ESH Hospitality 10-K 2015 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, 2015

-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	Commission file number 001-36191
Extended Stay America, Inc.	ESH Hospitality, Inc.
(Exact name of registrant as specified in its charter)	(Exact name of registrant as specified in its charter)

Delaware	Delaware
(State or other jurisdiction of incorporation or organization)	(State or other jurisdiction of incorporation or organization)

46-3140312	27-3559821
(I.R.S. Employer Identification Number)	(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  x	No  ¨
ESH Hospitality, Inc.	Yes  x	No  ¨

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

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 RegulationS-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  x	Accelerated filer  ¨
	Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  ¨
ESH Hospitality, Inc.	Large accelerated filer  x	Accelerated filer  ¨
	Non-accelerated filer  ¨ (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 30, 2015, the aggregate value of the registrants’ Paired Shares held by non-affiliates was approximately $812.2 million, based on the number of shares held by non-affiliates as of June 30, 2015 and the closing price of the registrants’ Paired Shares on the New York Stock Exchange on June 30, 2015.

As of February 19, 2016, Extended Stay America, Inc. had 204,593,912 shares of common stock outstanding and ESH Hospitality, Inc. had 204,593,912 shares of Class B common stock and 250,493,583 shares of Class A common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statements relating to the 2016 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		9
Item 1B.	Unresolved Staff Comments		38
Item 2.	Properties		39
Item 3.	Legal Proceedings		40
Item 4.	Mine Safety Disclosures		40
PART II
Item 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		41
Item 6.	Selected Financial Data		45
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		51
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		82
Item 8.	Financial Statements and Supplementary Data		84
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		176
Item 9A.	Controls and Procedures		176
Item 9B.	Other Information		180
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		181
Item 11.	Executive Compensation		181
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		181
Item 13.	Certain Relationships and Related Transactions, and Director Independence		182
Item 14.	Principal Accounting Fees and Services		182
PART IV
Item 15.	Exhibits and Financial Statement Schedules		183

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 “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 the hotels and other aspects 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; and

• 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 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 real estate investment trust (“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, which leases its hotel properties to the Operating Lessees. 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 the Pre-IPO Transactions, ESH Strategies was indirectly owned by the Sponsors (as defined below).

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• ESA ManagementandHVM. The term “ESA Management” refers to ESA Management LLC, a Delaware limited liability company, and its subsidiaries. ESA Management is a wholly-owned subsidiary of the Corporation and manages ESH REIT’s leased hotel properties on behalf of 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 their behalf.

• 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 funds or affiliates.

See “Business—Our Corporate Structure” for a simplified structure chart reflecting our 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 hotels, we are referring to the management of hotels by ESA Management, a subsidiary of the Corporation, and the operation of hotels by the Operating Lessees, each a subsidiary of the Corporation, subsequent to the Pre-IPO Transactions, and the management of hotels by HVM, an eligible independent contractor, and the operation of hotels by the Operating Lessees, subsidiaries of ESH REIT, 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, a subsidiary of the Corporation.

• 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).

This combined annual report on Form 10-K presents the following sections or portions of sections separately for each of the Company, on a consolidated and combined basis, 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidations, due to the Corporation’s controlling financial interest in ESH REIT, the Corporation consolidates ESH REIT’s financial position, results of operations, comprehensive income and cash flows with those of the Corporation. The Corporation’s stand-alone financial condition and related information is discussed herein where applicable. In addition, with respect to other financial and non-financial disclosure items required by Form 10-K, any material differences between the Corporation and ESH REIT are discussed herein.

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This report also includes separate Part II Item 9A – Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of Extended Stay America, Inc. and ESH Hospitality, Inc. in order to establish that the Chief Executive Officer and the Chief Financial Officer of each registrant has made the requisite certifications and that Extended Stay America, Inc. and ESH Hospitality, Inc. are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

CERTAIN DEFINED TERMS

The following are definitions of lodging operating metrics used throughout 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 by The Highland Group.

“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 during that period.

“RevPAR” or “revenue per available room” means the product of 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 ancillary revenues, such as food and beverage revenues, or parking, pet, telephone or other guest service revenues.

When used in connection with our company-wide initiatives to reinvest in our hotel properties in this combined annual report on Form 10-K (in all cases, unless the context otherwise requires or where otherwise indicated), the term “hotel renovation” refers 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.

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 policies, anticipated benefits or use of proceeds from any dispositions, 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” include forward-looking statements. 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

iv

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, including the over-building of hotels in our markets and new sources of potential competition such as sharing platforms;

• fluctuations in the supply and demand for hotel rooms;

• changes in the tastes and preferences of our customers;

• 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, natural disasters and severe weather;

• our ability to implement our business strategies profitably;

• the availability of capital for reinvestments, including future hotel renovation, construction, development and/or acquisition;

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

• the high fixed cost of hotel operations;

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

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

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

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

• our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems, including technology used in the delivery of guest services;

• the occurrence of cybersecurity incidents;

• our ability to protect our trademarks and other intellectual property;

• 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, which may cause ESH REIT to fail to meet the REIT income tests;

• amendments to or elimination of the pairing arrangement or other changes to our organizational structure;

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• 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;

• our relationships with associates and changes in labor laws;

• 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;

• changes in local market or neighborhood conditions which may diminish the value of real property;

• increases in interest rates, hotel operating costs or other costs we incur in connection with operating our business;

• our substantial indebtedness and debt service obligations, including material increases in our cost of borrowing, and our ability to refinance debt when it matures;

• our ability to access credit or capital markets;

• 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 may be 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. Estimates and forward-looking statements speak only as of the date they were made and we undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

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PART I

Item 1. Business

Our Company

We are the largest integrated owner/operator of company-branded hotels in North America. Our business operates in the extended stay lodging industry, and as of December 31, 2015, we own and operate 629 hotels comprising approximately 69,400 rooms located in 44 states across the United States and in Canada. We own and operate the substantial majority of our hotels under our 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. For the year ended December 31, 2015, the Company had revenues of approximately $1.3 billion, Adjusted EBITDA of approximately $603.1 million and net income of approximately $283.0 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” 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 on-site guest laundry. Our guests include business travelers, leisure travelers, professionals on temporary work or training assignments, persons relocating, temporarily displaced or purchasing a home and anyone else in need of temporary housing. Our guests generally rent accommodations on a weekly or longer term basis. For the year ended December 31, 2015, approximately 32.2%, 23.6% and 44.2% of our total revenues were derived from guests with stays from 1-6 nights, from 7-29 nights, and 30 or more nights, respectively.

We seek to drive our competitive advantage by becoming a dominant brand with national distribution; owning and operating hotels with great locations, affordable prices and relevant amenities; and leveraging our business model to drive superior cash flow. To achieve this competitive advantage, we focus on continually improving our product and service, improving marketing efforts, driving ADR and maximizing cost and capital structure efficiency, all while seeking to return value to our shareholders.

Our History

We were founded in 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 8,500 employees and are led by a management team with public company experience in hospitality, consumer retail and service businesses.

Prior to the Offering, we restructured and reorganized our then-existing business through 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, are 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 hotels and other aspects of our business through the Corporation. This 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 approximately 55% of the tax benefit of REIT status for the consolidated enterprise).

1

The Corporation

Extended Stay America, Inc. was incorporated in Delaware on July 8, 2013. The Corporation operates all 629 hotels owned by ESH REIT. The hotels are operated by the Operating Lessees, wholly-owned subsidiaries of the Corporation, pursuant to leases with ESH REIT, and are managed by ESA Management, a wholly-owned subsidiary of the Corporation, pursuant to management agreements with the Operating Lessees. The substantial majority of the hotels are operated under our core brand, Extended Stay America. ESH Strategies, a wholly-owned subsidiary of the Corporation, owns the brands related to our business.

ESH REIT

ESH Hospitality, Inc. was formed as a limited liability company 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 all of the Company’s 629 hotel properties, which are leased 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 equity. 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 Company executives. Prior to the Pre-IPO Transactions, the Operating Lessees were 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 hotels 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 then-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 all 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 now leases the hotel properties from ESH REIT, owns the trademarks related to the business and manages the hotels. 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 the substantial majority of our hotels under our core brand, Extended Stay America, and during 2013 completed an extensive rebranding program to consolidate hotels that were operated under the former brands of Homestead Studio Suites, Studio Plus and Extended Stay Deluxe to this single brand. Extended Stay America-branded hotels feature:

• In-room kitchens;

• Free WiFi;

• Free grab-and-go breakfast;

• Flat screen TVs with premium cable channels; and

• On-site guest laundry.

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We own and operate 626 Extended Stay America-branded hotels with approximately 68,900 rooms in the United States and three hotels with 500 rooms in Canada under the Extended Stay Canada brand.

In December 2015, we sold a portfolio of 53 hotel properties, 47 of which operated under our former Crossland Economy Studios brand and six of which operated under our Extended Stay America brand, and certain intellectual property of Crossland Economy Studios (the “Portfolio Sale”). We no longer own, operate or manage these hotel properties, nor does the Corporation own intellectual property related to Crossland Economy Studios. See Note 4 to each of the consolidated and combined financial statements of Extended Stay America, Inc. and the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K.

Our Corporate Structure

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

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Our Industry

U.S. Lodging Industry

The lodging industry is a significant part of the U.S. economy, generating over $142.6 billion of room revenues in 2015 and comprising approximately 5.0 million hotel rooms as of December 31, 2015, according to STR, Inc. (f/k/a “Smith Travel Research, Inc.”) (“STR”)⁽¹⁾. 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 recovered while supply growth has remained at historically low rates. According to PricewaterhouseCoopers (“PwC”), room supply grew 1.1% in 2015 and is expected to grow 1.9% in 2016, in line with historical rates of annual supply growth. RevPAR has grown in the U.S. lodging industry for each year starting in 2010. According to PwC, RevPAR for the overall U.S. lodging industry grew 6.3% in 2015, and is expected to grow 5.5% in 2016.

U.S. Extended Stay Segment

Extended stay hotels represent a growing segment within the U.S. lodging industry with approximately 387,000 rooms for the nine months ended September 30, 2015, 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 on the mid-price extended stay segment, which comprised approximately 40% of the supply of extended stay rooms in 2015.

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, the Company’s 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 the Company’s expenses are fixed and do not fluctuate with changes in revenues, declines in revenues can cause disproportionate fluctuations or decreases in the Company’s quarterly earnings and operating cash flows during these periods.

ESH REIT’s revenues and earnings are generally highest during the fourth quarter of each calendar year as rental revenues contingent upon Operating Lessee hotel revenues are not earned for accounting purposes until certain hotel revenue thresholds are achieved, which typically occur in the fourth quarter. ESH REIT’s cash flows generally remain consistent each quarter of the calendar year.

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, occupancy levels and rates realized by owners of hotel properties through economic cycles. Variability of results through some economic 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 and/or operators of hotel properties. The costs of running a hotel, and in particular an extended stay 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—Risks Related to the Lodging Industry—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 distributions to our shareholders.”

(1) STR does not endorse or provide any guidance to any proposed investment in Extended Stay America, Inc. or ESH Hospitality, Inc.

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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, brand recognition, supply and availability of alternative lodging and ability to reach people through multiple channels. Competitors may include new participants in the lodging industry 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 product offerings to include facilities in the mid-price segment. We also compete for travelers with hotels outside the extended stay segment as well as serviced apartments and private homes, rooms and apartments rented on the internet. In addition, we face competition for both quality acquisition opportunities and locations to build new hotels as well as for guests to fill and pay for those hotels. We also face competition from third-party internet travel intermediaries, such as Priceline.com, Booking.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 8,500 employees. Approximately 8,000 of these employees are hotel property-level employees, comprised of approximately 3,500 full time employees and approximately 4,500 part time employees. None of our employees are currently 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 150 sales professionals focused on growing our business with key accounts, building relationships with new customers and coaching our hotel operations teams on local sales. We are organized regionally and 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 total revenues in 2015 was derived from accounts managed by this team. Our upgraded brand and amenity offerings now allow our sales team to target a broader corporate customer base. We recently implemented a new sales structure that provides more centralized support as 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 40 professionals. They are responsible for determining prices and managing the availability of room inventory to different channels and customer segments. We phased in most of the functionality for our automated revenue management system across our entire portfolio of hotels by the end of 2015 and we expect to complete rolling out the final system functions by the end of the first quarter of 2016. This system allows us to automatically price against demand from our short and long-term guests. We believe that this system will further improve our sales team’s efficiency and effectiveness.

Our marketing strategy is focused on growing awareness of our brand, Extended Stay America, and demand for our hotels through a combination of media channels, including print, 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. During 2015, we launched our new customer loyalty program, called Extended Perks, which has more than one million members. The program is built around the idea of “instant rewards – no points required” with members receiving discounts on our rooms, offers and discounts from our merchandise partners, as well as check-in and room preference priorities. We believe this program will help us generate repeat business and market directly to more of our customers.

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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 booking partners. We outsource our reservation system, our call center and management of our website. For the year ended December 31, 2015, approximately 37.2% of our total revenues was derived from property-direct reservations, approximately 24.6% was derived from our central call center, approximately 17.8% was derived from our own proprietary website, approximately 10.7% was derived from online booking partners and approximately 9.7% 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, 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 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.

Phase I environmental assessments were obtained for substantially all of our hotel properties in 2012 and for all hotel properties purchased since that time. 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 subject to limits, deductibles and exclusions customarily carried for similar businesses. We believe that our environmental insurance policy is 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

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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 materially 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.

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. 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 or when 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.

Intellectual Property

In the highly competitive hospitality industry in which we operate, trademarks, service marks, trade names, logos and other proprietary rights are very important to the success of our business. The Corporation has a significant number of trademarks, service marks, trade names, logos, other proprietary rights and pending registrations and expends significant resources each year on surveillance, registration and protection of its trademarks, service marks, trade names, logos and other proprietary rights.

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, including our results of operations. There are frequently proposals under consideration, at the federal and state levels, to increase the minimum wage and to expand overtime pay requirements.

Under the Americans 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 and operation of our hotels and other facilities subject to the ADA, 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

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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.extendedstayamerica.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” or at www.aboutstay.com, 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.

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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 distributions 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 and private homes, rooms and apartments rented on the internet). Many of the major hospitality chains own multiple brands that provide substantial economies of scale. We expect that competition within the mid-price segment of the extended stay lodging market will continue as we face increased competition from third-party internet travel intermediaries, such as Priceline.com, Booking.com, Expedia.com and Travelocity.com, particularly as those intermediaries continue to consolidate, 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, supply and availability of alternative lodging and ability to reach people through multiple channels. See “Business—Competition.” To maintain our rates, 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 all of our competitors, and a number of our competitors have a significant number of individuals participating in well-established 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, and 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 distributions 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, real estate taxes and insurance premiums, 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 material 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.

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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 distributions 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, margins and profitability. 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 operating margins.

Uncertainty regarding the rate, pace and duration of recovery from the last 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 and potentially develop, construct 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;

• new sources of potentially competitive supply, such as private homes, rooms or apartments rented on the internet;

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

• dependence on corporate and commercial travelers and on tourism;

• decreased demand for longer-term lodging or lodging facilities;

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

• high levels of unemployment and depressed housing prices;

• 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 existing hotel properties or to potentially develop, construct or acquire new hotel properties;

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

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• 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 our 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 future growth. These factors may be exacerbated by the relatively illiquid nature of our real estate holdings, which limits 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. The Company’s occupancy rates and revenues generally are lower during the first and fourth quarter of each calendar year. Quarterly variations in hotel revenues could materially adversely affect the Company’s near term operating revenues and cash flows, which in turn could have a material adverse effect on the Company’s 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. 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 expected 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 increases in our 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 hotel reinvestment program across our portfolio in order to seek to drive incremental market share gains. As of December 31, 2015, we have substantially completed renovations at 463 hotels, with total incurred costs of approximately $456.3 million. Also, as of December 31, 2015, we are in the process of implementing renovations at 13 additional hotels and will begin renovations at an additional 43 hotels during the first quarter of 2016, with combined estimated total costs of approximately $62.7 million. Renovations for all remaining Extended Stay America-branded hotels are expected to be completed by early 2017, with estimated total costs of approximately $125.8 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Capital Expenditures.”

The realization of returns on our capital investments in line with our expectations is dependent on a number of factors, including, but not limited to, general economic conditions, other events beyond our control, whether

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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 the types of returns that we have achieved on our historical capital expenditures, 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 capital investments could materially adversely affect our business, financial condition and results of operations.

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 distributions 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 distributions, 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 develop, construct or 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, development, construction or acquisition and therefore the ability to meaningfully grow our revenues. As of December 31, 2015, we had total indebtedness of approximately $2.8 billion, net of unamortized deferred financing costs and debt discount of approximately $35.2 million. 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, ESH REIT’s $1.91 billion mortgage loan, net of unamortized deferred financing costs of approximately $19.5 million, entered into on November 30, 2012 (the “ 2012 Mortgage Loan”) and ESH REIT’s $361.5 million term loan facility, net of unamortized deferred financing costs and debt discount of approximately $4.9 million, entered into on June 23, 2014 (the “2014 Term Loan”) prohibit any further encumbrances on the collateral securing that indebtedness, which is comprised of substantially all of our hotels. In the past, reduced ongoing maintenance and/or capital investment in our hotel properties resulted in declining performance of our business.

Additionally, our ongoing operations 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 or development 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

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properties, then our ability to use cash for other purposes, including paying distributions to our shareholders or the potential development, construction or 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.

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 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;

• the average age of hotels in our portfolio, which is approximately 17 years;

• risks associated with the possibility that expense increases will outpace revenue increases and that in the event of an economic downturn, our high proportion of fixed expenses 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, travel-related accidents, extreme weather 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 a significant amount of long-lived assets, including goodwill and intangible 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 Note 2 to each of the consolidated and combined financial statements of Extended Stay America, Inc. and the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K. Times of economic distress and/or uncertainty, declining demand and declining earnings often result in declining asset values for real estate and real property. As a result, we have incurred, and are likely to incur in the future, impairment charges which may be material and adversely affect our results of operations and earnings.

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We have a significant amount of debt and debt service obligations that could adversely affect our financial condition and reduce operational flexibility.

We have a significant amount of debt. As of December 31, 2015, we had total indebtedness of approximately $2.8 billion, net of unamortized deferred financing costs and debt discount of approximately $35.2 million, and the Company had a debt-to-equity ratio of 1.9x. In the future, subject to compliance with the covenants included in our current indebtedness, we may incur significant additional indebtedness and intercompany indebtedness to finance future hotel acquisitions, developments, renovation and improvement activities and for other corporate purposes. Our 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 distributions 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.

We cannot assure you that our business will generate sufficient cash flows to enable us to pay our indebtedness, fund our other liquidity needs, including existing or future capital needs, or pay distributions to our shareholders. If we are unable to meet our debt service obligations, our indebtedness will prevent us from paying cash distributions 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.

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 at or before maturity or on 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.

The terms of the agreements governing our indebtedness have restrictive covenants and our failure to comply with any of these could put us in default, which would have an adverse effect on our business, including our current and future prospects. 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;

• incur certain liens;

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

• make certain expenditures, including capital expenditures;

• pay distributions on or repurchase our capital stock; and

• enter into certain transactions with affiliates.

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In addition, under our 2012 Mortgage Loan, the occurrence of (i) an Event of Default, (ii) a Debt Yield Trigger Event or (iii) a Guarantor Bankruptcy Event would result in a Cash Trap Event, each as defined. 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 distributions.

Under both the Corporation Revolving Credit Facility and the ESH REIT Revolving Credit Facility, the occurrence of a Trigger Event or an Adjusted Trigger Event or a Default or an Event of Default (each as defined) would require the Corporation or ESH REIT, as the case may be, to prepay advances existing under its revolving credit facility and cash collateralize outstanding letters of credit. During a Trigger Event, Adjusted Trigger Event, a Default or an Event of Default, the Corporation or ESH REIT, as the case may be, would be restricted from making cash distributions. For a more detailed description of the financial and other covenants imposed by the agreements governing our indebtedness, see Note 7 to the consolidated and combined financial statements of Extended Stay America, Inc. and Note 6 to the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K.

These covenants could impair our ability to grow our business, take advantage of attractive business opportunities, successfully compete or pay distributions to shareholders. 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 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 additional restrictions on us.

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

The 2012 Mortgage Loan is secured by mortgages on 625 of our 629 hotel properties and related assets. The 2014 Term Loan is secured by ESH REIT’s 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 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, ESH REIT 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. The Company also may assume or incur new mortgage indebtedness on hotel properties that it develops, constructs or acquires in the future. Any default under any one of ESH REIT’s existing or future mortgage debt obligations may increase its risk, or the Company’s risk, of default on its other indebtedness.

Rating agency downgrades or withdrawals may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade rating, and there can be no assurance that any rating assigned by the rating agencies will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the

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rating, such as adverse changes, so warrant. A lowering or withdrawal of our credit ratings may increase our future borrowing costs and reduce our access to capital, which could have a material adverse impact on its financial condition and results of operations.

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 operate the substantial majority of our hotels under our core brand, Extended Stay America. Our ability to attract and retain guests depends, in part, upon the external perceptions of Extended Stay America, 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 are likely to 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 brand 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 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 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.

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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.

The geographic concentration of our portfolio may make us particularly susceptible to adverse 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 or other unfavorable factors. As of December 31, 2015, 14.5% of our rooms were in California, 9.9% of our rooms were in Texas, 8.3% of our rooms were in Florida and 5.5% 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 extreme weather, 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.

We may seek to expand through development or acquisitions of other companies and hotel properties, and we may also seek to divest of some of our hotel properties and other assets or 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 significant debt;

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

• assuming unknown and contingent liabilities; or

• creating additional expenses.

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The success of any acquisition will 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;

• integrating corporate personnel, offices and support systems;

• coordinating sales, distribution, marketing and other functions;

• integrating operating processes and information technology systems; and

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

In December 2015, we divested of hotel properties and other assets pursuant to the Portfolio Sale. There are numerous risks commonly encountered in divestitures, including, diversion of management’s attention, loss of key employees following such a transaction, difficulties in the separation of operations, services and personnel and damage to existing customer, vendor and other business relationships. In the future, we may divest of additional hotel properties or assets. Any such divestments may yield lower than expected returns. In some circumstances, sales of properties or other assets may result in losses. In addition, sellers typically retain certain liabilities or indemnify buyers for certain matters such as lawsuits, tax liabilities and environmental matters. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction, may involve conditions outside our control and ultimately may be material.

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 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.

In the future, we may also seek to build new hotels. We currently do not have significant real estate development experience and expect that commencing a development program, if any, will 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. We may be exposed to additional risks, including, but not limited to, access to capital, contractors and materials on favorable economic terms and risks associated with new development and/or construction during an economic downturn.

We cannot assure you that we will be able to successfully identify strategic growth opportunities or complete transactions on commercially reasonable terms or at all, or that we will actually realize any anticipated benefits from such transactions. There may be, as applicable, 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, disposition, development, construction or franchise opportunities in desirable locations. Similarly, we cannot assure you that we will be able to obtain financing for developments or acquisitions on attractive terms or at all, or that the ability to obtain such financing will not be restricted by the terms of our current or future indebtedness. In addition, our pairing arrangement may prevent our use of common tax-free

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acquisition structures, which may increase the cost and difficulty of acquiring other businesses and hotel properties and inhibit our ability to expand through acquisitions in which consideration other than cash is contemplated.

In addition, any such acquisition, disposition, development, construction or franchising activity could demand significant attention from our management that would otherwise be available for our current ongoing operations, which could have a material adverse effect on our existing or future 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.

For the year ended December 31, 2015, approximately 10.7% of our total hotel revenues were 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.

A failure by our intermediaries to attract or retain their customer bases could lower demand for our hotel rooms and, in turn, reduce our revenues from these distribution channels. 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. Increased size and scale resulting from continuing consolidation among third-party intermediaries may increase their pricing power in negotiating commissions and other contract concessions. 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, revenue and property management, procurement and operation of 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, including our revenue management system, our results of operations could be adversely affected and our ability to compete effectively could be diminished.

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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, extreme weather and force majeure events, including earthquakes, tornados, blizzards, 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 significant 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 providers’ 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 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

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created by the major credit card brands, designed to ensure that companies handling credit card information maintain a secure environment. In prior years, we failed to maintain compliance with the PCI DSS and accordingly were subject to monthly penalties imposed by VISA. We are currently in compliance with the PCI DSS. If we fail to maintain PCI DSS compliance, we could become subject to additional penalties or lose our ability to accept credit card payments. As approximately 83.5% of our hotel revenues for the year ended December 31, 2015 were paid by credit card, loss of the ability to accept credit cards for payment would significantly disrupt our operations, would reduce our occupancy levels and would likely 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 effectively.

We rely on a variety of direct marketing techniques, including telemarketing, email and postal mailings. 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. In addition, any violation of these laws could result in significant penalties. 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 services 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 threats 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 by us 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. 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 developments, 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 development, construction, acquisition, renovation

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or 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 and other facilities may not be fully compliant with the ADA. If one or more of these facilities is not in compliance with the ADA or any other regulatory requirements, we may be required to incur additional costs to bring the facility 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.

We are subject to federal, state and local laws and regulations regarding employment.

We are subject to numerous laws and regulations at federal, state, provincial and local levels concerning the employer/employee relationship, including wages, working hours, working conditions, hiring practices and discrimination. Violations of these laws and regulations could affect numerous employees, whose claims might be asserted through class action lawsuits or through government action. Lawsuits of this nature 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 or tax compliance costs in the United States and Canada.

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 the composition of our earnings in jurisdictions with differing tax rates, changes in the valuation of or valuation allowances against 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 our tax 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, as well as future periods.

Increases in ESH REIT’s real estate taxes could materially adversely affect our profitability and ability to pay distributions 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 continue to be assessed and reassessed by taxing authorities. In particular, ESH REIT’s real estate taxes could increase following acquisitions as acquired properties are reassessed. If real estate taxes continue to 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

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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 toward 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 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 or at all. In addition, there can be no assurance that the lenders under our debt instruments will not take the position that we do not have sufficient insurance coverage and therefore are in breach of these 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. In recent years, we have experienced turnover in several senior management roles and we have focused time and resources on recruiting or promoting from within the new members of our current senior management team. The continued turnover of senior management or the unexpected loss of one or more of our key personnel or any negative public perception with respect to these individuals could have a material adverse effect on our business, results of operations and financial condition. There can be no assurance that we will 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.

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 approximately 8,000 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 hotel operating expenses and our general and administrative expenses, 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 distributions to shareholders.

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

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organize groups of our employees. If relationships with our employees or other field personnel deteriorate or 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, our suppliers and other contractual counterparties 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 “Item 3-Legal Proceedings.”

We may be liable for indemnification or similar payments relating to our Company’s 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 bankruptcy and/or reorganization of our Company’s predecessor.

We were acquired out of bankruptcy by the Sponsors on October 8, 2010. We may be liable for indemnification or similar payments relating to our Company’s predecessor. Under its constitutive documents, other agreements or applicable law, our Company’s 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 our Company’s 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 a 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 adversely affected.

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 substantially reduce the amount of cash available to pay distributions 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

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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, August 2014 and November 2015 secondary offerings and May 2015 notes offering , the Company received an opinion that ESH REIT should have qualified as a REIT as of that time. We believe ESH REIT has continued to operate in conformity with the requirements to qualify as a REIT since the November 2015 secondary offering and that ESH REIT continues to satisfy all 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 regularly 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 our Paired 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 would materially adversely affect our business, cash flows and operating strategies and the market value of our Paired 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 would impair our business, cash flows, operating strategies and materially adversely affect the market price of our Paired Shares.

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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.

However, events beyond our knowledge or control could result in a shareholder, including an investor in the Sponsors or the Sponsors’ funds, 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 of ESH REIT’s gross income is generated by rent paid pursuant to the operating leases with the Corporation, substantially all 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.

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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. We did not seek an advance ruling from the IRS regarding ESH REIT’s qualification as a REIT.

The ownership limits that apply to REITs, as prescribed by the Code and by ESH REIT’s charter, may inhibit market activity in our Paired 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 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 our Paired 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 generates 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.

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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, our effective tax rate and our income tax liability.

Our principal Operating Lessee was recently subject to an audit by the Internal Revenue Service.

In February 2014, we received notice that the Company’s principal Operating Lessee would 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. In November 2014, the IRS completed this audit and issued a no change letter. Despite this favorable outcome and the fact that this Operating Lessee ceased to be a taxable REIT subsidiary of ESH REIT in 2013, the IRS may choose to audit subsequent taxable years for this Operating Lessee, or audit other open years for other taxpayers. 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. While we believe that our rent provisions reflect arm’s-length terms, there can be no assurance that the IRS will agree in any potential audit.

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 distributions 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 intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. 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 cash distributions could adversely affect the market price of our Paired Shares.

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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 asset 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.

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 distributions 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 our Paired 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 our Paired 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, construction 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.

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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, to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets, or to partially or completely terminate previous hedges that are no longer serving as hedges, 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 taxable REIT subsidiary (“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. There can be no assurance that the IRS will not challenge this treatment or that a court would not sustain such a challenge. Under recent legislation, however, a publically traded REIT is permitted to treat all owners of 5% or less of its stock as U.S. persons unless it has actual knowledge to the contrary. 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 non-U.S. holder (other than a qualified foreign pension fund, as defined in Section 897(1)(2) of the Code (a “Qualified Foreign Pension Fund”), or any entity all of the interests of which are held by a Qualified Foreign Pension Fund) did not at any time during a specified testing period directly or indirectly own more than 10% 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.

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.

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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 10% 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 is regularly traded on an established securities market located in the United States. 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 10% 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 distribution 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 distribution 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.

Qualified Foreign Pension Funds are not subject to tax (including withholding tax) under FIRPTA with respect to distributions attributable to gain from sale or exchange of a USRPI.

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 distributions 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. Distributions 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 our 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

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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, actually or constructively, more than 10% 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. Qualified Foreign Pension Funds are not subject to tax (including withholding tax) under FIRPTA with respect to gain from the disposition of stock in a real property holding corporation.

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 distributions from 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 distributions to 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 and our Paired Shares. See “—Risks Related to ESH REIT and its Status as a REIT.”

Risks Related to our Paired Shares

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

The market price of our 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 our Paired Shares or changes in analysts’ financial estimates;

• variations in quarterly results of operations compared to market expectations;

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

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

• increased competition;

• future sales of our 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 has been, and may continue to be, volatile. The stock market in general, and in the lodging industry in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of market participants. Accordingly, these broad market and industry factors may significantly reduce the market price of our Paired Shares, regardless of our operating performance. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion

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of management’s attention, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities.

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

Affiliates of the Sponsors collectively beneficially own 62.5% of our 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. Accordingly, the Corporation is a “controlled company” within the meaning of the NYSE rules. ESH REIT is a “controlled company” 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 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 our 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 currently hold, 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 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.

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

Future sales or the availability for sale of substantial amounts of our Paired Shares in the public market could adversely affect the prevailing market price of our Paired Shares and could impair our ability to raise capital through future sales of equity securities. We cannot predict the size of future issuances of our Paired Shares or the effect, if any, that future issuances and sales of our Paired Shares by us or our Sponsors will have on the market price of our Paired Shares. Sales of substantial amounts of our Paired Shares by the Sponsors have, and the perception that such sales could occur may, adversely affect prevailing market prices for our Paired Shares.

The charters of the Corporation and ESH REIT authorize us to issue 3,500,000,000 Paired Shares, of which 204,593,912 Paired Shares are outstanding as of February 19, 2016. Of these shares, the 71,637,500 Paired Shares sold in the Offering and subsequent secondary offerings are freely transferable without restriction or further registration under the Securities Act by persons other than “affiliates,” as that term is defined in Rule 144 under the Securities Act. The Sponsors currently own 127,960,388 Paired Shares collectively, all of which have been registered pursuant to the automatic shelf registration statement that we filed in June 2015, and have additional rights with respect to the remainder 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.

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

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

The Amended and Restated Extended Stay America, Inc. Long-Term Incentive Plan and the Amended and Restated ESH Hospitality, Inc. Long-Term Incentive Plan (each an “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 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 LTIP, and the non-Granting Entity’s agreement to issue its component of our 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 our Paired Share.

The Granting Entity will compensate the non-Granting Entity generally in cash for its issuance of its component of our 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% ownership interest in ESH REIT.

Under the LTIPs, a grant of restricted stock units 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 generally 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 over the service period on a mark-to-market basis each period rather than on a straight-line basis.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, our stock price may decline.

We provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this combined annual report on Form 10-K and in our other public filings and statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we reduce our guidance for future periods, as we have in the past, the market price of our Paired Shares may decline.

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

The trading market for our Paired Shares depends in part on the research and reports that third-party securities analysts publish about Extended Stay America and the lodging industry. One or more analysts could downgrade, and in the past have downgraded, our Paired Shares or issue other negative commentary about Extended Stay America 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 America, we could lose visibility in the market. As a result of one or more of these factors, the trading price of our Paired Shares could decline.

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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 Paired 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;

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

• 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 our Paired Shares, which, under certain circumstances, could reduce the market price of our 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 our Paired Shares, which could depress the price of our 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 our Paired Shares. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our 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 our Paired Shares.

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

35

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 our Paired Shares.

There is a possibility that there will be amendments to or elimination of the pairing arrangement.

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. 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 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 our 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 our 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 our 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 our 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 our 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. 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;

• to facilitate a transaction whose benefits outweigh the benefits of maintaining ESH REIT’s status as a REIT; 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 circumstances under which the board would terminate ESH REIT’s status as a REIT.

If ESH REIT’s status as a 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.

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 Exchange Act and the corporate governance standards of the Sarbanes-Oxley Act of 2002 (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 comply with the Exchange Act, Sarbanes-Oxley Act and NYSE requirements, significant resources and management oversight are required. This requires significant management attention and significant costs associated with compliance, which could have a material adverse effect on us and the price of our 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.

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

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. We are required to provide reliable financial statements and reports to our shareholders. To monitor the accuracy and reliability of our financial reporting, we have established an internal audit function that oversees our internal controls. In addition, we have developed policies and procedures with respect to company-wide business processes and cycles in order to implement effective internal control over financial reporting. We have established controls and procedures designed to ensure that total hotel revenues and hotel operating expenses are properly recorded at our hotels. While we have undertaken substantial work to comply with Section 404 of the Sarbanes-Oxley Act, we cannot be certain that we will be successful in maintaining effective internal control over our financial reporting and may determine in the future that our existing internal controls need improvement. If we fail to comply with proper overall controls, we could be materially harmed or fail to meet our reporting obligations. In addition, the existence of a material weakness or significant deficiency in our internal controls could result in errors in our financial statements that could require a restatement, cause us to fail to meet our reporting obligations, result in increased costs to remediate any deficiencies, attract regulatory scrutiny or lawsuits and cause investors to lose confidence in our reported financial information, leading to a substantial decline in the market price of our Paired Shares.

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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.

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Item 2. Properties

As of December 31, 2015, we owned and operated 629 hotels. The average age of our hotel properties at December 31, 2015 was 16.8 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 provides certain information regarding those hotels.

State/Country	Number of Hotels	Number of Rooms	% of Total Rooms
California	83	10,053	14.5%
Texas	62	6,888	9.9%
Florida	52	5,751	8.3%
Illinois	33	3,814	5.5%
Virginia	30	3,290	4.7%
North Carolina	31	3,161	4.6%
Ohio	28	2,677	3.9%
Georgia	24	2,403	3.5%
Washington	19	2,181	3.1%
New Jersey	18	2,097	3.0%
Maryland	19	2,066	3.0%
Michigan	18	1,988	2.9%
Tennessee	17	1,772	2.6%
Pennsylvania	16	1,713	2.5%
Arizona	15	1,704	2.5%
Massachusetts	13	1,435	2.1%
Colorado	12	1,422	2.0%
New York	11	1,325	1.9%
Missouri	12	1,276	1.8%
Indiana	13	1,228	1.8%
Minnesota	10	1,043	1.5%
South Carolina	10	976	1.4%
Kentucky	8	770	1.1%
Kansas	6	708	1.0%
Alabama	7	693	1.0%
Wisconsin	6	665	1.0%
Oregon	5	642	0.9%
Connecticut	5	570	0.8%
Nevada	4	529	0.8%
Canada	3	500	0.7%
Utah	4	484	0.7%
Oklahoma	5	475	0.7%
Louisiana	4	428	0.6%
Alaska	4	419	0.6%
Rhode Island	4	403	0.6%
New Mexico	3	330	0.5%
Arkansas	3	305	0.4%
Mississippi	3	273	0.4%
Montana	2	208	0.3%
Iowa	2	190	0.3%
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	629	69,383	100%

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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 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.

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PART II

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

Market Information

Our Paired Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “STAY.” Below is a quarterly summary of the high and low prices of, and cash distributions declared on our Paired Shares, from January 1, 2014 through December 31, 2015:

	Price per Paired Share				Corporation Cash Distributions Declared		ESH REIT Cash Distributions Declared
2015	High		Low
Fourth Quarter(1)	$	19.63	$	15.75	$	0.08	$	0.34
Third Quarter		19.34		16.18		0.02		0.15
Second Quarter		21.00		18.77		0.02		0.15
First Quarter		21.30		18.67		0.00		0.15
2014
Fourth Quarter	$	23.30	$	17.63	$	0.00	$	0.15
Third Quarter		24.06		21.86		0.00		0.15
Second Quarter		23.83		21.04		0.00		0.15
First Quarter		26.57		22.64		0.00		0.08

(1) In the fourth quarter of 2015, in addition to our regular quarterly cash distribution, each of the Board of Directors of ESH REIT and the Corporation declared a special cash distribution of $0.19 per share, payable to Class A and Class B common shareholders, and of $0.06 per share, payable to common shareholders, respectively.

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

Holders of Record

As of February 19, 2016, there were 48 holders of record of our 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.

Distribution Policies

In 2016, we intend to maintain or slightly increase our current distribution rate of $0.17 per Paired Share per quarter unless our consolidated results of operations, net income, Adjusted EBITDA, liquidity, cash flows, financial condition or prospects, economic conditions or other factors differ materially from our current assumptions. We intend to make a significant portion of 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 Paired Share distributions, the expected Paired Share 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.

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.”

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Corporation Distribution Policy

The payment of Corporation distributions is 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 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 distributions depends on its receipt of cash distributions from ESH REIT in respect of the Class A common stock, 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. See Note 7 to the consolidated and combined financial statements of Extended Stay America, Inc. and Note 6 to the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K, for a description of the restrictions on the Corporation’s and ESH REIT’s ability to pay distributions.

On February 23, 2016, the Board of Directors of the Corporation declared a cash distribution of $0.02 per common share for the fourth quarter of 2015. The distribution is payable on March 22, 2016 to shareholders of record as of March 8, 2016.

ESH REIT Distribution Policy

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 intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT is 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. Taxable income as computed for purposes of the foregoing 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 (“U.S. GAAP”) for financial reporting purposes.

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:

• consolidated results of operations;

• debt service requirements;

• capital expenditure requirements for its hotel properties;

• 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; and

• other factors that ESH REIT’s Board of Directors may deem relevant.

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Holders of ESH REIT Class A and Class B common stock are entitled to any common stock distributions that ESH REIT’s Board of Directors may declare. Approximately 55% of ESH REIT’s distributions are paid to the Corporation on account of its ownership of the Class A common stock. Each share of Class A and Class B common stock is entitled to the same amount of distributions per share, except as described below, 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.

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 Note 6 to the consolidated financial statements of ESH Hospitality, Inc., which are included in Item 8 in this combined annual report on Form 10-K, 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.

On February 23, 2016, the Board of Directors of ESH REIT declared a cash distribution of $0.15 per Class A and Class B common share for the fourth quarter of 2015. This distribution is payable on March 22, 2016 to shareholders of record as of March 8, 2016.

Stock Performance Graph

The following graph compares the total shareholder return on our 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 Hotels, Resorts & Cruise Lines 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, 2015. The graph assumes an initial investment of $100 on November 13, 2013 in our 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 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

In March 2015, ESH REIT issued 190,089 shares of Class A common stock to the Corporation for consideration of approximately $1.7 million. 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.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

None.

Share Repurchase Program

On December 10, 2015, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized a combined Paired Share repurchase program for up to $100 million of the Paired Shares. On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares. The program expires on December 31, 2016. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice. As of December 31, 2015, we have not repurchased any Paired Shares pursuant to the combined Paired Share repurchase program.

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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, 2015, 2014 and 2013 and as of December 31, 2015 and 2014 have been derived from the audited consolidated and combined financial statements of the Company, which are included in Item 8 in this combined annual report on Form 10-K. The selected historical consolidated and combined financial data of the Company for the years ended December 31, 2012 and 2011 and as of December 31, 2013, 2012 and 2011 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 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 of Extended Stay America, Inc. and related notes and other financial information included herein.

	Company
(Dollars in thousands, except ADR, RevPAR and per Share and per Paired Share data)	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Statement of operations data:
Total revenues	$	1,284,753		$	1,213,475		$	1,132,818		$	1,011,462		$	942,728
Hotel operating expenses		604,087			592,101			540,551			493,635			463,369
Total operating expenses		915,620			865,989			821,827			727,574			677,351
Income from operations		500,072			348,738			312,125			284,272			265,609
Net income		283,022			150,554			82,656			22,281			46,635
Net (income) loss attributable to noncontrolling interests		(169,982	)		(110,958	)		3,575			(1,549	)		(1,062	)
Net income attributable to common shareholders or members		113,040			39,596			86,231			20,732			45,573
Net income per common share-basic	$	0.55		$	0.19		$	0.49		$	0.12		$	0.27
Net income per common share-diluted	$	0.55		$	0.19		$	0.49		$	0.12		$	0.26
Cash distributions paid per common share	$	0.06		$	—		$	—		$	—		$	—
Distributions declared per common share	$	0.12		$	—		$	—		$	—		$	—
Other financial data:
Cash flows provided by (used in):
Operating activities	$	428,889		$	370,485		$	311,313		$	201,110		$	180,605
Investing activities		66,289			(182,243	)		(165,259	)		(223,842	)		(43,389	)
Financing activities		(243,180	)		(127,160	)		(188,977	)		27,594			(50,074	)
Capital expenditures		204,717			173,239			172,540			271,464			106,064
EBITDA(a)		701,237			532,182			480,178			414,210			386,047
Adjusted EBITDA(a)		603,081			556,660			518,610			434,908			409,864
Hotel Operating Profit(b)		689,965			626,978			594,082			508,449			468,955
Hotel Operating Margin(b)		53.7	%		51.7	%		52.5	%		50.8	%		50.3	%
Paired Share Income(c)	$	283,006		$	150,538		$	81,926		$	20,732		$	45,573
Adjusted Paired Share Income(c)		194,699			169,711			121,829			71,030			62,160
Adjusted Paired Share Income per Paired Share—basic(c)	$	0.95		$	0.83		$	0.70		$	0.42		$	0.37
Adjusted Paired Share Income per Paired Share—diluted(c)	$	0.95		$	0.83		$	0.69		$	0.41		$	0.36
Operating data:
Rooms (at period end)		69,383			76,000			76,219			75,928			73,657
Occupancy		73.7	%		74.3	%		74.2	%		73.3	%		75.1	%
ADR	$	62.22		$	57.93		$	54.15		$	49.77		$	45.20
RevPAR	$	45.89		$	43.02		$	40.18		$	36.46		$	33.96

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	Company
	December 31,		December 31,		December 31,		December 31,		December 31,
(In thousands)	2015		2014		2013		2012		2011
Balance sheet data:
Total assets	$	4,528,900	$	4,449,142	$	4,407,795	$	4,427,188	$	4,312,966
Total debt, net of unamortized deferred financing costs and debt discount(d)		2,762,388		2,859,391		2,862,951		3,541,162		2,635,881
Mandatorily redeemable preferred stock		21,202		21,202		21,202		—		—
Noncontrolling interest		608,684		599,799		596,632		3,157		1,925

(a) EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are key metrics used by management to assess our operating performance 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 similar measures calculated by other companies. This information should not be considered as an alternative to net income, net income per common share, cash flow from operations or any other operating performance measure calculated in accordance with U.S. GAAP. Additionally, EBITDA and Adjusted EBITDA should not solely be considered as measures of our liquidity or indicative of funds available to fund our cash needs, including our ability to pay distributions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—EBITDA and Adjusted EBITDA” for a definition and discussion of EBITDA and Adjusted EBITDA.

