning of the period	$	275,342	$	152,203	$	33,837
Additions during period:
Depreciation		166,679		128,564		119,064
Deductions during period:
Dispositions and other		2,650		5,425		698
Balance, end of period	$	439,371	$	275,342	$	152,203

ESH REIT’s changes in investment in real estate for the years ended December 31, 2013, 2012 and 2011 are as follows:

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Balance, beginning of the period	$	4,385,964	$	3,996,335	$	3,894,468
Additions during period:
Acquisitions		16,429		131,831		—
Capital expenditures		179,104		271,222		116,279
Deductions during period:
Dispositions and other		31,749		12,004		14,412
Impairment		3,330		1,420		—
Balance, end of period	$	4,546,418	$	4,385,964	$	3,996,335

ESH REIT’s changes in accumulated depreciation for the years ended December 31, 2013, 2012 and 2011 are as follows:

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011
Balance, beginning of the period	$	275,342	$	152,203	$	33,837
Additions during period:
Depreciation		165,998		128,564		119,064
Deductions during period:
Dispositions and other		14,861		5,425		698
Balance, end of period	$	426,479	$	275,342	$	152,203

152

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

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Corporation

As of December 31, 2013, the Corporation reviewed, under the direction of the Chief Executive Officer and Chief Financial Officer, the disclosure controls and procedures of the Corporation, as defined in Exchange Act Rule 13a-15(e). Based upon and as of the date of that review, the Chief Executive Officer and Chief Financial Officer of the Corporation concluded that the disclosure controls and procedures of the Corporation were effective to ensure that information required to be disclosed in the reports that the Corporation files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the management of the Corporation, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

ESH REIT

As of December 31, 2013, the ESH REIT reviewed, under the direction of the Chief Executive Officer and Chief Financial Officer, the disclosure controls and procedures of the ESH REIT, as defined in Exchange Act Rule 13a-15(e). Based upon and as of the date of that review, the Chief Executive Officer and Chief Financial Officer of the ESH REIT concluded that the disclosure controls and procedures of the ESH REIT were effective to ensure that information required to be disclosed in the reports that the ESH REIT files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the management of the ESH REIT, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control Over Financial Reporting

This combined annual report on Form 10-K does not include reports of management’s assessment regarding internal control over financial reporting or attestation reports of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.

Changes in Internal Control over Financial Reporting

Corporation

During the fourth quarter of 2013, the Corporation implemented a new purchase to pay system. In cases where functions of the new system were not fully operational as of the end of 2013, we relied on existing procedures and controls or utilized supplementary procedures and controls. We are continuing to work toward the full utilization of the new system and expect to complete that process during the remainder of 2014. There were no other changes in the Corporation’s internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

ESH REIT

During the fourth quarter of 2013, ESH REIT implemented a new purchase to pay process. The purchase to pay system used in connection with this process is the property of the Corporation and it is utilized by ESH REIT pursuant to a services agreement. In cases where functions of the new system were not fully operational as of the end of 2013, we relied on existing procedures and controls or utilized supplementary procedures and controls. We are continuing to work toward the full utilization of the new system and expect to complete that process during the remainder of 2014. There were no other changes in the ESH REIT’s internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the ESH REIT’s internal control over financial reporting.

Item 9B. Other Information

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), which added Section 13(r) of the Exchange Act, the Company hereby incorporates by reference herein Exhibit 99.1 of this report, which includes disclosures publicly filed and/or provided to Blackstone by Hilton Worldwide, Inc., SunGard Capital Corp., SunGard Capital Corp. II, SunGard Data Systems, Inc. and Travelport Limited, which may be considered the Company’s affiliates.

153

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information regarding our directors and nominees for director required by Item 401 of Regulation S-K will be included under the headings “Proposal 1—Election of Directors” in our Proxy Statements prepared for the solicitation of proxies in connection with our annual Meetings of Shareholders to be held May 21, 2014 (“Proxy Statements”), which information is incorporated by reference herein.

Information regarding our executive officers required by Item 401(b) of Regulation S-K will be included under the heading “Executive Officers” in our Proxy Statements, which information is incorporated by reference herein

Information required by Item 405 of Regulation S-K will be included under the headings “Stock—Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statements, which information is incorporated by reference herein.

Information required by Item 406 of Regulation S-K will be included under the headings “Corporate Governance and Board Matters—Code of Business Conduct and Ethics” in our Proxy Statements, which information is incorporated by reference herein.

Information required by paragraphs (c)(3), (d)(4) and (d)(5) of Item 407 of Regulation S-K will be included under the headings “Questions and Answers About the Annual Meeting and Voting” and “Corporate Governance and Board Matters” in our Proxy Statements, which information is incorporated by reference herein.

Item 11. Executive Compensation

The information required by Item 402 and paragraphs (e)(4) and (e)(5) of Item 407 of Regulations S-K regarding executive compensation will be presented under the headings “Compensation Discussion and Analysis” and “Corporate Governance and Board Matters—Compensation Committee Interlocks and Insider Participation” in our Proxy Statements, which information is incorporated by reference herein. Notwithstanding the foregoing, the information provided under the headings “Executive Compensation—Report of the Compensation Committee” in our Proxy Statements is furnished and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

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

The information regarding the security ownership of certain beneficial owners and management required by Item 403 of Regulation S-K will be presented under the headings “Stock—Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statements, which information is incorporated by reference herein.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2013 with respect to the Paired Shares that may be issued under our existing equity compensation plans:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Equity compensation plans approved by security holders		449,850	(1)		—		7,550,150	(2)
Equity compensation plans not approved by security holders		—			—		—
Total		449,850	(1)		—		7,550,150	(2)

(1) Includes (i) 339,850 Paired Shares underlying time-vesting restricted stock unit awards made under the Extended Stay America, Inc. 2013 Long-Term Incentive Plan and (ii) 100,000 Paired Shares underlying an award of restricted stock made under the ESH Hospitality, Inc. 2013 Long-Term Incentive Plan.

(2) This number represents the aggregate number of securities available for future issuance under both the Extended Stay America, Inc. 2013 Long-Term Incentive Plan and the ESH Hospitality, Inc. 2013 Long-Term Incentive Plan.

154

Item 13. Certain Relationships and Related Transaction, and Director Independence

The information regarding certain relationships and related transactions required by Item 404 and Item 407(a) of Regulation S-K will be presented under the headings “Certain Relationships and Related Party Transactions” in our Proxy Statements, which information is incorporated by reference herein.

Item 14. Principal Accounting Fees and Services

The information regarding our principal accounting fees and services required by Item 9(e) of Schedule 14A will be presented under the heading “Principal Accounting Fees and Services” in our Proxy Statements, which information is incorporated by reference herein.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements

See “Item 8—Financial Statements and Supplementary Data.”

(a)(2) Financial Statement Schedules

See “Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2013” included in Item 8 of this combined annual report on Form 10-K.

(a)(3) List of Exhibits

Exhibit Number	Description
2.1	Debtors’ Fifth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as amended (filed as Exhibit 2.1 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
3.1	Amended and Restated Certification of Incorporation of Extended Stay America, Inc. (filed as Exhibit 3.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
3.2	Amended and Restated Bylaws of Extended Stay America, Inc. (filed as Exhibit 3.2 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
3.3	Amended and Restated Certificate of Incorporation of ESH Hospitality, Inc. (filed as Exhibit 3.3 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
3.4	Bylaws of ESH Hospitality, Inc. (filed as Exhibit 3.4 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
4.1	Specimen Stock Certificate of Extended Stay America, Inc. (filed as Exhibit 4.1 to the Registrants’ Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
4.1.1	Specimen Stock Certificate of ESH Hospitality, Inc. (filed as Exhibit 4.1.1 to the Registrants’ Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
4.2	Stockholders Agreement, by and among Extended Stay America, Inc., ESH Hospitality, Inc. and the Sponsor Shareholders (as defined therein), dated November 18, 2013 (filed as Exhibit 4.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
4.3	Registration Rights Agreement, among Extended Stay America, Inc., ESH Hospitality, Inc. and the other parties listed therein, dated November 18, 2013 (filed as Exhibit 4.2 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).