The following table provides a reconciliation of net income to EBITDA and Adjusted EBITDA for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 (in thousands):

	Company
	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Net income	$	283,022		$	150,554		$	82,656		$	22,281		$	46,635
Interest expense, net		137,782			149,364			234,459			257,349			211,924
Income tax expense (benefit)		76,536			45,057			(4,990	)		4,642			7,050
Depreciation and amortization		203,897			187,207			168,053			129,938			120,438
EBITDA		701,237			532,182			480,178			414,210			386,047
Non-cash equity-based compensation		10,500			8,803			20,168			4,409			4,730
Other non-operating expense		2,732			3,763			—			—			—
Impairment of long-lived assets		9,011			2,300			3,330			1,420			—
Gain on sale of hotel properties		(130,894	)		(864	)		—			—			—
Restructuring expenses		—			—			605			5,763			10,491
Acquisition transaction expenses		—			—			235			1,675			593
Other expenses		10,495	(1)		10,476	(2)		14,094	(3)		7,431	(4)		8,003	(5)
Adjusted EBITDA	$	603,081		$	556,660		$	518,610		$	434,908		$	409,864

(1) Includes costs incurred in connection with the preparation of the registration statement filed in June 2015 and the November 2015 secondary offering of approximately $0.9 million, transaction costs of approximately $0.3 million associated with the sale of hotel properties, and loss on disposal of assets of approximately $9.3 million.

(2) Includes public company transition costs of approximately $3.0 million, including approximately $1.5 million in costs incurred in connection with the August 2014 secondary offering, consulting fees of approximately $1.9 million related to the implementation of certain key strategic initiatives, including review of our corporate infrastructure, and loss on disposal of assets of approximately $5.6 million.

(3) Includes costs related to preparations for our initial public offering of approximately $11.2 million, consisting primarily of the Pre-IPO Transactions, and loss on disposal of assets of approximately $2.9 million.

(4) Includes costs related to preparations for our initial public offering of approximately $1.6 million, consisting primarily of the Pre-IPO Transactions, consulting fees of approximately $4.9 million related to the implementation of certain key strategic initiatives, including services related to pricing and yield management projects, and loss on disposal of assets of approximately $0.9 million.

(5) Includes consulting fees of approximately $7.4 million related to the implementation of certain key strategic initiatives, including services related to pricing and yield management projects, and loss on disposal of assets of approximately $0.6 million

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(b) Hotel Operating Profit and Hotel Operating Margin. Hotel Operating Profit and Hotel Operating Margin are supplemental measures of aggregate hotel-level profitability used by management to evaluate hotel operating profitability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—Hotel Operating Profit and Hotel Operating Margin” for definitions and discussion of Hotel Operating Profit and Hotel Operating Margin.

The following table provides a reconciliation of 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, 2015, 2014, 2013, 2012 and 2011 (in thousands):

	Company
	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Room revenues	$	1,265,653		$	1,195,816		$	1,113,956		$	984,273		$	912,988
Other hotel revenues		19,100			17,659			17,787			16,898			18,693
Total hotel revenues		1,284,753			1,213,475			1,131,743			1,001,171			931,681
Hotel operating expenses(1)		594,788			586,497			537,661			492,722			462,726
Hotel Operating Profit	$	689,965		$	626,978		$	594,082		$	508,449		$	468,955
Hotel Operating Margin		53.7	%		51.7	%		52.5	%		50.8	%		50.3	%

(1) Excludes loss on disposal of assets of approximately $9.3 million, $5.6 million, $2.9 million, $0.9 million and $0.6 million, respectively.

(c) Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share. We believe that Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share provide meaningful indicators of the Company’s operating performance in addition to separate and/or individual analyses of net income attributable to common shareholders of the Corporation and net income attributable to Class B common shareholders of ESH REIT, each of which is impacted by specific U.S. GAAP requirements and may not necessarily reflect how cash flows are generated on an individual entity or total enterprise basis.

Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share should not be considered as alternatives to net income of the Company, net income of the Corporation, net income of ESH REIT, net income per share of common stock of the Corporation, net income per share of Class A or Class B common stock of ESH REIT or any other operating measure calculated in accordance with U.S. GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share” for definitions and discussion of Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Income per Paired Share.

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The following table provides a reconciliation of net income attributable to common shareholders or members to Paired Share Income and Adjusted Paired Share Income and a calculation of Adjusted Paired Share Income per Paired Share for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 (in thousands, except per Paired Share data):

	Company
	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Net income attributable to common shareholders or members	$	113,040		$	39,596		$	86,231		$	20,732		$	45,573
Noncontrolling interests attributable to Class B common shares of ESH REIT		169,966			110,942			(4,305	)(1)		—			—
Paired Share Income		283,006			150,538			81,926			20,732			45,573
Debt extinguishment costs		2,392			7,185			22,984			36,593			—
Other non-operating expense		2,061			2,871			—			—			—
Impairment of long-lived assets		6,598			1,771			3,245			1,420			—
Gain on sale of hotel properties		(107,726	)		(659	)		—			—			—
Restructuring expenses		—			—			576			4,772			9,117
Acquisition transaction expenses		—			—			229			1,360			515
Other expenses		8,368	(2)		8,005	(3)		12,869	(4)		6,153	(5)		6,955	(6)
Adjusted Paired Share Income	$	194,699		$	169,711		$	121,829		$	71,030		$	62,160
Adjusted Paired Share Income per Paired Share - basic	$	0.95		$	0.83		$	0.70		$	0.42		$	0.37
Adjusted Paired Share Income per Paired Share - diluted	$	0.95		$	0.83		$	0.69		$	0.41		$	0.36
Weighted average Paired Shares outstanding - basic		204,211			203,548			174,894			169,816			168,813
Weighted average Paired Shares outstanding - diluted		204,567			204,508			176,268			171,796			171,345

(1) Prior to the change in our legal and corporate structure in November 2013, which occurred in connection with the Corporation’s and ESH REIT’s initial public offering, no portion of the Company’s (i.e., the Paired Shares’) noncontrolling interests represented interests attributable to Class B common shares of ESH REIT.

(2) Includes costs incurred in connection with the preparation of the registration statement filed in June 2015 and the November 2015 secondary offering of approximately $0.9 million pre-tax, transaction costs of approximately $0.3 million pre-tax associated with the sale of hotel properties, and loss on disposal of assets of approximately $9.3 million pre-tax, which total approximately $8.4 million after-tax.

(3) Includes public company transition costs of approximately $3.0 million pre-tax, including approximately $1.5 million pre-tax in costs incurred in connection with the August 2014 secondary offering, consulting fees of approximately $1.9 million pre-tax related to the implementation of certain key strategic initiatives, including review of our corporate infrastructure, and loss on disposal of assets of approximately $5.6 million pre-tax, which total approximately $8.0 million after-tax.

(4) Includes costs related to preparations for our initial public offering of approximately $11.2 million pre-tax, consisting primarily of the Pre-IPO Transactions, and loss on disposal of assets of approximately $2.9 million pre-tax, which total approximately $12.9 million after-tax.

(5) Includes costs related to preparations for our initial public offering of approximately $1.6 million pre-tax, consisting primarily of the Pre-IPO Transactions, consulting fees of approximately $4.9 million pre-tax related to the implementation of certain key strategic initiatives, including services related to pricing and yield management projects, and loss on disposal of assets of approximately $0.9 million pre-tax, which total approximately $6.2 million after-tax.

(6) Includes consulting fees of approximately $7.4 million pre-tax related to the implementation of certain key strategic initiatives, including services related to pricing and yield management projects, and loss on disposal of assets of approximately $0.6 million pre-tax, which total approximately $7.0 million after-tax.

(d) As discussed in Note 2 to the consolidated and combined financial statements of Extended Stay America, Inc., which are included in Item 8 in this combined annual report on Form 10-K, effective December 31, 2015, the Company early adopted FASB Accounting Standard Update (“ASU”) No. 2015-03 and ASU No. 2015-15. Therefore, total debt is shown net of unamortized deferred financing costs and debt discount in the selected financial data table. Because the early adoption of these updates required retrospective application, the historical financial information contained in this Item 6 and elsewhere in this report has been restated to reflect the retrospective impact of our adoption.

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Selected Historical Financial and Other Data—ESH REIT

The selected historical consolidated financial data of ESH REIT for the years ended December 31, 2015, 2014 and 2013 and as of December 31, 2015 and 2014 have been derived from the audited consolidated financial statements of ESH REIT, which are included in Item 8 in this combined annual report on Form 10-K. The selected historical consolidated financial data of ESH REIT for the years ended December 31, 2012 and 2011 and as of December 31, 2013, 2012 and 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 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 of ESH Hospitality, Inc. and related notes and other financial information included herein.

	ESH REIT
(In thousands, except per share data)	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Statement of operations data:
Rental revenues from Extended Stay America, Inc.	$	719,635		$	684,205		$	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		719,635			684,205			1,072,539			1,011,517			942,853
Hotel operating expenses		97,062			93,826			478,727			493,635			463,369
Total operating expenses		312,079			292,493			740,395			729,842			677,518
Income from operations		524,209			392,845			333,219			282,059			265,567
Net income		378,184			247,094			100,466			20,068			46,593
Net income per common share:
Class A-basic	$	0.83		$	0.54		$	0.26		$	0.05		$	0.12
Class A-diluted	$	0.83		$	0.54		$	0.26		$	0.05		$	0.12
Class B-basic	$	0.83		$	0.55		$	0.26		$	0.05		$	0.12
Class B-diluted	$	0.83		$	0.54		$	0.25		$	0.05		$	0.12
Cash distributions paid per common share
Class A	$	0.60		$	0.53		$	0.20		$	2.19		$	0.07
Class B	$	0.60		$	0.53		$	0.20		$	2.19		$	0.07
Distributions declared per common share
Class A	$	0.79		$	0.53		$	0.20		$	2.19		$	0.07
Class B	$	0.79		$	0.53		$	0.20		$	2.19		$	0.07
Other financial data:
Cash flows provided by (used in):
Operating activities	$	511,985		$	432,857		$	295,198		$	194,169		$	180,546
Investing activities		61,034			(153,307	)		(164,078	)		(223,842	)		(43,395	)
Financing activities		(383,579	)		(264,355	)		(215,679	)		34,340			(50,074	)
Capital expenditures		199,135			166,358			171,931			271,464			106,064

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	ESH REIT
(In thousands)	December 31, 2015		December 31, 2014		December 31, 2013		December 31, 2012		December 31, 2011
Balance sheet data:
Total assets	$	4,316,549	$	4,268,970	$	4,286,440	$	4,422,896	$	4,302,333
Total debt, net of unamortized deferred financing costs and debt discount(a)		2,762,388		2,859,391		2,862,951		3,541,162		2,635,881

(a) As discussed in Note 2 to the consolidated financial statements of ESH Hospitality, Inc., which are included in Item 8 in this combined annual report on Form 10-K, effective December 31, 2015, ESH REIT early adopted FASB ASU No. 2015-03 and ASU No. 2015-15. Therefore, total debt is shown net of unamortized deferred financing costs and debt discount in the selected financial data table. Because the early adoption of these updates required retrospective application, the historical financial information contained in this Item 6 and elsewhere in this report has been restated to reflect the retrospective impact of our adoption.

EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share 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, consolidated enterprise, which is reflected in the consolidated and combined Company results of operations; therefore, we believe these performance measures are meaningful for the Company only.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated and combined financial statements and ESH REIT’s consolidated financial statements, each of which have been prepared in accordance with U.S. 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 expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those relating to property and equipment, goodwill, revenue recognition, income taxes, equity-based compensation and investments. We base our estimates and judgments on historical experience and various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

The following discussion may contain forward-looking statements about our market, analysis, future trends, the demand for our services, capital expenditures 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.

The following discussion should be read in conjunction with “Business-Our Company,” “Business-Our History-The Pre-IPO Transactions,” “Selected Historical Financial and Other Data—the Company,” “Selected Historical Financial and Other Data—ESH REIT,” 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. Unless otherwise defined in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for definitions of our indebtedness, see Note 7 to the consolidated and combined financial statements of Extended Stay America, Inc. and Note 6 to the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K.

We present below separate results of operations for each of the Company and ESH REIT. 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 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 then-existing business and legal entities such that the Operating Lessees, ESH Strategies and the assets and obligations of HVM were transferred to the Corporation. Subsequent to the Pre-IPO Transactions, 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. Also 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.

Overview

We are the largest integrated owner/operator of company-branded hotels in North America. Our business operates in the extended stay lodging industry, and as of December 31, 2015, we own and operate 629 hotel properties comprising approximately 69,400 rooms located in 44 states across the United States and in Canada. We own and operate the substantial majority of our hotels under our 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.

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

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feature fully-furnished rooms with in-room kitchens, complimentary grab-and-go breakfast, free WiFi, flat screen TVs and on-site guest laundry. Our guests include business travelers, leisure travelers, professionals on temporary work or training assignments, persons relocating, temporarily displaced or purchasing a home and anyone else in need of temporary housing. Our guests generally rent accommodations on a weekly or longer term basis. For the year ended December 31, 2015, approximately 32.2%, 23.6% and 44.2% of our total revenues were derived from guests with stays from 1-6 nights, from 7-29 nights, and 30 or more nights, respectively.

We seek to drive our competitive advantage by becoming a dominant brand with national distribution; owning and operating hotels with great locations, affordable prices and relevant amenities; and leveraging our business model to drive superior cash flow. To achieve this competitive advantage, we focus on continually improving our product and service, improving marketing efforts, driving ADR and maximizing cost and capital structure efficiency, all while seeking to return value to our shareholders.

In December 2015, we sold a portfolio of 53 hotel properties, 47 of which operated under our former Crossland Economy Studios brand and six of which operated under our Extended Stay America brand, and certain intellectual property of Crossland Economy Studios (the “Portfolio Sale”). We no longer own, operate or manage these hotel properties, nor does the Corporation own intellectual property related to Crossland Economy Studios. See Note 4 to each of the consolidated and combined financial statements of Extended Stay America, Inc. and the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K.

Key Metrics Evaluated by Management

We evaluate the performance of our business through the use of certain non-GAAP financial measures. U.S. 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 U.S. GAAP performance measures such as total revenues, net income, net income per share and cash flow provided by operating activities. These financial measures include EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share. 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 U.S. GAAP measures under “—Non-GAAP Financial Measures.”

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 during that period. 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 represents the product of 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 ancillary revenues, such as food and beverage revenues, or parking, pet, telephone or other guest service revenues. 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, 2015, room revenues represented approximately 98.5% of our total revenues.

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RevPAR changes that are driven predominately by occupancy have different implications on incremental operating profitability 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 and 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.

Understanding Our Results of Operations – The Company

Revenues and Expenses. The Company’s revenues are derived from the operation of our hotels. Hotel operating expenses account for the largest portion of the Company’s operating expenses and reflect ongoing expenses associated with the ownership and management of our 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, 2015:

	Percentage of 2015 Revenues
•      Room revenues. Room revenues are driven primarily by ADR and occupancy. Pricing policy and customer mix are significant drivers of ADR. Due to our relatively high occupancy levels, our primary focus is on increasing RevPAR by increasing ADR. For the year ended December 31, 2015, we experienced RevPAR growth of approximately 6.7% compared to the year ended December 31, 2014, due to a shift in our customer mix to a greater number of high yield, shorter-stay guests as well as the collective impact of our hotel reinvestment program, upgraded operational practices, investments in marketing and focus on service excellence.	98.5%
•      Other hotel revenues. Other hotel revenues include ancillary revenues such as laundry revenues, vending commissions, additional housekeeping fees and pet charges. Occupancy and customer mix, as well as the number and percentage of guests that have longer-term stays, are the key drivers of other hotel revenues.	1.5%

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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, 2015:

	Percentage of 2015 Operating Expenses
•       Hotel operating expenses. Hotel operating expenses have both fixed and variable components. Operating expenses that are relatively fixed include personnel expense, real estate tax expense and property insurance premium expense. Occupancy is a key driver of expenses that have a high degree of variability such as housekeeping services and amenity costs. Other variable expenses include marketing costs, reservation costs, property insurance claims expense and repairs and maintenance expense. We experienced an increase in hotel operating expenses of approximately $12.0 million for the year ended December 31, 2015 compared to the year ended December 31, 2014, due mainly to increases in reservation costs as well as hotel personnel expense and credit card transaction fees. These increases were partially offset by decreases in marketing costs, property insurance claims expense and certain amenity costs.	66.0%
•       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 and professional fees, including consulting, audit, tax and legal fees.	10.8%
•       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, including capital expenditures incurred with respect to our hotel renovations.	22.2%
•       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.	1.0%

Understanding Our Results of Operations – ESH REIT

Revenues. ESH REIT’s rental revenues are generated from leasing its hotel properties to the Operating Lessees. Rental revenues consist of fixed minimum rental payments recognized on a straight-line basis over the lease terms plus specified percentages paid by the Operating Lessees of total hotel revenues over designated thresholds.

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Expenses. 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, 2015:

	Percentage of 2015 Operating Expenses
•       Hotel operating expenses. ESH REIT’s hotel operating expenses include expenses directly related to ownership of the hotels, such as real estate tax expense and property insurance premium and claims expense.	31.1%
•       General and administrative expenses. General and administrative expenses include overhead expenses incurred directly by ESH REIT and administrative service costs reimbursed to ESA Management.	5.1%
•       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, including capital expenditures incurred with respect to our hotel renovations.	63.8%

Results of Operations

For the years ended December 31, 2015 and 2014 and 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 primarily 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 Corporation and therefore are presented as noncontrolling interests.

For the period from January 1, 2013 through the Pre-IPO Transactions, the consolidated and combined financial statements of the Company included the financial position, results of operations, comprehensive income, changes in equity and cash flows of the Company’s predecessor, which included ESH REIT’s predecessor, ESH Hospitality LLC, ESH Strategies and a consolidated variable interest entity, HVM, our former management entity. Third party equity interests in HVM, which represented all of HVM’s equity, were not owned by the Company’s predecessor and therefore were presented as noncontrolling interests. ESH REIT and ESH Strategies became a consolidated group prior to 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 combined ESH REIT’s predecessor financial information with that of ESH Strategies.

For the years ended December 31, 2015 and 2014 and 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 period from January 1, 2013 through the Pre-IPO Transactions, the consolidated financial statements of ESH REIT included the financial position, results of operations, comprehensive income, changes in equity and cash flows of ESH REIT’s predecessor, ESH Hospitality LLC, its subsidiaries, which included the Operating Lessees, and HVM. Third party equity interests in HVM, which represented all of HVM’s equity, were not owned by ESH REIT and therefore were presented as noncontrolling interests.

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Results of Operations – The Company

Comparison of Years Ended December 31, 2015 and December 31, 2014

As of December 31, 2014, we owned and operated 682 hotels consisting of 76,000 rooms. On December 8, 2015, we completed the Portfolio Sale. Therefore, as of December 31, 2015, we owned and operated 629 hotels consisting of approximately 69,400 rooms.

The following table presents our consolidated results of operations for the years ended December 31, 2015 and 2014, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Change ($)			Change (%)
Revenues:
Room revenues	$	1,265,653		$	1,195,816		$	69,837			5.8	%
Other hotel revenues		19,100			17,659			1,441			8.2	%
Total revenues		1,284,753			1,213,475			71,278			5.9	%
Operating expenses:
Hotel operating expenses		604,087			592,101			11,986			2.0	%
General and administrative expenses		98,625			84,381			14,244			16.9	%
Depreciation and amortization		203,897			187,207			16,690			8.9	%
Impairment of long-lived assets		9,011			2,300			6,711			291.8	%
Total operating expenses		915,620			865,989			49,631			5.7	%
Gain on sale of hotel properties		130,894			864			130,030			15049.8	%
Other income		45			388			(343	)		(88.4	)%
Income from operations		500,072			348,738			151,334			43.4	%
Other non-operating expense		2,732			3,763			(1,031	)		(27.4	)%
Interest expense, net		137,782			149,364			(11,582	)		(7.8	)%
Income before income tax expense		359,558			195,611			163,947			83.8	%
Income tax expense		76,536			45,057			31,479			69.9	%
Net income		283,022			150,554			132,468			88.0	%
Net income attributable to noncontrolling interests(1)		(169,982	)		(110,958	)		(59,024	)		53.2	%
Net income attributable to common shareholders	$	113,040		$	39,596		$	73,444			185.5	%

(1) Noncontrolling interests in Extended Stay America, Inc. include approximately 45% of ESH REIT’s common equity and 125 shares of ESH REIT preferred stock.

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The following table presents key operating metrics, including occupancy, ADR, RevPAR and renovation displacement data for our hotels for the years ended December 31, 2015 and 2014, respectively:

	Year Ended December 31, 2015			Year Ended December 31, 2014			Change
Number of hotels (as of December 31)		629			682			(53	)
Number of rooms (as of December 31)		69,383			76,000			(6,617	)
Occupancy		73.7	%		74.3	%		(60) bps
ADR	$	62.22		$	57.93			7.4	%
RevPAR	$	45.89		$	43.02			6.7	%
Hotel Inventory (as of December 31)(1)
Renovated Extended Stay America(2)		463			335			128
Unrenovated Extended Stay America and other		166			300			(134	)
Crossland Economy Studios		—			47			(47	)
Total number of hotels		629			682			(53	)
Renovation Displacement Data (in thousands, except percentages)(1)
Total available room nights		27,581			27,795			(214	)
Room nights displaced from renovation		363			224			139
% of available room nights displaced		1.3	%		0.8	%		50 bps

(1) See “—Liquidity and Capital Resources – Capital Expenditures – Hotel Reinvestment Program” for a discussion of our phased capital investment programs across our portfolio.

(2) Includes three Extended Stay Canada-branded hotels.

Room revenues. Room revenues increased by approximately $69.8 million, or 5.8%, to approximately $1,265.7 million for the year ended December 31, 2015 compared to approximately $1,195.8 million for the year ended December 31, 2014. The increase in room revenues was primarily due to a 7.4% increase in ADR partially offset by a 60 bps decrease in occupancy, resulting in a 6.7% increase in RevPAR, which was primarily a result of a shift in our customer mix to a greater number of high yield, shorter-stay guests as well as the collective impact of our hotel reinvestment program, upgraded operational practices, investments in marketing and focus on service excellence.

Other hotel revenues. Other hotel revenues increased by approximately $1.4 million, or 8.2%, to approximately $19.1 million for the year ended December 31, 2015 compared to approximately $17.7 million for the year ended December 31, 2014.

Hotel operating expenses. Hotel operating expenses increased by approximately $12.0 million, or 2.0%, to approximately $604.1 million for the year ended December 31, 2015 compared to approximately $592.1 million for the year ended December 31, 2014. The increase was mainly due to an increase in loss on disposal of assets of approximately $8.3 million as a result of our hotel reinvestment program. The Company completed 128 hotel renovations during the year ended December 31, 2015 compared to 105 hotel renovations during the year ended December 31, 2014. Additionally, the increase in hotel operating expenses was partly due to an increase in reservation costs of approximately $7.5 million, mainly due to system-wide implementation of our central call center and an increase in sales volume, as well as an increase in hotel personnel expense of approximately $7.0 million and credit card transaction fees of approximately $2.5 million. These increases were partially offset by a decrease in marketing costs of approximately $4.1 million, mainly due to a decrease in television advertising, as well as a decrease in property insurance claims expense of approximately $2.1 million due to fewer and less severe insurable events than in the prior year and a decrease in amenity costs of approximately $4.2 million.

Hotel Operating Margin (as defined in “—Non-GAAP Financial Measures—Hotel Operating Profit and Hotel Operating Margin”) increased to 53.7% for the year ended December 31, 2015 compared to 51.7% for the

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year ended December 31, 2014. Total room and other hotel revenues increased by approximately $71.3 million for the year ended December 31, 2015 compared to the year ended December 31, 2014, while Hotel Operating Profit (as defined in “–Non-GAAP Financial Measures—Hotel Operating Profit and Hotel Operating Margin”), increased by approximately $63.0 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 88.4%.

General and administrative expenses.General and administrative expenses increased by approximately $14.2 million, or 16.9%, to approximately $98.6 million for the year ended December 31, 2015 compared to approximately $84.4 million for the year ended December 31, 2014. The increase was mainly driven by increases in personnel expense of approximately $11.9 million, attributable to an increase in short-term incentive compensation during the year ended December 31, 2015 due to our improved operating performance and a credit of approximately $2.3 million recognized in the prior year related to the settlement of previous incentive agreements with certain operations personnel, as well as increases in non-cash equity based compensation of approximately $1.7 million mainly due to new grants awarded to executives during the year ended December 31, 2015, legal settlements and professional fees totaling approximately $1.6 million and ongoing costs related to our new revenue management system of approximately $1.6 million. These increases were offset by decreases in public company transition costs, including secondary offering costs, and consulting fees related to the implementation of certain key strategic initiatives of approximately $3.9 million.

Depreciation and amortization. Depreciation and amortization increased by approximately $16.7 million, or 8.9%, to approximately $203.9 million for the year ended December 31, 2015 compared to approximately $187.2 million for the year ended December 31, 2014. The increase in depreciation and amortization was primarily due to an increase in investment in hotel assets as a result of our hotel reinvestment program.

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 years ended December 31, 2015 and 2014, we recognized impairment charges related to property and equipment of approximately $9.0 million and $2.3 million, respectively.

Gain on sale of hotel properties. During the year ended December 31, 2015, we recognized a gain on sale of hotel properties of approximately $130.9 million, which related to the Portfolio Sale. During the year ended December 31, 2014, we recognized a gain on sale of hotel properties of approximately $0.9 million, which related to the sale of our two Hometown Inn-branded hotels.

Other-non operating expense. During the years ended December 31, 2015 and 2014, we recognized non-cash foreign currency transaction losses of approximately $2.7 million and $3.8 million, respectively, mainly related to the appreciation of the U.S. dollar versus the Canadian dollar at one of our Canadian currency-based entities which has U.S. dollar denominated debt.

Interest expense, net. Excluding debt extinguishment costs of approximately $3.0 million and $9.4 million for the years ended December 31, 2015 and 2014, respectively, net interest expense decreased approximately $5.2 million, or 3.7%, to approximately $134.8 million for the year ended December 31, 2015 compared to approximately $140.0 million for the year ended December 31, 2014 primarily due to a decrease in the Company’s outstanding debt. As of December 31, 2015, the Company had total debt outstanding, net of unamortized deferred financing costs and debt discount, of approximately $2,762.4 million compared to approximately $2,859.4 million as of December 31, 2014. The Company’s weighted-average interest rate increased to approximately 4.4% as of December 31, 2015 from approximately 4.0% as of December 31, 2014 primarily due to the issuance of $500.0 million of 5.25% senior notes due in 2025 (the “2025 Notes”), the proceeds of which were used to repay $500.0 million of the outstanding balance under its $2.52 billion mortgage loan (the “2012 Mortgage Loan”), a portion of which had a varying floating interest rate.

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Income tax expense. Our effective income tax rate decreased by approximately 1.7 percentage points to approximately 21.3% for the year ended December 31, 2015 compared to approximately 23.0% for the year ended December 31, 2014. 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. The decrease in our effective income tax rate for the year ended December 31, 2015 is due to the fact that in 2015, ESH REIT distributed closer to 100% of its taxable income than it did in 2014. In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. ESH REIT will incur federal and state income tax at statutory rates on its taxable income not distributed.

Comparison of Years Ended December 31, 2014 and December 31, 2013

As of December 31, 2013, we owned and operated 684 hotels consisting of approximately 76,200 rooms. In July 2014, we sold two hotels which operated under the Hometown Inn brand. As of December 31, 2014, we owned and operated 682 hotels consisting of 76,000 rooms.

The following table presents our consolidated and combined results of operations for the years ended December 31, 2014 and 2013, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31, 2014			Year Ended December 31, 2013			Change ($)			Change (%)
Revenues:
Room revenues	$	1,195,816		$	1,113,956		$	81,860			7.3	%
Other hotel revenues		17,659			17,787			(128	)		(0.7	)%
Management fees, license fees and other revenues		—			1,075			(1,075	)		n/m
Total revenues		1,213,475			1,132,818			80,657			7.1	%
Operating expenses:
Hotel operating expenses		592,101			540,551			51,550			9.5	%
General and administrative expenses		84,381			108,325			(23,944	)		(22.1	)%
Depreciation and amortization		187,207			168,053			19,154			11.4	%
Impairment of long-lived assets		2,300			3,330			(1,030	)		(30.9	)%
Managed property payroll expenses		—			728			(728	)		n/m
Restructuring expenses		—			605			(605	)		n/m
Acquisition transaction expenses		—			235			(235	)		n/m
Total operating expenses		865,989			821,827			44,162			5.4	%
Gain on sale of hotel properties		864			—			864			n/m
Other income		388			1,134			(746	)		(65.8	)%
Income from operations		348,738			312,125			36,613			11.7	%
Other non-operating expense		3,763			—			3,763			n/m
Interest expense, net		149,364			234,459			(85,095	)		(36.3	)%
Income before income tax expense		195,611			77,666			117,945			151.9	%
Income tax expense (benefit)		45,057			(4,990	)		50,047			(1002.9	)%
Net income		150,554			82,656			67,898			82.1	%
Net (income) loss attributable to noncontrolling interests(1)		(110,958	)		3,575			(114,533	)		(3203.7	)%
Net income attributable to common shareholders or members	$	39,596		$	86,231		$	(46,635	)		(54.1	)%

(1) Noncontrolling interests in Extended Stay America, Inc. include approximately 45% of ESH REIT’s common equity and 125 shares of ESH REIT preferred stock.

n/m = not meaningful

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The following table presents key operating metrics, including occupancy, ADR, RevPAR and renovation displacement data for our hotels for the years ended December 31, 2014 and 2013, respectively:

	Year Ended December 31, 2014			Year Ended December 31, 2013			Change
Number of hotels (as of December 31)		682			684			(2	)
Number of rooms (as of December 31)		76,000			76,219			(219	)
Occupancy		74.3	%		74.2	%		10 bps
ADR	$	57.93		$	54.15			7.0	%
RevPAR	$	43.02		$	40.18			7.1	%
Hotel Inventory (as of December 31)(1):
Renovated Extended Stay America(2)		335			230			105
Unrenovated Extended Stay America and other		300			407			(107	)
Crossland Economy Studios		47			47			—
Total number of hotels		682			684			(2	)
Renovation Displacement Data (in thousands, except percentages)(1):
Total available room nights		27,795			27,722			73
Room nights displaced from renovation		224			222			2
% of available room nights displaced		0.8	%		0.8	%		0 bps

(1) See “—Liquidity and Capital Resources – Capital Expenditures – Hotel Reinvestment Program” for a discussion of our phased capital investment programs across our portfolio.

(2) Includes three Extended Stay Canada-branded hotels.

Room revenues. Room revenues increased by approximately $81.9 million, or 7.3%, to approximately $1,195.8 million for the year ended December 31, 2014 compared to approximately $1,114.0 million for the year ended December 31, 2013. The increase in room revenues was due to a 7.0% increase in ADR and a 10 bps increase in occupancy, resulting in a 7.1% increase in RevPAR, which was primarily a result of a shift in our customer mix to a greater number of high yield, shorter-stay guests as well as our hotel reinvestment program, operating and service initiatives and more consistent pricing and discount policies.

Other hotel revenues. Other hotel revenues remained relatively consistent, decreasing by approximately $0.1 million, or 0.7%, to approximately $17.7 million for the year ended December 31, 2014 compared to approximately $17.8 million for the year ended December 31, 2013.

Management fees, license fees and other revenues. Management fees, license fees and other revenues were $0 for the year ended December 31, 2014 compared to approximately $1.1 million for the year ended December 31, 2013. The decrease in these fees was due to the acquisition of two hotels on December 31, 2013 which we previously managed.

Hotel operating expenses. Hotel operating expenses increased by approximately $51.6 million, or 9.5%, to approximately $592.1 million for the year ended December 31, 2014 compared to approximately $540.6 million for the year ended December 31, 2013. The increase in hotel operating expenses was partly driven by an increase in marketing and reservation costs of approximately $17.9 million, primarily related to our national advertising campaign and the system-wide implementation of our central reservations call center. Additionally, the increase was impacted by increases in property insurance claims expense and repairs and maintenance expense of approximately $13.6 million, an increase in utilities expense of approximately $4.7 million and increases in hotel personnel expense, real estate tax expense and loss on disposal of assets.

Hotel Operating Margin (as defined in “—Non-GAAP Financial Measures—Hotel Operating Profit and Hotel Operating Margin”) decreased to 51.7% for the year ended December 31, 2014 compared to 52.5% for the year ended December 31, 2013. Total room and other hotel revenues increased by approximately $81.7 million

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for the year ended December 31, 2014 compared to the year ended December 31, 2013, while Hotel Operating Profit (as defined in “—Non-GAAP Financial Measures—Hotel Operating Profit and Hotel Operating Margin”), excluding the loss on disposal of assets, increased by approximately $32.9 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 40.2%.

General and administrative expenses. General and administrative expenses decreased by approximately $23.9 million, or 22.1%, to approximately $84.4 million for the year ended December 31, 2014 compared to approximately $108.3 million for the year ended December 31, 2013. During 2013, costs related to our initial public offering totaled approximately $25.8 million and consisted of approximately $14.6 million in equity-based compensation expense as a result of the modification of the vesting schedules of awards outstanding prior to the Pre-IPO Transactions and approximately $11.2 million primarily related to the Pre-IPO Transactions. Further, we incurred approximately $9.4 million related to our rebranding initiative, which was completed in 2013. Excluding these costs, general and administrative expenses increased by approximately $11.3 million, or 15.5%, mainly due to an increase in equity-based compensation expense of approximately $3.2 million, public company transition costs of approximately $3.0 million, including approximately $1.5 million in secondary offering costs, and $1.9 million in consulting fees related to the implementation of certain key strategic initiatives, including review of our corporate infrastructure. The remaining increase was primarily due to ongoing costs related to our new revenue management system and new human resources payroll system.

Depreciation and amortization. Depreciation and amortization increased by approximately $19.2 million, or 11.4%, to approximately $187.2 million for the year ended December 31, 2014 compared to approximately $168.1 million for the year ended December 31, 2013. The increase in depreciation and amortization was primarily due to an increase in investment in hotel assets as a result of our hotel reinvestment program.

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 years ended December 31, 2014 and 2013, we recognized impairment charges related to property and equipment of approximately $2.3 million and $3.3 million, respectively.

Managed property payroll expenses. Managed property payroll expenses were $0 for the year ended December 31, 2014 compared to approximately $0.7 million for the year ended December 31, 2013. This decrease was due to our acquisition of two hotels on December 31, 2013 which we previously managed.

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 that consisted of personnel relocation, recruitment and separation payments. No restructuring expenses were incurred during the year ended December 31, 2014.

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 17 hotels from HFI Acquisitions Company LLC (“HFI”) in December 2012 and two hotels from LVP Acquisition Corporation (“LVP”) in December 2013. No acquisition transaction expenses were incurred during the year ended December 31, 2014.

Gain on sale of hotel properties.During the year ended December 31, 2014, we recognized a gain on sale of hotel properties of approximately $0.9 million, which related to the sale of our two Hometown Inn-branded hotels.

Other-non operating expense. During the year ended December 31, 2014, we recognized a non-cash foreign currency transaction loss of approximately $3.8 million related to the appreciation of the U.S. dollar versus the Canadian dollar at one of our Canadian currency-based entities which has U.S. dollar denominated debt.

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Interest expense, net. In the fourth quarter of 2013 and subsequent to the Offering, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans, terminated the Extended Stay LLC revolving credit facility and entered into the ESH REIT Revolving Credit Facility. Also, the Corporation entered into the Corporation Revolving Credit Facility. In the second quarter of 2014, ESH REIT repaid the remaining outstanding $365.0 million of the 2012 Mezzanine Loans using principally all of the net proceeds from its 2014 Term Loan. As a result of these transactions, the Company’s total debt and mandatorily redeemable preferred stock decreased by approximately $693.0 million, or 19.2%, from approximately $3.6 billion as of September 30, 2013 to approximately $2.9 billion as of December 31, 2014, and its weighted-average interest rate decreased from approximately 5.4% as of September 30, 2013 to approximately 4.0% as of December 31, 2014. For the year ended December 31, 2014, net interest expense decreased by approximately $85.1 million, or 36.3%, to approximately $149.4 million compared to approximately $234.5 million for the year ended December 31, 2013.

For the year ended December 31, 2014, net interest expense includes approximately $9.4 million of debt extinguishment and other costs incurred in connection with the 2012 Mezzanine Loan prepayment of $365.0 million, which consist of prepayment penalties and other costs of approximately $4.3 million and the write-off of unamortized deferred financing costs of approximately $5.1 million. For the year ended December 31, 2013, net interest expense included approximately $27.1 million of debt extinguishment and other costs incurred in connection with the 2012 Mezzanine Loan prepayment of $715.0 million, the establishment of the Corporation Revolving Credit Facility and the ESH REIT Revolving Credit Facility and the termination of the Extended Stay LLC revolving credit facility, which consisted of prepayment penalties and other costs of approximately $15.4 million and the write-off of unamortized deferred financing costs of approximately $11.7 million.

Income tax expense (benefit). Our effective income tax rate was 23.0% for the year ended December 31, 2014 compared to (6.4)% for the year ended December 31, 2013, primarily due to legal, corporate structure and entity-related changes that were a result of the Pre-IPO Transactions, which included the recognition in 2013 of a deferred tax benefit at ESH REIT primarily related to net operating loss carryforwards recognized in connection with the change in ESH REIT’s expected distribution policy. Since the Corporation owns the Class A common stock of ESH REIT, which represents approximately 55% of the outstanding common stock of ESH REIT, approximately 55% of ESH REIT’s distributions are subject to corporate income tax. 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. ESH REIT will incur federal and state income tax at statutory rates on its taxable income not distributed.

Results of Operations—ESH REIT

ESH REIT owns all of its hotel properties. ESH REIT’s sole source of revenues is lease rental revenues and its hotel operating expenses reflect only those that are incurred directly related to ownership of the hotels. Costs reimbursed to ESA Management are reflected as a component of general and administrative expenses.

Comparison of Years Ended December 31, 2015 and December 31, 2014

As of December 31, 2014, ESH REIT owned 682 hotels consisting of 76,000 rooms. On December 8, 2015, ESH REIT sold a portfolio of 53 hotels, 47 of which operated under the Crossland Economy Studios brand and six of which operated under the Extended Stay America brand. As of December 31, 2015, ESH REIT owned 629 hotels consisting of approximately 69,400 rooms.

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The following table presents ESH REIT’s consolidated results of operations for the years ended December 31, 2015 and 2014, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31, 2015		Year Ended December 31, 2014			Change ($)			Change (%)
Revenues:Rental revenues from Extended Stay America, Inc.	$	719,635	$	684,205		$	35,430			5.2	%
Operating expenses:
Hotel operating expenses		97,062		93,826			3,236			3.4	%
General and administrative expenses		15,973		15,634			339			2.2	%
Depreciation and amortization		199,044		183,033			16,011			8.7	%
Total operating expenses		312,079		292,493			19,586			6.7	%
Gain on sale of hotel properties		116,616		864			115,752			13397.2	%
Other income		37		269			(232	)		(86.2	)%
Income from operations		524,209		392,845			131,364			33.4	%
Other non-operating expense		2,726		3,629			(903	)		(24.9	)%
Interest expense, net		134,780		143,232			(8,452	)		(5.9	)%
Income before income tax expense (benefit)		386,703		245,984			140,719			57.2	%
Income tax expense (benefit)		8,519		(1,110	)		9,629			(867.5	)%
Net income	$	378,184	$	247,094		$	131,090			53.1	%

Rental revenues from Extended Stay America, Inc. Rental revenues increased by approximately $35.4 million, or 5.2%, to approximately $719.6 million for the year ended December 31, 2015 compared to approximately $684.2 million for the year ended December 31, 2014. Rental revenues consist of fixed minimum rental payments recognized on a straight-line basis over the terms of the lease plus specified percentages of total hotel revenues over designated thresholds paid by the Operating Lessees. Percentage rental revenues of approximately $228.8 million and $190.2 million were recognized during the years ended December 31, 2015 and 2014, respectively. Percentage rental revenues increased due to increased total hotel revenues at the leased hotel properties. The appreciation of the U.S. dollar relative to the Canadian dollar partially offset this increase.

Hotel operating expenses. Hotel operating expenses increased by approximately $3.2 million, or 3.4%, to approximately $97.1 million for the year ended December 31, 2015 compared to approximately $93.8 million for the year ended December 31, 2014. The increase was primarily driven by an increase in property-related costs that were obligations of ESH REIT due to its ownership of the hotels, including loss on disposal of assets of approximately $3.6 million and real estate tax expense of $0.5 million due mainly to the reassessment of the tax values at our renovated properties. These increases were partially offset by a decrease in property insurance claims expense totaling approximately $0.7 million.

General and administrative expenses. General and administrative expenses increased by approximately $0.3 million, or 2.2%, to approximately $16.0 million for the year ended December 31, 2015 compared to approximately $15.6 million for the year ended December 31, 2014. The increase was mainly due to an increase in reimbursable costs of approximately $2.2 million to ESA Management for certain administrative services performed on ESH REIT’s behalf (including executive management, accounting, financial analysis, training and technology) as well as an increase in professional and other fees of approximately $0.8 million. These increases were partially offset by a decrease in public company transition costs and consulting fees totaling approximately $3.0 million.

Depreciation and amortization. Depreciation and amortization increased by approximately $16.0 million, or 8.7%, to approximately $199.0 million for the year ended December 31, 2015 compared to approximately $183.0

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million for the year ended December 31, 2014. The increase in depreciation and amortization was primarily due to an increase in investment in hotel assets as a result of our hotel reinvestment program.

Gain on sale of hotel properties. During the year ended December 31, 2015, ESH REIT recognized a gain on sale of hotel properties of approximately $116.6 million, which related to the sale of a portfolio of 53 hotels, 47 of which operated under the Crossland Economy Studios brand and six of which operated under the Extended Stay America brand. During the year ended December 31, 2014, ESH REIT recognized a gain on sale of hotel properties of approximately $0.9 million, which related to the sale of its two Hometown Inn-branded hotels.

Other-non operating expense. During the years ended December 31, 2015 and 2014, ESH REIT recognized non-cash foreign currency transaction losses of approximately $2.7 million and $3.6 million, respectively, mainly related to the appreciation of the U.S. dollar versus the Canadian dollar at one of its Canadian currency-based entities which has U.S. dollar denominated debt.