155

Exhibit Number	Description
4.4	Pairing Agreement between Extended Stay America, Inc. and ESH Hospitality, Inc., dated November 12, 2013 (filed as Exhibit 4.3 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.1	Management Agreement, between ESA P Portfolio Operating Lessee LLC and ESA Management, LLC, dated November 11, 2013 (filed as Exhibit 10.3 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.2	Management Agreement, between ESA 2007 Operating Lessee LLC and ESA Management, LLC, dated November 11, 2013 (filed as Exhibit 10.4 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.3	Management Agreement, between ESA Canada Operating Lessee LLC and HVM Canada Hotel Management ULC, dated November 11, 2013 (filed as Exhibit 10.5 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.4*	Management Agreement, between ESA LVP Operating Lessee LLC and ESA Management, LLC, dated December 31, 2013.
10.5	Trademark License Agreement, dated as of October 8, 2010, by and between ESH Strategies Branding LLC and ESA P Portfolio Operating Lessee Inc. (filed as Exhibit 10.4 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.5.1	First Amendment to Trademark License Agreement, dated as of November 30, 2012, by and between ESH Strategies Branding LLC and ESA P Portfolio Operating Lessee Inc. (filed as Exhibit 10.4.1 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.5.2	Second Amendment to Trademark License Agreement, dated as of December 13, 2012, by and between ESH Strategies Branding LLC and ESA P Portfolio Operating Lessee Inc. (filed as Exhibit 10.4.2 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.6	Trademark License Agreement, dated as of October 8, 2010, by and between ESH Strategies Branding LLC and ESA 2007 Operating Lessee Inc. (filed as Exhibit 10.5 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.7*	Trademark License Agreement, dated as of December 31, 2013, by and between ESH Strategies Branding LLC and ESA LVP Operating Lessee.
10.8	Trademark License Agreement, dated as of October 8, 2010, by and between ESH Strategies Branding LLC and ESA Canada Operating Lessee Inc. (filed as Exhibit 10.7 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).

156

Exhibit Number	Description
10.8.1	First Amendment to Trademark License Agreement, dated as of November 30, 2012, by and between ESH Strategies Branding LLC and ESA Canada Operating Lessee Inc. (filed as Exhibit 10.7.1 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.9	Loan Agreement, dated as of November 30, 2012, by and among ESA P Portfolio LLC, ESA P Portfolio MD Borrower LLC, ESA Canada Properties Borrower LLC and ESH/TN Properties LLC, as Borrowers, and ESA P Portfolio MD Trust, as Maryland Owner, ESA Canada Administrator LLC, as Signatory Trustee, ESA Canada Properties Trust, as Canadian Trust, ESA P Portfolio Operating Lessee Inc. and ESA Canada Operating Lessee Inc., collectively, as Operating Lessee, New ESA Canada Operating Lessee LLC and New ESA P Portfolio Operating Lessee LLC, collectively, as Operating Lessee Holdco, and JPMorgan Chase Bank, National Association, German American Capital Corporation, Citigroup Global Markets Realty Corp, Bank of America, N.A. and Goldman Sachs Mortgage Company, collectively, as Lender (filed as Exhibit 10.8 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.9.1	First Amendment to Loan Agreement, dated as of January 31, 2013, by and among ESA P Portfolio LLC, ESA P Portfolio MD Borrower LLC, ESA Canada Properties Borrower LLC and ESH/TN Properties LLC, as Borrowers, and ESA P Portfolio MD Trust, as Maryland Owner, ESA Canada Administrator LLC, as Signatory Trustee, ESA Canada Properties Trust, as Canadian Trust, ESA P Portfolio Operating Lessee Inc. and ESA Canada Operating Lessee Inc., collectively, as Operating Lessee, New ESA Canada Operating Lessee LLC and New ESA P Portfolio Operating Lessee LLC, collectively, as Operating Lessee Holdco, and JPMorgan Chase Bank, National Association, German American Capital Corporation, Citigroup Global Markets Realty Corp, Bank of America, N.A. and Goldman Sachs Mortgage Company, collectively, as Lender (filed as Exhibit 10.9.1 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.10	Mezzanine A Loan Agreement, dated as of November 30, 2012, by and among ESH Mezzanine A LLC, ESH Mezzanine A-2 LLC, ESH Canada Mezzanine A LLC and ESH Canada Mezzanine A-2 LLC, collectively, as Borrower, and JPMorgan Chase Bank, National Association, German American Capital Corporation, Citigroup Global Markets Realty Corp, Bank of America, N.A. and Goldman Sachs Mortgage Company, collectively, as Lender (filed as Exhibit 10.10 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.11	Mezzanine B Loan Agreement, dated as of November 30, 2012, by and among ESH Mezzanine B LLC, ESH Mezzanine B-2 LLC, ESH Canada Mezzanine B LLC and ESH Canada Mezzanine B-2 LLC, collectively, as Borrower, and JPMorgan Chase Bank, National Association, German American Capital Corporation, Citigroup Global Markets Realty Corp, Bank of America, N.A. and Goldman Sachs Mortgage Company, collectively, as Lender (filed as Exhibit 10.11 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.12	Mezzanine C Loan Agreement, dated as of November 30, 2012, by and among ESH Mezzanine C LLC, ESH Mezzanine C-2 LLC, ESH Canada Mezzanine C LLC and ESH Canada Mezzanine C-2 LLC, collectively, as Borrower, and JPMorgan Chase Bank, National Association, German American Capital Corporation, Citigroup Global Markets Realty Corp, Bank of America, N.A. and Goldman Sachs Mortgage Company, collectively, as Lender (filed as Exhibit 10.12 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.13	Intercreditor Agreement, dated as of November 30, 2012 (filed as Exhibit 10.14 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).