Interest expense, net. Excluding debt extinguishment costs of approximately $3.0 million and $9.4 million for the years ended December 31, 2015 and 2014, respectively, net interest expense decreased approximately $2.0 million, or 1.5%, to approximately $131.8 million for the year ended December 31, 2015 compared to approximately $133.8 million for the year ended December 31, 2014 primarily due to a decrease in ESH REIT’s outstanding debt. As of December 31, 2015, ESH REIT had total debt outstanding, net of unamortized deferred financing costs and debt discount, of approximately $2,762.4 million compared to approximately $2,859.4 million as of December 31, 2014. ESH REIT’s weighted-average interest rate increased to approximately 4.4% as of December 31, 2015 from 3.9% as of December 31, 2014 primarily due to the issuance of the 2025 Notes, the proceeds of which were used to repay $500.0 million of the outstanding balance under its 2012 Mortgage Loan, a portion of which had a varying floating interest rate.

Income tax expense (benefit).ESH REIT’s effective income tax rate increased by approximately 2.7 percentage points to a provision of approximately 2.2% for the year ended December 31, 2015 compared to a benefit of approximately 0.5% for the year ended December 31, 2014, primarily due to the use of ESH REIT’s existing net operating loss carryforward. 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. In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. ESH REIT will incur federal and state income tax at statutory rates on its taxable income not distributed.

Comparison of Years Ended December 31, 2014 and December 31, 2013

For the year ended December 31, 2014 and 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 performs the management and administrative services previously performed by HVM, are not consolidated within ESH REIT’s results of operations, as ESA Management is owned by the Corporation.

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

• For the year ended December 31, 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, ESH REIT’s consolidated results of operations reflect ESH REIT’s sole source of revenues, lease rental revenues, which are not eliminated in consolidation due to the fact that ESH REIT does not own the Operating Lessees. Prior to the Pre-IPO Transactions, ESH REIT’s consolidated results of operations reflected room and other hotel revenues, as lease rental revenues and expenses with respect to the operating leases between ESH REIT and its previously owned, consolidated taxable REIT subsidiaries, the Operating Lessees, eliminated in consolidation.

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• For the year ended December 31, 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, ESH REIT’s consolidated results of operations reflect only those hotel operating expenses that are incurred directly related to ownership of the hotels. 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 tax expense and property insurance expense, which are directly related to the ownership of the hotels) or by the Operating Lessees (i.e., utilities expense, hotel personnel expense, marketing expense and repairs and maintenance expense, which are incurred by the Operating Lessees).

• For the year ended December 31, 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, costs reimbursed to ESA Management do not eliminate in consolidation and are reflected as a component of general and administrative expenses. Prior to the Pre-IPO Transactions, since ESH REIT consolidated the results of operations of HVM, administrative costs paid to HVM eliminated in consolidation, and general and administrative expenses included all of ESH REIT predecessor’s overhead expenses.

As of December 31, 2013, ESH REIT owned 684 hotels consisting of approximately 76,200 rooms. In July 2014, ESH REIT sold two hotels which operated under the Hometown Inn brand. Therefore, as of December 31, 2014, ESH REIT owned 682 hotels consisting of 76,000 rooms.

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The following table presents ESH REIT’s consolidated results of operations for the years ended December 31, 2014 and 2013, including the amount and percentage change in these results between the periods (in thousands):

	Year Ended December 31, 2014			Year Ended December 31, 2013			Change ($)			Change (%)
Revenues:
Rental revenues from Extended Stay America, Inc.	$	684,205		$	71,900		$	612,305			(851.6	)%
Hotel room revenues		—			983,950			(983,950	)		n/m
Other hotel revenues		—			15,576			(15,576	)		n/m
Management fees and other revenues		—			1,113			(1,113	)		n/m
Total revenues		684,205			1,072,539			(388,334	)		(36.2	)%
Operating expenses:
Hotel operating expenses		93,826			478,727			(384,901	)		(80.4	)%
General and administrative expenses		15,634			86,676			(71,042	)		(82.0	)%
Depreciation and amortization		183,033			167,185			15,848			9.5	%
Impairment of long-lived assets		—			3,330			(3,330	)		n/m
Managed property payroll expenses		—			639			(639	)		n/m
Trademark license fees		—			2,998			(2,998	)		n/m
Restructuring expenses		—			605			(605	)		n/m
Acquisition transaction expenses		—			235			(235	)		n/m
Total operating expenses		292,493			740,395			(447,902	)		(60.5	)%
Gain on sale of hotel properties		864			—			864			n/m
Other income		269			1,075			(806	)		(75.0	)%
Income from operations		392,845			333,219			59,626			17.9	%
Other non-operating expense		3,629			—			3,629			n/m
Interest expense, net		143,232			233,629			(90,397	)		(38.7	)%
Income before income tax benefit		245,984			99,590			146,394			147.0	%
Income tax benefit		(1,110	)		(876	)		(234	)		26.7	%
Net income		247,094			100,466			146,628			145.9	%
Net income attributable to noncontrolling interests		—			(730	)		730			n/m
Net income attributable to common shareholders or members	$	247,094		$	99,736		$	147,358			147.7	%

n/m = not meaningful

Rental revenues from Extended Stay America, Inc. Rental revenues were approximately $684.2 million for the year ended December 31, 2014 compared to approximately $71.9 million for the year ended December 31, 2013. For the year ended December 31, 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, the consolidated results of operations of ESH REIT include rental revenues associated with the operating leases, since during these periods, rental revenues were not eliminated in consolidation. Rental revenues consist of fixed minimum rental payments recognized on a straight-line basis over the terms of the lease plus specified percentages on total hotel revenues over designated thresholds paid by the Operating Lessees. Percentage rental revenues of approximately $190.2 million were recognized during the year ended December 31, 2014. 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. During that period, ESH REIT’s rental revenues, as well as the Operating Lessee’s rental expenses, eliminated in consolidation.

Hotel room revenues. In connection with the Pre-IPO Transactions, ESH REIT transferred ownership of the Operating Lessees to the Corporation. ESH REIT’s consolidated results of operations for the year ended

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December 31, 2014 do not include results of operations of the Operating Lessees while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included results of operations of the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions.

Other hotel revenues. In connection with the Pre-IPO Transactions, ESH REIT transferred ownership of the Operating Lessees to the Corporation. ESH REIT’s consolidated results of operations for the year ended December 31, 2014 do not include results of operations of the Operating Lessees while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included the results of operations of the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions.

Management fees and other revenues. ESA Management, 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. ESH REIT’s consolidated results of operations for the year ended December 31, 2014 do not include results of operations of ESA Management while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included results of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions.

Hotel operating expenses. In connection with the Pre-IPO Transactions, ESH REIT transferred ownership of the Operating Lessees to the Corporation. ESH REIT’s consolidated results of operations for the year ended December 31, 2014 do not include results of operations of the Operating Lessees while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included results of operations of the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions. Hotel operating expenses decreased by approximately $384.9 million, or 80.4%, to approximately $93.8 million for the year ended December 31, 2014 compared to approximately $478.7 million for the year ended December 31, 2013. This decrease was due to the fact that for the year ended December 31, 2014, hotel operating expenses include only those expenses directly related to ownership of the hotels, such as real estate tax expense and property insurance expense, and do not include hotel operating expenses incurred by the Operating Lessees.

Subsequent to the Pre-IPO Transactions, Hotel Operating Margin is not a relevant operating measure for ESH REIT as its sole source of revenues is rental revenue generated from leasing the hotel properties and its hotel operating expenses are limited to expenses directly related to ownership of the hotels.

General and administrative expenses. ESA Management acquired all of the assets and assumed all of the liabilities of HVM in connection with the Pre-IPO Transactions. ESH REIT’s consolidated results of operations for the year ended December 31, 2014 do not include results of operations of ESA Management while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included results of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions. General and administrative expenses decreased by approximately $71.0 million, or 82.0%, to approximately $15.6 million for the year ended December 31, 2014 compared to approximately $86.7 million for the year ended December 31, 2013. This decrease was mainly due to the fact that for the year ended December 31, 2014, general and administrative expenses do not include direct expenses of ESA Management. For the year ended December 31, 2014, general and administrative expenses include professional fees, including legal, audit, tax, board and other fees of approximately $5.0 million, public company transition costs of approximately $1.4 million, which include secondary offering costs, and consulting fees of approximately $1.9 million related to the implementation of certain key strategic initiatives, including review of our corporate infrastructure. Also included are reimbursed costs of approximately $7.3 million that ESH REIT incurred under its services agreement with ESA Management for certain overhead services performed on ESH REIT’s behalf (including executive management, accounting, financial analysis, training and technology).

Depreciation and amortization. Depreciation and amortization increased by approximately $15.8 million, or 9.5%, to approximately $183.0 million for the year ended December 31, 2014 compared to approximately $167.2 million for the year ended December 31, 2013. The increase in depreciation and amortization was primarily due to an increase in investment in hotel assets as a result of our hotel reinvestment program.

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Impairment of long-lived assets. Asset impairments are recorded as required based on an evaluation of property and equipment for impairment. No impairment charges were incurred by ESH REIT during the year ended December 31, 2014. During the year ended December 31, 2013, ESH REIT recognized an impairment charge related to property and equipment of approximately $3.3 million.

Managed property payroll expenses. ESA Management acquired all of the assets and assumed all of the liabilities of HVM in connection with the Pre-IPO Transactions. ESH REIT’s consolidated results of operations for the year ended December 31, 2014 do not include results of operations of ESA Management while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included results of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions.

Trademark license fees. In connection with the Pre-IPO Transactions, ESH REIT transferred ownership of the Operating Lessees to the Corporation. ESH REIT’s consolidated results of operations for the year ended December 31, 2014 do not include results of operations of the Operating Lessees while ESH REIT’s consolidated results of operations for the year ended December 31, 2013 included results of operations of the Operating Lessees for the period from January 1, 2013 through the Pre-IPO Transactions.

Restructuring expenses. During the year ended December 31, 2013, HVM initiated an operations restructuring which changed certain aspects of its property staffing model, and incurred costs of approximately $0.6 million that consisted of personnel relocation, recruitment and separation payments. No restructuring expenses were incurred during the year ended December 31, 2014.

Acquisition transaction expenses. During the year ended December 31, 2013, ESH REIT incurred acquisition transaction costs of approximately $0.2 million related to the acquisition of assets of 17 hotels from HFI in December 2012 and two hotels from LVP in December 2013. No acquisition transaction expenses were incurred during the year ended December 31, 2014.

Gain on sale of hotel properties. During the year ended December 31, 2014, ESH REIT recognized a gain on sale of hotel properties of approximately $0.9 million, which related to the sale of its two Hometown Inn-branded hotels.

Other-non operating expense. During the year ended December 31, 2014, ESH REIT recognized a non-cash foreign currency transaction loss of approximately $3.6 million related to the appreciation of the U.S. dollar versus the Canadian dollar at one of ESH REIT’s Canadian currency-based entities which has U.S. dollar denominated debt.

Interest expense, net. In the fourth quarter of 2013 and subsequent to the Offering, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans, terminated the Extended Stay LLC revolving credit facility and entered into the ESH REIT Revolving Credit Facility. In the second quarter of 2014, ESH REIT repaid the remaining outstanding $365.0 million of the 2012 Mezzanine Loans using principally all of the net proceeds from its 2014 Term Loan. As a result of these transactions, ESH REIT’s total debt decreased by approximately $714.2 million, or 19.8%, from approximately $3.6 billion as of September 30, 2013 to approximately $2.9 billion as of December 31, 2014, and its weighted-average interest rate decreased from approximately 5.4% as of September 30, 2013 to approximately 3.9% as of December 31, 2014.

For the year ended December 31, 2014, net interest expense decreased by approximately $90.4 million, or 38.7%, to approximately $143.2 million compared to approximately $233.6 million for the year ended December 31, 2013. For the year ended December 31, 2014, net interest expense includes approximately $9.4 million of debt extinguishment and other costs incurred in connection with the 2012 Mezzanine Loan prepayments of $365.0 million, which consist of prepayment penalties and other costs of approximately $4.3 million and the write-off of unamortized deferred financing costs of approximately $5.1 million. For the year ended December 31, 2013, net interest expense included approximately $26.9 million of debt extinguishment and other costs incurred in connection with the 2012 Mezzanine Loan prepayment of $715.0 million, the establishment of the ESH REIT Revolving Credit Facility and the termination of the Extended Stay LLC revolving credit facility, which consisted of prepayment penalties and other costs of approximately $15.2 million and the write-off of unamortized deferred financing costs of approximately $11.7 million.

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Income tax benefit. ESH REIT’s effective income tax rate was approximately (0.5)% for the year ended December 31, 2014 compared to (0.9)% for the year ended December 31, 2013, primarily due to the 2013 recognition of a deferred tax benefit of approximately $6.6 million primarily related to net operating loss carryforwards recognized in connection with the change in ESH REIT’s 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. ESH REIT will incur federal and state income tax at statutory rates on its taxable income not distributed.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

EBITDA is defined as net income excluding: (1) net interest expense; (2) income tax expense (benefit); and (3) depreciation and amortization. EBITDA is a commonly used measure of performance in many industries. The Company believes 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 net interest expense, our corporate structure, primarily income tax expense (benefit) 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.

The Company uses 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 operating performance and that the presentation of Adjusted EBITDA, when combined with the U.S GAAP presentation of net income, net income per common 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:

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

• Other non-operating expense (income)—We exclude the effect of other non-operating expense or income, as we believe non-cash foreign currency transaction loss or gain is 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 they are not reflective of ongoing or future operating performance.

• Gain on sale of hotel properties—We exclude the gain on sale of hotel properties, as we believe it is not reflective of ongoing or future operating performance.

• Restructuring expenses—We exclude restructuring expenses that include employee separation payments and other restructuring costs, as we believe they are not reflective of ongoing or future operating performance.

• Acquisition transaction expenses—We exclude acquisition transaction expenses associated with the acquisition of hotels as we believe they are not reflective of ongoing or future operating performance.

• Other expenses—We exclude the effect of other expenses that we do not consider reflective of ongoing or future operating performance including the following: public company transition costs, including costs incurred in connection with secondary offerings, transaction costs associated with the sale of hotel properties, costs related to the preparations for our initial public offering, consulting fees related to the implementation of certain key strategic initiatives and loss on disposal of assets.

EBITDA and Adjusted EBITDA as presented may not be comparable to similar measures calculated by other companies. This information should not be considered as an alternative to net income, net income per

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common share, cash flow from operations or any other operating performance measure calculated in accordance with U.S. 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 and assessments of operating performance. The Company’s consolidated and combined statements of operations and cash flows include capital expenditures, net interest expense 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 measures of our liquidity or indicative of funds available to fund our cash needs, including our ability to pay distributions.

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, consolidated enterprise, which is reflected in the consolidated and combined Company results of operations; therefore, we believe these performance measures are meaningful for the Company only. The following table provides a reconciliation of net income to EBITDA and Adjusted EBITDA for the Company for the years ended December 31, 2015, 2014 and 2013 (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Net income	$	283,022		$	150,554		$	82,656
Interest expense, net		137,782			149,364			234,459
Income tax expense (benefit)		76,536			45,057			(4,990	)
Depreciation and amortization		203,897			187,207			168,053
EBITDA		701,237			532,182			480,178
Non-cash equity-based compensation		10,500			8,803			20,168
Other non-operating expense		2,732			3,763			—
Impairment of long-lived assets		9,011			2,300			3,330
Gain on sale of hotel properties		(130,894	)		(864	)		—
Restructuring expenses		—			—			605
Acquisition transaction expenses		—			—			235
Other expenses		10,495	(1)		10,476	(2)		14,094	(3)
Adjusted EBITDA	$	603,081		$	556,660		$	518,610

(1) Includes costs incurred in connection with the preparation of the registration statement filed in June 2015 and the November 2015 secondary offering of approximately $0.9 million, transaction costs of approximately $0.3 million associated with the sale of hotel properties and loss on disposal of assets of approximately $9.3 million.

(2) Includes public company transition costs of approximately $3.0 million, including approximately $1.5 million in costs incurred in connection with the August 2014 secondary offering, consulting fees of approximately $1.9 million related to the implementation of certain key strategic initiatives, including review of our corporate infrastructure, and loss on disposal of assets of approximately $5.6 million.

(3) Includes costs related to preparations for our initial public offering of approximately $11.2 million, consisting primarily of the Pre-IPO Transactions, and loss on disposal of assets of approximately $2.9 million.

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 used by management to evaluate hotel operating profitability. 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.

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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, consolidated enterprise, which is reflected in the consolidated and combined Company results of operations; therefore, we believe these performance measures are meaningful for the Company only. The following table provides a reconciliation of 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 Company for the years ended December 31, 2015, 2014 and 2013 (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Room revenues	$	1,265,653		$	1,195,816		$	1,113,956
Other hotel revenues		19,100			17,659			17,787
Total hotel revenues		1,284,753			1,213,475			1,131,743
Hotel operating expenses(1)		594,788			586,497			537,661
Hotel Operating Profit	$	689,965		$	626,978		$	594,082
Hotel Operating Margin		53.7	%		51.7	%		52.5	%

(1) Excludes loss on disposal of assets of approximately $9.3 million, $5.6 million and $2.9 million, respectively.

Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share

We present Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share as supplemental measures of the Company’s operating performance. We believe that these are useful measures for investors since our Paired Shares, directly through the common stock of the Corporation and Class B common stock of ESH REIT, and indirectly through the Corporation’s ownership of the Class A common stock of ESH REIT, entitle holders of our Paired Shares to participate in 100% of the common equity and earnings of both the Corporation and ESH REIT. As required by U.S. GAAP, net income attributable to common shareholders excludes earnings attributable to ESH REIT’s Class B common shares, a noncontrolling interest. Based on the limitation on transfer provided for in each of the Corporation’s and ESH REIT’s charters, shares of common stock of the Corporation and shares of Class B common stock of ESH REIT are transferrable and tradable only in combination as units, each unit consisting of one share of the Corporation’s common stock and one share of ESH REIT Class B common stock. As a result, we believe that Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share represent useful measures to holders of our Paired Shares.

Paired Share Income is defined as the sum of net income attributable to common shareholders or members and noncontrolling interests attributable to Class B common shares of ESH REIT. Adjusted Paired Share Income is defined as Paired Share Income adjusted for items that, net of income taxes, we believe are not reflective of our ongoing or future operating performance. We adjust Paired Share Income for the following items, net of income taxes, and refer to this measure as Adjusted Paired Share Income: debt extinguishment costs, other non-operating expense (including foreign currency transaction gain or loss), impairment of long-lived assets, gain on sale of hotel properties, restructuring expenses, acquisition transaction expenses and other expenses, such as public company transition costs, including costs incurred in connection with secondary offerings, transaction costs associated with the sale of hotel properties, costs related to the preparations for our initial public offering, consulting fees related to the implementation of certain key strategic initiatives and loss on disposal of assets. With the exception of equity-based compensation, an ongoing charge, and debt extinguishment costs, these adjustments (other than the effect of income taxes) are the same as those used in the reconciliation of EBITDA to Adjusted EBITDA.

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Adjusted Paired Share Income per Paired Share is defined as Adjusted Paired Share Income divided by the number of Paired Shares outstanding on a basic and diluted basis. Until such time as the number of outstanding common shares of the Corporation and Class B common shares of ESH REIT differ, we believe Adjusted Paired Share Income per Paired Share is useful to investors, as it represents the economic risks and rewards related to an investment in our Paired Shares. We believe that Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share provide meaningful indicators of the Company’s operating performance in addition to separate and/or individual analyses of net income attributable to common shareholders of the Corporation and net income attributable to Class B common shareholders of ESH REIT, each of which is impacted by specific U.S. GAAP requirements, including the recognition of contingent lease rental revenues and the recognition of lease rental revenues on a straight-line basis, and may not necessarily reflect how cash flows are generated on an individual entity or total enterprise basis. Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share should not be considered as an alternative to net income of the Company, net income of the Corporation, net income of ESH REIT, net income per share of common stock of the Corporation, net income per share of Class A or Class B common stock of ESH REIT or any other operating measure calculated in accordance with U.S. GAAP.

Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share 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, consolidated enterprise, which is reflected in the consolidated and combined Company results of operations; therefore, we believe these performance measures are meaningful for the Company only.

The following table provides a reconciliation of net income attributable to common shareholders or members to Paired Share Income, Adjusted Paired Share Income and a calculation of Adjusted Paired Share Income per Paired Share for the years ended December 31, 2015, 2014 and 2013 (in thousands, except per Paired Share data):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Net income attributable to common shareholders or members	$	113,040		$	39,596		$	86,231
Noncontrolling interests attributable to Class B common shares of ESH REIT		169,966			110,942			(4,305	)(1)
Paired Share Income		283,006			150,538			81,926
Debt extinguishment costs		2,392			7,185			22,984
Other non-operating expense		2,061			2,871			—
Impairment of long-lived assets		6,598			1,771			3,245
Gain on sale of hotel properties		(107,726	)		(659	)		—
Restructuring expenses		—			—			576
Acquisition transaction expenses		—			—			229
Other expenses		8,368	(2)		8,005	(3)		12,869	(4)
Adjusted Paired Share Income	$	194,699		$	169,711		$	121,829
Adjusted Paired Share Income per Paired Share – basic	$	0.95		$	0.83		$	0.70
Adjusted Paired Share Income per Paired Share – diluted	$	0.95		$	0.83		$	0.69
Weighted average Paired Shares outstanding – basic		204,211			203,548			174,894
Weighted average Paired Shares outstanding – diluted		204,567			204,508			176,268

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(1) Prior to the change in our legal and corporate structure in November 2013, which occurred in connection with the Corporation’s and ESH REIT’s initial public offering, no portion of the Company’s (i.e., the Paired Shares’) noncontrolling interests represented interests attributable to Class B common shares of ESH REIT.

(2) Includes costs incurred in connection with the preparation of the registration statement filed in June 2015 and the November 2015 secondary offering of approximately $0.9 million pre-tax, transaction costs of approximately $0.3 million pre-tax associated with the sale of hotel properties and loss on disposal of assets of approximately $9.3 million pre-tax, which total approximately $8.4 million after-tax.

(3) Includes public company transition costs of approximately $3.0 million pre-tax, including approximately $1.5 million pre-tax in costs incurred in connection with the August 2014 secondary offering, consulting fees of approximately $1.9 million pre-tax related to the implementation of certain key strategic initiatives, including review of our corporate infrastructure, and loss on disposal of assets of approximately $5.6 million pre-tax, which total approximately $8.0 million after-tax.

(4) Includes costs related to preparations for our initial public offering of approximately $11.2 million pre-tax, consisting primarily of the Pre-IPO Transactions, and loss on disposal of assets of approximately $2.9 million pre-tax, which total approximately $12.9 million after-tax.

Inflation

We do not believe that inflation had a material effect on our business during the years ended December 31, 2015, 2014 or 2013. 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.

Liquidity and Capital Resources

Company Overview

On a consolidated and combined basis, we have historically generated significant cash flow from 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 $428.9 million for the year ended December 31, 2015. Our current liquidity requirements consist primarily of funds necessary to pay for operating expenses associated with our hotels, recurring maintenance and capital expenditures necessary to maintain our hotels, general and administrative expenses, interest expense, income taxes, scheduled principal payments (including debt maturity payments) on ESH REIT’s outstanding indebtedness, potential Paired Share repurchases, Corporation distributions and required ESH REIT distributions. 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 our hotel reinvestment program from a combination of cash on hand, cash flow from operations and/or borrowings under our revolving credit facilities (as described below), as needed. Other long-term liquidity requirements are expected to include the need to obtain funds to acquire, develop or construct additional hotels, as well as funds for principal payments on ESH REIT’s 2012 Mortgage Loan, the 2014 Term Loan and the 2025 Notes maturing between December 2017 and May 2025 as well as the repayment of any outstanding amounts under our revolving credit facilities which mature in November 2016. See Note 7 to the consolidated and combined financial statements of Extended Stay America, Inc. and Note 6 to the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K. We cannot assure you that the Corporation and/or ESH REIT will be able to refinance any of its debt on attractive terms at or before maturity or, on commercially reasonable terms or at all.

We expect to meet our long-term liquidity requirements through various sources of capital, including future debt or equity financings by the Corporation and/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 existing or prospective 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.

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The Company had cash and cash equivalents of approximately $373.2 million and restricted cash of approximately $84.4 million at December 31, 2015. Based upon the current level of operations, management believes that our cash flow from operations together with our cash balances and available borrowings under our revolving credit facilities will be adequate to meet our anticipated funding requirements and business objectives for the foreseeable future. We regularly review our capital structure and at any time may refinance or repay existing indebtedness, incur new indebtedness or issue or purchase debt or equity securities.

In May 2015, ESH REIT issued $500.0 million of the 2025 Notes. ESH REIT used the proceeds to repay $318.0 million of Component A and $182.0 million of Component B of the 2012 Mortgage Loan.

In June 2015, the Corporation and ESH REIT filed an automatic shelf registration statement with the SEC pursuant to which, from time to time, (i) the Corporation and ESH REIT may offer and sell an unlimited number of Paired Shares and (ii) certain selling stockholders (the “Selling Shareholders”) may offer and sell up to 142,960,388 Paired Shares. The Selling Shareholders consist solely of entities affiliated with the Sponsors and do not include officers or directors of the Corporation or ESH REIT. In November 2015, the Selling Shareholders sold 15,000,000 Paired Shares into the public market pursuant to the automatic shelf registration statement. As of December 31, 2015, the Corporation and ESH REIT have not sold any securities registered pursuant to the automatic shelf registration statement. As such, neither the automatic shelf registration statement nor the secondary offering have impacted the Company’s liquidity.

In December 2015, the Company sold a portfolio of 53 hotel properties, 47 of which operated under the Crossland Economy Studios brand and six of which operated under the Extended Stay America brand, and certain intellectual property of Crossland Economy Studios for $285.0 million. The Company received approximately $276.3 million in proceeds related to the sale and recognized a gain of approximately $130.9 million, net of closing costs and adjustments. ESH REIT repaid approximately $86.1 million of the outstanding balance of the 2012 Mortgage Loan in December 2015 using a portion of the net proceeds from the sale. The remaining proceeds are expected to be used to pay income tax associated with the gain on sale, repurchase Paired Shares or fund future capital expenditures, acquisitions, development or construction of new hotels in compliance with ESH REIT’s existing debt agreements. See Note 4 to each of the consolidated and combined financial statements of Extended Stay America, Inc. and the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K. At the same time, the Board of Directors of ESH REIT declared a special cash distribution of $0.19 per share, payable to ESH Hospitality, Inc.’s Class A and Class B common shareholders, totaling $86.5 million, $38.9 million of which is payable to holders of Paired Shares. Additionally, the Board of Directors of Extended Stay America, Inc. declared a special cash distribution of $0.06 per share, payable to Extended Stay America, Inc.’s common shareholders, totaling $12.3 million. These distributions, which total to $0.25 per Paired Share, were paid on January 18, 2016 to shareholders of record as of January 4, 2016.

On December 10, 2015, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized a combined Paired Share repurchase program for up to $100 million of the Paired Shares. On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares. The program expires on December 31, 2016. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice. As of December 31, 2015, we have not repurchased any Paired Shares pursuant to the combined Paired Share repurchase program.

On February 23, 2016, the Board of Directors of ESH REIT declared a cash distribution of $0.15 per Class A and Class B common share for the fourth quarter of 2015. Additionally, the Board of Directors of the Corporation declared a cash distribution of $0.02 per common share for the fourth quarter of 2015. These distributions, which total $0.17 per Paired Share, will be payable on March 22, 2016 to shareholders of record as

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of March 8, 2016. See “Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distribution Policies” for a description of our distribution policies.

The Corporation

The Corporation’s primary source of liquidity is distribution income it receives 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 has accumulated, and we expect that it will continue to accumulate, cash. We expect that it will continue to distribute cash to its common shareholders, and that over time it will return cash to ESH REIT in order to fund the renovation, acquisition, development 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, subject to the conditions contained in the ESH REIT Revolving Credit Facility, the 2014 Term Loan and the 2025 Notes. 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. Entering into an unsecured intercompany credit facility and the terms of such credit facility are subject to a number of factors, and we may not enter into an intercompany credit facility at all. The Corporation’s long-term liquidity requirements will also include the repayment of any outstanding amounts under, or refinancing of, the Corporation’s revolving credit facility which matures in November 2016 and is subject to a one-year extension.

The Corporation is expected to continue to pay distributions on its common stock to meet a portion of our expected distribution rate on our Paired Shares. In 2016, the Corporation intends to distribute at least $0.02 per quarter per share of common stock, unless its consolidated results of operations, net income, liquidity, cash flows, financial condition or prospects, economic conditions or other factors, including the ability to effectively execute certain tax planning strategies, differ from current assumptions. The payment of distributions in the future 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 distributions 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

ESH REIT’s primary source of liquidity is rental revenues derived from contractual lease arrangements with the Operating Lessees. ESH REIT’s primary use of liquidity is fixed costs of ownership of the hotel properties, including interest expense, scheduled principal payments (including debt maturity payments) on its outstanding indebtedness, real estate tax expense, property insurance expense, capital expenditures, including those capital expenditures related to our hotel reinvestment program, and the payment of distributions. Other long-term liquidity requirements are expected to include the need to obtain funds to acquire, develop or construct additional hotels. 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

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• 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.

In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. ESH REIT is 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.

In 2016, ESH REIT intends to distribute at least $0.15 per quarter per share of Class A and Class B common stock, unless its consolidated results of operations, net income, liquidity, cash flows, financial condition or prospects, economic conditions or other factors differ from current assumptions. To the extent distributions in respect of the Class B common stock of ESH REIT are not sufficient to meet our expected Paired Share distributions, the expected Paired Share distributions are expected to 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.

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, and as discussed above, ESH REIT will need to refinance all or a portion of its debt, including the 2012 Mortgage Loans, the 2014 Term Loan and the 2025 Notes, on or before maturity. ESH REIT’s long-term liquidity requirements will also include the repayment of any outstanding amounts under ESH REIT’s revolving credit facility which matures in November 2016, subject to a one year extension. See Note 6 to the consolidated financial statements of ESH Hospitality, Inc., which are included in Item 8 in this combined annual report on Form 10-K. We cannot assure you that ESH REIT will be able to refinance any of its debt on attractive terms at or before maturity, on commercially reasonable terms or at all.

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 tables and comparisons are provided for the Company:

Comparison of Years Ended December 31, 2015 and December 31, 2014

We had unrestricted cash and cash equivalents of approximately $373.2 million and $121.3 million at December 31, 2015 and 2014, respectively. The following table summarizes the changes in our cash and cash equivalents as a result of operating, investing and financing activities for the years ended December 31, 2015 and 2014 (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Change ($)
Cash provided by (used in):
Operating activities	$	428,889		$	370,485		$	58,404
Investing activities		66,289			(182,243	)		248,532
Financing activities		(243,180	)		(127,160	)		(116,020	)
Effects of changes in exchange rate on cash and cash equivalents		(83	)		(215	)		132
Net increase in cash and cash equivalents	$	251,915		$	60,867		$	191,048

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Cash Flows provided by Operating Activities

Cash flows provided by operating activities totaled approximately $428.9 million for the year ended December 31, 2015 compared to approximately $370.5 million for the year ended December 31, 2014, an increase of approximately $58.4 million. Cash flows from operations were positively impacted during the year ended December 31, 2015 by additional cash generated through improved hotel operating performance, specifically a 6.7% increase in RevPAR and a 200 bps increase in Hotel Operating Margin, slightly offset by higher income tax payments of approximately $33.4 million as a result of this improved performance and the Portfolio Sale.

Cash Flows provided by (used in) Investing Activities

Cash flows provided by investing activities totaled approximately $66.3 million for the year ended December 31, 2015 compared to cash flows used in investing activities of approximately $182.2 million for the year ended December 31, 2014. Cash flows provided by investing activities increased primarily due to the receipt of net proceeds of approximately $276.3 million from the Portfolio Sale in December 2015. This increase was partially offset by a decrease in proceeds related to insurable property events of approximately $8.7 million. Additionally, the Company increased its investment in property and equipment by approximately $31.5 million, primarily related to the renovation of a greater number of hotels in 2015, as evidenced by the fact that approximately 363,000 room nights were displaced from renovation during the year ended December 31, 2015 compared to approximately 224,000 room nights displaced from renovation during the year ended December 31, 2014.

Cash Flows used in Financing Activities

Cash flows used in financing activities totaled approximately $243.2 million for the year ended December 31, 2015 compared to approximately $127.2 million for the year ended December 31, 2014, an increase of approximately $116.0 million. Cash flows used in financing activities increased primarily due to an increase in net loan repayments of approximately $81.8 million, mainly related to the 2012 Mortgage Loan repayments of approximately $86.1 million in December 2015 as well as the mandatory prepayment of approximately $8.5 million on the 2014 Term Loan in March 2015 partially offset by 2014 revolving credit facility repayments of $20.0 million. Additionally, there was an increase in total distributions paid to holders of Paired Shares of approximately $26.9 million.

Comparison of Years Ended December 31, 2014 and December 31, 2013

We had unrestricted cash and cash equivalents of approximately $121.3 million and $60.5 million at December 31, 2014 and 2013, respectively. The following table summarizes the changes in our cash and cash equivalents as a result of operating, investing and financing activities for the years ended December 31, 2014 and 2013 (in thousands):

	Year Ended December 31, 2014			Year Ended December 31, 2013			Change ($)
Cash provided by (used in):
Operating activities	$	370,485		$	311,313		$	59,172
Investing activities		(182,243	)		(165,259	)		(16,984	)
Financing activities		(127,160	)		(188,977	)		61,817
Effects of changes in exchange rate on cash and cash equivalents		(215	)		(202	)		(13	)
Net increase (decrease) in cash and cash equivalents	$	60,867		$	(43,125	)	$	103,992

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Cash Flows provided by Operating Activities

Cash flows provided by operating activities totaled approximately $370.5 million for the year ended December 31, 2014 compared to approximately $311.3 million for the year ended December 31, 2013, an increase of approximately $59.2 million. Cash flows from operations increased primarily due to a decrease in interest payments as a result of the partial repayment of the 2012 Mezzanine Loans, as well as improved hotel operating performance, specifically a 10 bps increase in occupancy and a 7.0% increase in ADR, which led to a 7.1% increase in RevPAR. These increases were partially offset by higher income tax payments as a result of the Company’s change in legal and corporate structure.

Cash Flows used in Investing Activities

Cash flows used in investing activities totaled approximately $182.2 million for the year ended December 31, 2014 compared to approximately $165.3 million for the year ended December 31, 2013, an increase of approximately $17.0 million. Cash flows used in investing activities increased primarily due to an increase in restricted cash provided as collateral for insurance reserves of approximately $21.6 million and an increase in proceeds related to insurable property events of approximately $11.9 million. These increases were partially offset by the fact that no cash was used for hotel acquisitions in the year ended December 31, 2014 as compared to $16.4 million used for hotel acquisitions in the year ended December 31, 2013.

Cash Flows used in Financing Activities

Cash flows used in financing activities totaled approximately $127.2 million for the year ended December 31, 2014 compared to approximately $189.0 million for the year ended December 31, 2013, a decrease of approximately $61.8 million. Cash flows used in financing activities decreased primarily due to a decrease in net loan repayments of approximately $129.7 million. During 2013, the majority of the 2012 Mezzanine Loans were repaid using proceeds from the Offering and cash on hand, while the remaining balance was repaid during 2014 using principally all of the proceeds from the 2014 Term Loan. This decrease was offset by an increase in net payments of $40.0 million on revolving credit facilities and an increase in distributions paid to holders of Paired Shares of approximately $27.8 million.

Sources and Uses of Cash – ESH REIT

The following cash flow tables and comparisons are provided for ESH REIT:

Comparison of Years Ended December 31, 2015 and December 31, 2014

ESH REIT had unrestricted cash and cash equivalents of approximately $223.3 million and $33.8 million at December 31, 2015 and 2014, respectively. The following table summarizes the changes in ESH REIT’s cash and cash equivalents as a result of operating, investing and financing activities for the years ended December 31, 2015 and 2014 (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Change ($)
Cash provided by (used in):
Operating activities	$	511,985		$	432,857		$	79,128
Investing activities		61,034			(153,307	)		214,341
Financing activities		(383,579	)		(264,355	)		(119,224	)
Effects of changes in exchange rate on cash and cash equivalents		—			24			(24	)
Net increase in cash and cash equivalents	$	189,440		$	15,219		$	174,221

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Cash Flows provided by Operating Activities

Cash flows provided by operating activities totaled approximately $512.0 million for the year ended December 31, 2015 compared to approximately $432.9 million for the year ended December 31, 2014, an increase of approximately $79.1 million. Cash flows from operations increased primarily due to an increase in rental revenues collected from the Operating Lessees of approximately $69.3 million, primarily due to increased hotel revenues of ESH REIT’s leased hotel properties for the year ended December 31, 2015 as compared to the year ended December 31, 2014. This increase was supplemented by changes in certain working capital accounts.

Cash Flows provided by (used in) Investing Activities

Cash flows provided by investing activities totaled approximately $61.0 million for the year ended December 31, 2015 compared to cash flows used in investing activities of approximately $153.3 million for the year ended December 31, 2014. Cash flows provided by investing activities increased primarily due to the receipt of net proceeds of approximately $265.0 million from the sale of the portfolio of 53 hotels in December 2015. This increase was partially offset by a decrease in proceeds related to insurable property events of approximately $8.7 million. Additionally, ESH REIT increased its investment in property and equipment by approximately $32.8 million, primarily related to the renovation of a greater number of hotels in 2015, as evidenced by the fact that approximately 363,000 room nights were displaced from renovation during the year ended December 31, 2015 compared to approximately 224,000 room nights displaced from renovation during the year ended December 31, 2014.

Cash Flows used in Financing Activities

Cash flows used in financing activities totaled approximately $383.6 million for the year ended December 31, 2015 compared to approximately $264.4 million for the year ended December 31, 2014, an increase of approximately $119.2 million. Cash flows used in financing activities increased primarily due to an increase in net loan repayments of approximately $81.8 million, mainly related to the 2012 Mortgage repayments of approximately $86.1 million in December 2015 as well as the mandatory prepayment of approximately $8.5 million on the 2014 Term Loan in March 2015 partially offset by 2014 revolving credit facility repayments of $20.0 million. Additionally, there was an increase in distributions paid to ESH REIT’s holders of Class A and Class B common shares of approximately $32.2 million.

Comparison of Years Ended December 31, 2014 and December 31, 2013

ESH REIT had unrestricted cash and cash equivalents of approximately $33.8 million and $18.6 million at December 31, 2014 and 2013, respectively. The following table summarizes the changes in ESH REIT’s cash and cash equivalents as a result of operating, investing and financing activities for the years ended December 31, 2014 and 2013 (in thousands):

	Year Ended December 31, 2014			Year Ended December 31, 2013			Change ($)
Cash provided by (used in):
Operating activities	$	432,857		$	295,198		$	137,659
Investing activities		(153,307	)		(164,078	)		10,771
Financing activities		(264,355	)		(215,679	)		(48,676	)
Effects of changes in exchange rate on cash and cash equivalents		24			(147	)		171
Net increase (decrease) in cash and cash equivalents	$	15,219		$	(84,706	)	$	99,925

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Cash Flows provided by Operating Activities

Cash flows provided by operating activities totaled approximately $432.9 million for the year ended December 31, 2014 compared to approximately $295.2 million for the year ended December 31, 2013, an increase of approximately $137.7 million. Cash flow from operations increased primarily due to a decrease in interest payments as a result of the partial repayment of the 2012 Mezzanine Loans. For the year ended December 31, 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, ESH REIT’s cash flows from operations do not include cash flows from operations of the Operating Lessees or our management entity while ESH REIT’s cash flows from operations for the period from January 1, 2013 through the Pre-IPO Transactions included cash flows from operations of the Operating Lessees and our management entity.

Cash Flows used in Investing Activities

Cash flows used in investing activities totaled approximately $153.3 million for the year ended December 31, 2014 compared to approximately $164.1 million for the year ended December 31, 2013, a decrease of approximately $10.8 million. Cash flows used in investing activities decreased primarily due to the fact that no cash was used for hotel acquisitions in the year ended December 31, 2014 as compared to $16.2 million used for hotel acquisitions in the year ended December 31, 2013. This decrease was partially offset by an increase in proceeds related to insurable property events of approximately $11.9 million.

Cash Flows used in Financing Activities

Cash flows used in financing activities totaled approximately $264.4 million for the year ended December 31, 2014 compared to approximately $215.7 million for the year ended December 31, 2013, an increase of approximately $48.7 million. Cash flows used in financing activities increased primarily due to an increase in distributions paid to ESH REIT’s Class A and Class B common shareholders of approximately $162.5 million as well as net payments of $40.0 million on revolving credit facilities. These increases were partially offset by a decrease in net loan repayments of approximately $156.4 million. During 2013, the majority of the 2012 Mezzanine Loans were repaid using proceeds from the Offering and cash on hand, while the remaining balance was repaid during 2014 using principally all of the proceeds from the 2014 Term Loan.

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, 2015, 2014 and 2013, we incurred capital expenditures of approximately $204.7 million, $173.2 million and $172.5 million, respectively. These capital expenditures were primarily made as a result of our hotel reinvestment program, which remains ongoing. Funding for future capital expenditures is expected to be provided primarily from cash flows from operations or, to the extent necessary, the Corporation or ESH REIT Revolving Credit Facilities. In 2016, we expect to incur capital expenditures between $240.0 million and $260.0 million.

Hotel Reinvestment Program

Since 2011, we have been performing a significant number of hotel renovations and have been executing a phased capital investment program across our portfolio in order to seek to drive increases in ADR and incremental market share gains. 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. Prior to undertaking capital investment at a hotel, management determines whether, in its view, the investment is likely to result in incremental revenues and profits and achieve a return on investment that management believes would meet our return criteria.

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A hotel renovation generally requires approximately $1.0 million in capital spend per hotel. Hotel renovations typically include remodeling of common areas, new paint, carpet, signage, tile or vinyl flooring and counters in the 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.

We have undertaken our hotel reinvestment program in phases. As of December 31, 2015, we have substantially completed renovations at 463 hotels, with total incurred costs of approximately $456.3 million. Also, as of December 31, 2015, we are in the process of implementing renovations at 13 additional hotels and will begin renovations at an additional 43 hotels during the first quarter of 2016, with combined estimated total costs of approximately $62.7 million. Renovations for all remaining Extended Stay America-branded hotels are expected to be completed by early 2017, with estimated total costs of approximately $125.8 million.

Rebranding

The Company incurred no rebranding costs during the years ended December 31, 2015 and 2014. In 2013, we completed an extensive rebranding program to consolidate hotels that were operated under the former brands Homestead Studio Suites, Studio Plus and Extended Stay Deluxe to our core brand, Extended Stay America. We spent approximately $9.4 million on rebranding during the year ended December 31, 2013. Costs associated with rebranding were recorded as general and administrative expenses.

Our Indebtedness

As of December 31, 2015, our total indebtedness, including mandatorily redeemable preferred stock, was approximately $2.8 billion. For a detailed discussion of our indebtedness during the periods presented, see Notes 7 and 8 to the consolidated and combined financial statements of Extended Stay America, Inc. and Note 6 to the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2015 (in thousands):

	Payments Due by Period
	Total		2016		2017		2018		2019		2020		Thereafter
ESH REIT 2012 Mortgage Loan(1)	$	1,931,157	$	—	$	111,157	$	—	$	1,820,000	$	—	$	—
ESH REIT 2014 Term Loan (2)		366,463		—		—		—		366,463		—		—
ESH REIT 2025 Notes		500,000		—		—		—		—		—		500,000
Corporation mandatorily redeemable preferred stock		21,202		—		—		—		—		21,202		—
Interest payments on outstanding debt obligations(3)(4)		629,623		125,281		125,182		121,344		112,028		27,663		118,125
Operating lease obligations		96,934		2,649		2,718		2,788		2,843		2,964		82,972
Other commitments(5)		5,118		299		299		299		299		321		3,601
Total contractual obligations	$	3,550,497	$	128,229	$	239,356	$	124,431	$	2,301,633	$	52,150	$	704,698

(1) The 2012 Mortgage Loan is included on the Company’s consolidated balance sheet net of unamortized deferred financing costs of approximately $19.5 million.