157

Exhibit Number	Description
10.14†	Employment Agreement by and between HVM L.L.C. and James L. Donald entered into as of February 21, 2012 (filed as Exhibit 10.15 to the Registrants’ Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.14.1†	Acknowledgment of Assumption executed by James L. Donald on October 15, 2013 (filed as Exhibit 10.15.1 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.15.1†	Employment Agreement by and between HVM L.L.C. and Peter Crage entered into as of July 7, 2011 (filed as Exhibit 10.16.1 to the Registrants’ Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.15.2†	First Amendment to Employment Agreement by and between HVM L.L.C. and Peter Crage entered into as of January 31, 2012 (filed as Exhibit 10.16.2 to the Registrants’ Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.15.3†	Waiver and Acknowledgement executed by Peter Crage on October 9, 2013 (filed as Exhibit 10.16.3 to the Registrants’ Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.15.4†	Acknowledgment of Assumption executed by Peter Crage on October 9, 2013 (filed as Exhibit 10.16.4 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.16†	Employment Agreement by and between HVM L.L.C. and Thomas Seddon entered into as of March 26, 2012 (filed as Exhibit 10.17 to the Registrants’ Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.16.1†	Acknowledgment of Assumption executed by Thomas Seddon on October 16, 2013 (filed as Exhibit 10.17.1 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.17†	Employment Agreement by and between HVM L.L.C. and Jonathan Halkyard entered into as of September 1, 2013 (filed as Exhibit 10.18 to the Registrants’ Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.17.1†	Acknowledgment of Assumption executed by Jonathan Halkyard on October 11, 2013 (filed as Exhibit 10.18.1 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.18†	Employment Agreement by and between HVM L.L.C. and M. Thomas Buoy entered into as of August 24, 2011 (filed as Exhibit 10.19 to the Registrants’ Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.18.1†	First Amendment to Employment Agreement by and between HVM L.L.C. and M. Thomas Buoy (filed as Exhibit 10.19.1 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.18.2†	Second Amendment to Employment Agreement by and between HVM L.L.C. and M. Thomas Buoy entered into as of October 17, 2013 (filed as Exhibit 10.19.2 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.18.3†	Waiver and Acknowledgement executed by M. Thomas Buoy on October 17, 2013 (filed as Exhibit 10.19.3 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.18.4†	Acknowledgment of Assumption executed by M. Thomas Buoy on October 17, 2013 (filed as Exhibit 10.19.4 to the Registrants’ Amendment No. 6 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.19†	Extended Stay America, Inc. 2013 Long-Term Incentive Plan, adopted as of November 12, 2013 (filed as Exhibit 10.6 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).

158

Exhibit Number	Description
10.20†	ESH Hospitality, Inc. 2013 Long-Term Incentive Plan, adopted as of November 12, 2013 (filed as Exhibit 10.7 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.21	Lease Agreement, dated as of October 8, 2010, by and between ESA P Portfolio, L.L.C., ESA P Portfolio MD Trust, and ESH/TN Properties L.L.C., individually and collectively as Landlord, and ESA P Portfolio Operating Lessee Inc., as Tenant (filed as Exhibit 10.23 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.21.1	First Amendment to Lease Agreement, dated as of April 9, 2012, by and between ESA P Portfolio L.L.C., ESA P Portfolio MD Trust, and ESH/TN Properties L.L.C., individually and collectively as Landlord, and ESA P Portfolio Operating Lessee Inc., as Tenant (filed as Exhibit 10.23 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.21.2	Second Amendment to Lease Agreement, dated as of November 30, 2012, by and between ESA P Portfolio L.L.C., ESA P Portfolio MD Trust, and ESH/TN Properties L.L.C., individually and collectively as Landlord, and ESA P Portfolio Operating Lessee Inc., as Tenant (filed as Exhibit 10.23 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.21.3	Third Amendment to Lease Agreement, dated as of December 13, 2012, by and between ESA P Portfolio L.L.C., ESA P Portfolio MD Trust, and ESH/TN Properties L.L.C., individually and collectively as Landlord, and ESA P Portfolio Operating Lessee Inc., as Tenant (filed as Exhibit 10.23 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.21.4	Fourth Amendment to Lease Agreement, dated as of April 15, 2013, by and between ESA P Portfolio L.L.C., ESA P Portfolio MD Trust, and ESH/TN Properties L.L.C., individually and collectively as Landlord, and ESA P Portfolio Operating Lessee Inc., as Tenant (filed as Exhibit 10.23 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.21.5	Fifth Amendment to Lease Agreement, by and between ESA P Portfolio L.L.C., ESA P Portfolio MD Trust and ESH/TN Properties L.L.C., individually and collectively as Landlord, and ESA P Portfolio Operating Lessee LLC, as Tenant, dated November 11, 2013 (filed as Exhibit 10.8 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.22	Lease Agreement, dated as of October 8, 2010, by and between ESA Canada Administrator L.L.C., as Landlord, and ESA Canada Properties Trust, as Beneficial Owner, and ESA Canada Operating Lessee Inc., as Tenant (filed as Exhibit 10.24 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.22.1	First Amendment to Lease Agreement, dated as of November 30, 2012 and effective as of January 1, 2012, by and between ESA Canada Administrator L.L.C., as Landlord, ESA Canada Properties Trust, as Beneficial Owner, and ESA Canada Operating Lessee Inc., as Tenant (filed as Exhibit 10.24.1 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.22.2	Second Amendment to Lease Agreement, by and between ESA Canada Administrator L.L.C., as Landlord, ESA Canada Properties Trust, as Beneficial Owner, and ESA Canada Operating Lessee ULC, as Tenant, dated as of November 11, 2013 (filed as Exhibit 10.9 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.23	Lease Agreement, dated as of October 8, 2010, by and between ESA UD Properties L.L.C., as Landlord, and ESA 2007 Operating Lessee Inc., as Tenant (filed as Exhibit 10.25 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.23.1	First Amendment to Lease Agreement, by and between ESA UD Properties L.L.C., as Landlord, and ESA 2007 Operating Lessee Inc., as Tenant, dated November 11, 2013 (filed as Exhibit 10.10 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.24*	Lease Agreement, dated as of December 31, 2013, by and between ESA LVP Portfolio LLC, as Landlord, and ESA LVP Operating Lessee LLC, as Tenant.
10.25	Asset Purchase Agreement, between ESA Management, LLC, as Buyer, and HVM L.L.C., as Seller, dated as of October 9, 2013 (filed as Exhibit 10.26 to the Registrants’ Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.26	Form of Indemnification Agreement between Extended Stay America, Inc. and Directors and Executive Officers (filed as Exhibit 10.27 to the Registrants’ Amendment No. 8 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.27	Form of Indemnification Agreement between ESH Hospitality, Inc. and Directors and Executive Officers (filed as Exhibit 10.28 to the Registrants’ Amendment No. 8 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).