(2) The 2014 Term Loan is included on the Company’s consolidated balance sheet net of unamortized deferred financing costs and debt discount of approximately $3.6 million and $1.3 million, respectively. No mandatory prepayment is required during the three months ending March 31, 2016, based on the calculation of Excess Cash Flow for the year ended December 31, 2015. Contractual obligations exclude mandatory prepayments related to ESH REIT’s Excess Cash Flow for future years as they are not currently known.

81

(3) Floating rate interest calculated using the base rate plus LIBOR floor of 0.75% for the 2014 Term Loan.

(4) Includes dividends payable on the Corporation’s mandatorily redeemable preferred stock.

(5) 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.

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, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements 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 periods. Actual results may differ significantly from these estimates and assumptions. We believe the following accounting policies, which are described in detail in Note 2 to each of the consolidated and combined financial statements of Extended Stay America, Inc. and the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 of this combined annual report on Form 10-K, 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: property and equipment, goodwill, revenue recognition, income taxes, equity-based compensation and investments. 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.

Recent Accounting Pronouncements

For discussion of recently issued accounting standards, see Note 2 to each of the consolidated and combined financial statements of Extended Stay America, Inc. and the consolidated financial statements of ESH Hospitality, Inc., both of which are included in Item 8 in this combined annual report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Both the Corporation and ESH REIT may continue to seek to reduce earnings and cash flow volatility associated with changes in interest rates, foreign currency exchange rates and commodity prices by entering into financial arrangements to provide a hedge against a portion of the risks associated with such volatility, when applicable. We will 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 foregoing objectives. We do not use derivatives for trading or speculative purposes.

The Corporation

As of December 31, 2015, the Corporation had minimal exposure to market risk from changes in interest rates because it had no variable rate debt as there were no outstanding amounts drawn on the Corporation Revolving Credit Facility. The Corporation’s exposure to market risk from changes in interest rates will increase in future periods should the Corporation incur variable rate debt, including draws on the Corporation Revolving Credit Facility.

82

ESH REIT

As of December 31, 2015, approximately $366.5 million of ESH REIT’s outstanding gross indebtedness of approximately $2.8 billion had a variable rate of interest. If market rates of interest on ESH REIT’s variable rate debt fluctuate by 1.0%, interest expense would increase or decrease, and depending on the rate movement, ESH REIT’s future earnings and cash flows would fluctuate by approximately $2.5 million annually, assuming that the amount outstanding under ESH REIT’s variable rate debt remains at approximately $366.5 million.

As of December 31, 2015, less than 1.5% of the book value of ESH REIT’s hotels are owned outside the United States. ESH REIT has exposure to market risk from changes in foreign currency exchange rates for its Canadian hotels. A fluctuation of 1.0% in the exchange rate between the U.S. dollar and the Canadian dollar would result in a foreign currency transaction gain or loss of approximately $0.2 million.

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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		85
Consolidated Balance Sheets as of December 31, 2015 and 2014		86
Consolidated and Combined Statements of Operations for the Years Ended December 31, 2015, 2014 and 2013		87
Consolidated and Combined Statements of Comprehensive Income for the Years Ended December  31, 2015, 2014 and 2013		88
Consolidated and Combined Statements of Changes in Equity for the Years Ended December  31, 2015, 2014 and 2013		89
Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013		90
Notes to Consolidated and Combined Financial Statements		91
ESH HOSPITALITY, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm		124
Consolidated Balance Sheets as of December 31, 2015 and 2014		125
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014 and 2013		126
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013		127
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2015, 2014 and 2013		128
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013		129
Notes to Consolidated Financial Statements		130
FINANCIAL STATEMENT SCHEDULES
Schedule III—Real Estate and Accumulated Depreciation		160

84

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 balance sheets of Extended Stay America, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014, 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, 2015. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, 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.

As discussed in Note 2 to the financial statements, the Company has changed its presentation of debt issuance costs as of December 31, 2015 and 2014 due to the retrospective adoption of an accounting standards update regarding the presentation of debt issuance costs.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on the criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 23, 2016

85

EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2015 AND 2014

(In thousands, except share and per share data)

	December 31, 2015			December 31, 2014
ASSETS
PROPERTY AND EQUIPMENT—Net of accumulated depreciation of $781,929 and $622,514	$	3,921,341		$	4,087,448
RESTRICTED CASH		84,416			73,382
CASH AND CASH EQUIVALENTS		373,239			121,324
INTANGIBLE ASSETS—Net of accumulated amortization of $7,010 and $5,814		29,723			31,656
GOODWILL		53,531			55,633
ACCOUNTS RECEIVABLE—Net of allowance for doubtful accounts of $2,413 and $2,762		18,164			26,552
OTHER ASSETS		48,486			53,147
TOTAL ASSETS	$	4,528,900		$	4,449,142
LIABILITIES AND EQUITY
LIABILITIES:
Mortgage loan payable—Net of unamortized deferred financing costs of $19,536 and $27,299	$	1,911,621		$	2,490,750
Term loan facility payable—Net of unamortized deferred financing costs and debt discount of $4,940 and $6,359		361,523			368,641
Senior notes payable—Net of unamortized deferred financing costs of $10,756 and $0		489,244			—
Mandatorily redeemable preferred stock—$0.01 par value, $1,000 redemption value, 8.0%, 350,000,000 shares authorized, 21,202 shares issued and outstanding as of December 31, 2015 and 2014		21,202			21,202
Accounts payable and accrued liabilities		243,969			172,440
Deferred tax liabilities		12,984			6,792
Total liabilities		3,040,543			3,059,825
COMMITMENTS AND CONTINGENCIES (Note 13)
EQUITY:
Common stock—$0.01 par value, 3,500,000,000 shares authorized, 204,593,912 and 204,517,265 shares issued and outstanding as of December 31, 2015 and 2014, respectively		2,049			2,048
Additional paid in capital		784,194			779,447
Retained earnings		102,184			13,833
Accumulated other comprehensive loss		(8,754	)		(5,810	)
Total Extended Stay America, Inc. shareholders’ equity		879,673			789,518
Noncontrolling interests		608,684			599,799
Total equity		1,488,357			1,389,317
TOTAL LIABILITIES AND EQUITY	$	4,528,900		$	4,449,142

See accompanying notes to consolidated and combined financial statements.

86

EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands, except per share data)

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
REVENUES:
Room revenues	$	1,265,653		$	1,195,816		$	1,113,956
Other hotel revenues		19,100			17,659			17,787
Management fees, license fees and other revenues		—			—			1,075
Total revenues		1,284,753			1,213,475			1,132,818
OPERATING EXPENSES:
Hotel operating expenses		604,087			592,101			540,551
General and administrative expenses		98,625			84,381			108,325
Depreciation and amortization		203,897			187,207			168,053
Impairment of long-lived assets		9,011			2,300			3,330
Managed property payroll expenses		—			—			728
Restructuring expenses		—			—			605
Acquisition transaction expenses		—			—			235
Total operating expenses		915,620			865,989			821,827
GAIN ON SALE OF HOTEL PROPERTIES (NOTE 4)		130,894			864			—
OTHER INCOME		45			388			1,134
INCOME FROM OPERATIONS		500,072			348,738			312,125
OTHER NON-OPERATING EXPENSE		2,732			3,763			—
INTEREST EXPENSE, NET		137,782			149,364			234,459
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		359,558			195,611			77,666
INCOME TAX EXPENSE (BENEFIT)		76,536			45,057			(4,990	)
NET INCOME		283,022			150,554			82,656
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(169,982	)		(110,958	)		3,575
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS OR MEMBERS	$	113,040		$	39,596		$	86,231
NET INCOME PER COMMON SHARE:
Basic	$	0.55		$	0.19		$	0.49
Diluted	$	0.55		$	0.19		$	0.49
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:
Basic		204,211			203,548			174,894
Diluted		204,567			204,508			176,268

See accompanying notes to consolidated and combined financial statements.

87

EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands)

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
NET INCOME	$	283,022		$	150,554		$	82,656
FOREIGN CURRENCY TRANSLATION LOSS, NET OF TAX		(6,321	)		(2,728	)		(3,980	)
COMPREHENSIVE INCOME		276,701			147,826			78,676
COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(166,605	)		(109,972	)		3,575
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS OR MEMBERS	$	110,096		$	37,854		$	82,251

See accompanying notes to consolidated and combined financial statements.

88

EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands, except per share data)

	Members’ Capital								Additional Paid in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ and Members’ Equity			Non- controlling Interests			Total Equity
				Common Stock
				Shares			Amount
BALANCE—January 1, 2013	$	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 loss, net of tax		—			—			—		—		—			(3,980	)		(3,980	)		—			(3,980	)
Member distributions—$0.20 per LLC member interest		—			—			—		—		(78,400	)		—			(78,400	)		(2,011	)		(80,411	)
ESH REIT preferred distributions		—			—			—		—		(16	)		—			(16	)		—			(16	)
Equity-based compensation		4,094			100			—		14,712		—			—			18,806			1,362			20,168
Company reorganization		(748,618	)		172,200			1,723		424,233		(38,588	)		(212	)		(361,462	)		329,273			(32,189	)
Sale of equity, net of issuance costs		—			32,488			325		333,414		—			—			333,739			268,426			602,165
BALANCE—December 31, 2013		—			204,788			2,048		772,359		(25,763	)		(4,068	)		744,576			596,632			1,341,208
Net income		—			—			—		—		39,596			—			39,596			110,958			150,554
Foreign currency translation loss, net of tax		—			—			—		—		—			(1,742	)		(1,742	)		(986	)		(2,728	)
ESH REIT common distributions—$0.53 per Class B common share		—			—			—		—		—			—			—			(108,504	)		(108,504	)
ESH REIT preferred distributions		—			—			—		—		—			—			—			(16	)		(16	)
Equity-based compensation		—			(271	)		—		7,088		—			—			7,088			1,715			8,803
BALANCE—December 31, 2014		—			204,517			2,048		779,447		13,833			(5,810	)		789,518			599,799			1,389,317
Net income		—			—			—		—		113,040			—			113,040			169,982			283,022
Foreign currency translation loss, net of tax		—			—			—		—		—			(2,944	)		(2,944	)		(3,377	)		(6,321	)
Corporation common distributions—$0.12 per common share		—			—			—		—		(24,689	)		—			(24,689	)		—			(24,689	)
ESH REIT common distributions—$0.79 per Class B common share		—			—			—		—		—			—			—			(162,351	)		(162,351	)
ESH REIT preferred distributions		—			—			—		—		—			—			—			(16	)		(16	)
Equity-based compensation		—			77			1		4,747		—			—			4,748			4,647			9,395
BALANCE—December 31, 2015	$	—			204,594		$	2,049	$	784,194	$	102,184		$	(8,754	)	$	879,673		$	608,684		$	1,488,357

See accompanying notes to consolidated and combined financial statements.

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EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands)

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
OPERATING ACTIVITIES:
Net income	$	283,022		$	150,554		$	82,656
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		202,531			185,833			166,679
Amortization of intangible assets		1,366			1,374			1,374
Foreign currency transaction loss		2,732			3,763			—
Amortization and write-off of deferred financing costs and debt discount		12,608			19,597			24,191
Amortization of above-market ground leases		(136	)		(136	)		(136	)
Loss on disposal of property and equipment		9,299			3,144			3,493
Impairment of long-lived assets		9,011			2,300			3,330
Gain on sale of hotel properties		(130,894	)		(864	)		—
Equity-based compensation		10,500			8,803			20,168
Deferred income tax expense (benefit)		8,709			(520	)		(11,554	)
Changes in assets and liabilities:
Accounts receivable, net		8,306			(5,040	)		(2,909	)
Other assets		(2,755	)		(821	)		(2,464	)
Accounts payable and accrued liabilities		14,590			2,498			26,485
Net cash provided by operating activities		428,889			370,485			311,313
INVESTING ACTIVITIES:
Purchases of property and equipment		(204,717	)		(173,239	)		(172,540	)
Acquisition of hotels, property and equipment		—			—			(16,368	)
Proceeds from sale of hotel properties, net		277,108			3,223			—
(Increase) decrease in restricted cash and insurance collateral		(11,363	)		(26,151	)		22,173
Proceeds from insurance recoveries		5,261			13,924			2,020
Purchase of HVM noncontrolling interests		—			—			(544	)
Net cash provided by (used in) investing activities		66,289			(182,243	)		(165,259	)
FINANCING ACTIVITIES:
Principal payments on mortgage loans		(586,892	)		(1,794	)		(5,865	)
Proceeds from term loan facility, net of debt discount		—			373,125			—
Principal payments on term loan facility		(8,537	)		—			—
Proceeds from senior notes		500,000			—			—
Proceeds from revolving credit facilities		90,000			210,000			20,000
Payments on revolving credit facilities		(90,000	)		(230,000	)		—
Principal payments on mezzanine loans		—			(365,000	)		(715,000	)
Payments of deferred financing costs		(11,476	)		(5,222	)		(9,850	)
Tax withholdings related to restricted stock unit settlements		(1,105	)		—			—
Sale of equity		—			—			649,750
Equity issuance costs		—			—			(47,585	)
Corporation common distributions		(12,278	)		—			—
ESH REIT common distributions		(122,876	)		(108,253	)		(78,400	)
ESH REIT preferred distributions		(16	)		(16	)		(16	)
Distributions to HVM members		—			—			(2,011	)
Net cash used in financing activities		(243,180	)		(127,160	)		(188,977	)
CHANGES IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN FOREIGN CURRENCY EXCHANGE RATES		(83	)		(215	)		(202	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		251,915			60,867			(43,125	)
CASH AND CASH EQUIVALENTS—Beginning of period		121,324			60,457			103,582
CASH AND CASH EQUIVALENTS—End of period	$	373,239		$	121,324		$	60,457
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest, excluding prepayment and other penalties	$	120,220		$	125,258		$	201,227
Cash payments for income taxes—Net of refunds of $97, $281 and $941	$	69,825		$	36,379		$	233
NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures included in accounts payable and accrued liabilities	$	23,951		$	15,912		$	21,241
Corporation common distributions included in accounts payable and accrued liabilities	$	12,411		$	—		$	—
ESH REIT common distributions included in accounts payable and accrued liabilities	$	39,734		$	259		$	—
Issuance of mandatorily redeemable preferred stock	$	—		$	—		$	21,202

See accompanying notes to consolidated and combined financial statements.

90

EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

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, 2015 and 2014, the Company owned and operated 626 and 679 hotel properties, respectively, in 44 U.S. states consisting of approximately 68,900 and 75,500 rooms, respectively, and three hotels in Canada consisting of 500 rooms. The substantial majority of the hotels are operated under the core brand, Extended Stay America. The three hotels in Canada are operated under the brand Extended Stay Canada. As of December 31, 2014, 47 hotels were operated under the brand Crossland Economy Studios.

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

Prior to the Pre-IPO Transactions, 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”), which contracted with HVM LLC (“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 brands were owned by a subsidiary of ESH Strategies LLC (“ESH Strategies”), a Delaware limited liability company, that licensed the brands 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 and Organization Subsequent to the Initial Public Offering

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.

91

• 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 then-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 Internal Revenue Code of 1986, as amended (the “Code”) (see Note 15).

• 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 approximately $21.2 million of mandatorily redeemable preferred stock of the Corporation, which pays preferred dividends at 8.0% per annum (see Note 8).

• 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 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 and Secondary Offerings

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.

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 $715.0 million of its outstanding mezzanine loans (see Note 7).

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In August 2014, certain selling stockholders (the “Selling Shareholders”) sold 24,150,000 Paired Shares as part of a secondary offering. The Selling Shareholders consisted solely of entities affiliated with the Sponsors and did not include officers or directors of the Corporation or ESH REIT. Neither the Corporation nor ESH REIT sold Paired Shares in the secondary offering and neither received proceeds from the secondary offering. The Corporation and ESH REIT did, however, incur professional fees in connection with the secondary offering. For the year ended December 31, 2014, total costs incurred were approximately $1.5 million.

In June 2015, the Corporation and ESH REIT filed an automatic shelf registration statement with the U.S. Securities and Exchange Commission (“SEC”) pursuant to which, from time to time, (i) the Corporation and ESH REIT may offer and sell an unlimited number of Paired Shares and (ii) the Selling Shareholders may offer and sell up to 142,960,388 Paired Shares. In November 2015, the Selling Shareholders sold 15,000,000 Paired Shares registered pursuant to the automatic shelf registration statement. Neither the Corporation nor ESH REIT sold Paired Shares in the secondary offering and neither received proceeds from the secondary offering. Additionally, as of December 31, 2015, the Corporation and ESH REIT have not sold any securities registered pursuant to the automatic shelf registration statement. The Corporation and ESH REIT did, however, incur professional fees in connection with filing the automatic shelf registration and the secondary offering totaling approximately $0.9 million during the year ended December 31, 2015.

As of December 31, 2015 and 2014, the public owned approximately 36.9% and 28.9%, respectively, of the outstanding Paired Shares, while the Sponsors and senior management, including certain directors, owned approximately 63.1% and 71.1%, respectively, of the outstanding Paired Shares. As of December 31, 2015, the Corporation owned 250,493,583 shares of ESH REIT’s Class A common stock; the Sponsors, senior management, including certain directors, and the public owned 204,593,912 shares of ESH REIT’s Class B common stock, each of which is attached to and trades as a single unit with a share of the Corporation’s common stock.

Basis of Consolidation and Combination

The accompanying consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). References to the Company, its financial position, results of operations, comprehensive income, changes in equity and cash flows refer to the Corporation and its consolidated subsidiaries, including the Operating Lessees, ESH Strategies, ESA Management and ESH REIT, for periods from the Pre-IPO Transactions through December 31, 2015, and to the Company’s predecessor, which includes ESH REIT’s predecessor, ESH Strategies and HVM (see Notes 2 and 12), for the period from January 1, 2013 through the Pre-IPO Transactions.

Third party equity interests in ESH REIT consist of all 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 (see Note 11). These interests, which are not owned by the Corporation, are presented as noncontrolling interests in the accompanying consolidated and combined financial statements.

For the period from January 1, 2013 through the Pre-IPO Transactions, third party equity interests in HVM, which represented all of HVM’s equity, were not owned by the Company or the Company’s predecessor and are presented as noncontrolling interests in the accompanying consolidated and combined financial statements (see Notes 11 and 12).

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.

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All intercompany accounts and transactions have been eliminated.

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 (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 of certain equity-based awards. 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—Accounts receivable primarily consists of receivables due from corporate customers and third-party internet intermediaries. A 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 accounts receivable are uncollectible, they are written off against the allowance for doubtful accounts.

Restricted Cash—Restricted cash primarily consists of amounts held in cash management accounts and in escrows for the payment of hotel occupancy/sales taxes, real estate taxes and insurance, capital improvements, ground leases, operating expenses (including management fees and reimbursements) and mortgage debt service, all as required by ESH REIT’s mortgage loan agreement (see Note 7). As of December 31, 2015 and 2014, restricted cash also includes deposits held for insurance collateral of approximately $21.2 million and $21.6 million, respectively.

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	5–49 years
Hotel building improvements	3–39 years
Hotel site improvements	3–20 years
Hotel furniture, fixtures and equipment	3–10 years
Corporate furniture, fixtures, equipment, software and other	3–15 years

Management assesses the performance of long-lived assets for potential impairment at least annually, as well as when events or changes in circumstances indicate 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 each hotel property. Impairment is recognized when estimated future undiscounted cash flows, including proceeds from disposition, are less than the carrying value of each hotel property.

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To the extent that a hotel property is impaired, the excess carrying amount of each hotel property over its estimated fair value is recognized as an impairment charge and reduces income from operations. Fair value is determined based upon the discounted cash flows of each hotel property, quoted market prices or independent appraisals, as considered necessary. The Company recognized impairment charges related to property and equipment of approximately $9.0 million, $2.3 million and $3.3 million for the years ended December 31, 2015, 2014 and 2013, respectively (see Note 5). 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 a hotel property could occur in a future period in which conditions change.

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 at least annually and 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 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. At such time their classification as indefinite-lived intangible assets is reassessed. The Company 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, 2015, 2014 or 2013.

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 goodwill associated with all hotels when analyzing for potential impairment. The Company 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, 2015, 2014 or 2013.

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 is determined 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.

Assets Held For Sale—The Company classifies assets as held for sale when management commits to a formal plan to sell the assets, actively seeks a buyer for the assets and the consummation of a sale is considered probable and is expected within one year. The Company considers the consummation of a sale probable once a purchase and sale agreement has been executed, the buyer has a significant non-refundable deposit at risk and no significant financing contingencies exist. Upon designating an asset as held for sale, the Company stops recognizing depreciation expense and records the asset at the lower of its carrying value, which includes allocable goodwill, or its estimated fair value, less estimated costs to sell. Any such adjustment in the carrying value is recognized as an impairment charge.

Discontinued Operations—Effective January 1, 2014, the Company early adopted Accounting Standards Update (“ASU”) No. 2014-08 issued by the Financial Accounting Standards Board (“FASB”) as discussed

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further in “Recently Issued Accounting Standards” below. This update defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, which generally results in reporting discontinued operations less frequently than under the previous accounting standard.

Deferred Financing Costs—Effective December 31, 2015, the Company early adopted FASB ASU No. 2015-03 and ASU No. 2015-15 as discussed further in “Recently Issued Accounting Standards” below. Costs incurred in obtaining financing are amortized over the terms of the related loans on a straight-line basis, which approximates the effective interest method. Deferred financing costs are presented in the accompanying consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability, except those incurred under a revolving-debt arrangement which are presented as a component of other assets in the accompanying consolidated balance sheets. Upon repayment of, or in conjunction with, a material change in the terms of the underlying debt agreement, remaining unamortized costs are included as a component of net interest expense. During the years ended December 31, 2015, 2014 and 2013, approximately $2.1 million, $5.1 million and $11.7 million, respectively, of unamortized deferred financing costs, primarily related to the prepayment of mortgage and mezzanine loans, are included in net 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 net interest expense in the accompanying consolidated and combined statements of operations, was approximately $10.1 million, $14.3 million and $12.5 million for the years ended December 31, 2015, 2014 and 2013, 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 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.

Advertising Costs—Advertising costs are expensed as incurred. In 2015 and 2014, total advertising costs were approximately $24.1 million and $28.3 million, respectively, and are classified as hotel operating expenses in the accompanying consolidated statements of operations. Prior to 2014, internet advertising costs were included in hotel operating expenses and all other advertising costs were included in general and administrative expenses in the accompanying consolidated and combined statement of operations. For the year ended December 31, 2013, advertising costs were approximately $28.2 million, approximately $18.8 million of which are classified as hotel operating expenses, and approximately $9.4 million of which are classified as general and administrative expenses.

Operating Leases—Rent expense, including ground rent, 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 the Company makes its own assumptions about how market participants would price the asset or liability

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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 and term loans, senior notes, mandatorily redeemable preferred stock and revolving credit facilities. The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities and revolving credit facilities are representative of their fair values due to the short-term nature or frequent settlement of these instruments. The fair values of mortgage and term loans, senior notes 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 the Company’s current mortgage and term loans, senior notes and mandatorily redeemable preferred stock or from quoted market prices, when available (see Notes 7 and 8).

Derivative Instruments—Derivative instruments, including derivative instruments embedded in other contracts (if applicable), are recorded in the accompanying consolidated balance sheets as either assets or liabilities measured at fair value unless the transactions qualify and are designated as normal purchases and sales. 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 workers’ compensation, general liability 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 actuarial evaluations based on historical and projected claims and medical cost trends. As of December 31, 2015 and 2014, approximately $39.3 million and $41.3 million, respectively, of liabilities for such high-deductible insurance programs are included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

Investments—The Company consolidates a subsidiary when it has the ability to direct the activities that most significantly impact the economic performance of the subsidiary. Judgment is required with respect to the consolidation of investments, including 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. Third party equity interests in consolidated subsidiaries or variable interest entities are presented as noncontrolling interests.

The Company evaluates subsidiaries and affiliates, as well as other entities, to determine if they are variable interest entities (“VIEs”). If a subsidiary, affiliate or other entity is a VIE, it is subject to the consolidation framework specifically for VIEs. The Company considers an entity a VIE if equity investors own an interest therein that does not have the characteristics of a controlling financial 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 Company reviews 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, the Company held a variable interest in HVM, a separate, independently owned hotel management and administrative services company (see Note 12). 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

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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, the Company’s predecessor represented approximately 99% 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 the period from January 1, 2013 through the Pre-IPO Transactions. Since the Company had no equity interest in HVM, the results of operations and members’ capital of HVM were reported as noncontrolling interests in the accompanying consolidated and combined financial statements for the period from January 1, 2013 through the Pre-IPO Transactions. Subsequent to the Pre-IPO Transactions, HVM no longer meets the definition of a VIE. See summarized financial information of HVM in Note 12.

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 includes distribution income related to its ownership of approximately 55% of ESH REIT. As a result, approximately 55% of ESH REIT’s distributions are subject to corporate income tax. Prior to 2014, the Corporation received no distribution 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 (i.e., the Sponsors) and ESH REIT generally incurred no federal 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 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 real estate investment trust (“REIT”) under provisions 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 is subject to federal income and excise taxes on undistributed income.

In 2015, ESH REIT distributed approximately 95% of its taxable income and utilized its federal net operating loss carryforward and, as a result, incurred minimal current federal income tax in the form of alternative minimum tax. Deferred tax expense was incurred due to the utilization of the deferred tax asset associated with the net operating loss carryforward. In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. Accordingly, ESH REIT is expected to be subject to federal and state income tax on approximately 5% of its taxable income. As a result, the Company has recorded deferred tax assets and liabilities to reflect the fact that an estimated 5% of ESH REIT’s future taxable income is expected to be subject to tax.

Foreign Currency—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 revenues and expenses are translated into U.S. dollars using the average exchange rate for the period. The assets and liabilities of these subsidiaries are translated into U.S. dollars using the exchange rate in effect at the balance sheet date. As of December 31, 2015 and 2014, foreign currency translation losses, net of tax, of approximately $8.8 million and

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$5.8 million, respectively, are reflected in accumulated other comprehensive loss as a component of equity in the accompanying consolidated balance sheets. Foreign currency transaction losses mainly related to U.S. dollar denominated debt at Canadian subsidiaries of approximately $2.7 million and $3.8 million are included in other non-operating expense in the accompanying consolidated statements of operations for the years ended December 31, 2015 and 2014, 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 foreign currency translation adjustments are presented as a separate component of consolidated and combined equity.

Equity-Based Compensation—The Corporation and ESH REIT each maintain a Long-Term Incentive Plan (“LTIP”), as amended and restated in 2015, and approved by their shareholders, under which the Corporation and ESH REIT may issue to eligible employees or directors restricted stock awards, restricted stock units or other equity-based awards, in respect of Paired Shares. The Company recognizes costs related to equity-based awards over their vesting periods. The issuing entity classifies equity-based awards granted in exchange for employee or director services as either equity awards or as liability awards. The classification of an award either as an equity award or a liability award is generally 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 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 expense is recognized for awards for which employees or directors do not render the requisite services. All awards granted subsequent to the Pre-IPO Transactions are classified as equity awards except those equity-based awards issued by ESH REIT to its directors, which are classified as liability awards.

Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan further described in Note 14. Equity-based compensation related to this plan was recorded in the accompanying consolidated and combined statements of operations due to the fact that HVM was a consolidated VIE.

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 those services to similar classes of customers. The amounts of long-lived assets and net revenues outside the U.S. are not significant for any period presented.

Recently Issued Accounting Standards

Imputation of Interest—Simplifying the Presentation of Debt Issuance Costs—In April and August 2015, the FASB issued accounting standards updates which require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. These updates allow an entity to continue to defer and present debt issuance costs under a revolving-debt arrangement as an asset and amortize the deferred debt issuance costs ratably over the term of the revolving-debt arrangement. These updates do not affect the current guidance on the recognition and measurement of debt issuance costs or the amortization of debt issuance costs as interest expense.

The Company early adopted these updates as of December 31, 2015, and applied their provisions retrospectively. As a result, as of December 31, 2015, approximately $19.5 million, $3.6 million and $10.8 million of unamortized deferred financing costs are presented as direct reductions of the carrying amounts of mortgage loan payable, term loan facility payable and senior notes payable, respectively, and approximately $2.4 million of unamortized deferred financing costs related to revolving credit facilities are included in other assets in the accompanying consolidated balance sheet. Further, the presentation of approximately $27.3 million, $4.7 million and $5.1 million of unamortized deferred financing costs have been reclassified from deferred financing

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costs to mortgage loan payable, term loan facility payable and other assets, respectively, in the accompanying consolidated balance sheet as of December 31, 2014. Other than the current year consolidated balance sheet presentation and the aforementioned reclassification, the adoption of these updates did not have an impact on the Company’s consolidated and combined financial statements.

Intangibles—Goodwill and Other—Internal-Use Software—In April 2015, the FASB issued an accounting standards update which clarifies the accounting for fees paid by a customer in a cloud computing arrangement. This update provides guidance to customers regarding whether a cloud computing arrangement includes the sale or license of software or, alternatively, the sale of a service. This update will be effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Consolidation—Amendments to the Consolidation Analysis—In February 2015, the FASB issued an accounting standards update which amends the consolidation requirements under U.S. GAAP, changing the analysis performed by a company to determine whether it has a variable interest in an entity and when to consolidate such entities. This update will be effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted, and may be applied using one of two retrospective application methods. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Income Statement—Extraordinary and Unusual Items—In January 2015, the FASB issued an accounting standards update to simplify income statement presentation by eliminating the concept of extraordinary items. This update will be effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Presentation of Financial Statements—Going Concern—In August 2014, the FASB issued an accounting standards update which provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. This update requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt” about its ability to continue as a going concern. This update is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Contractual Revenue—In May 2014, the FASB issued an accounting standards update which amends existing revenue recognition accounting standards. This update is based on the principle that revenue is recognized when an entity transfers goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires more detailed disclosure to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits the use of either a retrospective or cumulative effect transition method. This update is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Reporting Discontinued Operations—In April 2014, the FASB issued an accounting standards update which modifies the definition of discontinued operations and requires that only disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results be reported as discontinued operations in the financial statements. This update is effective for all disposals (or classifications as held for sale) of an entity that occur within annual periods beginning on or after December 15,

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2014 and interim periods within those years. Early adoption is permitted, but only for disposals that have not been reported in financial statements previously issued or available for issuance. The Company adopted this guidance as of January 1, 2014, and it did not have a material effect on the Company’s accompanying consolidated and combined financial statements due to a limited number of historical dispositions. This guidance is expected to result in reporting discontinued operations less frequently than the previous accounting standard.

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 certain equity-based awards issued under long-term incentive plans (see Note 14).

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 Company’s predecessor’s recapitalization for the year ended December 31, 2013.

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, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Numerator:
Net income available to common shareholders—basic	$	113,040		$	39,596		$	86,231
Less amounts available to noncontrolling interests assuming conversion		(152	)		(315	)		(166	)
Net income available to common shareholders—diluted	$	112,888		$	39,281		$	86,065
Denominator:
Weighted-average number of common shares outstanding—basic		204,211			203,548			174,894
Dilutive securities		356			960			1,374
Weighted-average number of common shares outstanding—diluted		204,567			204,508			176,268
Net income per common share—basic	$	0.55		$	0.19		$	0.49
Net income per common share—diluted	$	0.55		$	0.19		$	0.49

4. HOTEL ACQUISITIONS AND DISPOSITIONS

December 2015 Disposition—On December 8, 2015, the Company sold a portfolio of 53 hotel properties, 47 of which operated under the Crossland Economy Studios brand and six of which operated under the Extended Stay America brand, and certain intellectual property of Crossland Economy Studios for gross proceeds of $285.0 million. The carrying value of this portfolio, including net working capital and allocable goodwill, was approximately $145.4 million, resulting in a gain, net of closing costs and adjustments, of approximately $130.9 million, which is reported in gain on sale of hotel properties in the accompanying consolidated statement of operations for the year ended December 31, 2015. This disposition was not reported as a discontinued operation.

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During the years ended December 31, 2015, 2014 and 2013 these hotel properties contributed total room and other hotel revenues, total operating expenses and income before income tax expense (benefit) as follows (in thousands):

	Year Ended December 31, 2015		Year Ended December 31, 2014		Year Ended December 31, 2013
Total room and other hotel revenues	$	67,399	$	66,023	$	63,893
Total operating expenses		44,516		46,403		46,228
Income before income tax expense (benefit)(1)		18,857		15,768		13,811

(1) The only interest expense included is related to the 2012 Mortgage Loan (as defined in Note 7).

July 2014 Disposition—On July 28, 2014, the Company sold its two Hometown Inn-branded hotel properties, with a carrying value of approximately $2.2 million, for proceeds of $3.5 million. Net of closing costs and adjustments, the Company recognized a gain on sale of approximately $0.9 million. This disposition was not reported as a discontinued operation.

December 2013 Acquisition—On December 31, 2013, the Company acquired the assets and assumed the liabilities of two hotels from LVP Acquisition Corporation (“LVP”) for cash consideration of approximately $16.5 million. The vast majority of the purchase price was allocated to property and equipment. Legal, professional and other fees and costs directly related to the acquisition totaled approximately $0.2 million for the year ended December 31, 2013. These costs are included in acquisition transaction expenses in the accompanying consolidated and combined statement of operations.

5. PROPERTY AND EQUIPMENT

Net investment in property and equipment as of December 31, 2015 and 2014, consists of the following (in thousands):

	December 31, 2015			December 31, 2014
Hotel properties:
Land and site improvements	$	1,296,918		$	1,351,160
Building and improvements		2,859,227			2,894,021
Furniture, fixtures and equipment		522,617			443,149
Total hotel properties		4,678,762			4,688,330
Corporate furniture, fixtures, equipment, software and other		22,833			19,957
Undeveloped land parcel		1,675			1,675
Total cost		4,703,270			4,709,962
Less accumulated depreciation:
Hotel properties		(767,240	)		(608,600	)
Corporate furniture, fixtures, equipment, software and other		(14,689	)		(13,914	)
Total accumulated depreciation		(781,929	)		(622,514	)
Property and equipment—net	$	3,921,341		$	4,087,448

During the years ended December 31, 2015, 2014 and 2013, the Company, using Level 3 unobservable inputs, assessed property and equipment for potential impairment. The Company recognized impairment charges of approximately $9.0 million, $2.3 million and $3.3 million, respectively, in the accompanying consolidated and

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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 hotel related cash flows based on assumed long-term growth rates, demand trends, expected future capital expenditures and estimated discount rates. These assumptions are based on the Company’s historical data and experience, the Company’s budgets, industry projections and micro and macro general economic condition projections.

As of December 31, 2015, substantially all of the hotel properties (625 of 629 hotel properties) are pledged as security for ESH REIT’s 2012 Mortgage Loan (as defined in Note 7).

6. INTANGIBLE ASSETS AND GOODWILL

The Company’s intangible assets and goodwill as of December 31, 2015 and 2014, consist of the following (dollars in thousands):

	December 31, 2015
	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Definite-lived intangible assets—customer relationships		20 years	$	26,800	$	(7,010	)	$	19,790
Indefinite-lived intangible assets—trademarks				9,933		—			9,933
Total intangible assets				36,733		(7,010	)		29,723
Goodwill				53,531		—			53,531
Total intangible assets and goodwill			$	90,264	$	(7,010	)	$	83,254

	December 31, 2014
	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Definite-lived intangible assets:
Customer relationships		20 years	$	26,800	$	(5,670	)	$	21,130
Customer e-mail database		5 years		170		(144	)		26
Total definite-lived intangible assets				26,970		(5,814	)		21,156
Indefinite-lived tangible assets—trademarks				10,500		—			10,500
Total intangible assets				37,470		(5,814	)		31,656
Goodwill				55,633		—			55,633
Total intangible assets and goodwill			$	93,103	$	(5,814	)	$	87,289

On December 8, 2015, in conjunction with the sale of 53 hotel properties and certain intellectual property, the Company wrote off approximately $2.1 million and $0.6 million of goodwill and trademarks, respectively, against the gain on sale of hotel properties in the accompanying consolidated statement of operations (see Note 4).

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The remaining weighted-average amortization period for definite-lived intangible assets is approximately 15 years as of December 31, 2015. Estimated future amortization expense for definite-lived intangible assets is as follows (in thousands):

Years Ending December 31,
2016	$	1,340
2017		1,340
2018		1,340
2019		1,340
2020		1,340
Thereafter		13,090
Total	$	19,790

7. DEBT

The Company’s outstanding debt, net of unamortized deferred financing costs and debt discount, as of December 31, 2015 and 2014, is as follows (in thousands):

	December 31, 2015		December 31, 2014
Mortgage loan payable—Net of unamortized deferred financing costs of $19,536 and $27,299	$	1,911,621	$	2,490,750
Term loan facility payable—Net of unamortized deferred financing costs and debt discount of $4,940 and $6,359		361,523		368,641
Senior notes payable—Net of unamortized deferred financing costs of $10,756 and $0		489,244		—
Total debt	$	2,762,388	$	2,859,391

During the years ended December 31, 2015 and 2014, the following transactions occurred (in thousands):

	December 31,			December 31,
	2015			2014
Debt—beginning of year	$	2,859,391		$	2,862,951	(2)
Additions:
Proceeds from term loan facility, net of debt discount		—			373,125
Proceeds from senior notes		500,000			—
Proceeds from revolving credit facilities		90,000			210,000
Amortization and write-off of deferred financing costs and debt discount(1)		9,902			15,331
Deductions:
Payments on mortgage loan		(586,892	)		(1,794	)
Payments on term loan facility		(8,537	)		—
Payments on mezzanine loans		—			(365,000	)
Payments on revolving credit facilities		(90,000	)		(230,000	)
Payments of deferred financing costs		(11,476	)		(5,222	)
Debt—end of year	$	2,762,388		$	2,859,391

(1) Excludes amortization of deferred financing costs related to revolving credit facilities.

(2) As discussed in Note 2, the Company early adopted FASB ASU No. 2015-03 and ASU No. 2015-15, which require the retrospective application of the presentation of debt issuance costs as direct reductions to the related liabilities. Therefore, this amount is presented net of unamortized deferred financing costs of approximately $41.9 million as of December 31, 2013.

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The Company’s debt, unamortized deferred financing costs and debt discount, as of December 31, 2015 and 2014, consist of the following (in thousands):

				Outstanding Principal						Unamortized Deferred Financing Costs					Interest Rate
Loan	Stated Amount(1)			December 31, 2015			December 31, 2014			December 31, 2015		December 31, 2014		Stated Interest Rate	December 31, 2015			December 31, 2014			Maturity Date
Mortgage loan
2012 Mortgage Loan—Component A	$	350,000		$	—		$	348,049		$	—	$	—	LIBOR(2) + 2.0547%		N/A			2.2260	%		12/1/2015	(3)
2012 Mortgage Loan—Component B		350,000			111,157			350,000			784		3,760	3.4047%		3.4047	%		3.4047	%		12/1/2017
2012 Mortgage Loan—Component C		1,820,000			1,820,000			1,820,000			18,752		23,539	4.0547%		4.0547	%		4.0547	%		12/1/2019
Term loan facility
2014 Term Loan		375,000			365,157	(4)		373,320	(5)		3,635		4,679	LIBOR(2)(6) + 4.25%		5.00	%		5.00	%		6/24/2019	(10)
Senior notes
2025 Notes		500,000			500,000			—			10,756		—	5.25%		5.25	%		N/A			5/1/2025
Revolving credit facilities
ESH REIT revolving credit facility(7)		250,000	(8)		—			—			1,431		3,055	LIBOR(2) + 3.00%		N/A			N/A			11/18/2016	(9)
Corporation revolving credit facility(7)		50,000			—			—			956		2,038	LIBOR(2) + 3.75%		N/A			N/A			11/18/2016	(9)
Total				$	2,796,314		$	2,891,369		$	36,314	$	37,071

(1) Amortization is interest only.

(2) London Interbank Offering Rate.

(3) The original maturity date of Component A of the 2012 Mortgage Loan was December 1, 2014. In December 2014, ESH REIT exercised its first one-year extension option and extended the maturity date of Component A of the 2012 Mortgage Loan to December 1, 2015. Component A of the 2012 Mortgage Loan was repaid at its extended maturity.

(4) The 2014 Term Loan is presented net of debt discount of approximately $1.3 million as of December 31, 2015.

(5) The 2014 Term Loan is presented net of debt discount of approximately $1.7 million as of December 31, 2014.

(6) The 2014 Term Loan includes a LIBOR floor of 0.75%.

(7) Each revolving credit facility’s unamortized deferred financing costs are included in other assets in the accompanying consolidated balance sheets.

(8) ESH REIT is able to request to increase the facility to an amount of up to $350 million at any time, subject to certain conditions.

(9) Each revolving credit facility is subject to a one-year extension option.

(10) Subject to certain exceptions, mandatory prepayments of up to 50% of Excess Cash Flow may be required based on ESH REIT’s Consolidated Leverage Ratio, each as defined. ESH REIT made a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. No mandatory prepayment is required during the three months ending March 31, 2016, based on the calculation of Excess Cash Flow for the year ended December 31, 2015.

In December 2015, using a portion of the net proceeds from the sale of a portfolio of 53 hotel properties, ESH REIT repaid approximately $86.1 million of the outstanding balance under its 2012 Mortgage Loan (as defined below), which consisted of approximately $29.3 million of Component A and approximately $56.8 million of Component B. ESH REIT incurred approximately $0.7 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mortgage Loan, consisting of the write-off of unamortized deferred financing costs of approximately $0.4 million and other costs of approximately $0.3 million.

On May 15, 2015, using the proceeds from its 2025 Notes (as defined below), ESH REIT repaid $500.0 million of the outstanding balance under its 2012 Mortgage Loan, which consisted of $318.0 million of Component A and $182.0 million of Component B. ESH REIT incurred approximately $2.3 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mortgage Loan, consisting of the write-off of unamortized deferred financing costs of approximately $1.7 million and other costs of approximately $0.6 million.

On June 23, 2014, using principally all of the net proceeds from its 2014 Term Loan (as defined below), ESH REIT repaid the remaining outstanding balance of $365.0 million of its 2012 Mezzanine Loans (as defined below). ESH REIT

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incurred approximately $9.4 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mezzanine Loans, consisting of the write-off of unamortized deferred financing costs of approximately $5.1 million and prepayment penalties and other costs of approximately $4.3 million.

In the fourth quarter of 2013 and subsequent to the Offering, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans. ESH REIT incurred approximately $25.2 million of debt extinguishment costs in connection with the repayment of the 2012 Mezzanine Loans, consisting of prepayment penalties and other costs of approximately $14.3 million and the write-off of unamortized deferred financing costs of approximately $10.9 million.

Debt extinguishment costs are included as a component of net interest expense in the accompanying consolidated and combined statements of operations.

ESH REIT Mortgage Loan

On November 30, 2012, subsidiaries of ESH REIT entered into a $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”). After giving effect to the 2015 repayments discussed above, monthly required interest-only payments are approximately $6.6 million. Principal amounts, interest rates and maturities of the components of the 2012 Mortgage Loan are included in the table above. Subsequent to January 1, 2016, Components B and C of the 2012 Mortgage Loan may be prepaid without incurring a prepayment penalty or premium.