159

Exhibit Number	Description
10.28	Credit Agreement among Extended Stay America, Inc., as Borrower, The Several Lenders from Time to Time Parties Hereto, Deutsche Bank AG New York Branch, Goldman Sachs Lending Partners LLC, Citibank, N.A., Bank of America, N.A., Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Macquarie Capital (USA) Inc., as Syndication Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, dated November 18, 2013 (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.29	Credit Agreement among ESH Hospitality, Inc., as Borrower, The Several Lenders from Time to Time Parties Hereto, Deutsche Bank AG New York Branch, Goldman Sachs Lending Partners LLC, Citibank, N.A., Bank of America, N.A., Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Macquarie Capital (USA) Inc., as Syndication Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, dated November 18, 2013 (filed as Exhibit 10.2 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.30†*	Extended Stay America Incentive Plan for Executives (as implemented for 2013).
10.31†*	Second Amended and Restated Restricted Paired Share Agreement, by and among ESH Hospitality Holdings LLC, Extended Stay America, Inc. and ESH Hospitality, Inc., dated as of March 10, 2014
10.32†	Form of Share Distribution Notice (filed as Exhibit 10.32 to the Registrants’ Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
21.1*	List of Subsidiaries of Extended Stay America, Inc.
23.1*	Consent of Deloitte & Touche LLP.
23.2*	Consent of Deloitte & Touche LLP.
31.1*	Certification of the Chief Executive Officer of Extended Stay America, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer of Extended Stay America, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*	Certification of the Chief Executive Officer of ESH Hospitality, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*	Certification of the Chief Financial Officer of ESH Hospitality, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Chief Executive Officer and the Chief Financial Officer of Extended Stay America, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of the Chief Executive Officer and the Chief Financial Officer of ESH Hospitality, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	Section 13(r) disclosure.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

** Filed herewith, XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

† Management contract or compensatory plan or arrangement.

160

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXTENDED STAY AMERICA, INC.
By:	/s/ James L. Donald
	James L. Donald
	Chief Executive Officer

Date: March 20, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ James L. Donald James L. Donald	Chief Executive Officer and Director (Principal Executive Officer)	March 20, 2014
/s/ Peter J. Crage Peter J. Crage	Chief Financial Officer (Principal Financial and Accounting Officer)	March 20, 2014
/s/ Douglas G. Geoga Douglas G. Geoga	Director	March 20, 2014
/s/ William Kussell William Kussell	Director	March 20, 2014
/s/ Richard F. Wallman Richard F. Wallman	Director	March 20, 2014
/s/ A.J. Agarwal A.J. Agarwal	Director	March 20, 2014
/s/ Michael Barr Michael Barr	Director	March 20, 2014
/s/ William D. Rahm William D. Rahm	Director	March 20, 2014

Date: March 20, 2014

161

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ESH Hospitality, Inc.
By:	/s/ James L. Donald
	James L. Donald
	Chief Executive Officer

Date: March 20, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ James L. Donald James L. Donald	Chief Executive Officer (Principal Executive Officer)	March 20, 2014
/s/ Peter J. Crage Peter J. Crage	Chief Financial Officer (Principal Financial and Accounting Officer)	March 20, 2014
/s/ Douglas G. Geoga Douglas G. Geoga	Director	March 20, 2014
/s/ Richard F. Wallman Richard F. Wallman	Director	March 20, 2014
/s/ Chris Daniello Chris Daniello	Director	March 20, 2014
/s/ Kevin Dinnie Kevin Dinnie	Director	March 20, 2014
/s/ Ty Wallach Ty Wallach	Director	March 20, 2014

Date: March 20, 2014

162