As of December 31, 2015 and 2014, substantially all of ESH REIT’s hotel properties served as collateral for the 2012 Mortgage Loan. ESH REIT guarantees, under a customary recourse carve out guaranty (i) under certain limited circumstances, losses related to the 2012 Mortgage Loan plus enforcement costs incurred by the lenders and (ii) under certain other limited circumstances, repayment of the 2012 Mortgage Loan up to an aggregate liability under this clause (iii) of $252.0 million plus enforcement costs.

In connection with the 2012 Mortgage Loan, the Loan Parties (as defined in the agreement governing the 2012 Mortgage Loan) made certain representations, warranties and covenants customary in similar 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 a Mortgage 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, each 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, 2015, none of these events had occurred, and the Debt Yield was 29.0%.

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, 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. 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 agreements governing the 2012 Mortgage Loan. Upon the occurrence of an Event of Default, as defined, the lender 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.

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All receipts from the 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 and cash management agreements and are, therefore, classified as restricted cash on the accompanying consolidated balance sheets. Receipts are allocated to CMA subaccounts for hotel occupancy/goods and services sales taxes, real estate taxes, insurance, ground leases, operating expenses (including management fees and reimbursements), capital improvements and mortgage 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.

ESH REIT Term Loan Facility

On June 23, 2014, ESH REIT entered into a $375.0 million term loan facility (the “2014 Term Loan”). ESH REIT used principally all of the 2014 Term Loan net proceeds to repay the outstanding balance on its 2012 Mezzanine Loans of $365.0 million. Subject to certain conditions, the principal amount of the 2014 Term Loan may be increased from time to time up to an amount which would not cause the Consolidated Leverage Ratio, as defined, to exceed 5.25 to 1.0. The 2014 Term Loan matures on June 24, 2019, though it may be extended with lender consent. The 2014 Term Loan bears interest at a rate equal to (i) LIBOR (subject to a floor of 0.75%) plus 4.25%, or (ii) a base rate (determined by reference to the highest of (1) prime lending rate, (2) the overnight federal funds rate plus 0.5%, or (3) the one-month adjusted LIBOR rate (subject to a floor of 0.75%) plus 1.0%) plus 3.25%. There is no scheduled amortization on the 2014 Term Loan; however, subject to certain exceptions, mandatory prepayments of up to 50% of Excess Cash Flow may be required, based on ESH REIT’s Consolidated Leverage Ratio, each as defined. For the year ended December 31, 2015, ESH REIT had no Excess Cash Flow, as defined, and therefore no mandatory prepayment is required during the three months ending March 31, 2016. For the period from July 1, 2014 through December 31, 2014, ESH REIT’s Excess Cash Flow, as defined, totaled approximately $17.1 million, which required ESH REIT to make a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015.

Obligations under the 2014 Term Loan are guaranteed by certain of ESH REIT’s 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. The 2014 Term Loan is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility on a pari passu basis with obligations under the ESH REIT Revolving Credit Facility (as defined below), with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. Subject to an intercreditor agreement that, among other things, provides priority in favor of the ESH REIT Revolving Credit Facility under certain circumstances, the 2014 Term Loan may be repaid prior to its maturity, subject to a prepayment penalty on or after December 24, 2015 but prior to June 24, 2016 in an amount equal to 1.0% of the aggregate principal amount repaid. Repayments on or after June 24, 2016 require no prepayment penalty.

The 2014 Term Loan contains a number of restrictive 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 distributions and make other restricted payments, engage in transactions with ESH REIT’s affiliates, sell all or substantially all of its assets, merge and create liens. The 2014 Term Loan also contains certain customary affirmative covenants and events of default. During a Trigger Event, an Adjusted Trigger Event, a Default or an Event of Default, each as defined, ESH REIT is restricted from making cash distributions, subject to certain exceptions. As of December 31, 2015, none of these events had occurred.

ESH REIT Senior Notes

On May 15, 2015, ESH REIT issued $500.0 million of 5.25% senior notes due in 2025 (the “2025 Notes”) under an indenture (the “Indenture”) with Deutsche Bank Trust Company Americas, as trustee, at a price equal to 100% of their par value in a private placement pursuant to Rule 144A of the Securities Act of 1933, as amended.

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ESH REIT used the proceeds and cash on hand to repay $500.0 million of the outstanding balance under its 2012 Mortgage Loan. The 2025 Notes mature on May 1, 2025 and bear interest at a fixed rate of 5.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year.

The 2025 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of ESH REIT’s subsidiaries that guarantee ESH REIT’s obligations under the 2014 Term Loan and the ESH REIT Revolving Credit Facility. The 2025 Notes rank equally in right of payment with ESH REIT’s existing and future senior unsecured indebtedness, and senior in right of payment to all future subordinated indebtedness, if any. The 2025 Notes are effectively junior to any of ESH REIT’s secured indebtedness to the extent of the value of the assets securing such indebtedness.

ESH REIT may redeem the 2025 Notes at any time on or after May 1, 2020, in whole or in part, at a redemption price equal to 102.625% of the principal amount, declining annually to 100% of the principal amount from May 1, 2023 and thereafter, plus accrued and unpaid interest. Prior to May 1, 2020, ESH REIT may redeem the 2025 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus a “make-whole” premium, as defined in the Indenture, plus accrued and unpaid interest. Prior to May 1, 2018, subject to certain conditions, ESH REIT may redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 105.250% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds from certain equity offerings, provided 65% of the original amount of the principal remains outstanding after the occurrence of each such redemption. Upon a Change of Control, as defined, holders of the 2025 Notes have the right to require ESH REIT to redeem the 2025 Notes at 101% of the principal amount, plus accrued and unpaid interest.

The Indenture contains a number of customary covenants that, subject to certain exceptions, limit ESH REIT’s ability and the ability of certain of its subsidiaries to incur additional debt, create certain liens, pay dividends or distributions, make certain investments and other payments, enter into affiliate transactions, sell assets or merge, consolidate or transfer substantially all of their assets, among other things. ESH REIT was in compliance with all covenants set forth in the Indenture as of December 31, 2015.

Revolving Credit Facilities

ESH REIT Revolving Credit Facility—On November 18, 2013, ESH REIT entered into a $250.0 million revolving credit facility (the “ESH REIT Revolving Credit Facility”). Subject to the satisfaction of certain criteria, ESH REIT is able to request to increase the facility to an amount up to $350.0 million at any time. 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. 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, subject to a one-year extension option.

ESH REIT had no letters of credit outstanding under this credit facility, an outstanding balance drawn of $0 and borrowing capacity available of $250.0 million as of December 31, 2015 and 2014. ESH REIT incurred approximately $1.0 million, $1.3 million and $0.1 million of interest expense and fees in connection with this facility, which are included as a component of net interest expense in the accompanying consolidated and combined statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

ESH REIT’s obligations under the ESH REIT Revolving Credit Facility are 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. The ESH REIT Revolving Credit Facility is secured by

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a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility on a pari passu basis with obligations under the 2014 Term Loan, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan.

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 distributions and make other restricted payments, engage in transactions with ESH REIT’s affiliates, sell all or substantially all of its 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, as defined, calculated as of the end of such fiscal quarter, be less than or equal to 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 or the Adjusted Debt Yield, each as defined, not be less than 9.0% as of the last day of such calendar month.

In order to avoid a Trigger Event or an Adjusted Trigger Event, the ESH REIT Revolving Credit Facility requires a Debt Yield and an Adjusted Debt Yield, each as defined, of at least 11.5%. The occurrence of a Trigger Event or an Adjusted Trigger Event would require ESH REIT to repay the outstanding facility balance and cash collateralize outstanding letters of credit and restrict ESH REIT from making cash distributions, subject to certain exceptions. As of December 31, 2015, the Debt Yield and Adjusted Debt Yield were 29.0% and 20.0%, respectively, and no Trigger Event or Adjusted Trigger Event had occurred.

Corporation Revolving Credit Facility—On November 18, 2013, the Corporation entered into a revolving credit facility (the “Corporation Revolving Credit Facility”) of $75.0 million. On November 18, 2014, the borrowing availability under the facility decreased 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. 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, subject to a one-year extension option.

As of December 31, 2015, the Corporation had one letter of credit outstanding under this facility of $1.8 million, an outstanding balance drawn of $0 and borrowing capacity available of $48.2 million. As of December 31, 2014 the Corporation had one letter of credit outstanding under this facility of $3.6 million, an outstanding balance drawn of $0 and borrowing capacity available of approximately $46.4 million. The Corporation incurred approximately $0.3 million, $1.2 million and $0.2 million of interest expense and fees in connection with this facility, which are included as a component of net interest expense in the accompanying consolidated and combined statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

The Corporation’s obligations under the Corporation Revolving Credit Facility are 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 ESH REIT’s 2012 Mortgage Loan. 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, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan.

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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 distributions 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, as defined, calculated as of the end of such fiscal quarter, be less than or equal to 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 and the Adjusted Debt Yield, each as defined, not be less than 9.0% as at the last day of such calendar month.

In order to avoid a Trigger Event or an Adjusted Trigger Event, each as defined, the Corporation Revolving Credit Facility requires a Debt Yield and an Adjusted Debt Yield of at least 12.0%. The occurrence of a Trigger Event or an Adjusted Trigger Event would require the Corporation to repay the outstanding facility balance and cash collateralize outstanding letters of credit and restrict the Corporation from making cash distributions, subject to certain exceptions. As of December 31, 2015, the Debt Yield and Adjusted Debt Yield were 29.0% and 20.0%, respectively, and no Trigger Event or Adjusted 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. Extended Stay LLC incurred a fee of 0.5% on the undrawn revolver balance. 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 net interest expense in the 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 net interest expense in the accompanying consolidated and combined statement of operations for the year ended December 31, 2013.

ESH REIT Mezzanine Loans

On November 30, 2012, ESH REIT entered into three mezzanine loans totaling $1.08 billion (the “2012 Mezzanine Loans”). The 2012 Mezzanine Loans would have matured on December 1, 2019, with all outstanding principal and unpaid interest due on that date; however, as discussed above, in 2013, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans and in 2014, ESH REIT repaid the remaining outstanding balance of $365.0 million of the 2012 Mezzanine Loans. Under certain limited circumstances, losses related to the 2012 Mezzanine Loans and costs incurred by the lenders were guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $108.0 million.

Assumed Mortgage Loan

Two of ESH REIT’s hotel properties were subject to a mortgage loan that was assumed on October 8, 2010 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.

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Interest Expense—The components of net interest expense for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Contractual interest(1)	$	123,411		$	123,736		$	194,980
Amortization of deferred financing costs and debt discount		10,490			14,510			12,537
Debt extinguishment and other costs		4,198			11,228			27,076
Interest income		(317	)		(110	)		(134	)
Total	$	137,782		$	149,364		$	234,459

(1) Contractual interest includes dividends on the shares of mandatorily redeemable preferred stock (see Note 8).

Future Maturities of Debt—The future maturities of debt as of December 31, 2015, are as follows (in thousands):

Years Ending December 31,
2016	$	—
2017		111,157
2018		—
2019		2,186,463	(1)
2020		—
Thereafter		500,000
Total	$	2,797,620

(1) Subject to certain exceptions, the 2014 Term Loan may require mandatory prepayments of up to 50% of Excess Cash Flow based on ESH REIT’s Consolidated Leverage Ratio, each as defined. Mandatory prepayments are determined on an annual basis and are payable during the first three months of the subsequent fiscal year. No mandatory prepayment is required during the three months ending March 31, 2016, based on the calculation of Excess Cash Flow for the year ended December 31, 2015.

Fair Value of Debt—As of December 31, 2015 and 2014, the estimated fair value of ESH REIT’s 2012 Mortgage Loan, 2014 Term Loan and 2025 Notes was approximately $2.8 billion and $2.9 billion, respectively. The estimated fair values of ESH REIT’s 2012 Mortgage Loan, 2014 Term Loan and 2025 Notes 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 2012 Mortgage Loan, 2014 Term Loan and 2025 Notes (Level 2 fair value measures) or quoted market prices (Level 1 fair value measures), when available.

8. 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, 2015 and 2014. Dividends on these 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 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 unpaid dividends.

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Due to the fact that the 8.0% voting preferred stock is mandatorily redeemable by the Corporation, it is classified as a liability on the accompanying consolidated balance sheets. Dividends on these preferred shares are classified as net interest expense on the accompanying consolidated and combined statements of operations.

Fair Value of Mandatorily Redeemable Preferred Stock—As of December 31, 2015 and 2014, the estimated fair value of the 8.0% voting preferred stock was approximately $21.2 million. The estimated fair value of the 8.0% voting preferred stock is determined by comparing current borrowing rates and risk spreads offered in the market to the stated interest rates and spreads (Level 2 fair value measures).

9. INCOME TAXES

Income before income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 consists of the following (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
U.S.	$	362,844		$	201,312		$	76,501
Canada		(3,286	)		(5,701	)		1,165
Total	$	359,558		$	195,611		$	77,666

The components of income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	Year Ended December 31, 2015		Year Ended December 31, 2014			Year Ended December 31, 2013
Federal (including foreign):
Current	$	56,282	$	39,161		$	3,520
Deferred		8,183		(746	)		(10,131	)
State:
Current		11,545		6,416			3,044
Deferred		526		226			(1,423	)
Total	$	76,536	$	45,057		$	(4,990	)

The differences between the income tax expense (benefit) at the effective tax rate and the statutory U.S. federal income tax rate for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	Year Ended December 31, 2015					Year Ended December 31, 2014					Year Ended December 31, 2013
Tax at statutory rate	$	125,845		35.0	%	$	68,464		35.0	%	$	27,183		35.0	%
State income tax		7,987		2.2			4,609		2.4			357		0.4
Foreign income tax rate differential		4		—			44		—			203		0.3
Nondeductible (nontaxable):
ESH REIT income		(59,386	)	(16.5	)		(38,753	)	(19.8	)		(33,798	)	(43.5	)
Pass-through entity income		—		—			—		—			(1,182	)	(1.5	)
Change in expected distribution policy		—		—			—		—			(5,561	)	(7.2	)
Equity-based compensation		954		0.3			1,376		0.7			6,598		8.5
Other permanent differences		1,247		0.3			810		0.4			1,678		2.2
Change in ESH REIT temporary differences		(399	)	(0.1	)		10,718		5.4			—		—
Valuation allowance		923		0.3			1,182		0.6			216		0.3
Other—net		(639	)	(0.2	)		(3,393	)	(1.7	)		(684	)	(0.9	)
Income tax expense (benefit)—net	$	76,536		21.3	%	$	45,057		23.0	%	$	(4,990	)	(6.4	)%

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The significant components of deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014, consist of the following (in thousands):

	December 31, 2015			December 31, 2014
Deferred tax assets:
Net operating loss carryforwards	$	2,991		$	7,641
Accruals and allowances		31,743			28,411
Deferred financing costs		23			74
Equity-based compensation		3,165			1,571
Depreciable property		6			—
Intangible assets		—			3,538
Other		185			2,676
Total deferred tax assets		38,113			43,911
Valuation allowance		(2,878	)		(1,955	)
Net deferred tax assets		35,235			41,956
Deferred tax liabilities:
Undistributed ESH REIT income		(40,248	)		(28,669	)
Intangible assets		(3,516	)		(6,735	)
Prepaid expenses		(3,865	)		(1,085	)
Depreciable property		—			(3,204	)
Accruals and allowances		—			(8,540	)
Other		(590	)		(515	)
Total net deferred tax liabilities:	$	(12,984	)	$	(6,792	)

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 net capital gain, 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 is subject to federal income and excise taxes on undistributed income.

In 2015, ESH REIT distributed approximately 95% of its taxable income and utilized its federal net operating loss carryforward of approximately $18.6 million and, as a result, incurred minimal current federal income tax in the form of alternative minimum tax. Deferred tax expense was incurred due to the utilization of the deferred tax asset associated with the net operating loss carryforward. In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. Accordingly, ESH REIT is expected to be subject to federal and state income tax on approximately 5% of its taxable income. As a result, the Company has recorded deferred tax assets and liabilities to reflect the fact that an estimated 5% of ESH REIT’s future taxable income is expected to be subject to tax.

ESH REIT had taxable income prior to distributions of approximately $369.0 million, $194.0 million and $192.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. In 2015, ESH REIT made approximately $273.1 million in cash distributions to its shareholders, of which approximately $113.0 million was considered capital gain and approximately $160.1 million was considered ordinary taxable income.

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In January 2016, ESH REIT paid a special distribution of approximately $86.5 million, of which approximately $77.4 million was deductible in 2015. The special distribution paid in 2016 will be considered a taxable dividend. In 2014, ESH REIT made approximately $241.2 million in cash distributions to its shareholders. In 2013, ESH REIT made approximately $239.8 million in distributions to its shareholders, which consisted of a cash distribution of approximately $78.4 million and a property distribution of approximately $161.4 million. All of the 2014 and 2013 distributions were considered taxable dividends.

As of December 31, 2015 and 2014, 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.

In connection with the Pre-IPO Transactions, a deferred income tax impact of approximately $10.0 million was recorded as a reduction to additional paid in capital in 2013. Additionally, 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. The deferred tax asset related to an ESH REIT net operating loss carryforward of approximately $18.6 million and was utilized in 2015.

As of December 31, 2015, the book basis of ESH REIT’s property and equipment was approximately $80.0 million greater than the tax basis of its assets.

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 2012 to present are subject to examination by the Internal Revenue Service and other taxing authorities.

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10. QUARTERLY RESULTS (Unaudited)

Quarterly financial data for the years ended December 31, 2015 and 2014 is as follows (in thousands, except per share data):

	Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
	March 31,						June 30,						September 30,						December 31,
	2015			2014			2015			2014			2015			2014			2015(1)			2014
Total revenues	$	287,591		$	270,316		$	340,311		$	321,914		$	360,516		$	338,553		$	296,335		$	282,692
Income from operations		69,916			60,203			117,285			106,245			115,818			113,590			197,053			68,700
Net income		27,860			16,081			64,805			46,284			58,225			60,185			132,132			28,004
Net income attributable to noncontrolling interests		(6,312	)		(5,291	)		(6,822	)		(3,048	)		(20,569	)		(16,310	)		(136,279	)		(86,309	)
Net income (loss) attributable to common shareholders		21,548			10,790			57,983			43,236			37,656			43,875			(4,147	)		(58,305	)
Net income (loss) per common share—basic(2)	$	0.11		$	0.05		$	0.28		$	0.21		$	0.18		$	0.22		$	(0.02	)	$	(0.29	)
Net income (loss) per common share—diluted(2)	$	0.11		$	0.05		$	0.28		$	0.21		$	0.18		$	0.21		$	(0.02	)	$	(0.29	)

(1) Includes gain on sale of hotel properties of approximately $130.9 million, which relates to the sale of a portfolio of 53 hotel properties and certain intellectual property in December 2015 as discussed in Note 4.

(2) The sum of the four quarters may differ from the annual amount due to rounding.

11. EQUITY

The Corporation

The Corporation has authorized 3,500.0 million shares of common stock, par value $0.01 per share, of which approximately 204.6 million and 204.5 million shares were issued and outstanding as of December 31, 2015 and 2014, respectively. 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, 2015 and 2014. With respect to dividend, distribution and liquidation rights, the 8.0% voting preferred stock ranks senior to the Corporation’s common stock. Dividends on these preferred shares are payable quarterly in arrears at a rate of 8.0% per year. The outstanding 8.0% voting preferred shares are classified as a liability on the accompanying consolidated balance sheets and are further described in Note 8.

The Corporation paid cash distributions totaling approximately $12.3 million during the year ended December 31, 2015 to its common shareholders, all of which were considered taxable dividends. No distributions were paid during the years ended December 31, 2014 or 2013.

On December 10, 2015, the Board of Directors of the Corporation declared a special cash distribution of $0.06 per share, payable to Extended Stay America Inc.’s common shareholders, totaling approximately $12.3 million, which is included in accounts payable and accrued liabilities in the accompanying consolidated balance

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sheet as of December 31, 2015. The Corporation paid this special distribution, which will be considered a taxable dividend, on January 18, 2016 to shareholders of record as of January 4, 2016.

Also, on December 10, 2015, the Board of Directors of Extended Stay America, Inc., together with the Board of Directors of ESH Hospitality, Inc., authorized a combined Paired Share repurchase program for up to $100 million of the Paired Shares. On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares. The program expires on December 31, 2016. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice.

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 250.5 million and 250.3 million shares were issued and outstanding as of December 31, 2015 and 2014, respectively. All issued and outstanding shares of ESH REIT Class A common stock were held by the Corporation as of December 31, 2015 and 2014. ESH REIT has authorized 7,800.0 million shares of Class B common stock, par value $0.01 per share, of which approximately 204.6 million and 204.5 million shares were issued and outstanding as of December 31, 2015 and 2014, respectively. Each share of ESH REIT’s outstanding Class B common stock is attached to and trades as a single unit with one share of the Corporation’s common stock.

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, 2015 and 2014. Additionally, ESH REIT has authorized 125 shares of preferred stock, no par value, of which 125 shares were issued and outstanding as of December 31, 2015 and 2014. This 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 unpaid dividends. 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 unpaid dividends.

ESH REIT paid cash distributions totaling approximately $273.1 million (of which approximately $150.3 million was paid to the Corporation), $241.2 million (of which approximately $132.7 million was paid to the Corporation), and $78.4 million (paid to the Sponsors prior to the Offering) during the years ended December 31, 2015, 2014 and 2013, respectively. Property distributions of approximately $161.4 million were made during the year ended December 31, 2013.

On December 10, 2015, the Board of Directors of ESH REIT declared a special cash distribution of $0.19 per share, payable to ESH Hospitality, Inc.’s Class A and Class B common shareholders, totaling approximately $86.5 million. Approximately $47.6 million is payable to the Corporation and is eliminated in consolidation; the remainder, approximately $38.9 million, is payable to ESH REIT Class B common shareholders and is included in accounts payable and accrued liabilities, in the accompanying consolidated balance sheet as of December 31, 2015. ESH REIT paid this special distribution on January 18, 2016 to shareholders of record as of January 4, 2016.

Also, on December 10, 2015, and as noted above, the Board of Directors of ESH Hospitality, Inc., together with the Board of Directors of Extended Stay America, Inc., authorized a combined Paired Share repurchase program for up to $100 million of the Paired Shares. On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares. The program expires on December 31, 2016. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice.

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Noncontrolling Interests

As of December 31, 2015 and 2014, third party equity interests in ESH REIT consist of the outstanding shares of the Class B common stock of ESH REIT, which represent approximately 45% of ESH REIT’s total common equity, and the outstanding 125 shares of 12.5% preferred stock of ESH REIT. These interests, which are not owned by the Corporation, are presented as noncontrolling interests. Prior to the Offering, noncontrolling interests consisted of all of the equity of HVM, a consolidated VIE (see Note 12).

12. VARIABLE INTEREST ENTITY

As discussed in Notes 1 and 2, the results of operations, comprehensive income and cash flows of HVM are consolidated in the Company’s accompanying consolidated and combined financial statements for the period from January 1, 2013 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 and service agreements were terminated and ESA Management entered into new management and service agreements with the Corporation and its subsidiaries. The following describes HVM’s financial activity prior to the Pre-IPO Transactions, including activity between HVM and ESH REIT, the majority of which eliminated in consolidation and combination.

Hotel Management Agreements with the Company—On October 8, 2010, ESH REIT’s taxable REIT subsidiaries, the Operating Lessees, executed management agreements with HVM with respect to 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 for the period from January 1, 2013 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 (described below), 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 October 8, 2010, 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 Corporation acquired the net assets of HVM; therefore, the administrative services agreements were terminated at that time.

Third Party Management Agreements—For the period from January 1, 2013 through the Pre-IPO Transactions, HVM managed two hotels for a third-party hotel owner-operator under a separate agreement with each hotel. These management agreements were assumed by ESA Management as part of the Pre-IPO Transactions. The Company acquired these hotels on December 31, 2013 (see Note 4).

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The following table sets forth a summary of hotel management fees, administrative services fees, general and administrative 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 (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		General and administrative expense reimbursement fees		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

Condensed Consolidated Financial Information—The condensed consolidated statement of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions is as follows (in thousands):

Revenues:
Management fee revenues	$	62,173
Reimbursement of payroll from managed properties		180,335
Total revenues		242,508
Operating expenses:
General and administrative expenses		58,049
Restructuring expenses		605
Managed property payroll expenses		180,335
Depreciation and amortization		1,300
Total operating expenses		240,289
Other income		120
Net income	$	2,339

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13. COMMITMENTS AND CONTINGENCIES

Lease Commitments—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 three leases include multiple renewal options for generally five or 10 year periods.

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. The lease was assumed by ESA Management as part of the Pre-IPO Transactions. 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.

Rent expense on office and ground leases is recognized on a straight-line basis and was approximately $3.3 million, $3.2 million and $3.3 million for the years ended December 31, 2015, 2014 and 2013, 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, 2015, are as follows (in thousands):

Years Ending December 31,
2016	$	2,649
2017		2,718
2018		2,788
2019		2,843
2020		2,964
Thereafter		82,972
Total	$	96,934

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 years ended December 31, 2015, 2014 and 2013, and is included in hotel operating expenses in the accompanying consolidated and combined statements of operations.

Letter of Credit—As of December 31, 2015, the Company had one outstanding letter of credit, issued by the Corporation, for $1.8 million, which is collateralized by the Corporation’s revolving credit facility.

Legal Contingencies—The Company is not a party to any 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 financial statements.

14. EQUITY-BASED COMPENSATION

The Corporation and ESH REIT each maintain a long-term incentive plan (“LTIP”), as amended and restated in 2015, and approved by their shareholders. Under the LTIPs, the Corporation and ESH REIT may issue to eligible employees or directors restricted stock awards (“RSAs”), restricted stock units (“RSUs”) or other equity-based awards, in respect of Paired Shares, with service, performance or market vesting conditions. The aggregate number of Paired Shares that may be the subject of awards under the LTIPs shall not exceed 8.0 million, of which no more than 4.0 million may be granted as incentive stock options. Each of the

119

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. As of December 31, 2015, 6,050,035 Paired Shares were available for future issuance under the LTIPs.

Equity-based compensation expense 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. A portion of the grant-date fair value of all equity-based awards is allocated to a share of common stock of the Corporation and a portion is allocated to a share of Class B common stock of ESH REIT. Equity-based compensation expense was approximately $10.5 million, $8.8 million and $20.2 million for the years ended December 31, 2015, 2014 and 2013, respectively, and is included in general and administrative expenses in the accompanying consolidated and combined statements of operations.

As of December 31, 2015, unrecognized compensation expense related to outstanding equity-based awards and the related weighted-average period over which it is expected to be recognized subsequent to December 31, 2015, is presented in the following table. Total unrecognized compensation expense will be adjusted for actual forfeitures.

	Unrecognized Compensation Expense Related to Outstanding RSUs/RSAs (in thousands)		Remaining Weighted- Average Amortization Period (in years)
RSAs/RSUs with service vesting conditions	$	9,443		1.8
RSUs with performance vesting conditions		—		n/a
RSUs with market vesting conditions		3,224		2.5
Total unrecognized compensation expense	$	12,667

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RSA/RSU activity during the years ended December 31, 2015, 2014 and 2013, after taking into account the conversion of Profit Units (defined below) issued under HVM’s management incentive plan at the time of the Offering was as follows:

						Performance-Based Awards
	Service-Based Awards					Performance Vesting				Market Vesting
	Number of RSAs/RSUs (in thousands)			Weighted- Average Grant- Date Fair Value(1)		Number of RSUs (in thousands)		Weighted- Average Grant- Date Fair Value		Number of RSUs (in thousands)			Weighted- Average Grant- Date Fair Value(1)
Outstanding RSAs/RSUs—January 1, 2013		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 settled in 2013		(96	)	$	6.67		—	$	—		—		$	—
RSAs/RSUs forfeited in 2013		(520	)	$	5.76		—	$	—		—		$	—
Outstanding RSAs/RSUs—December 31, 2013		1,933		$	12.02		—	$	—		—		$	—
RSAs/RSUs granted in 2014		135		$	24.33		—	$	—		—		$	—
RSAs/RSUs settled in 2014		(719	)	$	8.87		—	$	—		—		$	—
RSAs/RSUs forfeited in 2014		(278	)	$	8.38		—	$	—		—		$	—
Outstanding RSAs/RSUs—December 31, 2014		1,071		$	16.43		—	$	—		—		$	—
RSAs/RSUs granted in 2015		462		$	18.93		19	$	19.07		557		$	6.84
RSAs/RSUs settled in 2015		(499	)	$	15.19		—	$	—		—		$	—
RSAs/RSUs forfeited in 2015		(42	)	$	15.99		—	$	—		(1	)	$	20.76
Outstanding RSAs/RSUs—December 31, 2015		992		$	18.24		19	$	19.07		556		$	6.81
Vested RSAs/RSUs—December 31, 2015		145		$	23.97		19	$	19.07		—		$	—
Nonvested RSAs/RSUs—December 31, 2015		847		$	17.25		—	$	—		556		$	6.81
Vested RSAs/RSUs—December 31, 2014		131		$	24.08		—	$	—		—		$	—
Nonvested RSAs/RSUs—December 31, 2014		940		$	15.37		—	$	—		—		$	—

(1) A valuation was performed contemporaneously with the issuance of grants.

Service-Based Awards

The Corporation granted 454,048 service-based awards during the year ended December 31, 2015, with a weighted-average grant-date fair value of $18.91. ESH REIT granted 7,552 service-based awards during the year ended December 31, 2015, with a grant-date fair value of $19.74. The grant-date fair value of awards with service vesting conditions is based on the closing price of a Paired Share on the date of grant. Service-based awards vest over a period of two to four years, subject to the grantee’s continued employment or service.

Performance-Based Awards

The Corporation granted 19,126 awards with performance vesting conditions during the year ended December 31, 2015, with a grant-date fair value of $19.07 to certain executives. The grant-date fair value of awards with performance vesting conditions is based on the closing price of a Paired Share on the date of grant. The equity-based compensation expense recognized over the one-year period is adjusted to reflect the probability of the achievement of performance targets defined in the award agreements. These awards vest over a one-year period, subject to the grantee’s continued employment, with the ability to earn Paired Shares in a range of 0% to 200% of the awarded number of RSUs based on linear interpolation of the achievement of defined performance targets. As of December 31, 2015, all awards with performance vesting conditions are expected to be satisfied at or near their target level.

121

During the year ended December 31, 2015, the Corporation granted 500,000 and 57,388 awards with market vesting conditions with a grant-date fair value of $5.24 and $20.76, respectively, to certain executives. These awards vest over a three-year period, subject to the grantee’s continued employment, with the ability to earn Paired Shares in a range of 0% to 150% of the awarded number of RSUs based on linear interpolation of the absolute total shareholder return of a Paired Share or the total shareholder return of a Paired Share relative to the total shareholder return of other publicly traded lodging companies identified in the award agreements. The grant-date fair value of awards with market vesting conditions is typically based on a third-party valuation. During the year ended December 31, 2015, the grant-date fair values of awards with market vesting conditions were calculated using Monte Carlo simulation models with the following weighted-average key assumptions:

Expected holding period	2.95 years
Risk–free rate of return	0.98	%
Expected dividend yield	3.69	%
Expected volatility(1)	28.00	%

(1) This assumption applies only to awards that vest based on the absolute total shareholder return of a Paired Share.

Awards Issued Prior to the Offering

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 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 (subject to holding requirements that generally matched the vesting schedule of the underlying Profit Units). As a result of this acceleration, the Company incurred compensation expense of approximately $14.6 million during the year ended December 31, 2013.

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 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 represented the period of time that the Profit Units were expected to be outstanding. The Profit Units were assumed to remain outstanding until a change in control of ownership. The risk-free rate of return for periods approximating the expected holding period of the Profit 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 predecessor’s historical dividend rate. Because the 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 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 were as follows:

Expected holding period	0.25 years
Risk–free rate of return	0.2	%
Expected dividend yield	0.0	%
Expected volatility	30.0	%
Discount for lack of marketability	20.0	%

122

In December 2010, HVM entered into agreements designed to incentivize and retain certain operations personnel whose duties included 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 connection with the Pre-IPO Transactions, ESA Management assumed this liability. In May 2014, ESA Management modified and settled the majority of the agreements, resulting in a gain of approximately $1.7 million during the year ended December 31, 2014, which is included as a component general and administrative expenses in the accompanying consolidated statement of operations. As of December 31, 2015 and 2014, approximately $0.3 million is included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to the remaining outstanding agreements.

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 $18,000 during 2015 and $17,500 during 2014 and 2013. Employer contributions, net of forfeitures, totaled approximately $1.7 million, $1.6 million and $1.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.

16. RELATED PARTY TRANSACTIONS

In 2013, 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, 2015 and 2014.

17. SUBSEQUENT EVENTS

On January 18, 2016, the Corporation paid a special cash distribution, which was declared on December 10, 2015, of $0.06 per share to its common shareholders, totaling approximately $12.3 million. Also on January 18, 2016, ESH REIT paid a special cash distribution, which was declared on December 10, 2015, of $0.19 per share to its Class A and Class B common shareholders, totaling approximately $86.5 million, of which approximately $47.6 million was paid to the Corporation.

On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares.

On February 23, 2016, the Board of Directors of the Corporation declared a cash distribution of $0.02 per share for the fourth quarter of 2015 on its common stock. This distribution is payable on March 22, 2016 to shareholders of record as of March 8, 2016. Also on February 23, 2016, the Board of Directors of ESH REIT declared a cash distribution of $0.15 per share for the fourth quarter of 2015 on its Class A and Class B common stock. This distribution is also payable on March 22, 2016 to shareholders of record as of March 8, 2016.

123

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, 2015 and 2014, 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, 2015. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, 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.

As discussed in Note 2 to the financial statements, the Company has changed its presentation of debt issuance costs as of December 31, 2015 and 2014 due to the retrospective adoption of an accounting standards update regarding the presentation of debt issuance costs.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on the criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 23, 2016

124

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2015 AND 2014

(In thousands, except share and per share data)

	December 31, 2015			December 31, 2014
ASSETS
PROPERTY AND EQUIPMENT—Net of accumulated depreciation of $765,034 and $606,960	$	3,920,906		$	4,079,648
RESTRICTED CASH		60,945			49,999
CASH AND CASH EQUIVALENTS		223,256			33,816
RENTS RECEIVABLE FROM EXTENDED STAY AMERICA, INC.		4,299			1,984
DEFERRED RENTS RECEIVABLE FROM EXTENDED STAY AMERICA, INC.		41,546			30,883
DUE FROM EXTENDED STAY AMERICA, INC.		—			1,238
GOODWILL		52,245			54,297
DEFERRED TAX ASSETS		—			3,206
OTHER ASSETS		13,352			13,899
TOTAL ASSETS	$	4,316,549		$	4,268,970
LIABILITIES AND EQUITY
LIABILITIES:
Mortgage loan payable—Net of unamortized deferred financing costs of $19,536 and $27,299	$	1,911,621		$	2,490,750
Term loan facility payable—Net of unamortized deferred financing costs and debt discount of $4,940 and $6,359		361,523			368,641
Senior notes payable—Net of unamortized deferred financing costs of $10,756 and $0		489,244			—
Unearned rental revenues from Extended Stay America, Inc.		38,321			28,109
Due to Extended Stay America, Inc.		64,680			—
Accounts payable and accrued liabilities		101,997			49,437
Deferred tax liabilities		2,697			—
Total liabilities		2,970,083			2,936,937
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY:
Common stock—Class A: $0.01 par value, 4,300,000,000 shares authorized, 250,493,583 and 250,303,494 shares issued and outstanding as of December 31, 2015 and 2014, respectively; Class B: $0.01 par value, 7,800,000,000 shares authorized, 204,593,912 and 204,517,265 shares issued and outstanding as of December 31, 2015 and 2014, respectively		4,554			4,551
Additional paid in capital		1,168,903			1,182,611
Preferred stock—no par value, $1,000 liquidation value, 125 shares authorized, issued and outstanding as of December 31, 2015 and 2014		73			73
Retained earnings		186,306			150,652
Accumulated other comprehensive loss		(13,370	)		(5,854	)
Total equity		1,346,466			1,332,033
TOTAL LIABILITIES AND EQUITY	$	4,316,549		$	4,268,970

See accompanying notes to consolidated financial statements.

125

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands, except per share data)

	Year Ended December 31, 2015		Year Ended December 31, 2014			Year Ended December 31, 2013
REVENUES:
Rental revenues from Extended Stay America, Inc.	$	719,635	$	684,205		$	71,900
Hotel room revenues		—		—			983,950
Other hotel revenues		—		—			15,576
Management fees and other revenues		—		—			1,113
Total revenues		719,635		684,205			1,072,539
OPERATING EXPENSES:
Hotel operating expenses		97,062		93,826			478,727
General and administrative expenses		15,973		15,634			86,676
Depreciation and amortization		199,044		183,033			167,185
Impairment of long-lived assets		—		—			3,330
Managed property payroll expenses		—		—			639
Trademark license fees		—		—			2,998
Restructuring expenses		—		—			605
Acquisition transaction expenses		—		—			235
Total operating expenses		312,079		292,493			740,395
GAIN ON SALE OF HOTEL PROPERTIES (NOTE 4)		116,616		864			—
OTHER INCOME		37		269			1,075
INCOME FROM OPERATIONS		524,209		392,845			333,219
OTHER NON-OPERATING EXPENSE		2,726		3,629			—
INTEREST EXPENSE, NET		134,780		143,232			233,629
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		386,703		245,984			99,590
INCOME TAX EXPENSE (BENEFIT)		8,519		(1,110	)		(876	)
NET INCOME		378,184		247,094			100,466
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		—		—			(730	)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS OR MEMBERS	$	378,184	$	247,094		$	99,736
NET INCOME PER COMMON SHARE:
Class A—basic	$	0.83	$	0.54		$	0.26
Class A—diluted	$	0.83	$	0.54		$	0.26
Class B—basic	$	0.83	$	0.55		$	0.26
Class B—diluted	$	0.83	$	0.54		$	0.25
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:
Class A—basic		250,451		250,300			213,759
Class A—diluted		250,451		250,300			213,759
Class B—basic		204,211		203,548			174,894
Class B—diluted		204,567		204,508			176,268

See accompanying notes to consolidated financial statements.

126

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands)

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
NET INCOME	$	378,184		$	247,094		$	100,466
FOREIGN CURRENCY TRANSLATION LOSS, NET OF TAX		(7,516	)		(2,194	)		(3,980	)
COMPREHENSIVE INCOME		370,668			244,900			96,486
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		—			—			(730	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS OR MEMBERS	$	370,668		$	244,900		$	95,756

See accompanying notes to consolidated financial statements.

127

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands, except per share data)

	Members’ Capital			Common Stock							Preferred Stock				Additional Paid in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ and Members’ Equity			Noncontrolling Interests			Total Equity
				Class A Shares		Class B Shares			Amount		Shares		Amount
BALANCE—January 1, 2013	$	740,576			—		—		$	—		125	$	73	$	—		$	2,266		$	124		$	743,039		$	3,157		$	746,196
Net income		—			—		—			—		—		—		—			99,736			—			99,736			730			100,466
Foreign currency translation loss, net of tax		—			—		—			—		—		—		—			—			(3,980	)		(3,980	)		—			(3,980	)
Member distributions—$0.20 per LLC member interest		—			—		—			—		—		—		—			(78,400	)		—			(78,400	)		(2,011	)		(80,411	)
Preferred distributions		—			—		—			—		—		—		—			(16	)		—			(16	)		—			(16	)
Equity-based compensation		4,094			122		100			—		—		—		2,460			—			—			6,554			—			6,554
ESH REIT reorganization		(744,670	)		210,467		172,200			3,828		—		—		734,475			(33,203	)		196			(39,374	)		(1,876	)		(41,250	)
Sale of equity, net of issuance costs		—			39,707		32,488			723		—		—		599,219			—			—			599,942			—			599,942
BALANCE—December 31, 2013		—			250,296		204,788			4,551		125		73		1,336,154			(9,617	)		(3,660	)		1,327,501			—			1,327,501
Net income		—			—		—			—		—		—		—			247,094			—			247,094			—			247,094
Foreign currency translation loss, net of tax		—			—		—			—		—		—		—			—			(2,194	)		(2,194	)		—			(2,194	)
Issuance of common stock		—			7		—			—		—		—		138			—			—			138			—			138
Common distributions—$0.53 per Class A and Class B common share		—			—		—			—		—		—		(154,356	)		(86,805	)		—			(241,161	)		—			(241,161	)
Preferred distributions		—			—		—			—		—		—		—			(16	)		—			(16	)		—			(16	)
Equity-based compensation		—			—		(271	)		—		—		—		675			(4	)		—			671			—			671
BALANCE—December 31, 2014		—			250,303		204,517			4,551		125		73		1,182,611			150,652			(5,854	)		1,332,033			—			1,332,033
Net income		—			—		—			—		—		—		—			378,184			—			378,184			—			378,184
Foreign currency translation loss, net of tax		—			—		—			—		—		—		—			—			(7,516	)		(7,516	)		—			(7,516	)
Issuance of common stock		—			191		97			3		—		—		3,516			—			—			3,519			—			3,519
Common distributions—$0.79 per Class A and Class B common share		—			—		—			—		—		—		(17,698	)		(342,514	)		—			(360,212	)		—			(360,212	)
Preferred distributions		—			—		—			—		—		—		—			(16	)		—			(16	)		—			(16	)
Equity-based compensation		—			—		(20	)		—		—		—		474			—			—			474			—			474
BALANCE—December 31, 2015	$	—			250,494		204,594		$	4,554		125	$	73	$	1,168,903		$	186,306		$	(13,370	)	$	1,346,466		$	—		$	1,346,466

See accompanying notes to consolidated financial statements.

128

ESH HOSPITALITY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

(In thousands)

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
OPERATING ACTIVITIES:
Net income	$	378,184		$	247,094		$	100,466
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		199,044			183,033			165,998
Amortization of intangible assets		—			—			1,187
Foreign currency transaction loss		2,726			3,629			—
Amortization and write-off of deferred financing costs and debt discount		11,526			16,956			23,998
Amortization of above-market ground leases		(136	)		(136	)		(136	)
Loss on disposal of property and equipment		9,206			3,133			3,493
Impairment of long-lived assets		—			—			3,330
Gain on sale of hotel properties		(116,616	)		(864	)		—
Equity-based compensation		474			671			6,643
Deferred income tax expense (benefit)		6,076			1			(7,440	)
Deferred rents receivable from Extended Stay America, Inc.		(13,028	)		(27,252	)		(3,631	)
Changes in assets and liabilities:
Accounts receivable, net		—			—			(9,821	)
Due to/from Extended Stay America, Inc., net		21,787			29,711			(63,096	)
Other assets		(5,334	)		(7,241	)		13,699
Unearned rental revenue/rents receivable from Extended Stay America, Inc., net		7,897			(11,713	)		37,838
Accounts payable and accrued liabilities		10,179			(4,165	)		22,670
Net cash provided by operating activities		511,985			432,857			295,198
INVESTING ACTIVITIES:
Purchases of property and equipment		(199,135	)		(166,358	)		(171,931	)
Acquisition of hotels, property, and equipment		—			—			(16,241	)
Proceeds from sale of hotel properties, net		265,854			3,223			—
(Increase) decrease in restricted cash and insurance collateral		(10,946	)		(4,096	)		22,074
Proceeds from insurance recoveries		5,261			13,924			2,020
Net cash provided by (used in) investing activities		61,034			(153,307	)		(164,078	)
FINANCING ACTIVITIES:
Principal payments on mortgage loans		(586,892	)		(1,794	)		(5,865	)
Proceeds from term loan facility, net of debt discount		—			373,125			—
Principal payments on term loan facility		(8,537	)		—			—
Proceeds from senior notes		500,000			—			—
Proceeds from revolving credit facility		90,000			143,000			20,000
Payments on revolving credit facility		(90,000	)		(163,000	)		—
Principal payments on mezzanine loans		—			(365,000	)		(715,000	)
Payments of deferred financing costs		(11,476	)		(5,222	)		(4,978	)
Net proceeds to Extended Stay America, Inc.		(5,928	)		(4,676	)		—
Sale of equity		—			—			619,933
Equity issuance costs		—			—			(19,991	)
Common stock issued		2,414			138			—
Common distributions		(273,144	)		(240,910	)		(78,400	)
Preferred distributions		(16	)		(16	)		(16	)
Distributions to HVM members		—			—			(2,011	)
Company reorganization		—			—			(29,351	)
Net cash used in financing activities		(383,579	)		(264,355	)		(215,679	)
CHANGES IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN FOREIGN CURRENCY EXCHANGE RATES		—			24			(147	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		189,440			15,219			(84,706	)
CASH AND CASH EQUIVALENTS—Beginning of period		33,816			18,597			103,303
CASH AND CASH EQUIVALENTS—End of period	$	223,256		$	33,816		$	18,597
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest, excluding prepayment and other penalties	$	118,226		$	122,184		$	201,089
Income tax payments—Net of refunds of $37, $127 and $935	$	1,044		$	873		$	239
NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures included in due to/from Extended Stay America, Inc. and accounts payable and accrued liabilities	$	23,571		$	15,876		$	20,103
Common distributions included in accounts payable and accrued liabilities	$	39,734		$	—		$	—
Common distributions included in due to Extended Stay America, Inc.	$	47,594		$	—		$	—

See accompanying notes to consolidated financial statements.

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ESH HOSPITALITY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

1. BUSINESS, ORGANIZATION AND BASIS OF CONSOLIDATION

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. Subsequent to the Pre-IPO Transactions, 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.

As of December 31, 2015 and 2014, ESH REIT and its subsidiaries owned 626 and 679 hotel properties, respectively, in 44 U.S. states consisting of approximately 68,900 and 75,500 rooms, respectively, and three hotels in Canada consisting of 500 rooms. The hotels are operated by wholly-owned subsidiaries of the Corporation (the “Operating Lessees”) pursuant to leases between ESH REIT and the Operating Lessees. For the period from January 1, 2013 through the Pre-IPO Transactions, the Operating Lessees were subsidiaries of ESH REIT, referred to as taxable REIT subsidiaries. The substantial majority of the hotels are operated under the core brand, Extended Stay America. The three hotels in Canada are operated under the brand Extended Stay Canada. As of December 31, 2014, 47 hotels were operated under the brand Crossland Economy Studios. The brands are owned by ESH Hospitality Strategies LLC (“ESH Strategies”), a subsidiary of the Corporation.

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

Prior to the Pre-IPO Transactions, 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 the taxable REIT subsidiaries which contracted with HVM LLC (“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 and Organization Subsequent to the Initial Public Offering

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 then-current fair market value terms.

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• 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 Internal Revenue Code of 1986, as amended (the “Code”) (see Note 14).

• 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 approximately $21.2 million of mandatorily redeemable preferred stock of the Corporation.

• 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 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 and Secondary Offerings

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.

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. 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 $715.0 million of its outstanding mezzanine loans (see Note 6).

In August 2014, certain selling stockholders (the “Selling Shareholders”) sold 24,150,000 Paired Shares as part of a secondary offering. The Selling Shareholders consisted solely of entities affiliated with the Sponsors and did not include officers or directors of the Corporation or ESH REIT. Neither the Corporation nor ESH REIT sold Paired Shares in the secondary offering and neither received proceeds from the secondary offering. The Corporation and ESH REIT did, however, incur professional fees in connection with the secondary offering. For the year ended December 31, 2014, total costs incurred by ESH REIT were approximately $0.7 million.

In June 2015, the Corporation and ESH REIT filed an automatic shelf registration statement with the U.S. Securities and Exchange Commission (“SEC”) pursuant to which, from time to time, (i) the Corporation and ESH REIT may offer and sell an unlimited number of Paired Shares and (ii) the Selling Shareholders may offer

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and sell up to 142,960,388 Paired Shares. In November 2015, the Selling Shareholders sold 15,000,000 Paired Shares registered pursuant to the automatic shelf registration statement. Neither the Corporation nor ESH REIT sold Paired Shares in the secondary offering and neither received proceeds from the secondary offering. Additionally, as of December 31, 2015, the Corporation and ESH REIT have not sold any securities registered pursuant to the automatic shelf registration statement. The Corporation and ESH REIT did, however, incur professional fees in connection with filing the automatic shelf registration and the secondary offering. Total costs incurred by ESH REIT were approximately $0.3 million during the year ended December 31, 2015.

As of December 31, 2015 and 2014, the public owned approximately 36.9% and 28.9%, respectively, of the outstanding Paired Shares, while the Sponsors and senior management, including certain directors, owned approximately 63.1% and 71.1%, respectively, of the outstanding Paired Shares. As of December 31, 2015, the Corporation owned 250,493,583 shares of ESH REIT’s Class A common stock; the Sponsors, senior management, including certain directors, and the public owned 204,593,912 shares of ESH REIT’s Class B common stock, each of which is attached to and trades as a single unit with a share 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 U.S. (“U.S. GAAP”).

The consolidated results of operations of ESH REIT include the results of operations of ESH REIT and its subsidiaries, which, subsequent to the Pre-IPO Transactions, do not include the Operating Lessees. The results of operations of ESA Management, which 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.

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 ESH REIT’s predecessor, ESH Hospitality LLC, and its subsidiaries, which included the Operating Lessees. Additionally, for the period from January 1, 2013 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 10). 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.

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 2013 (see Note 4), the estimated useful lives of tangible assets as well as in the assessment of tangible and intangible assets, including goodwill, for impairment, estimated liabilities for insurance reserves, and the grant-date fair value of certain equity-based awards prior to completion of the Pre-IPO Transactions. Actual results could differ from those estimates.

Cash and Cash Equivalents—ESH REIT considers all cash on hand, demand deposits with financial institutions 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.

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Restricted Cash—Restricted cash consists of amounts held in cash management accounts and in escrows for the payment of real estate taxes and insurance, capital improvements, ground leases and mortgage debt service, all as required by ESH REIT’s mortgage loan agreement (see Note 6).

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	5–49 years
Hotel building improvements	3–39 years
Hotel site improvements	3–20 years
Hotel furniture, fixtures and equipment	3–10 years
Office furniture, fixtures and equipment	3–7 years

Management assesses the performance of long-lived assets for potential impairment at least annually, as well as when events or changes in circumstances indicate 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 group of hotel properties (groups of hotel properties align with hotels as they are grouped under ESH REIT’s operating leases) to the estimated future undiscounted cash flows expected to be generated by the group of hotel properties. Impairment is recognized when estimated future undiscounted cash flows, including proceeds from disposition, are less than the carrying value of a group of hotel properties.

To the extent that a group of hotel properties is impaired, the excess carrying amount of the group of hotel properties over its estimated fair value is recognized as an impairment charge and reduces income from operations. Fair value is determined based upon the discounted cash flows of a group of hotel properties, quoted market prices, or independent appraisals, as considered necessary. ESH REIT did not recognize any impairment charges related to property and equipment for the years ended December 31, 2015 or 2014, or for the period from the Pre-IPO Transactions through December 31, 2013 (see Note 5). 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 a group of hotel properties could occur in a future period in which conditions change.

For the period from January 1, 2013 through the Pre-IPO Transactions, recoverability of property and equipment was measured by a comparison of the carrying amount of a hotel property to the estimated future undiscounted cash flows expected to be generated by each hotel property. Impairment was recognized when estimated future undiscounted cash flows, including proceeds from disposition, were less than the carrying value of each hotel property. To the extent that a hotel property was impaired, the excess carrying amount of each hotel property over its estimated fair value was recognized as an impairment charge and reduced income from operations. Fair value was determined based upon the discounted cash flows of each hotel property, quoted market prices, or independent appraisals, as considered necessary. ESH REIT recognized an impairment charge related to property and equipment of approximately $3.3 million for the period from January 1, 2013 through the Pre-IPO Transactions (see Note 5).

Intangible Assets and Liabilities—Subsequent to the Pre-IPO Transactions and as of December 31, 2015, 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

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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.

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 and 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 analyzes goodwill associated with all hotels when analyzing for potential impairment. ESH REIT 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, 2015, 2014 or 2013.

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 is determined 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.

Assets Held For Sale—ESH REIT classifies assets as held for sale when management commits to a formal plan to sell the assets, actively seeks a buyer for the assets and the consummation of a sale is considered probable and is expected within one year. ESH REIT considers the consummation of a sale probable once a purchase and sale agreement has been executed, the buyer has a significant non-refundable deposit at risk and no significant financing contingencies exist. Upon designating an asset as held for sale, ESH REIT stops recognizing depreciation expense and records the asset at the lower of its carrying value, which includes allocable goodwill, or its estimated fair value, less estimated costs to sell. Any such adjustment in the carrying value is recognized as an impairment charge.

Discontinued Operations—Effective January 1, 2014, ESH REIT early adopted Accounting Standards Update (“ASU”) No. 2014-08 issued by the Financial Accounting Standards Board (“FASB”) as discussed further in “Recently Issued Accounting Standards” below. This update defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, which generally results in reporting discontinued operations less frequently than under the previous accounting standard.

Deferred Financing Costs—Effective December 31, 2015, ESH REIT early adopted FASB ASU No. 2015-03 and ASU No. 2015-15 as discussed further in “Recently Issued Accounting Standards” below. Costs incurred in obtaining financing are amortized over the terms of the related loans on a straight-line basis, which approximates the effective interest method. Deferred financing costs are presented in the accompanying consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability, except those incurred under a revolving-debt arrangement which are presented as a component of other assets in the accompanying consolidated balance sheets. Upon repayment of, or in conjunction with, a material change in the terms of the underlying debt agreement, remaining unamortized costs are included as a component of net interest expense. During the years ended December 31, 2015, 2014 and 2013, approximately $2.1 million, $5.1 million and $11.7 million, respectively, of unamortized deferred financing costs, primarily related to the prepayment of mortgage and mezzanine loans, are included in net interest expense in the accompanying consolidated statements of operations. Amortization of deferred financing costs unrelated to the prepayment of mortgage and mezzanine

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loans, which is also included in net interest expense in the accompanying consolidated statements of operations, was approximately $9.0 million, $11.7 million and $12.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Revenue Recognition—ESH REIT’s sole source of revenues is rental revenue derived from leases with the Operating Lessees. ESH REIT records rental revenues on a straight-line basis as they are earned during the lease terms. Rents receivable from Extended Stay America, Inc. on the accompanying consolidated balance sheets represent monthly rental amounts contractually due from the Operating Lessees. Deferred rents receivable from Extended Stay America, Inc. on the accompanying consolidated balance sheets represent the cumulative difference between straight-line rental revenues recognized and rental revenues contractually due from the Operating Lessees. This amount, approximately $41.5 million as of December 31, 2015, is expected to be received in cash by October 2018.

Lease rental payments received prior to rendering services are included in unearned rental revenues from Extended Stay America, Inc. on the accompanying consolidated balance sheets. Contingent rental revenues, specifically percentage rental revenues related to hotel revenues of the Operating Lessees, are recognized when such amounts are fixed and determinable (i.e., when percentage rental revenue thresholds have been achieved).

For the period from January 1, 2013 through the Pre-IPO Transactions, ESH REIT’s primary source of consolidated reported revenues was hotel room revenues, since rental revenues derived from leases eliminated in consolidation. Hotel room revenues and other hotel revenues were recognized when services were provided. 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.

Advertising Costs—Prior to the Pre-IPO Transactions, advertising costs were expensed as incurred. Internet advertising costs were included in hotel operating expenses and all other advertising costs were included in general and administrative expenses in the accompanying consolidated statements of operations for the period from January 1, 2013 through the Pre-IPO Transactions and were approximately $26.3 million, approximately $16.9 million of which were classified as hotel operating expenses and approximately $9.4 million of which were classified as general and administrative expenses. No advertising costs have been incurred by ESH REIT since the Pre-IPO Transactions.

Operating Leases—Rent expense, including ground rent, 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

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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.

ESH REIT’s financial instruments consist of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, mortgage and term loans, senior notes and its revolving credit facility. The carrying values of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities and ESH REIT’s revolving credit facility are representative of their fair values due to the short-term nature or frequent settlement of these instruments. The fair values of mortgage and term loans and senior notes 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 term loans and senior notes or from quoted market prices, when available (see Note 6).

Derivative Instruments—Derivative instruments, including derivative instruments embedded in other contracts (if applicable), are recorded in the accompanying consolidated balance sheets as either assets or liabilities measured at fair value unless the transactions qualify and are designated as normal purchases and sales. 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.

Investments—ESH REIT consolidates a subsidiary when it has the ability to direct the activities that most significantly impact the economic performance of the subsidiary. Judgment is required with respect to the consolidation of investments, including 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. Third party equity interests in consolidated subsidiaries or variable interest entities are presented as noncontrolling interests.

ESH REIT evaluates subsidiaries and affiliates, as well as other entities, to determine if they are variable interest entities (“VIEs”). If a subsidiary, affiliate or other entity is a VIE, it is subject to the consolidation framework specifically for VIEs. ESH REIT considers an entity a VIE if equity investors own an interest therein that does not have the characteristics of a controlling financial 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,” ESH REIT reviews 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, a separate, independently owned hotel management and administrative services company (see Note 10). 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, ESH REIT’s predecessor represented approximately 99% of the business conducted by HVM. 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 for the period from January 1, 2013 through the Pre-IPO Transactions. Since ESH REIT had no equity interest in HVM, the results of operations and members’ capital of HVM were 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 VIE. See summarized financial information of HVM in Note 10.

Income Taxes—ESH REIT has elected to be taxed as and expects to continue to qualify as a real estate investment trust (“REIT”) under provisions of the Code. A REIT is a legal entity that holds real estate assets and

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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 is subject to federal income and excise taxes on undistributed income.

In 2015, ESH REIT distributed approximately 95% of its taxable income and utilized its federal net operating loss carryforward and, as a result, incurred minimal current federal income tax in the form of alternative minimum tax. Deferred tax expense was incurred due to the utilization of the deferred tax asset associated with the net operating loss carryforward. In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. Accordingly, ESH REIT is expected to be subject to federal and state income tax on approximately 5% of its taxable income. As a result, ESH REIT has recorded deferred tax assets and liabilities to reflect the fact that an estimated 5% of its future taxable income is expected to be subject to tax.

Prior to the Pre-IPO Transactions, the Operating Lessees were subsidiaries of ESH REIT and 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. HVM’s operating results were reportable by its members or members of its ultimate parent. Thus, federal income taxes were not recognized for HVM. HVM was also subject to state and local taxes in certain jurisdictions.

Foreign Currency—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 revenues and expenses are translated into U.S. dollars using the average exchange rate for the period. The assets and liabilities of these subsidiaries are translated into U.S. dollars using the exchange rate in effect at the balance sheet date. As of December 31, 2015 and 2014, foreign currency translation losses, net of tax, of approximately $13.4 million and $5.9 million, respectively, are reflected in accumulated other comprehensive loss as a component of equity in the accompanying consolidated balance sheets. Foreign currency transaction losses mainly related to U.S. dollar denominated debt at Canadian subsidiaries of approximately $2.7 million and $3.6 million are included in other non-operating expense in the accompanying consolidated statements of operations for the years ended December 31, 2015 and 2014, 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 foreign currency translation adjustments are displayed as a separate component of consolidated equity.

Equity-Based Compensation—ESH REIT maintains a Long-Term Incentive Plan (“LTIP”), as amended and restated in 2015, and approved by its shareholders, under which it may issue to eligible employees or directors restricted stock awards, restricted stock units or other equity-based awards, in respect of Paired Shares. ESH REIT recognizes costs related to equity-based awards over their vesting periods. ESH REIT classifies equity-based awards granted in exchange for employee or director services as either equity awards or as liability awards. The classification of an award either as an equity award or a liability award is generally 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 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 expense is recognized for awards for which employees or directors do not render the requisite services. All awards are classified as equity awards.

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Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan further described in Note 13. Equity-based compensation related to this plan was recorded in the accompanying consolidated statements of operations due to the fact that HVM was a consolidated VIE.

Segments—ESH REIT’s business represents 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 those services (i.e., lease the hotel properties) to similar classes of customers. The amounts of long-lived assets and revenues outside the U.S. are not significant for any period presented.

Recently Issued Accounting Standards

Imputation of Interest—Simplifying the Presentation of Debt Issuance Costs—In April and August 2015, the FASB issued accounting standards updates which require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. These updates allow an entity to continue to defer and present debt issuance costs under a revolving-debt arrangement as an asset and amortize the deferred debt issuance costs ratably over the term of the revolving-debt arrangement. These updates do not affect the current guidance on the recognition and measurement of debt issuance costs or the amortization of debt issuance costs as interest expense.

ESH REIT early adopted these updates as of December 31, 2015, and applied their provisions retrospectively. As a result, as of December 31, 2015, approximately $19.5 million, $3.6 million and $10.8 million of unamortized deferred financing costs are presented as direct reductions of the carrying amounts of mortgage loan payable, term loan facility payable and senior notes payable, respectively, and approximately $1.4 million of unamortized deferred financing costs related to a revolving credit facility is included in other assets in the accompanying consolidated balance sheet. Further, the presentation of approximately $27.3 million, $4.7 million and $3.1 million of unamortized deferred financing costs have been reclassified from deferred financing costs to mortgage loan payable, term loan facility payable and other assets, respectively, in the accompanying consolidated balance sheet as of December 31, 2014. Other than the current year consolidated balance sheet presentation and the aforementioned reclassification, the adoption of these updates did not have an impact on ESH REIT’s consolidated financial statements.

Intangibles—Goodwill and Other—Internal-Use Software—In April 2015, the FASB issued an accounting standards update which clarifies the accounting for fees paid by a customer in a cloud computing arrangement. This update provides guidance to customers regarding whether a cloud computing arrangement includes the sale or license of software or, alternatively, the sale of a service. This update will be effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted, and may be applied either prospectively or retrospectively. ESH REIT does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Consolidation—Amendments to the Consolidation Analysis—In February 2015, the FASB issued an accounting standards update which amends the consolidation requirements under U.S. GAAP, changing the analysis performed by a company to determine whether it has a variable interest in an entity and when to consolidate such entities. This update will be effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted, and may be applied using one of two retrospective application methods. ESH REIT does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Income Statement—Extraordinary and Unusual Items—In January 2015, the FASB issued an accounting standards update to simplify income statement presentation by eliminating the concept of extraordinary items. This update will be effective for interim and annual reporting periods beginning after December 15, 2015, with

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early adoption permitted, and may be applied either prospectively or retrospectively. ESH REIT does not expect the adoption of the update to have a material effect on its consolidated financial statements.

Presentation of Financial Statements—Going Concern—In August 2014, the FASB issued an accounting standards update which provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. This update requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt” about its ability to continue as a going concern. This update is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. ESH REIT does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Reporting Discontinued Operations—In April 2014, the FASB issued an accounting standards update which modifies the definition of discontinued operations and requires that only disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results be reported as discontinued operations in the financial statements. This update is effective for all disposals (or classifications as held for sale) of an entity that occur within annual periods beginning on or after December 15, 2014 and interim periods within those years. Early adoption is permitted, but only for disposals that have not been reported in financial statements previously issued or available for issuance. ESH REIT adopted this guidance as of January 1, 2014, and it did not have a material effect on ESH REIT’s accompanying consolidated financial statements due to a limited number of historical dispositions. This guidance is expected to result in reporting discontinued operations less frequently than the previous accounting standard.

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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 unrestricted Class A and Class B common stock outstanding, respectively. 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 Class A and Class B common stock outstanding, respectively, plus other potentially dilutive securities. Dilutive securities include certain equity-based awards issued under long-term incentive plans (see Note 13).

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 recapitalization for the year ended December 31, 2013.

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, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Numerator:
Net income attributable to common shareholders	$	378,184		$	247,094		$	99,736
Less preferred dividends		(16	)		—			—
Net income available to common shareholders	$	378,168		$	247,094		$	99,736
Class A:
Net income available to common shareholders—basic	$	208,202		$	136,152		$	55,046
Less amounts available to Class B shareholders assuming conversion		(152	)		(315	)		(166	)
Net income available to common shareholders—diluted	$	208,050		$	135,837		$	54,880
Class B:
Net income available to common shareholders—basic	$	169,966		$	110,942		$	44,690
Amounts available to Class B shareholders assuming conversion		152			315			166
Net income available to common shareholders—diluted	$	170,118		$	111,257		$	44,856
Denominator:
Class A:
Weighted-average number of common shares outstanding—basic and diluted		250,451			250,300			213,759
Class B:
Weighted-average number of common shares outstanding—basic		204,211			203,548			174,894
Dilutive securities		356			960			1,374
Weighted-average number of common shares outstanding—diluted		204,567			204,508			176,268
Net income per common share—Class A—basic	$	0.83		$	0.54		$	0.26
Net income per common share—Class A—diluted	$	0.83		$	0.54		$	0.26
Net income per common share—Class B—basic	$	0.83		$	0.55		$	0.26
Net income per common share—Class B—diluted	$	0.83		$	0.54		$	0.25

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4. HOTEL ACQUISITIONS AND DISPOSITIONS

December 2015 Disposition—On December 8, 2015, ESH REIT sold a portfolio of 53 hotel properties, 47 of which operated under the Crossland Economy Studios brand and six of which operated under the Extended Stay America brand for gross proceeds of $273.0 million. ESH REIT’s carrying value of the portfolio, including net working capital and approximately $2.1 million of allocable goodwill, was approximately $148.4 million, resulting in a gain, net of closing costs and adjustments, of approximately $116.6 million, which is reported in gain on sale of hotel properties in the accompanying consolidated statement of operations for the year ended December 31, 2015. This disposition was not reported as a discontinued operation.

During the years ended December 31, 2015, 2014 and 2013 these hotel properties contributed rental revenues, total room and other hotel revenues, total operating expenses and income before income tax expense (benefit) as follows (in thousands):

	Year Ended December 31, 2015		Year Ended December 31, 2014		Year Ended December 31, 2013
Rental revenues from Extended Stay America, Inc.	$	42,403	$	41,749	$	4,194
Total room and other hotel revenues		—		—		56,024
Total operating expenses		12,514		13,464		42,202
Income before income tax expense (benefit)(1)		25,863		24,433		14,162

(1) The only interest expense included is related to the 2012 Mortgage Loan (as defined in Note 6).

July 2014 Disposition—On July 28, 2014, ESH REIT sold its two Hometown Inn-branded hotel properties, with a carrying value of approximately $2.2 million, for proceeds of $3.5 million. Net of closing costs and adjustments, ESH REIT recognized a gain on sale of approximately $0.9 million. This disposition was not reported as a discontinued operation.

December 2013 Acquisition—On December 31, 2013, ESH REIT acquired the assets and assumed the liabilities of two hotels from LVP Acquisition Corporation (“LVP”) for cash consideration of approximately $16.5 million. The vast majority of the purchase price was allocated to property and equipment. Legal, professional and other fees and costs directly related to the acquisition totaled approximately $0.2 million for the year ended December 31, 2013. These costs are included 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, 2015 and 2014, consists of the following (in thousands):

	December 31,			December 31,
	2015			2014
Hotel properties:
Land and site improvements	$	1,297,696		$	1,352,621
Building and improvements		2,868,943			2,894,730
Furniture, fixtures and equipment		517,626			437,582
Total hotel properties		4,684,265			4,684,933
Undeveloped land parcel		1,675			1,675
Total cost		4,685,940			4,686,608
Less accumulated depreciation		(765,034	)		(606,960	)��
Property and equipment—net	$	3,920,906		$	4,079,648

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During the years ended December 31, 2015, 2014 and 2013, ESH REIT, using Level 3 unobservable inputs, recognized impairment charges of approximately $0 million, $0 million and $3.3 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 hotel related cash flows based on assumed long-term growth rates, demand trends, expected future capital expenditures and estimated discount rates. These assumptions are based on ESH REIT’s historical data and experience, budgets, industry projections and micro and macro general economic condition projections.

As of December 31, 2015, substantially all of the hotel properties (625 out of 629 hotel properties) are pledged as security for ESH REIT’s 2012 Mortgage Loan (as defined in Note 6).

6. DEBT

ESH REIT’s outstanding debt, net of unamortized deferred financing costs and debt discount, as of December 31, 2015 and 2014, is as follows (in thousands):

	December 31,		December 31,
	2015		2014
Mortgage loan payable—Net of unamortized deferred financing costs of $19,536 and $27,299	$	1,911,621	$	2,490,750
Term loan facility payable—Net of unamortized deferred financing costs and debt discount of $4,940 and $6,359		361,523		368,641
Senior notes payable—Net of unamortized deferred financing costs of $10,756 and $0		489,244		—
Total debt	$	2,762,388	$	2,859,391

During the years ended December 31, 2015 and 2014, the following transactions occurred (in thousands):

	December 31,			December 31,
	2015			2014
Debt—beginning of year	$	2,859,391		$	2,862,951	(2)
Additions:
Proceeds from term loan facility, net of debt discount		—			373,125
Proceeds from senior notes		500,000			—
Proceeds from revolving credit facility		90,000			143,000
Amortization and write-off of deferred financing costs and debt discount(1)		9,902			15,331
Deductions:
Payments on mortgage loan		(586,892	)		(1,794	)
Payments on term loan facility		(8,537	)		—
Payments on mezzanine loans		—			(365,000	)
Payments on revolving credit facility		(90,000	)		(163,000	)
Payments of deferred financing costs		(11,476	)		(5,222	)
Debt—end of year	$	2,762,388		$	2,859,391

(1) Excludes amortization of deferred financing costs related to the revolving credit facility.

(2) As discussed in Note 2, ESH REIT early adopted FASB ASU No. 2015-03 and ASU No. 2015-15, which require the retrospective application of the presentation of debt issuance costs as direct reductions to the related liabilities. Therefore, this amount is presented net of unamortized deferred financing costs of approximately $41.9 million as of December 31, 2013.

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ESH REIT’s debt, unamortized deferred financing costs and debt discount, as of December 31, 2015 and 2014, consist of the following (in thousands):

				Outstanding Principal						Unamortized Deferred Financing Costs					Interest Rate
Loan	Stated Amount(1)			December 31, 2015			December 31, 2014			December 31, 2015		December 31, 2014		Stated Interest Rate	December 31, 2015			December 31, 2014	Maturity Date
Mortgage loan
2012 Mortgage Loan—Component A	$	350,000		$	—		$	348,049		$	—	$	—	LIBOR(2) + 2.0547%		N/A		2.2260%	12/1/2015(3)
2012 Mortgage Loan—Component B		350,000			111,157			350,000			784		3,760	3.4047%		3.4047	%	3.4047%	12/1/2017
2012 Mortgage Loan—Component C		1,820,000			1,820,000			1,820,000			18,752		23,539	4.0547%		4.0547	%	4.0547%	12/1/2019
Term loan facility
2014 Term Loan		375,000			365,157	(4)		373,320	(5)		3,635		4,679	LIBOR(2)(6) + 4.25%		5.00	%	5.00%	6/24/2019(10)
Senior notes
2025 Notes		500,000			500,000			—			10,756		—	5.25%		5.25	%	N/A	5/1/2025
Revolving credit facility
ESH REIT revolving credit facility(7)		250,000	(8)		—			—			1,431		3,055	LIBOR(2) + 3.00%		N/A		N/A	11/18/2016(9)
Total				$	2,796,314		$	2,891,369		$	35,358	$	35,033

(1) Amortization is interest only.

(2) London Interbank Offering Rate.

(3) The original maturity date of Component A of the 2012 Mortgage Loan was December 1, 2014. In December 2014, ESH REIT exercised its first one-year extension option and extended the maturity date of Component A of the 2012 Mortgage Loan to December 1, 2015. Component A of the 2012 Mortgage Loan was repaid at its extended maturity.

(4) The 2014 Term Loan is presented net of debt discount of approximately $1.3 million, as of December 31, 2015.

(5) The 2014 Term Loan is presented net of debt discount of approximately $1.7 million, as of December 31, 2014.

(6) The 2014 Term Loan includes a LIBOR floor of 0.75%.

(7) ESH REIT’s revolving credit facility’s unamortized deferred financing costs are included in other assets in the accompanying consolidated balance sheets.

(8) ESH REIT is able to request to increase the facility to an amount of up to $350 million at any time, subject to certain conditions.

(9) ESH REIT’s revolving credit facility is subject to a one-year extension option.

(10) Subject to certain exceptions, mandatory prepayments of up to 50% of Excess Cash Flow may be required based on ESH REIT’s Consolidated Leverage Ratio, each as defined. ESH REIT made a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. No mandatory prepayment is required during the three months ending March 31, 2016 based on the calculation of Excess Cash Flow for the year ended December 31, 2015.

In December 2015, using a portion of the net proceeds from the sale of a portfolio of 53 hotel properties, ESH REIT repaid approximately $86.1 million of the outstanding balance under its 2012 Mortgage Loan (as defined below), which consisted of approximately $29.3 million of Component A and approximately $56.8 million of Component B. ESH REIT incurred approximately $0.7 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mortgage Loan, consisting of the write-off of unamortized deferred financing costs of approximately $0.4 million and other costs of approximately $0.3 million.

On May 15, 2015, using the proceeds from its 2025 Notes (as defined below), ESH REIT repaid $500.0 million of the outstanding balance under its 2012 Mortgage Loan, which consisted of $318.0 million of Component A and $182.0 million of Component B. ESH REIT incurred approximately $2.3 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mortgage Loan, consisting of the write-off of unamortized deferred financing costs of approximately $1.7 million and other costs of approximately $0.6 million.

On June 23, 2014, using principally all of the net proceeds from its 2014 Term Loan (as defined below), ESH REIT repaid the remaining outstanding balance of $365.0 million of its 2012 Mezzanine Loans (as defined below). ESH REIT incurred approximately $9.4 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mezzanine Loans, consisting of the write-off of unamortized deferred financing costs of approximately $5.1 million and prepayment penalties and other costs of approximately $4.3 million.

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In the fourth quarter of 2013 and subsequent to the Offering, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans. ESH REIT incurred approximately $25.2 million of debt extinguishment costs in connection with the repayment of the 2012 Mezzanine Loans, consisting of prepayment penalties and other costs of approximately $14.3 million and the write-off of unamortized deferred financing costs of approximately $10.9 million.

Debt extinguishment costs are included as a component of net interest expense in the accompanying consolidated statements of operations.

ESH REIT Mortgage Loan

On November 30, 2012, subsidiaries of ESH REIT entered into a $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”). After giving effect to the 2015 repayments discussed above, monthly required interest-only payments are approximately $6.6 million. Principal amounts, interest rates and maturities of the components of the 2012 Mortgage Loan are included in the table above. Subsequent to January 1, 2016, Components B and C of the 2012 Mortgage Loan may be prepaid without incurring a prepayment penalty or premium.

As of December 31, 2015 and 2014, substantially all of ESH REIT’s hotel properties served as collateral for the 2012 Mortgage Loan. ESH REIT guarantees, under a customary recourse carve out guaranty (i) under certain limited circumstances, losses related to the 2012 Mortgage Loan plus enforcement costs incurred by the lenders and (ii) under certain other limited circumstances, repayment of the 2012 Mortgage Loan up to an aggregate liability under this clause (iii) of $252.0 million plus enforcement costs.

In connection with the 2012 Mortgage Loan, the Loan Parties (as defined in the agreement governing the 2012 Mortgage Loan) made certain representations, warranties and covenants customary in similar 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 a Mortgage 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, each 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, 2015, none of these events had occurred and the Debt Yield was 29.0%.

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, 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. 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 agreements governing the 2012 Mortgage Loan. Upon the occurrence of an Event of Default, as defined, the lender 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.

All receipts from the 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

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control of the loan service agent as specified by the terms of the mortgage loan agreement and cash management agreements and are, therefore classified as restricted cash on the accompanying consolidated balance sheets. Receipts are allocated to CMA subaccounts for hotel occupancy/goods and services sales taxes, real estate taxes, insurance, ground leases, operating expenses (including management fees and reimbursements), capital improvements and mortgage 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.

ESH REIT Term Loan Facility

On June 23, 2014, ESH REIT entered into a $375.0 million term loan facility (the “2014 Term Loan”). ESH REIT used principally all of the 2014 Term Loan net proceeds to repay the outstanding balance on its 2012 Mezzanine Loans of $365.0 million. Subject to certain conditions, the principal amount of the 2014 Term Loan may be increased from time to time up to an amount which would not cause the Consolidated Leverage Ratio, as defined, to exceed 5.25 to 1.0. The 2014 Term Loan matures on June 24, 2019, though it may be extended with lender consent. The 2014 Term Loan bears interest at a rate equal to (i) LIBOR (subject to a floor of 0.75%) plus 4.25%, or (ii) a base rate (determined by reference to the highest of (1) prime lending rate, (2) the overnight federal funds rate plus 0.5%, or (3) the one-month adjusted LIBOR rate (subject to a floor of 0.75%) plus 1.0%) plus 3.25%. There is no scheduled amortization on the 2014 Term Loan; however, subject to certain exceptions, mandatory prepayments of up to 50% of Excess Cash Flow may be required, based on ESH REIT’s Consolidated Leverage Ratio, each as defined. For the year ended December 31, 2015, ESH REIT had no Excess Cash Flow, as defined, and therefore no mandatory prepayment is required during the three months ending March 31, 2016. For the period from July 1, 2014 through December 31, 2014, ESH REIT’s Excess Cash Flow, as defined, totaled approximately $17.1 million, which required ESH REIT to make a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015.

Obligations under the 2014 Term Loan are guaranteed by certain of ESH REIT’s 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. The 2014 Term Loan is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility on a pari passu basis with obligations under the ESH REIT Revolving Credit Facility (as defined below), with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. Subject to an intercreditor agreement that, among other things, provides priority in favor of the ESH REIT Revolving Credit Facility under certain circumstances, the 2014 Term Loan may be repaid prior to its maturity, subject to a prepayment penalty on or after December 24, 2015 but prior to June 24, 2016 in an amount equal to 1.0% of the aggregate principal amount repaid. Repayments on or after June 24, 2016 require no prepayment penalty.

The 2014 Term Loan contains a number of restrictive 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 distributions and make other restricted payments, engage in transactions with ESH REIT’s affiliates, sell all or substantially all of its assets, merge and create liens. The 2014 Term Loan also contains certain customary affirmative covenants and events of default. During a Trigger Event, an Adjusted Trigger Event, a Default or an Event of Default, each as defined, ESH REIT is restricted from making cash distributions, subject to certain exceptions. As of December 31, 2015, none of these events had occurred.

ESH REIT Senior Notes

On May 15, 2015, ESH REIT issued $500.0 million of 5.25% senior notes due in 2025 (the “2025 Notes”) under an indenture (the “Indenture”) with Deutsche Bank Trust Company Americas, as trustee, at a price equal to 100% of their par value in a private placement pursuant to Rule 144A of the Securities Act of 1933, as amended. ESH REIT used the proceeds and cash on hand to repay $500.0 million of the outstanding balance under its 2012 Mortgage Loan. The 2025 Notes mature on May 1, 2025 and bear interest at a fixed rate of 5.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year.

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The 2025 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of ESH REIT’s subsidiaries that guarantee ESH REIT’s obligations under the 2014 Term Loan and the ESH REIT Revolving Credit Facility. The 2025 Notes rank equally in right of payment with ESH REIT’s existing and future senior unsecured indebtedness, and senior in right of payment to all future subordinated indebtedness, if any. The 2025 Notes are effectively junior to any of ESH REIT’s secured indebtedness to the extent of the value of the assets securing such indebtedness.

ESH REIT may redeem the 2025 Notes at any time on or after May 1, 2020, in whole or in part, at a redemption price equal to 102.625% of the principal amount, declining annually to 100% of the principal amount from May 1, 2023 and thereafter, plus accrued and unpaid interest. Prior to May 1, 2020, ESH REIT may redeem the 2025 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus a “make-whole” premium, as defined in the Indenture, plus accrued and unpaid interest. Prior to May 1, 2018, subject to certain conditions, ESH REIT may redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 105.250% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds from certain equity offerings, provided 65% of the original amount of the principal remains outstanding after the occurrence of each such redemption. Upon a Change of Control, as defined, holders of the 2025 Notes have the right to require ESH REIT to redeem the 2025 Notes at 101% of the principal amount, plus accrued and unpaid interest.

The Indenture contains a number of customary covenants that, subject to certain exceptions, limit ESH REIT’s ability and the ability of certain of its subsidiaries to incur additional debt, create certain liens, pay dividends or distributions, make certain investments and other payments, enter into affiliate transactions, sell assets or merge, consolidate or transfer substantially all of their assets, among other things. ESH REIT was in compliance with all covenants set forth in the Indenture as of December 31, 2015.

Revolving Credit Facilities

ESH REIT Revolving Credit Facility—On November 18, 2013, ESH REIT entered into a $250.0 million revolving credit facility (the “ESH REIT Revolving Credit Facility”). Subject to the satisfaction of certain criteria, ESH REIT is able to request to increase the facility to an amount up to $350.0 million at any time. 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. 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, subject to a one-year extension option.

ESH REIT had no letters of credit outstanding under this credit facility, an outstanding balance drawn of $0 and borrowing capacity available of $250.0 million as of December 31, 2015 and 2014. ESH REIT incurred approximately $1.0 million, $1.3 million and $0.1 million of interest expense and fees in connection with this facility, which are included as a component of net interest expense in the accompanying consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

ESH REIT’s obligations under the ESH REIT Revolving Credit Facility are 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. 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 on a pari passu basis with obligations under the 2014 Term Loan, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan.

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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 distributions and make other restricted payments, engage in transactions with ESH REIT’s affiliates, sell all or substantially all of its 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, as defined, calculated as of the end of such fiscal quarter, be less than or equal to 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 or the Adjusted Debt Yield, each as defined, not be less than 9.0% as of the last day of such calendar month.

In order to avoid a Trigger Event or an Adjusted Trigger Event, the ESH REIT Revolving Credit Facility requires a Debt Yield and an Adjusted Debt Yield, each as defined, of at least 11.5%. The occurrence of a Trigger Event or an Adjusted Trigger Event would require ESH REIT to repay the outstanding facility balance cash collateralize outstanding letters of credit and restrict ESH REIT from making cash distributions, subject to certain exceptions. As of December 31, 2015, the Debt Yield and Adjusted Debt Yield were 29.0% and 20.0%, respectively, and no Trigger Event or Adjusted 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. Extended Stay LLC incurred a fee of 0.5% on the undrawn revolver balance. 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 net interest expense in the 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 ESH REIT wrote off approximately $0.7 million in unamortized deferred financing costs, which are included as a component of net interest expense in the accompanying consolidated and combined statement of operations for the year ended December 31, 2013.

ESH REIT Mezzanine Loans

On November 30, 2012, ESH REIT entered into three mezzanine loans totaling $1.08 billion (the “2012 Mezzanine Loans”). The 2012 Mezzanine Loans would have matured on December 1, 2019, with all outstanding principal and unpaid interest due on that date; however, as discussed above, in 2013, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans and in 2014, ESH REIT repaid the remaining outstanding balance of $365.0 million of the 2012 Mezzanine Loans. Under certain limited circumstances, losses related to the 2012 Mezzanine Loans and costs incurred by the lenders were guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $108.0 million.

Assumed Mortgage Loan

Two of ESH REIT’s hotel properties were subject to a mortgage loan that was assumed on October 8, 2010 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.

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Interest Expense— The components of net interest expense for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Contractual interest	$	121,715		$	121,672		$	194,980
Amortization of deferred financing costs and debt discount		9,408			11,869			12,345
Debt extinguishment and other costs		3,890			10,223			26,933
Interest income		(233	)		(532	)		(629	)
Total	$	134,780		$	143,232		$	233,629

Future Maturities of Debt—The future maturities of debt as of December 31, 2015, are as follows (in thousands):

Years Ending December 31,
2016	$	—
2017		111,157
2018		—
2019		2,186,463	(1)
2020		—
Thereafter		500,000
Total	$	2,797,620

(1) Subject to certain exceptions, the 2014 Term Loan may require mandatory prepayments of up to 50% of Excess Cash Flow based on ESH REIT’s Consolidated Leverage Ratio, each as defined. Mandatory prepayments are determined on an annual basis and are payable during the first three months of the subsequent fiscal year. No mandatory prepayment is required during the three months ending March 31, 2016, based on the calculation of Excess Cash Flow for the year ended December 31, 2015.

Fair Value of Debt—As of December 31, 2015 and 2014, the estimated fair value of ESH REIT’s 2012 Mortgage Loan, 2014 Term Loan and 2025 Notes was approximately $2.8 billion and $2.9 billion, respectively. The estimated fair values of ESH REIT’s 2012 Mortgage Loan, 2014 Term Loan and 2025 Notes 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 2012 Mortgage Loan, 2014 Term Loan and 2025 Notes (Level 2 fair value measures) or quoted market prices (Level 1 fair value measures), when available.

7. INCOME TAXES

Income before income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 consists of the following (in thousands):

	Year Ended December 31, 2015		Year Ended December 31, 2014			Year Ended December 31, 2013
U.S.	$	386,656	$	247,694		$	97,878
Canada		47		(1,710	)		1,712
Total	$	386,703	$	245,984		$	99,590

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The components of income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	Year Ended December 31, 2015		Year Ended December 31, 2014			Year Ended December 31, 2013
Federal (including foreign):
Current	$	1,336	$	(1,694	)	$	3,520
Deferred		6,059		(309	)		(6,666	)
State:
Current		1,107		583			3,044
Deferred		17		310			(774	)
Total	$	8,519	$	(1,110	)	$	(876	)

The differences between income tax expense (benefit) at the effective tax rate and the statutory U.S. federal income tax rate for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	Year Ended December 31, 2015					Year Ended December 31, 2014					Year Ended December 31, 2013
Tax at statutory rate	$	135,346		35.0	%	$	86,094		35.0	%	$	34,857		35.0	%
State income tax		1,160		0.3			893		0.4			910		0.9
Foreign income tax rate differential		4		—			(135	)	(0.1	)		162		0.2
Nondeductible (nontaxable):
ESH REIT income		(128,354	)	(33.2	)		(85,184	)	(34.7	)		(33,798	)	(34.0	)
Pass-through entity income		—		—			—		—			(255	)	(0.3	)
Change in expected distribution policy		—		—			—		—			(5,561	)	(5.6	)
Equity-based compensation		—		—			1		—			1,865		1.9
Other permanent differences		(68	)	—			—		—			1,294		1.3
Valuation allowance		—		—			—		—			166		0.2
Other—net		431		0.1			(2,779	)	(1.1	)		(516	)	(0.5	)
Income tax expense (benefit)—net	$	8,519		2.2	%	$	(1,110	)	(0.5	)%	$	(876	)	(0.9	)%

The significant components of deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014, consist of the following (in thousands):

	December 31, 2015			December 31, 2014
Deferred tax assets:
Net operating loss carryforwards	$	—		$	7,267
Other		2			139
Total net deferred tax assets:		2			7,406
Deferred tax liabilities:
Depreciable property		(2,050	)		(3,073	)
Other		(649	)		(1,127	)
Total net deferred tax (liabilities) assets:	$	(2,697	)	$	3,206

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 net capital gain to its shareholders each year. In addition, ESH REIT must meet

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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 is subject to federal income and excise taxes on undistributed income.

In 2015, ESH REIT distributed approximately 95% of its taxable income and utilized its federal net operating loss carryforward of approximately $18.6 million and, as a result, incurred minimal current federal income tax in the form of alternative minimum tax. Deferred tax expense was incurred due to the utilization of the deferred tax asset associated with the net operating loss carryforward. In the future, ESH REIT intends to distribute its taxable income to the extent necessary to optimize its tax efficiency including, but not limited to, maintaining its REIT status, while retaining sufficient capital for its ongoing needs. ESH REIT expects that such distributions will be approximately 95% of its taxable income. Accordingly, ESH REIT is expected to be subject to federal and state income tax on approximately 5% of its taxable income. As a result, ESH REIT has recorded deferred tax assets and liabilities to reflect the fact that an estimated 5% of its future taxable income is expected to be subject to tax.

ESH REIT had taxable income prior to distributions of approximately $369.0 million, $194.0 million and $192.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. In 2015, ESH REIT made approximately $273.1 million in cash distributions to its shareholders, of which approximately $113.0 million was considered capital gain and approximately $160.1 million was considered ordinary taxable income. In January 2016, ESH REIT paid a special distribution of approximately $86.5 million, of which approximately $77.4 million was deductible in 2015. The special distribution paid in 2016 will be considered a taxable dividend. In 2014, ESH REIT made approximately $241.2 million in cash distributions to its shareholders. In 2013, ESH REIT made approximately $239.8 million in distributions to its shareholders, which consisted of a cash distribution of approximately $78.4 million and a property distribution of approximately $161.4 million. All of the 2014 and 2013 distributions were considered taxable dividends.

As of December 31, 2015, the book basis of ESH REIT’s property and equipment was approximately $80.0 million greater than the tax basis of its assets.

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 2012 to present are subject to examination by the Internal Revenue Service and other taxing authorities.

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8. QUARTERLY RESULTS (Unaudited)

Quarterly financial data for the years ended December 31, 2015 and 2014 is as follows (in thousands, except per share data):

	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	March 31,				June 30,				September 30,				December 31,
	2015		2014		2015		2014		2015		2014		2015(1)		2014
Rental revenues from Extended Stay America, Inc.	$	123,191	$	123,647	$	123,600	$	123,599	$	156,841	$	139,605	$	316,003	$	297,354
Income from operations		46,533		49,395		49,258		50,821		81,797		67,537		346,621		225,092
Net income		14,046		11,795		15,188		6,786		45,770		36,340		303,180		192,173
Net income per common share—Class A—basic(2)	$	0.03	$	0.03	$	0.03	$	0.01	$	0.10	$	0.08	$	0.67	$	0.42
Net income per common share—Class A—diluted(2)	$	0.03	$	0.03	$	0.03	$	0.01	$	0.10	$	0.08	$	0.67	$	0.42
Net income per common share—Class B—basic(2)	$	0.03	$	0.03	$	0.03	$	0.01	$	0.10	$	0.08	$	0.67	$	0.42
Net income per common share—Class B—diluted(2)	$	0.03	$	0.03	$	0.03	$	0.01	$	0.10	$	0.08	$	0.67	$	0.42

(1) Includes gain on sale of hotel properties of approximately $116.6 million, which relates to the sale of a portfolio of 53 hotel properties in December 2015 as discussed in Note 4.

(2) The sum of the four quarters may differ from the annual amount due to rounding.

9. EQUITY

ESH REIT has authorized 4,300.0 million shares of Class A common stock, par value $0.01 per share, of which approximately 250.5 million and 250.3 million shares were issued and outstanding as of December 31, 2015 and 2014, respectively. All issued and outstanding shares of ESH REIT Class A common stock were held by the Corporation as of December 31, 2015 and 2014. ESH REIT has authorized 7,800.0 million shares of Class B common stock, par value $0.01 per share, of which approximately 204.6 million and 204.5 million shares were issued and outstanding as of December 31, 2015 and 2014, respectively. Each share of ESH REIT’s outstanding Class B common stock is attached to and trades as a single unit with one share of the Corporation’s common stock.

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, 2015 and 2014. Additionally, ESH REIT has authorized 125 shares of preferred stock, no par value, of which 125 shares were issued and outstanding as of December 31, 2015 and 2014. 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 unpaid dividends. 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 unpaid dividends.

ESH REIT paid cash distributions totaling approximately $273.1 million (of which approximately $150.3 million was paid to the Corporation), $241.2 million (of which approximately $132.7 million was paid to the Corporation) and $78.4 million (paid to the Sponsors prior to the Offering) during the years ended December 31, 2015, 2014 and 2013, respectively. Property distributions of approximately $161.4 million were made during the year ended December 31, 2013.

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On December 10, 2015, the Board of Directors of ESH REIT declared a special cash distribution of $0.19 per share, payable to its Class A and Class B common shareholders, totaling approximately $86.5 million. Approximately $47.6 million is payable to the Corporation and is included in due to Extended Stay America, Inc. and approximately $38.9 million is payable to Class B common shareholders and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2015. ESH REIT paid this special distribution on January 18, 2016 to shareholders of record as of January 4, 2016.

Also, on December 10, 2015, the Board of Directors of ESH Hospitality, Inc., together with the Board of Directors of Extended Stay America, Inc., authorized a combined Paired Share repurchase program for up to $100 million of the Paired Shares. On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares. The program expires on December 31, 2016. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice.

ESH REIT records distributions in excess of retained earnings as a reduction to additional paid in capital. As of December 31, 2015, ESH REIT has cumulative earnings in excess of declared distributions of approximately $14.3 million.

Prior to the Pre-IPO Transactions, noncontrolling interests consisted of all of the equity of HVM, a consolidated VIE (see Note 10).

10. VARIABLE INTEREST ENTITY

As discussed in Notes 1 and 2, the results of operations, comprehensive income and cash flows of HVM are consolidated in ESH REIT’s accompanying consolidated financial statements for the period from January 1, 2013 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 and service 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 eliminated in consolidation.

Hotel Management Agreements with ESH REIT—On October 8, 2010, ESH REIT’s taxable REIT subsidiaries, the Operating Lessees, executed management agreements with HVM with respect to 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 for the period from January 1, 2013 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

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Excluding the agreements with the U.S. 17 hotel operators assumed by ESH REIT in December 2012 (described below), 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 October 8, 2010, ESH REIT 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 Corporation acquired the net assets of HVM; therefore, the administrative services agreements were terminated at that time.

Third Party Management Agreements—For the period from January 1, 2013 through the Pre-IPO Transactions, HVM managed two hotels for a third-party hotel owner-operator under a separate agreement with each hotel. These management agreements were assumed by ESA Management as part of the Pre-IPO Transactions. ESH REIT acquired these hotels on December 31, 2013 (see Note 4).

The following table sets forth a summary of hotel management fees, administrative services fees, general and administrative 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 (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		General and administrative expense reimbursement fees		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

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Condensed Consolidated Financial Information—The condensed consolidated statement of operations of HVM for the period from January 1, 2013 through the Pre-IPO Transactions is as follows (in thousands):

Revenues:
Management fee revenues	$	62,173
Reimbursement of payroll from managed properties		180,335
Total revenues		242,508
Operating expenses:
General and administrative expenses		58,049
Restructuring expenses		605
Managed property payroll expenses		180,335
Depreciation and amortization		1,300
Total operating expenses		240,289
Other income		120
Net income	$	2,339

11. RELATED PARTY TRANSACTIONS

Leases and Related Rental Revenues—ESH REIT’s revenues are derived from four leases. The counterparty to each lease agreement are the Operating Lessees, subsidiaries of the Corporation. ESH REIT recognizes fixed rental revenues with respect to the leases on a straight-line basis. For the years ended December 31, 2015 and 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, ESH REIT recognized fixed rental revenues from the Operating Lessees of approximately $490.8 million, $494.0 million and $67.2 million, respectively. Approximately $41.5 million and $30.9 million is recorded as deferred rents receivable from the Operating Lessees in the accompanying consolidated balance sheets as of December 31, 2015 and 2014, respectively. Deferred rents receivable are expected to be received in cash by October 2018.

Future fixed rental payments to be received under noncancelable leases as of December 31, 2015, are as follows (in thousands):

Years Ending December 31,
2016	$	466,226
2017		480,260
2018		412,267
Total	$	1,358,753

ESH REIT also recognized approximately $228.8 million, $190.2 million and $4.7 million in percentage rental revenues from the Operating Lessees for the years ended December 31, 2015 and 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, respectively. Approximately $4.3 million and $2.0 million of percentage rental revenues were outstanding and included as rents receivable from the Operating Lessees on the accompanying consolidated balance sheets as of December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, because all percentage rental revenue thresholds had been achieved for the year, no unearned percentage rental revenues existed.

As of December 31, 2015 and 2014, ESH REIT recorded unearned rental revenues from the Operating Lessees related to January 2016 and 2015 prepaid fixed rental revenues of approximately $38.3 million and $28.1 million, respectively.

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Distributions—Subsequent to the Pre-IPO Transactions, 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. Distributions of approximately $150.3 million and $132.7 million were paid from ESH REIT to the Corporation in respect of the Class A common stock of ESH REIT during the years ended December 31, 2015 and 2014, respectively.

Issuance of Common Stock—In March 2015, ESH REIT issued 190,089 shares of Class A common stock to the Corporation for consideration of approximately $1.7 million. Also, ESH REIT issued, and was compensated approximately $0.7 million for, 96,703 shares of Class B common stock, each of which was attached to a share of common stock of the Corporation to form a Paired Share, to settle vested restricted stock units.

As of December 31, 2015, 163,368 restricted stock units issued by the Corporation have vested but have not been settled. In March 2016, in accordance with the awards’ settlement provisions, ESH REIT expects to issue and be compensated for 163,368 shares of Class B common stock, each of which will be attached to a share of common stock of the Corporation to form a Paired Share. As of December 31, 2015, ESH REIT has recognized a receivable of approximately $1.1 million related to these equity-based awards, which is included in due to Extended Stay America, Inc. on the accompanying consolidated balance sheet.

Overhead Costs—ESA Management incurs costs under a services agreement with ESH REIT for certain overhead services performed on its behalf. The services relate to executive management, accounting, financial analysis, training and technology. For the years ended December 31, 2015 and 2014 and for the period from the Pre-IPO Transactions through December 31, 2013, ESH REIT incurred expense of approximately $9.5 million, $7.3 million and $1.1 million, respectively, related to this agreement, which is included in general and administrative expenses in the accompanying consolidated statements of operations. The expenses ESH REIT incurred under this services agreement include expenses related to applicable employees that participate in the Corporation’s long-term incentive plan (as described in Note 13). Such charges were approximately $1.1 million, $0.6 million and $0 for the years ended December 31, 2015, 2014 and 2013, respectively.

Working Capital—As of December 31, 2015, ESH REIT had an outstanding net payable of approximately $64.7 million due to the Corporation and its subsidiaries. This amount consists of an unpaid special cash distribution ESH REIT declared on its Class A common shares of approximately $47.6 million and certain disbursements ESA Management made on behalf of ESH REIT in the ordinary course of business. As of December 31, 2014, ESH REIT had an outstanding net receivable of approximately $1.2 million due from the Corporation and its subsidiaries. This amount included a receivable due from the Operating Lessees, consisting of certain disbursements ESH REIT made on their behalf, offset by a payable due to ESA Management, consisting of certain disbursements made on behalf of ESH REIT in the ordinary course of business. Outstanding balances are typically repaid within 60 days.

Trademark Fees—Prior to the Pre-IPO Transactions, ESH Strategies licensed the use of its trademarks to ESH REIT’s taxable REIT subsidiaries. The agreements provided for a trademark fee of 0.3% of revenues. Trademark fees under these agreements were approximately $3.0 million for the period from January 1, 2013 through the Pre-IPO Transactions and are included in the accompanying consolidated statement of operations.

12. COMMITMENTS AND CONTINGENCIES

Lease Commitments—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 three 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.

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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. The lease was assumed by ESA Management as part of the Pre-IPO Transactions. Office lease expense is included in general and administrative expenses in the accompanying consolidated statements of operations for the period from January 1, 2013 through the Pre-IPO Transactions.

Rent expense on office and ground leases is recognized on a straight-line basis and was approximately $1.5 million, $1.6 million and $3.0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Future minimum lease payments under operating leases as of December 31, 2015, are as follows (in thousands):

Years Ending December 31,
2016	$	729
2017		750
2018		771
2019		775
2020		845
Thereafter		81,536
Total	$	85,406

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 years ended December 31, 2015, 2014 and 2013, and is included in hotel operating expenses in the accompanying consolidated statements of operations.

Legal Contingencies—ESH REIT is not a party to any 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.

13. EQUITY-BASED COMPENSATION

The Corporation and ESH REIT each maintain a long-term incentive plan (“LTIP”), as amended and restated in 2015, and approved by their shareholders. Under the LTIPs, the Corporation and ESH REIT may issue to eligible employees or directors restricted stock awards (“RSAs”), restricted stock units (“RSUs”) or other equity-based awards, in respect of Paired Shares, with service, performance or market vesting conditions. The aggregate number of Paired Shares that may be the subject of awards under the LTIPs shall not exceed 8.0 million, of which no more than 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 common stock of the Corporation and Class B common stock of ESH REIT. As of December 31, 2015, 6,050,035 Paired Shares were available for future issuance under the LTIPs.

Equity-based compensation expense 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. The fair value of equity-based awards is based on the closing price of a Paired Share on the date of grant. A portion of the grant-date fair value of all equity-based awards is allocated to a share of common stock of the Corporation and a portion is allocated to a share of Class B common stock of ESH REIT. 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

156

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, a component of ESH REIT’s consolidated shareholders’ equity.

Equity-based compensation expense was approximately $1.1 million (which includes approximately $0.7 million paid or due to the Corporation), $1.4 million (which includes approximately $0.7 million paid or due to the Corporation) and $6.6 million (which includes approximately $0.1 million paid to the Corporation), for the years ended December 31, 2015, 2014 and 2013, respectively, and is included in general and administrative expenses in the accompanying consolidated statements of operations.

As of December 31, 2015, there was approximately $0.2 million of unrecognized compensation expense related to outstanding equity-based awards, which is expected to be recognized subsequent to December 31, 2015 over a weighted-average period of approximately 2.5 years. Total unrecognized compensation expense will be adjusted for actual forfeitures.

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. 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 accounts for awards issued under its LTIP in a manner similar to that of ESH REIT. For all LTIP awards granted by the Corporation, ESH REIT will receive compensation for the fair value of the Class B shares on the date of settlement of such Class B shares by ESH REIT. For the period from the Pre-IPO Transactions through December 31, 2015, the Corporation granted a total of 1,513,095 service-based and performance-based restricted stock units, of which 189,746 were forfeited or settled, under which ESH REIT is counterparty and is expected to issue, and be compensated in cash for, 1,323,349 shares of Class B common stock of ESH REIT in future periods, assuming performance-based awards vest at 100% and no forfeitures.

157

RSA/RSU activity during the years ended December 31, 2015, 2014 and 2013, after taking into account the conversion of Profit Units (defined below) issued under HVM’s management incentive plan at the time of the Offering was as follows:

	Number of RSAs/RSUs (in thousands)			Weighted- Average Grant- Date Fair Value(1)
Outstanding RSAs/RSUs—January 1, 2013		4,816		$	6.96
RSAs/RSUs granted in 2013		185		$	17.75
RSAs/RSUs converted or accelerated in 2013		(2,802	)	$	6.67
RSAs/RSUs settled in 2013		(96	)	$	6.67
RSAs/RSUs forfeited in 2013		(520	)	$	5.76
Outstanding RSAs/RSUs—December 31, 2013		1,583		$	9.35
RSAs/RSUs granted in 2014		3		$	23.14
RSAs/RSUs settled in 2014		(712	)	$	8.74
RSAs/RSUs forfeited in 2014		(274	)	$	8.07
Outstanding RSAs/RSUs—December 31, 2014		600		$	10.38
RSAs/RSUs granted in 2015		8		$	19.74
RSAs/RSUs settled in 2015		(344	)	$	11.11
RSAs/RSUs forfeited in 2015		(20	)	$	9.34
Outstanding RSAs/RSUs—December 31, 2015		244		$	9.71
Vested RSAs/RSUs—December 31, 2015		1		$	23.14
Nonvested RSAs/RSUs—December 31, 2015		243		$	9.65
Vested RSAs/RSUs—December 31, 2014		—		$	—
Nonvested RSAs/RSUs—December 31, 2014		600		$	10.38

(1) A valuation was performed contemporaneously with the issuance of grants.

Awards Issued Prior to the Offering

Prior to the Pre-IPO Transactions, HVM maintained a management incentive plan which provided for HVM employees and members of Holdings’ boards of managers awards of restricted limited liability interests (“Profit Units”) in 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 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 (subject to holding requirements that generally matched the vesting schedule of the underlying Profit Units). As a result of this acceleration, ESH REIT incurred compensation expense of approximately $2.3 million during the year ended December 31, 2013.

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 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’ members’ initial equity investments.

The expected holding period represented the period of time that the Profit Units were expected to be outstanding. The Profit Units were assumed to remain outstanding until a change in control of ownership. The risk-free rate of return for periods approximating the expected holding period of the Profit 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

158

REIT’s historical dividend rate. Because the equity was privately held and was not traded in an active market, ESH REIT used the historical volatility of the share values of publicly traded companies within similar industries as a surrogate for the expected volatility of the 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 were as follows:

Expected holding period	0.25 years
Risk–free rate of return	0.2	%
Expected dividend yield	0.0	%
Expected volatility	30.0	%
Discount for lack of marketability	20.0	%

14. 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 during 2013. Employer contributions, net of forfeitures, totaled approximately $1.3 million for the period from January 1, 2013 through the Pre-IPO Transactions.

15. SUBSEQUENT EVENTS

On January 18, 2016, ESH REIT paid a special cash distribution, which was declared on December 10, 2015, of $0.19 per share to its Class A and Class B common shareholders, totaling approximately $86.5 million, of which approximately $47.6 million was paid to the Corporation.

On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares.

On February 23, 2016, the Board of Directors of ESH REIT declared a cash distribution of $0.15 per share for the fourth quarter of 2015 on its Class A and Class B common stock. The distribution is payable on March 22, 2016 to shareholders of record as of March 8, 2016.

159

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Hotel Properties:
Anchorage — Downtown	Anchorage, AK		(4	)	$	723	$	8,791	$	137	$	83	$	661	$	937	$	806	$	9,452	$	1,074	$	11,332	$	(2,110	)		10/8/2010		2003		43
Anchorage — Midtown	Anchorage, AK		(4	)		2,600		20,740		240		75		771		1,337		2,675		21,511		1,577		25,763		(3,882	)		10/8/2010		2004		45
Fairbanks — Old Airport Way	Fairbanks, AK		(4	)		2,978		12,016		98		136		595		806		3,114		12,611		904		16,629		(2,623	)		10/8/2010		2001		40
Juneau — Shell Simmons Drive	Juneau, AK		(4	)		2,979		12,135		132		159		688		814		3,138		12,823		946		16,907		(2,487	)		10/8/2010		2001		41
Birmingham — Inverness	Birmingham, AL		(4	)		359		688		33		31		103		416		390		791		449		1,630		(400	)		10/8/2010		1996		26
Birmingham — Perimeter Park South	Birmingham, AL		(4	)		1,737		3,218		53		86		256		479		1,823		3,474		532		5,829		(918	)		10/8/2010		1998		33
Birmingham — Wildwood	Birmingham, AL		(4	)		385		1,890		33		121		115		502		506		2,005		535		3,046		(688	)		10/8/2010		1996		26
Huntsville — U.S. Space and Rocket Center	Huntsville, AL		(4	)		770		5,385		39		59		222		341		829		5,607		380		6,816		(1,233	)		10/8/2010		1997		32
Mobile — Spring Hill	Mobile, AL		(4	)		1,185		7,479		41		68		320		442		1,253		7,799		483		9,535		(1,574	)		10/8/2010		1997		32
Montgomery — Carmichael Rd.	Montgomery, AL		(4	)		1,045		—		35		109		98		313		1,154		98		348		1,600		(334	)		10/8/2010		1996		(6	)
Montgomery — Eastern Blvd.	Montgomery, AL		(4	)		600		4,231		44		63		389		721		663		4,620		765		6,048		(1,431	)		10/8/2010		1997		32
Little Rock — Financial Centre Parkway	Little Rock, AR		(4	)		1,630		2,916		46		50		687		944		1,680		3,603		990		6,273		(807	)		10/8/2010		1996		31
Little Rock — West Little Rock	Little Rock, AR		(4	)		1,708		1,931		39		58		537		813		1,766		2,468		852		5,086		(641	)		10/8/2010		1997		27
Fayetteville — Springdale	Springdale, AR		(4	)		1,460		—		55		96		651		809		1,556		651		864		3,071		(457	)		10/8/2010		2001		(6	)
Phoenix — Mesa	Mesa, AZ		(4	)		1,098		2,347		38		83		692		804		1,181		3,039		842		5,062		(682	)		10/8/2010		1997		37
Phoenix — Mesa — West	Mesa, AZ		(4	)		1,305		2,589		44		80		467		548		1,385		3,056		592		5,033		(830	)		10/8/2010		1997		32
Phoenix — Peoria	Peoria, AZ		(4	)		1,229		3,741		38		48		384		649		1,277		4,125		687		6,089		(930	)		10/8/2010		1998		39
Phoenix — Airport	Phoenix, AZ		(4	)		1,764		408		38		54		458		591		1,818		866		629		3,313		(846	)		10/8/2010		1998		40
Phoenix — Airport — E. Oak St.	Phoenix, AZ		(4	)		1,623		1,109		57		101		205		710		1,724		1,314		767		3,805		(649	)		10/8/2010		1997		36
Phoenix — Biltmore	Phoenix, AZ		(4	)		1,191		1,372		50		103		587		1,044		1,294		1,959		1,094		4,347		(835	)		10/8/2010		1997		37
Phoenix — Chandler	Phoenix, AZ		(4	)		1,130		2,983		39		54		452		707		1,184		3,435		746		5,365		(889	)		10/8/2010		1998		38
Phoenix — Chandler — E. Chandler Blvd.	Phoenix, AZ		(4	)		1,745		3,307		49		96		1,033		1,178		1,841		4,340		1,227		7,408		(1,156	)		10/8/2010		1998		34
Phoenix — Deer Valley	Phoenix, AZ		(4	)		945		2,092		39		56		424		857		1,001		2,516		896		4,413		(838	)		10/8/2010		1998		38
Phoenix — Midtown	Phoenix, AZ		(4	)		1,195		3,918		59		107		1,018		1,359		1,302		4,936		1,418		7,656		(1,401	)		10/8/2010		1998		39
Phoenix — Scottsdale	Scottsdale, AZ		(4	)		1,655		3,691		46		133		480		985		1,788		4,171		1,031		6,990		(1,098	)		10/8/2010		1997		37
Phoenix — Scottsdale — North	Scottsdale, AZ		(4	)		1,476		4,266		43		42		628		770		1,518		4,894		813		7,225		(1,203	)		10/8/2010		1997		32
Phoenix — Scottsdale — Old Town	Scottsdale, AZ		(4	)		1,605		2,564		43		110		577		828		1,715		3,141		871		5,727		(1,413	)		10/8/2010		1995		30
Phoenix — Airport — Tempe	Tempe, AZ		(4	)		1,228		3,249		46		112		327		521		1,340		3,576		567		5,483		(906	)		10/8/2010		1999		39
Tucson — Grant Road	Tucson, AZ		(4	)		1,780		5,364		43		69		677		829		1,849		6,041		872		8,762		(1,240	)		10/8/2010		1997		32
Oakland — Alameda	Alameda, CA		(4	)		5,165		9,134		57		61		696		807		5,226		9,830		864		15,920		(2,171	)		10/8/2010		2000		40
Oakland — Alameda Airport	Alameda, CA		(4	)		3,197		3,067		55		48		596		946		3,245		3,663		1,001		7,909		(1,191	)		10/8/2010		1999		40
San Jose — Santa Clara	Alviso, CA		(4	)		5,036		2,681		64		109		511		543		5,145		3,192		607		8,944		(1,123	)		10/8/2010		2001		41
Orange County — Anaheim Convention Center	Anaheim, CA		(4	)		4,439		3,574		73		73		674		866		4,512		4,248		939		9,699		(1,497	)		10/8/2010		2001		41
Orange County — Anaheim Hills	Anaheim, CA		(4	)		4,779		2,040		98		44		636		696		4,823		2,676		794		8,293		(1,127	)		10/8/2010		2002		42
Los Angeles — Arcadia	Arcadia, CA		(4	)		4,577		3,647		45		89		635		880		4,666		4,282		925		9,873		(1,341	)		10/8/2010		1998		38
Bakersfield — California Avenue	Bakersfield, CA		(4	)		1,186		2,153		43		160		593		811		1,346		2,746		854		4,946		(1,171	)		10/8/2010		1996		31
Bakersfield — Chester Lane	Bakersfield, CA		(4	)		1,002		4,514		142		54		389		578		1,056		4,903		720		6,679		(1,154	)		10/8/2010		2005		45
San Francisco — Belmont	Belmont, CA		(4	)		2,910		7,236		103		54		356		639		2,964		7,592		742		11,298		(1,674	)		10/8/2010		2003		43
Orange County — Brea	Brea, CA		(4	)		5,199		4,778		50		90		878		1,044		5,289		5,656		1,094		12,039		(1,980	)		10/8/2010		1998		33
Los Angeles — Burbank Airport	Burbank, CA		(4	)		6,120		9,690		106		75		722		957		6,195		10,412		1,063		17,670		(2,185	)		10/8/2010		2001		41
San Diego — Carlsbad Village by the Sea	Carlsbad, CA		(4	)		4,783		7,618		96		118		412		696		4,901		8,030		792		13,723		(1,834	)		10/8/2010		2002		42
Los Angeles — Carson	Carson, CA		(4	)		5,430		2,173		138		89		347		538		5,519		2,520		676		8,715		(1,048	)		10/8/2010		2004		44
Los Angeles — Chino Valley	Chino, CA		(4	)		1,288		3,297		108		54		420		820		1,342		3,717		928		5,987		(1,317	)		10/8/2010		2004		44
Orange County — Cypress	Cypress, CA		(4	)		5,543		4,484		59		56		658		968		5,599		5,142		1,027		11,768		(1,530	)		10/8/2010		1998		38
Dublin — Hacienda Dr.	Dublin, CA		(4	)		3,377		4,243		52		75		545		691		3,452		4,788		743		8,983		(1,368	)		10/8/2010		2000		40
Los Angeles — LAX Airport — El Segundo	El Segundo, CA		(4	)		9,922		5,598		68		126		978		1,080		10,048		6,576		1,148		17,772		(1,906	)		10/8/2010		1998		33
Sacramento — Elk Grove	Elk Grove, CA		(4	)		941		2,290		89		53		411		622		994		2,701		711		4,406		(833	)		10/8/2010		2003		43
Fairfield — Napa Valley	Fairfield, CA		(4	)		1,490		6,066		135		51		340		629		1,541		6,406		764		8,711		(1,351	)		10/8/2010		2004		44
Fremont — Fremont Blvd. South	Fremont, CA		(4	)		2,928		5,364		56		118		578		908		3,046		5,942		964		9,952		(1,806	)		10/8/2010		1999		39
Fremont — Newark	Fremont, CA		(4	)		7,370		6,048		101		303		1,057		1,430		7,673		7,105		1,531		16,309		(2,331	)		10/8/2010		1999		41
Fremont — Warm Springs	Fremont, CA		(4	)		5,114		1,271		58		66		466		619		5,180		1,737		677		7,594		(965	)		10/8/2010		2001		41
Fresno — North	Fresno, CA		(4	)		1,988		6,753		43		64		510		619		2,052		7,263		662		9,977		(1,800	)		10/8/2010		1997		32
Los Angeles — South	Gardena, CA		(4	)		3,977		3,909		51		92		595		879		4,069		4,504		930		9,503		(1,666	)		10/8/2010		1998		28

160

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Los Angeles — Glendale	Glendale, CA		(4	)		4,689		5,746		55		44		396		724		4,733		6,142		779		11,654		(1,448	)		10/8/2010		1999		39
Orange County — Huntington Beach	Huntington Beach, CA		(4	)		4,499		5,131		38		66		631		686		4,565		5,762		724		11,051		(1,325	)		10/8/2010		1998		38
Orange County — Irvine Spectrum	Irvine, CA		(4	)		7,355		5,703		54		125		701		1,041		7,480		6,404		1,095		14,979		(1,854	)		10/8/2010		1997		32
Los Angeles — La Mirada	La Mirada, CA		(4	)		3,681		2,557		39		45		549		830		3,726		3,106		869		7,701		(1,010	)		10/8/2010		1998		38
Orange County — Lake Forest	Lake Forest, CA		(4	)		5,530		2,182		43		87		555		704		5,617		2,737		747		9,101		(1,123	)		10/8/2010		1997		37
Livermore — Airway Blvd.	Livermore, CA		(4	)		2,553		3,576		44		69		540		824		2,622		4,116		868		7,606		(1,125	)		10/8/2010		1998		38
Los Angeles — Long Beach Airport	Long Beach, CA		(4	)		5,626		6,872		47		91		572		784		5,717		7,444		831		13,992		(1,816	)		10/8/2010		1997		37
Los Angeles — LAX Airport	Los Angeles, CA		(4	)		4,770		7,879		56		62		701		864		4,832		8,580		920		14,332		(1,897	)		10/8/2010		1999		39
San Jose — Milpitas	Milpitas, CA		(4	)		6,602		4,064		51		184		600		935		6,786		4,664		986		12,436		(1,466	)		10/8/2010		1998		38
San Jose — Milpitas — McCarthy Ranch	Milpitas, CA		(4	)		6,844		7,392		57		113		1,331		1,504		6,957		8,723		1,561		17,241		(2,571	)		10/8/2010		1997		32
Los Angeles — Monrovia	Monrovia, CA		(4	)		3,884		4,929		57		107		771		920		3,991		5,700		977		10,668		(1,551	)		10/8/2010		1998		38
San Jose — Morgan Hill	Morgan Hill, CA		(4	)		4,283		2,018		36		64		553		735		4,347		2,571		771		7,689		(872	)		10/8/2010		1998		38
San Jose — Mountain View	Mountain View, CA		(4	)		6,657		4,458		47		97		580		958		6,754		5,038		1,005		12,797		(1,715	)		10/8/2010		1997		32
Orange County — John Wayne Airport	Newport Beach, CA		(4	)		6,881		10,663		98		73		841		1,078		6,954		11,504		1,176		19,634		(2,398	)		10/8/2010		2001		41
Los Angeles — Northridge	Northridge, CA		(4	)		5,167		5,391		163		116		419		737		5,283		5,810		900		11,993		(1,429	)		10/8/2010		2005		45
Oakland — Emeryville	Oakland, CA		(4	)		3,927		9,132		117		169		495		1,002		4,096		9,627		1,119		14,842		(2,178	)		10/8/2010		2001		41
San Diego — Oceanside	Oceanside, CA		(4	)		4,271		5,999		43		102		547		806		4,373		6,546		849		11,768		(1,500	)		10/8/2010		1999		39
Los Angeles — Ontario Airport	Ontario, CA		(4	)		1,639		6,138		46		91		715		779		1,730		6,853		825		9,408		(1,734	)		10/8/2010		1997		37
Orange County — Katella Ave.	Orange, CA		(4	)		3,976		5,704		74		68		672		746		4,044		6,376		820		11,240		(1,710	)		10/8/2010		2001		41
Palm Springs — Airport	Palm Springs, CA		(4	)		1,955		3,506		98		93		459		746		2,048		3,965		844		6,857		(1,255	)		10/8/2010		2003		43
Pleasant Hill — Buskirk Ave.	Pleasant Hill, CA		(4	)		3,786		7,754		44		95		500		806		3,881		8,254		850		12,985		(1,879	)		10/8/2010		1997		37
Pleasanton — Chabot Dr.	Pleasanton, CA		(4	)		3,039		5,910		55		66		707		953		3,105		6,617		1,008		10,730		(1,827	)		10/8/2010		1998		38
Sacramento — White Rock Rd.	Rancho Cordova, CA		(4	)		1,301		2,717		47		162		740		820		1,463		3,457		867		5,787		(1,158	)		10/8/2010		1997		32
Richmond — Hilltop Mall	Richmond, CA		(4	)		2,232		4,124		51		54		281		695		2,286		4,405		746		7,437		(1,252	)		10/8/2010		2000		40
Sacramento — Roseville	Roseville, CA		(4	)		1,125		5,233		45		99		523		783		1,224		5,756		828		7,808		(1,352	)		10/8/2010		1998		38
Sacramento — Arden Way	Sacramento, CA		(4	)		888		2,349		45		132		461		713		1,020		2,810		758		4,588		(1,148	)		10/8/2010		1997		32
Sacramento — Northgate	Sacramento, CA		(4	)		932		2,359		44		226		463		748		1,158		2,822		792		4,772		(1,158	)		10/8/2010		1997		32
Sacramento — South Natomas	Sacramento, CA		(4	)		1,460		823		51		59		727		1,006		1,519		1,550		1,057		4,126		(904	)		10/8/2010		1998		33
San Francisco — San Carlos	San Carlos, CA		(4	)		4,233		5,299		49		82		766		943		4,315		6,065		992		11,372		(1,666	)		10/8/2010		1998		38
San Diego — Hotel Circle	San Diego, CA		(4	)		6,893		9,935		68		122		935		1,302		7,015		10,870		1,370		19,255		(2,679	)		10/8/2010		1999		39
San Diego—Mission Valley — Stadium	San Diego, CA		(4	)		6,978		1,797		85		38		503		714		7,016		2,300		799		10,115		(1,085	)		10/8/2010		2002		42
San Diego — Fashion Valley	San Diego, CA		(4	)		5,371		5,639		49		107		714		1,218		5,478		6,353		1,267		13,098		(2,174	)		10/8/2010		1997		32
Los Angeles — San Dimas	San Dimas, CA		(4	)		4,736		991		42		47		579		674		4,783		1,570		716		7,069		(949	)		10/8/2010		1999		39
San Jose — Airport	San Jose, CA		(4	)		8,118		5,912		75		97		963		1,139		8,215		6,875		1,214		16,304		(2,106	)		10/8/2010		2000		40
San Jose — Downtown	San Jose, CA		(4	)		6,480		6,070		53		84		1,123		1,226		6,564		7,193		1,279		15,036		(2,107	)		10/8/2010		1998		38
San Jose — Edenvale — North	San Jose, CA		(4	)		5,087		3,649		56		49		507		751		5,136		4,156		807		10,099		(1,359	)		10/8/2010		2000		40
San Jose — Edenvale — South	San Jose, CA		(4	)		5,359		3,832		83		80		562		888		5,439		4,394		971		10,804		(1,315	)		10/8/2010		2000		41
San Francisco — San Mateo —SFO	San Mateo, CA		(4	)		7,369		6,704		50		54		623		931		7,423		7,327		981		15,731		(2,106	)		10/8/2010		1997		32
San Rafael — Francisco Blvd. East	San Rafael, CA		(4	)		3,129		13,822		378		80		498		789		3,209		14,320		1,167		18,696		(2,431	)		10/8/2010		2007		47
San Ramon — Bishop Ranch —East	San Ramon, CA		(4	)		3,721		5,226		59		88		456		780		3,809		5,682		839		10,330		(1,569	)		10/8/2010		2000		40
San Ramon — Bishop Ranch —West	San Ramon, CA		(4	)		3,098		2,886		55		95		602		1,121		3,193		3,488		1,176		7,857		(1,587	)		10/8/2010		1998		33
Santa Barbara — Calle Real	Santa Barbara, CA		(4	)		3,301		8,709		41		111		589		628		3,412		9,298		669		13,379		(1,974	)		10/8/2010		1998		38
Santa Rosa — North	Santa Rosa, CA		(4	)		3,053		6,086		46		57		284		593		3,110		6,370		639		10,119		(1,386	)		10/8/2010		2000		40
Santa Rosa — South	Santa Rosa, CA		(4	)		1,592		4,998		41		107		458		818		1,699		5,456		859		8,014		(1,518	)		10/8/2010		1997		32
Los Angeles — Simi Valley	Simi Valley, CA		(4	)		3,088		7,175		113		166		540		692		3,254		7,715		805		11,774		(1,800	)		10/8/2010		2004		44
San Diego — Sorrento Mesa	San Diego, CA		(4	)		6,441		6,020		49		175		668		946		6,616		6,688		995		14,299		(2,032	)		10/8/2010		1998		33
Los Angeles — Valencia	Stevenson Ranch, CA		(4	)		9,414		—		20		80		548		710		9,494		548		730		10,772		(716	)		10/8/2010		2000		(6	)
Stockton — March Lane	Stockton, CA		(4	)		2,299		3,558		55		106		326		597		2,405		3,884		652		6,941		(1,154	)		10/8/2010		2001		41
San Jose — Sunnyvale	Sunnyvale, CA		(4	)		6,051		5,019		50		49		756		1,112		6,100		5,775		1,162		13,037		(1,858	)		10/8/2010		1997		32

161

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)							Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Temecula — Wine Country	Temecula, CA		(4	)		1,489		8,153		79		69		567			837		1,558		8,720		916		11,194		(1,979	)		10/8/2010		2002		42
Los Angeles — Torrance — Del Amo Circle	Torrance, CA		(4	)		5,953		4,361		78		99		611			1,050		6,052		4,972		1,128		12,152		(1,587	)		10/8/2010		1999		39
Los Angeles — Torrance Blvd.	Torrance, CA		(4	)		3,761		6,296		43		62		728			790		3,823		7,024		833		11,680		(1,765	)		10/8/2010		1997		37
Los Angeles — Torrance Harbor Gateway	Torrance, CA		(4	)		4,625		4,747		49		135		555			684		4,760		5,302		733		10,795		(1,483	)		10/8/2010		1999		39
Stockton — Tracy	Tracy, CA		(4	)		2,344		3,434		96		75		326			600		2,419		3,760		696		6,875		(1,139	)		10/8/2010		2003		43
Union City — Dyer St.	Union City, CA		(4	)		2,907		6,359		51		192		715			827		3,099		7,074		878		11,051		(1,733	)		10/8/2010		1999		39
Sacramento — Vacaville	Vacaville, CA		(4	)		809		3,179		76		66		533			648		875		3,712		724		5,311		(966	)		10/8/2010		2002		42
Sacramento — West Sacramento	West Sacramento, CA		(4	)		1,292		3,395		134		61		365			695		1,353		3,760		829		5,942		(1,032	)		10/8/2010		2004		44
Los Angeles — Woodland Hills	Woodland Hills, CA		(4	)		5,452		7,561		69		55		955			1,116		5,507		8,516		1,185		15,208		(1,933	)		10/8/2010		2000		40
Orange County — Yorba Linda	Yorba Linda, CA		(4	)		3,443		2,020		106		53		476			652		3,496		2,496		758		6,750		(1,091	)		10/8/2010		2003		43
Denver — Aurora South	Aurora, CO		(4	)		2,415		2,958		48		64		779			1,016		2,479		3,737		1,064		7,280		(884	)		10/8/2010		1996		31
Denver — Aurora North	Aurora, CO		(4	)		2,706		6,047		65		102		1,218			1,207		2,808		7,265		1,272		11,345		(1,538	)		10/8/2010		1997		39
Colorado Springs — West	Colorado Springs, CO		(4	)		3,338		1,325		41		92		114			305		3,430		1,439		346		5,215		(496	)		10/8/2010		1998		39
Denver — Tech Center — North	Denver, CO		(4	)		2,365		649		49		120		1,015			1,207		2,485		1,664		1,256		5,405		(1,017	)		10/8/2010		1996		31
Denver — Tech Center South	Englewood, CO		(4	)		1,714		978		46		94		119			316		1,808		1,097		362		3,267		(422	)		10/8/2010		1998		40
Denver — Tech Center South — Inverness	Englewood, CO		(4	)		2,941		1,340		46		178		523			1,307		3,119		1,863		1,353		6,335		(634	)		10/8/2010		1997		32
Denver — Cherry Creek	Glendale, CO		(4	)		1,856		2,713		40		157		683			832		2,013		3,396		872		6,281		(1,104	)		10/8/2010		1997		32
Denver — Tech Center — Central	Greenwood Village, CO		(4	)		2,392		1,286		51		181		1,069			1,205		2,573		2,355		1,256		6,184		(1,157	)		10/8/2010		1997		34
Denver — Tech Center South — Greenwood Village	Greenwood Village, CO		(4	)		1,767		2,278		110		134		366			1,033		1,901		2,644		1,143		5,688		(760	)		10/8/2010		2003		44
Denver — Lakewood South	Lakewood, CO		(4	)		2,338		3,348		43		72		616			841		2,410		3,964		884		7,258		(1,204	)		10/8/2010		1996		31
Denver — Park Meadows	Lone Tree, CO		(4	)		1,578		3,467		78		121		474			748		1,699		3,941		826		6,466		(1,096	)		10/8/2010		2002		42
Denver — Westminster	Westminster, CO		(4	)		2,779		4,683		49		166		658			694		2,945		5,341		743		9,029		(1,248	)		10/8/2010		2000		40
Hartford — Farmington	Farmington, CT		(4	)		1,080		6,003		65		74		181			674		1,154		6,184		739		8,077		(1,190	)		10/8/2010		1998		39
Hartford — Manchester	Manchester, CT		(4	)		1,002		6,723		67		72		599			730		1,074		7,322		797		9,193		(1,688	)		10/8/2010		2001		41
Hartford — Meriden	Meriden, CT		(4	)		687		6,207		81		119		431			752		806		6,638		833		8,277		(1,618	)		10/8/2010		2002		42
Norwalk — Stamford	Norwalk, CT		(4	)		2,866		12,533		64		110		780			1,034		2,976		13,313		1,098		17,387		(2,931	)		10/8/2010		1999		39
Shelton — Fairfield County	Shelton, CT		(4	)		2,001		11,314		60		93		850			1,093		2,094		12,164		1,153		15,411		(2,803	)		10/8/2010		1998		38
Ottawa	Ottawa, ON, Canada		(4	)		993		34,014		—		64		(10,432	)		4		1,057		23,582		4		24,643		(4,010	)		10/8/2010		1959		49
St. John's — Downtown	St. John's, Newfoundland, Canada		(4	)		672		9,636		—		115		(2,474	)		—		787		7,162		—		7,949		(1,582	)		10/8/2010		1966		44
Toronto — Vaughan	Vaughan Ontario, Canada		(4	)		11,047		16,011		—		142		(3,750	)		5		11,189		12,261		5		23,455		(3,661	)		10/8/2010		1990		30
Newark — Christiana — Wilmington	Newark, DE		(4	)		1,473		7,617		61		112		751			930		1,585		8,368		991		10,944		(1,903	)		10/8/2010		1998		38
Orlando — Altamonte Springs	Altamonte Springs, FL		(4	)		5,421		—		25		81		264			449		5,502		264		474		6,240		(358	)		10/8/2010		1998		(6	)
Boca Raton — Commerce	Boca Raton, FL		(4	)		5,920		3,219		56		123		883			935		6,043		4,102		991		11,136		(1,301	)		10/8/2010		1998		33
Tampa — Brandon	Brandon, FL		(4	)		3,709		3,540		696		186		731			568		3,895		4,271		1,264		9,430		(1,400	)		12/13/2012		1997		26
St. Petersburg — Clearwater — Executive Dr.	Clearwater, FL		(4	)		1,951		3,062		39		71		541			620		2,022		3,603		659		6,284		(1,194	)		10/8/2010		1998		38
Clearwater — Carillon Park	Clearwater, FL		(4	)		1,679		2,926		489		126		684			430		1,805		3,610		919		6,334		(1,179	)		12/13/2012		1997		22
Fort Lauderdale — Davie	Davie, FL		(4	)		5,014		3,117		492		121		209			422		5,135		3,326		914		9,375		(980	)		12/13/2012		1997		23
Daytona Beach — International Speedway	Daytona Beach, FL		(4	)		987		3,972		45		83		180			379		1,070		4,152		424		5,646		(823	)		10/8/2010		1998		41
Fort Lauderdale — Deerfield Beach	Deerfield Beach, FL		(4	)		2,885		3,421		38		100		484			643		2,985		3,905		681		7,571		(1,174	)		10/8/2010		1997		37
Destin — US 98 — Emerald Coast Pkwy.	Destin, FL		(4	)		1,149		2,528		96		86		1,568			635		1,235		4,096		731		6,062		(1,115	)		10/8/2010		2001		48

162

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Fort Lauderdale — Convention Center — Cruise Port	Fort Lauderdale, FL		(4	)		3,441		7,008		71		74		642		875		3,515		7,650		946		12,111		(1,831	)		10/8/2010		1999		39
Fort Lauderdale — Cypress Creek — Andrews Ave.	Fort Lauderdale, FL		(4	)		2,761		2,685		41		105		549		765		2,866		3,234		806		6,906		(797	)		10/8/2010		1998		33
Fort Lauderdale — Cypress Creek — NW 6th Way	Fort Lauderdale, FL		(4	)		2,480		751		62		66		122		522		2,546		873		584		4,003		(524	)		10/8/2010		1999		42
Fort Lauderdale — Plantation	Fort Lauderdale, FL		(4	)		6,352		2,252		61		48		432		643		6,400		2,684		704		9,788		(1,013	)		10/8/2010		2000		40
Gainesville — I-75	Gainesville, FL		(4	)		846		6,416		44		45		463		792		891		6,879		836		8,606		(1,379	)		10/8/2010		1997		32
Jacksonville — Baymeadows	Jacksonville, FL		(4	)		1,163		2,662		48		89		191		522		1,252		2,853		570		4,675		(839	)		10/8/2010		1998		38
Jacksonville — Lenoir Avenue East	Jacksonville, FL		(4	)		969		1,057		63		60		130		628		1,029		1,187		691		2,907		(504	)		10/8/2010		1997		37
Jacksonville — Deerwood Park	Jacksonville, FL		(4	)		943		3,910		66		102		565		1,187		1,045		4,475		1,253		6,773		(932	)		10/8/2010		1999		40
Jacksonville — Lenoir Avenue South	Jacksonville, FL		(4	)		842		1,862		47		57		92		359		899		1,954		406		3,259		(539	)		10/8/2010		1998		44
Jacksonville — Riverwalk — Convention Center	Jacksonville, FL		(4	)		593		3,693		52		88		541		764		681		4,234		816		5,731		(1,306	)		10/8/2010		2000		40
Jacksonville — Salisbury Rd. — Southpoint	Jacksonville, FL		(4	)		727		720		52		122		1,866		929		849		2,586		981		4,416		(863	)		10/8/2010		1999		39
Jacksonville — Southside — St. Johns Towne Ctr.	Jacksonville, FL		(4	)		925		2,679		47		92		412		614		1,017		3,091		661		4,769		(960	)		10/8/2010		1997		32
Orlando — Lake Mary — 1036 Greenwood Blvd	Lake Mary, FL		(4	)		2,229		—		19		51		318		596		2,280		318		615		3,213		(619	)		10/8/2010		2000		(6	)
Orlando — Lake Mary — 1040 Greenwood Blvd	Lake Mary, FL		(4	)		2,685		—		25		53		568		831		2,738		568		856		4,162		(262	)		10/8/2010		1998		(6	)
Melbourne—Airport	Melbourne, FL		(4	)		1,423		4,160		53		88		291		820		1,511		4,451		873		6,835		(947	)		10/8/2010		1998		39
Miami — Airport — Blue Lagoon	Miami, FL		(4	)		9,702		4,910		70		89		1,358		1,155		9,791		6,268		1,225		17,284		(1,911	)		10/8/2010		1998		33
Miami — Airport — Doral	Miami, FL		(4	)		10,164		4,188		1,131		246		1,161		428		10,410		5,349		1,559		17,318		(1,795	)		12/13/2012		1997		26
Miami — Airport — Doral — 87th Avenue South	Miami, FL		(4	)		4,451		7,542		92		53		628		756		4,504		8,170		848		13,522		(1,865	)		10/8/2010		2001		41
Miami — Airport — Doral — 25th Street	Miami, FL		(4	)		4,135		5,307		125		49		574		964		4,184		5,881		1,089		11,154		(1,606	)		10/8/2010		2002		42
Miami — Airport — Miami Springs	Miami, FL		(4	)		8,014		3,657		71		83		1,872		803		8,097		5,529		874		14,500		(1,727	)		10/8/2010		1998		40
Miami — Downtown Brickell — Cruise Port	Miami, FL		(4	)		3,323		7,312		85		93		682		752		3,416		7,994		837		12,247		(1,821	)		10/8/2010		2001		41
Miami — Coral Gables	Miami, FL		(4	)		2,866		7,211		76		71		598		726		2,937		7,809		802		11,548		(1,812	)		10/8/2010		2001		41
Orlando — Convention Center — 6443 Westwood	Orlando, FL		(4	)		2,472		2,071		68		113		590		953		2,585		2,661		1,021		6,267		(1,049	)		10/8/2010		1999		43
Orlando — Convention Center — Universal Blvd.	Orlando, FL		(4	)		3,326		3,097		58		171		824		1,464		3,497		3,921		1,522		8,940		(1,547	)		10/8/2010		1998		38
Orlando — Convention Ctr — Sports Complex	Orlando, FL		(4	)		2,767		1,466		43		94		664		845		2,861		2,130		888		5,879		(965	)		10/8/2010		1997		37
Orlando — Lake Buena Vista	Orlando, FL		(4	)		4,137		—		30		166		878		1,454		4,303		878		1,484		6,665		(1,060	)		10/8/2010		1998		(6	)
Orlando — Maitland — 1776 Pembrook Dr.	Orlando, FL		(4	)		2,103		807		74		60		115		422		2,163		922		496		3,581		(483	)		10/8/2010		2000		45
Orlando — Maitland — Summit Tower Blvd	Orlando, FL		(4	)		3,577		—		65		84		237		637		3,661		237		702		4,600		(495	)		10/8/2010		1998		(6	)
Orlando — Maitland — 1760 Pembrook Dr.	Orlando, FL		(4	)		2,133		1,347		41		42		295		650		2,175		1,642		691		4,508		(902	)		10/8/2010		1999		39
Orlando — Southpark — Commodity Circle	Orlando, FL		(4	)		3,483		2,051		64		94		667		1,231		3,577		2,718		1,295		7,590		(787	)		10/8/2010		1999		40
Orlando — Southpark — Equity Row	Orlando, FL		(4	)		2,854		432		49		60		215		503		2,914		647		552		4,113		(506	)		10/8/2010		1998		38
Orlando — Orlando Theme Parks — Vineland Rd.	Orlando, FL		(4	)		2,813		2,874		66		122		498		940		2,935		3,372		1,006		7,313		(1,131	)		10/8/2010		1998		42
Orlando — Orlando Theme Parks — Major Blvd.	Orlando, FL		(4	)		3,349		3,190		52		125		659		808		3,474		3,849		860		8,183		(1,246	)		10/8/2010		1999		39
Pensacola — University Mall	Pensacola, FL		(4	)		934		4,059		38		60		285		534		994		4,344		572		5,910		(943	)		10/8/2010		1997		37
Fort Lauderdale — Cypress Creek — Park North	Pompano Beach, FL		(4	)		3,567		2,828		65		108		1,742		1,267		3,675		4,570		1,332		9,577		(1,604	)		10/8/2010		1998		38
Tallahassee — Killearn	Tallahassee, FL		(4	)		356		1,769		29		77		75		538		433		1,844		567		2,844		(606	)		10/8/2010		1998		28

163

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Fort Lauderdale — Tamarac	Tamarac, FL		(4	)		3,709		3,054		712		192		839		360		3,901		3,893		1,072		8,866		(1,302	)		12/13/2012		1997		21
Tampa — Airport — Memorial Hwy.	Tampa, FL		(4	)		2,513		1,342		69		132		540		883		2,645		1,882		952		5,479		(941	)		10/8/2010		1999		42
Tampa — Airport — N. Westshore Blvd.	Tampa, FL		(4	)		2,564		3,918		64		52		870		1,089		2,616		4,788		1,153		8,557		(1,477	)		10/8/2010		1998		38
Tampa — Airport — Spruce Street	Tampa, FL		(4	)		2,437		3,066		102		72		378		564		2,509		3,444		666		6,619		(1,112	)		10/8/2010		2003		43
Tampa — North—USF — Attractions	Tampa, FL		(4	)		2,028		845		37		68		515		649		2,096		1,360		686		4,142		(794	)		10/8/2010		1997		37
Tampa — North Airport	Tampa, FL		(4	)		1,294		2,236		490		123		572		603		1,417		2,808		1,093		5,318		(822	)		12/13/2012		1997		20
West Palm Beach — Northpoint Corporate Park	West Palm Beach, FL		(4	)		2,723		3,326		49		84		363		752		2,807		3,689		801		7,297		(766	)		10/8/2010		1998		38
Atlanta — Alpharetta — Northpoint — East	Alpharetta, GA		(4	)		717		591		42		54		388		878		771		979		920		2,670		(419	)		10/8/2010		1997		27
Atlanta — Alpharetta — Northpoint — West	Alpharetta, GA		(4	)		1,218		1,673		58		64		469		864		1,282		2,142		922		4,346		(699	)		10/8/2010		1999		42
Atlanta — Alpharetta — Rock Mill Rd.	Alpharetta, GA		(4	)		1,391		1,101		40		53		367		580		1,444		1,468		620		3,532		(904	)		10/8/2010		1999		39
Atlanta — Clairmont	Atlanta, GA		(4	)		1,142		3,284		40		72		454		768		1,214		3,738		808		5,760		(953	)		10/8/2010		1998		38
Atlanta — Buckhead	Atlanta, GA		(4	)		1,183		4,086		42		75		466		763		1,258		4,552		805		6,615		(1,030	)		10/8/2010		1997		37
Atlanta — Marietta — Interstate N. Pkwy	Atlanta, GA		(4	)		1,766		3,023		72		65		235		464		1,831		3,258		536		5,625		(775	)		10/8/2010		1999		41
Atlanta — Marietta — Wildwood	Atlanta, GA		(4	)		852		2,881		40		79		542		787		931		3,423		827		5,181		(888	)		10/8/2010		1996		36
Atlanta — Perimeter — Hammond Drive	Atlanta, GA		(4	)		1,921		3,398		45		206		519		873		2,127		3,917		918		6,962		(958	)		10/8/2010		1997		32
Atlanta — Perimeter — Crestline	Atlanta, GA		(4	)		1,562		1,581		46		89		390		765		1,651		1,971		811		4,433		(686	)		10/8/2010		2000		40
Atlanta — Perimeter — Peachtree Dunwoody	Atlanta, GA		(4	)		1,203		2,928		44		98		469		778		1,301		3,397		822		5,520		(863	)		10/8/2010		1997		37
Atlanta — Vinings	Atlanta, GA		(4	)		1,924		5,785		57		77		512		922		2,001		6,297		979		9,277		(1,107	)		10/8/2010		1997		40
Columbus — Airport	Columbus, GA		(4	)		967		4,566		40		81		243		349		1,048		4,809		389		6,246		(1,076	)		10/8/2010		1997		32
Columbus — Bradley Park	Columbus, GA		(4	)		763		5,083		45		54		118		332		817		5,201		377		6,395		(1,052	)		10/8/2010		2000		40
Atlanta — Duluth	Duluth, GA		(4	)		1,177		1,252		61		48		123		175		1,225		1,375		236		2,836		(409	)		10/8/2010		1997		49
Atlanta — Gwinnett Place	Duluth, GA		(4	)		1,269		3,234		48		82		326		438		1,351		3,560		486		5,397		(878	)		10/8/2010		1990		30
Atlanta — Kennesaw Chastain Rd.	Kennesaw, GA		(4	)		1,092		1,560		38		84		160		469		1,176		1,720		507		3,403		(667	)		10/8/2010		1997		27
Atlanta — Kennesaw Town Center	Kennesaw, GA		(4	)		1,122		2,213		38		70		309		357		1,192		2,522		395		4,109		(669	)		10/8/2010		1998		38
Macon — North	Macon, GA		(4	)		537		4,151		46		83		56		297		620		4,207		343		5,170		(812	)		10/8/2010		1998		42
Atlanta — Marietta — Powers Ferry Rd.	Marietta, GA		(4	)		2,718		1,891		58		66		439		491		2,784		2,330		549		5,663		(762	)		10/8/2010		1998		38
Atlanta — Marietta — Windy Hill	Marietta, GA		(4	)		1,645		2,192		41		72		303		452		1,717		2,495		493		4,705		(717	)		10/8/2010		1998		39
Atlanta — Morrow	Morrow, GA		(4	)		1,713		2,276		41		98		176		392		1,811		2,452		433		4,696		(654	)		10/8/2010		1998		39
Atlanta — Peachtree Corners	Norcross, GA		(4	)		1,256		—		19		95		208		414		1,351		208		433		1,992		(238	)		10/8/2010		1997		(6	)
Savannah — Midtown	Savannah, GA		(4	)		564		5,079		66		73		410		727		637		5,489		793		6,919		(1,285	)		10/8/2010		2001		41
Atlanta — Cumberland Mall	Smyrna, GA		(4	)		1,631		2,038		45		57		605		751		1,688		2,643		796		5,127		(677	)		10/8/2010		1997		32
Des Moines — Urbandale	Urbandale, IA		(4	)		1,119		2,684		41		93		521		654		1,212		3,205		695		5,112		(651	)		10/8/2010		1999		39
Des Moines — West Des Moines	West Des Moines, IA		(4	)		1,089		2,742		39		116		787		926		1,205		3,529		965		5,699		(1,023	)		10/8/2010		1997		27
Boise — Airport	Boise, ID		(4	)		862		1,647		39		65		279		439		927		1,926		478		3,331		(540	)		10/8/2010		1997		37
Chicago — Midway	Bedford Park, IL		(4	)		2,028		2,261		130		80		556		782		2,108		2,817		912		5,837		(1,207	)		10/8/2010		2003		43
Bloomington — Normal	Bloomington, IL		(4	)		941		3,404		61		80		144		375		1,021		3,548		436		5,005		(799	)		10/8/2010		2001		41
Chicago — Buffalo Grove — Deerfield	Buffalo Grove, IL		(4	)		2,264		4,986		44		71		582		808		2,335		5,568		852		8,755		(1,357	)		10/8/2010		1998		38
Chicago — Burr Ridge	Burr Ridge, IL		(4	)		2,033		4,406		43		98		699		800		2,131		5,105		843		8,079		(1,442	)		10/8/2010		1996		36
Champaign — Urbana	Champaign, IL		(4	)		1,221		4,043		35		82		148		306		1,303		4,191		341		5,835		(854	)		10/8/2010		1998		38
Chicago — Darien	Darien, IL		(4	)		1,754		4,286		42		93		459		648		1,847		4,745		690		7,282		(1,273	)		10/8/2010		1999		39
Chicago — O'Hare	Des Plaines, IL		(4	)		1,946		3,737		44		106		681		798		2,052		4,418		842		7,312		(1,234	)		10/8/2010		1998		38
Chicago — O'Hare — Allstate Arena	Des Plaines, IL		(4	)		2,122		1,434		71		109		330		666		2,231		1,764		737		4,732		(686	)		10/8/2010		1999		40
Chicago — Downers Grove	Downers Grove, IL		(4	)		2,592		3,321		53		116		1,197		1,217		2,708		4,518		1,270		8,496		(1,634	)		10/8/2010		1996		36

164

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Chicago — Elmhurst — O'Hare	Elmhurst, IL		(4	)		1,728		2,769		42		113		419		744		1,841		3,188		786		5,815		(1,069	)		10/8/2010		1997		37
Chicago — Gurnee	Gurnee, IL		(4	)		1,557		2,759		37		132		287		970		1,689		3,046		1,007		5,742		(698	)		10/8/2010		1997		37
Chicago — Hanover Park	Hanover Park, IL		(4	)		4,217		1,081		38		44		554		607		4,261		1,635		645		6,541		(744	)		10/8/2010		1999		39
Chicago — Hillside	Hillside, IL		(4	)		1,661		1,134		49		68		623		874		1,729		1,757		923		4,409		(869	)		10/8/2010		1999		39
Chicago — Itasca	Itasca, IL		(4	)		1,419		2,764		46		106		149		614		1,525		2,913		660		5,098		(750	)		10/8/2010		1996		36
Chicago — Lansing	Lansing, IL		(4	)		1,778		2,399		44		132		602		814		1,910		3,001		858		5,769		(1,045	)		10/8/2010		1998		38
Chicago — Lisle	Lisle, IL		(4	)		1,908		2,176		42		97		419		587		2,005		2,595		629		5,229		(930	)		10/8/2010		2000		40
Chicago — Lombard — Oakbrook	Lombard, IL		(4	)		3,692		1,060		59		123		655		1,084		3,815		1,715		1,143		6,673		(1,156	)		10/8/2010		1999		39
Chicago — Lombard — Yorktown Center	Lombard, IL		(4	)		2,029		3,367		58		118		126		775		2,147		3,493		833		6,473		(890	)		10/8/2010		1998		40
Chicago — Naperville — East	Naperville, IL		(4	)		1,686		4,231		48		156		1,014		971		1,842		5,245		1,019		8,106		(1,577	)		10/8/2010		1997		37
Chicago — Naperville — West	Naperville, IL		(4	)		3,084		2,386		44		127		617		792		3,211		3,003		836		7,050		(1,135	)		10/8/2010		1996		36
St. Louis — O' Fallon, IL	O'Fallon, IL		(4	)		1,099		2,897		34		56		219		343		1,155		3,116		377		4,648		(725	)		10/8/2010		1998		38
Peoria — North	Peoria, IL		(4	)		1,063		3,528		63		69		278		613		1,132		3,806		676		5,614		(1,044	)		10/8/2010		2001		41
Rockford — I-90	Rockford, IL		(4	)		1,046		1,989		38		62		120		576		1,108		2,109		614		3,831		(531	)		10/8/2010		1997		47
Rockford — State Street	Rockford, IL		(4	)		971		293		34		140		449		774		1,111		742		808		2,661		(812	)		10/8/2010		1997		27
Chicago — Rolling Meadows	Rolling Meadows, IL		(4	)		1,643		640		44		58		215		575		1,701		855		619		3,175		(459	)		10/8/2010		1996		36
Chicago — Romeoville — Bollingbrook	Romeoville, IL		(4	)		1,741		3,612		38		112		513		684		1,853		4,125		722		6,700		(1,184	)		10/8/2010		1998		38
Chicago — Schaumburg — I-90	Schaumburg, IL		(4	)		3,507		703		98		101		435		724		3,608		1,138		822		5,568		(829	)		10/8/2010		2002		42
Chicago — Schaumburg — Convention Center	Schaumburg, IL		(4	)		2,016		1,190		49		93		254		796		2,109		1,444		845		4,398		(649	)		10/8/2010		1997		37
Chicago — Woodfield Mall	Schaumburg, IL		(4	)		1,649		2,501		43		137		449		650		1,786		2,950		693		5,429		(1,013	)		10/8/2010		1999		39
Chicago — Skokie	Skokie, IL		(4	)		2,305		8,355		65		83		578		998		2,388		8,933		1,063		12,384		(2,028	)		10/8/2010		2000		40
Chicago — Vernon Hills — Lake Forest	Vernon Hills, IL		(4	)		2,471		4,030		60		41		316		703		2,512		4,346		763		7,621		(1,201	)		10/8/2010		2000		40
Chicago — Vernon Hills — Lincolnshire	Vernon Hills, IL		(4	)		2,467		1,053		66		82		592		960		2,549		1,645		1,026		5,220		(1,069	)		10/8/2010		1999		39
Chicago — Westmont — Oak Brook	Westmont, IL		(4	)		3,510		587		52		117		764		1,093		3,627		1,351		1,145		6,123		(1,072	)		10/8/2010		1998		38
Evansville — East	Evansville, IN		(4	)		387		2,295		34		84		125		407		471		2,420		441		3,332		(786	)		10/8/2010		1997		27
Fort Wayne — North	Ft. Wayne, IN		(4	)		402		1,755		34		80		90		374		482		1,845		408		2,735		(623	)		10/8/2010		1996		26
Fort Wayne — South	Ft. Wayne, IN		(4	)		937		3,992		37		84		318		389		1,021		4,310		426		5,757		(949	)		10/8/2010		1997		37
Indianapolis — Airport	Indianapolis, IN		(4	)		1,566		—		39		1		481		553		1,567		481		592		2,640		(475	)		10/8/2010		1998		(6	)
Indianapolis — Airport — W. Southern Ave.	Indianapolis, IN		(4	)		1,505		1,103		77		147		255		762		1,652		1,358		839		3,849		(695	)		10/8/2010		1998		40
Indianapolis — Castleton	Indianapolis, IN		(4	)		558		2,108		40		82		256		470		640		2,364		510		3,514		(719	)		10/8/2010		1999		39
Indianapolis — North — Carmel	Indianapolis, IN		(4	)		812		851		29		49		93		366		861		944		395		2,200		(393	)		10/8/2010		1990		30
Indianapolis — Northwest — College Park	Indianapolis, IN		(4	)		363		945		28		46		155		447		409		1,100		475		1,984		(475	)		10/8/2010		1991		32
Indianapolis — Northwest — I-465	Indianapolis, IN		(4	)		1,385		4,782		66		123		374		842		1,508		5,156		908		7,572		(1,270	)		10/8/2010		1998		41
Indianapolis — West 86th St.	Indianapolis, IN		(4	)		581		2,330		40		163		557		581		744		2,887		621		4,252		(769	)		10/8/2010		1998		39
Merrillville — US Rte. 30	Merrillville, IN		(4	)		693		3,923		39		116		509		726		809		4,432		765		6,006		(1,151	)		10/8/2010		1996		36
South Bend — Mishawaka — North	Mishawaka, IN		(4	)		497		1,929		62		77		209		448		574		2,138		510		3,222		(687	)		10/8/2010		2001		41
South Bend — Mishawaka — South	Mishawaka, IN		(4	)		457		1,146		34		101		71		406		558		1,217		440		2,215		(506	)		10/8/2010		1997		27
Kansas City — Lenexa — 87th St.	Lenexa, KS		(4	)		1,413		1,161		47		325		627		688		1,738		1,788		735		4,261		(832	)		10/8/2010		1997		35
Kansas City — Shawnee Mission	Merriam, KS		(4	)		1,255		2,489		49		112		506		666		1,367		2,995		715		5,077		(857	)		10/8/2010		1997		32
Kansas City — Overland Park — Metcalf Ave	Overland Park, KS		(4	)		1,103		4,652		61		126		344		690		1,229		4,996		751		6,976		(1,014	)		10/8/2010		1997		41
Kansas City — Overland Park — Nall Ave.	Overland Park, KS		(4	)		603		2,291		45		24		335		1,210		627		2,626		1,255		4,508		(732	)		10/8/2010		1998		38
Kansas City — Overland Park — Quivira Rd.	Overland Park, KS		(4	)		1,120		959		43		126		429		673		1,246		1,388		716		3,350		(930	)		10/8/2010		1997		37
Wichita — East	Wichita, KS		(4	)		809		1,375		35		68		340		639		877		1,715		674		3,266		(481	)		10/8/2010		1997		27

165

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Cincinnati — Covington	Covington, KY		(4	)		880		5,352		38		56		512		742		936		5,864		780		7,580		(1,150	)		10/8/2010		1997		37
Cincinnati — Florence — Meijer Dr.	Florence, KY		(4	)		549		1,850		33		105		80		447		654		1,930		480		3,064		(631	)		10/8/2010		1996		26
Cincinnati — Florence — Turfway Rd.	Florence, KY		(4	)		827		2,575		37		94		117		389		921		2,692		426		4,039		(711	)		10/8/2010		1997		37
Lexington — Nicholasville Road	Lexington, KY		(4	)		1,415		4,119		45		113		874		833		1,528		4,993		878		7,399		(1,076	)		10/8/2010		1996		31
Lexington — Tates Creek	Lexington, KY		(4	)		910		1,692		29		343		840		622		1,253		2,532		651		4,436		(666	)		10/8/2010		1987		27
Louisville — Alliant Avenue	Louisville, KY		(4	)		812		2,628		48		93		529		861		905		3,157		909		4,971		(711	)		10/8/2010		1998		39
Louisville — Dutchman	Louisville, KY		(4	)		662		2,540		45		43		276		454		705		2,816		499		4,020		(832	)		10/8/2010		1996		31
Louisville — Hurstbourne	Louisville, KY		(4	)		656		439		30		303		583		712		959		1,022		742		2,723		(405	)		10/8/2010		1988		28
Baton Rouge — Citiplace	Baton Rouge, LA		(4	)		1,029		5,875		66		83		438		701		1,112		6,313		767		8,192		(1,707	)		10/8/2010		2001		41
New Orleans — Kenner	Kenner, LA		(4	)		1,028		6,843		79		70		439		654		1,098		7,282		733		9,113		(1,754	)		10/8/2010		2001		41
Lafayette — Airport	Lafayette, LA		(4	)		436		2,212		38		69		517		824		505		2,729		862		4,096		(693	)		10/8/2010		1998		38
New Orleans — Metairie	Metairie, LA		(4	)		559		5,559		41		55		404		780		614		5,963		821		7,398		(1,396	)		10/8/2010		1998		38
Boston — Braintree	Braintree, MA		(4	)		2,599		9,110		90		58		428		743		2,657		9,538		833		13,028		(1,891	)		10/8/2010		2002		42
Boston — Burlington	Burlington, MA		(4	)		2,533		6,944		58		65		899		1,188		2,598		7,843		1,246		11,687		(2,045	)		10/8/2010		1998		38
Boston — Danvers	Danvers, MA		(4	)		1,334		5,659		38		67		286		448		1,401		5,945		486		7,832		(992	)		10/8/2010		1998		47
Boston — Marlborough	Marlborough, MA		(4	)		2,137		3,464		48		73		761		1,081		2,210		4,225		1,129		7,564		(1,419	)		10/8/2010		1998		38
Foxboro — Norton	Norton, MA		(4	)		2,153		4,729		98		57		407		594		2,210		5,136		692		8,038		(1,228	)		10/8/2010		2003		43
Boston — Peabody	Peabody, MA		(4	)		1,649		5,178		110		91		590		1,024		1,740		5,768		1,134		8,642		(1,542	)		10/8/2010		1999		43
Boston — Tewksbury	Tewksbury, MA		(4	)		1,547		4,378		58		63		354		666		1,610		4,732		724		7,066		(1,191	)		10/8/2010		2001		41
Boston — Waltham — 52 4th Ave.	Waltham, MA		(4	)		2,025		6,620		58		65		660		1,367		2,090		7,280		1,425		10,795		(1,633	)		10/8/2010		1998		38
Boston — Waltham — 32 4th Ave.	Waltham, MA		(4	)		1,851		7,411		72		124		644		1,163		1,975		8,055		1,235		11,265		(2,085	)		10/8/2010		1999		39
Boston — Westborough — Computer Dr.	Westborough, MA		(4	)		2,747		2,788		48		146		623		999		2,893		3,411		1,047		7,351		(1,301	)		10/8/2010		1998		38
Boston — Westborough — Connector Road	Westborough, MA		(4	)		3,154		1,519		57		46		372		585		3,200		1,891		642		5,733		(795	)		10/8/2010		2001		41
Boston — Westborough — East Main Street	Westborough, MA		(4	)		2,366		2,763		81		90		612		866		2,456		3,375		947		6,778		(913	)		10/8/2010		2001		42
Boston — Woburn	Woburn, MA		(4	)		1,879		4,426		48		96		523		974		1,975		4,949		1,022		7,946		(1,422	)		10/8/2010		1998		39
Annapolis — Admiral Cochrane Drive	Annapolis, MD		(4	)		2,121		5,919		52		58		473		954		2,179		6,392		1,006		9,577		(1,564	)		10/8/2010		1999		39
Annapolis — Womack Drive	Annapolis, MD		(4	)		1,376		4,684		131		52		356		572		1,428		5,040		703		7,171		(1,285	)		10/8/2010		2004		45
Baltimore — Bel Air — Aberdeen	Bel Air, MD		(4	)		1,768		5,344		110		33		109		928		1,801		5,453		1,038		8,292		(1,073	)		10/8/2010		2004		44
Columbia — Columbia Parkway	Columbia, MD		(4	)		1,785		6,287		38		119		482		672		1,904		6,769		710		9,383		(1,617	)		10/8/2010		1997		37
Columbia — Columbia Corporate Park	Columbia, MD		(4	)		3,056		10,874		81		124		892		1,135		3,180		11,766		1,216		16,162		(2,618	)		10/8/2010		1998		39
Columbia — Gateway Drive	Columbia, MD		(4	)		2,241		5,038		42		69		759		955		2,310		5,797		997		9,104		(2,056	)		10/8/2010		1997		27
Frederick — Westview Dr.	Frederick, MD		(4	)		1,891		5,522		41		47		410		572		1,938		5,932		613		8,483		(1,446	)		10/8/2010		1999		39
Washington, D.C. — Gaithersburg — North	Gaithersburg, MD		(4	)		2,088		3,973		42		48		401		584		2,136		4,374		626		7,136		(1,207	)		10/8/2010		1999		39
Washington, D.C. — Gaithersburg — South	Gaithersburg, MD		(4	)		2,233		4,128		59		89		513		816		2,322		4,641		875		7,838		(937	)		10/8/2010		1999		40
Washington, D.C. — Germantown — Milestone	Germantown, MD		(4	)		1,413		4,673		44		83		350		531		1,496		5,023		575		7,094		(1,323	)		10/8/2010		1999		39
Washington, D.C. — Germantown — Town Center	Germantown, MD		(4	)		5,541		2,269		698		154		760		498		5,695		3,029		1,196		9,920		(1,430	)		12/13/2012		1997		19
Baltimore — Glen Burnie	Glen Burnie, MD		(4	)		2,374		9,428		132		53		339		560		2,427		9,767		692		12,886		(1,944	)		10/8/2010		2004		44
Columbia — Laurel — Ft. Meade	Jessup, MD		(4	)		1,505		5,910		112		74		343		763		1,579		6,253		875		8,707		(1,454	)		10/8/2010		2004		44
Washington, D.C. — Landover	Landover, MD		(4	)		3,119		5,378		39		49		545		758		3,168		5,923		797		9,888		(1,365	)		10/8/2010		1998		38
Lexington Park — Pax River	Lexington Park, MD		(4	)		1,206		5,140		48		70		459		717		1,276		5,599		765		7,640		(1,402	)		10/8/2010		2000		40
Baltimore — BWl Airport — International Dr.	Linthicum Heights, MD		(4	)		3,801		5,663		1,003		263		872		667		4,064		6,535		1,670		12,269		(1,778	)		12/13/2012		1997		32

166

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Baltimore — BWI Airport — Aero Dr.	Linthicum, MD		(4	)		2,316		8,515		43		112		572		707		2,428		9,087		750		12,265		(2,048	)		10/8/2010		1997		37
Washington, D.C. — Rockville	Rockville, MD		(4	)		5,800		9,696		64		82		600		1,084		5,882		10,296		1,148		17,326		(2,302	)		10/8/2010		1999		39
Baltimore — Timonium	Timonium, MD		(4	)		2,004		6,358		39		81		480		720		2,085		6,838		759		9,682		(1,593	)		10/8/2010		1998		38
Portland — Scarborough	Scarborough, ME		(4	)		828		4,601		52		76		483		843		904		5,084		895		6,883		(1,151	)		10/8/2010		2001		41
Detroit — Ann Arbor — Briarwood Mall	Ann Arbor, MI		(4	)		3,416		—		41		172		490		801		3,588		490		842		4,920		(483	)		10/8/2010		1997		(6	)
Detroit — Ann Arbor — University South	Ann Arbor, MI		(4	)		955		1,139		42		147		382		775		1,102		1,521		817		3,440		(538	)		10/8/2010		1997		41
Auburn Hills — University Drive	Auburn Hills, MI		(4	)		1,363		588		59		133		692		1,062		1,496		1,280		1,121		3,897		(723	)		10/8/2010		1999		39
Detroit — Auburn Hills — Featherstone Rd.	Auburn Hills, MI		(4	)		1,226		3,584		75		198		837		1,324		1,424		4,421		1,399		7,244		(1,199	)		10/8/2010		1999		41
Detroit — Auburn Hills — I — 75	Auburn Hills, MI		(4	)		1,948		—		47		153		539		819		2,101		539		866		3,506		(1,067	)		10/8/2010		1997		(6	)
Detroit — Canton	Canton, MI		(4	)		1,501		—		59		142		453		718		1,643		453		777		2,873		(557	)		10/8/2010		2001		(6	)
Detroit — Dearborn	Dearborn, MI		(4	)		1,018		2,051		77		133		471		748		1,151		2,522		825		4,498		(798	)		10/8/2010		2002		42
Detroit — Farmington Hills	Farmington Hills, MI		(4	)		1,084		570		41		122		75		504		1,206		645		545		2,396		(379	)		10/8/2010		1997		37
Grand Rapids — Kentwood	Kentwood, MI		(4	)		1,297		1,644		38		129		233		556		1,426		1,877		594		3,897		(600	)		10/8/2010		1998		38
Detroit — Madison Heights	Madison Heights, MI		(4	)		1,787		—		43		63		139		449		1,850		139		492		2,481		(372	)		10/8/2010		1997		(6	)
Detroit — Novi — Haggerty Road	Novi, MI		(4	)		1,102		1,620		44		123		513		743		1,225		2,133		787		4,145		(1,155	)		10/8/2010		1997		37
Detroit — Novi — Orchard Hill Place	Novi, MI		(4	)		1,237		421		78		95		59		348		1,332		480		426		2,238		(385	)		10/8/2010		2000		42
Detroit — Metropolitan Airport	Romulus, MI		(4	)		1,161		2,462		83		104		105		342		1,265		2,567		425		4,257		(683	)		10/8/2010		2001		41
Detroit — Roseville	Roseville, MI		(4	)		1,204		2,742		71		65		212		529		1,269		2,954		600		4,823		(765	)		10/8/2010		2001		41
Detroit — Southfield — I-696	Southfield, MI		(4	)		1,746		—		84		81		217		737		1,827		217		821		2,865		(540	)		10/8/2010		2002		(6	)
Detroit — Southfield — Northwestern Hwy.	Southfield, MI		(4	)		1,952		—		58		128		640		1,128		2,080		640		1,186		3,906		(510	)		10/8/2010		1999		(6	)
Detroit — Sterling Heights	Sterling Heights, MI		(4	)		998		1,550		42		97		768		867		1,095		2,318		909		4,322		(674	)		10/8/2010		1997		37
Detroit — Warren	Warren, MI		(4	)		1,448		—		37		134		254		432		1,582		254		469		2,305		(281	)		10/8/2010		1997		39
Minneapolis — Bloomington	Bloomington, MN		(4	)		1,440		3,092		39		69		422		743		1,509		3,514		782		5,805		(982	)		10/8/2010		1998		38
Minneapolis — Brooklyn Center	Brooklyn Center, MN		(4	)		1,367		2,491		38		85		181		727		1,452		2,672		765		4,889		(718	)		10/8/2010		1998		38
Minneapolis — Airport — Eagan — South	Eagan, MN		(4	)		1,517		2,133		51		81		450		707		1,598		2,583		758		4,939		(833	)		10/8/2010		1997		37
Minneapolis — Airport — Eagan — North	Eagan, MN		(4	)		1,888		2,331		60		99		627		1,067		1,987		2,958		1,127		6,072		(789	)		10/8/2010		1998		38
Minneapolis — Eden Prairie — Technology Drive	Eden Prairie, MN		(4	)		1,199		2,289		36		74		463		768		1,273		2,752		804		4,829		(863	)		10/8/2010		1998		38
Minneapolis — Eden Prairie — Valley View Road	Eden Prairie, MN		(4	)		1,614		3,658		39		76		393		746		1,690		4,051		785		6,526		(1,009	)		10/8/2010		1998		38
Minneapolis — Maple Grove	Maple Grove, MN		(4	)		2,543		560		38		93		355		589		2,636		915		627		4,178		(363	)		10/8/2010		1998		38
Rochester — North	Rochester, MN		(4	)		1,146		1,797		48		71		495		683		1,217		2,292		731		4,240		(567	)		10/8/2010		2001		41
Rochester — South	Rochester, MN		(4	)		1,119		1,439		50		80		413		642		1,199		1,852		692		3,743		(502	)		10/8/2010		2001		41
Minneapolis — Woodbury	Woodbury, MN		(4	)		1,805		2,559		43		53		363		756		1,858		2,922		799		5,579		(1,171	)		10/8/2010		1999		39
St. Louis — Airport — Central	Bridgeton, MO		(4	)		1,743		1,010		57		84		162		761		1,827		1,172		818		3,817		(624	)		10/8/2010		1998		39
Columbia — Stadium Blvd.	Columbia, MO		(4	)		734		2,511		91		84		183		493		818		2,694		584		4,096		(741	)		10/8/2010		2003		43
St. Louis — Earth City	Earth City, MO		(4	)		1,394		721		34		83		158		665		1,477		879		699		3,055		(494	)		10/8/2010		1997		27
Kansas City — Airport — Plaza Circle	Kansas City, MO		(4	)		603		992		40		132		214		892		735		1,206		932		2,873		(529	)		10/8/2010		1997		37
Kansas City — Airport — Tiffany Springs	Kansas City, MO		(4	)		811		3,292		52		120		195		648		931		3,487		700		5,118		(842	)		10/8/2010		1998		38
Kansas City — Country Club Plaza	Kansas City, MO		(4	)		1,028		5,114		46		116		558		670		1,144		5,672		716		7,532		(1,287	)		10/8/2010		1998		38
Kansas City — South	Kansas City, MO		(4	)		1,742		—		44		86		378		844		1,828		378		888		3,094		(582	)		10/8/2010		1997		(6	)
St. Louis — Westport — Central	Maryland Heights, MO		(4	)		829		2,112		48		71		493		877		900		2,605		925		4,430		(804	)		10/8/2010		1999		39

167

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)								Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements			Building and Improvements			FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
St. Louis — Westport — East Lackland Rd.	Maryland Heights, MO		(4	)		1,334		2,692		53		190			401			631		1,524		3,093		684		5,301		(896	)		10/8/2010		1996		31
Springfield — South	Springfield, MO		(4	)		777		3,170		40		91			183			1,007		868		3,353		1,047		5,268		(792	)		10/8/2010		1997		37
St. Louis — Westport — Craig Road	St. Louis, MO		(4	)		982		220		33		121			220			610		1,103		440		643		2,186		(372	)		10/8/2010		1994		24
St. Louis — St. Peters	St. Peters, MO		(4	)		1,165		3,797		44		86			325			380		1,251		4,122		424		5,797		(943	)		10/8/2010		1997		37
Jackson — East Beasley Road	Jackson, MS		(4	)		265		3,884		49		90			199			626		355		4,083		675		5,113		(862	)		10/8/2010		1999		39
Jackson — North	Jackson, MS		(4	)		256		3,381		40		125			168			618		381		3,549		658		4,588		(872	)		10/8/2010		1997		32
Jackson — Ridgeland	Ridgeland, MS		(4	)		345		3,103		33		95			163			540		440		3,266		573		4,279		(868	)		10/8/2010		1996		26
Billings — West End	Billings, MT		(4	)		936		3,915		97		99			464			570		1,035		4,379		667		6,081		(846	)		10/8/2010		2003		43
Great Falls — Missouri River	Great Falls, MT		(4	)		834		5,105		70		67			451			653		901		5,556		723		7,180		(1,012	)		10/8/2010		2002		42
Asheville — Tunnel Rd.	Asheville, NC		(4	)		2,216		2,559		38		62			387			734		2,278		2,946		772		5,996		(749	)		10/8/2010		1998		38
Raleigh — Cary — Harrison Ave.	Cary, NC		(4	)		791		1,353		33		42			321			713		833		1,674		746		3,253		(604	)		10/8/2010		1996		26
Raleigh — Cary — Regency Parkway North	Cary, NC		(4	)		903		4,357		44		34			424			835		937		4,781		879		6,597		(1,022	)		10/8/2010		1998		38
Raleigh — Cary — Regency Parkway South	Cary, NC		(4	)		1,018		4,505		53		89			443			822		1,107		4,948		875		6,930		(917	)		10/8/2010		1998		43
Charlotte — Airport	Charlotte, NC		(4	)		1,982		636		67		109			764			876		2,091		1,400		943		4,434		(1,195	)		10/8/2010		1998		33
Charlotte — Pineville — Park Rd.	Charlotte, NC		(4	)		1,111		3,250		60		74			487			669		1,185		3,737		729		5,651		(1,224	)		10/8/2010		1999		39
Charlotte — Pineville — Pineville Matthews Rd.	Charlotte, NC		(4	)		1,859		3,965		52		241			480			911		2,100		4,445		963		7,508		(1,109	)		10/8/2010		1999		43
Charlotte — Tyvola Rd.	Charlotte, NC		(4	)		1,563		727		54		68			429			626		1,631		1,156		680		3,467		(818	)		10/8/2010		1998		38
Charlotte — Tyvola Rd. — Executive Park	Charlotte, NC		(4	)		1,232		—		19		71			501			657		1,303		501		676		2,480		(664	)		10/8/2010		1995		(6	)
Charlotte — University Place	Charlotte, NC		(4	)		1,208		2,903		44		(29	)		461			706		1,179		3,364		750		5,293		(1,141	)		10/8/2010		1998		39
Charlotte — University Place — E. McCullough Dr.	Charlotte, NC		(4	)		1,045		—		35		84			497			638		1,129		497		673		2,299		(749	)		10/8/2010		1996		(6	)
Durham — Research Triangle Park — Hwy. 55	Durham, NC		(4	)		603		1,556		292		168			212			922		771		1,768		1,214		3,753		(613	)		12/13/2012		1997		19
Durham — Research Triangle Park — Hwy. 54	Durham, NC		(4	)		63		984		33		189			508			803		252		1,492		836		2,580		(1,267	)		10/8/2010		1996		26
Durham — RTP — Miami Blvd. — North	Durham, NC		(4	)		1,215		2,397		54		77			459			742		1,292		2,856		796		4,944		(677	)		10/8/2010		1998		40
Durham — RTP — Miami Blvd. — South	Durham, NC		(4	)		1,405		2,370		107		89			692			1,186		1,494		3,062		1,293		5,849		(998	)		10/8/2010		1998		42
Durham — University	Durham, NC		(4	)		1,208		3,006		43		135			447			729		1,343		3,453		772		5,568		(1,207	)		10/8/2010		1997		33
Durham — University — Ivy Creek Blvd.	Durham, NC		(4	)		1,684		3,947		57		95			236			433		1,779		4,183		490		6,452		(1,028	)		10/8/2010		1998		33
Fayetteville — Cross Creek Mall	Fayetteville, NC		(4	)		3,725		9,586		56		95			349			766		3,820		9,935		822		14,577		(2,093	)		10/8/2010		1999		39
Fayetteville — Owen Dr.	Fayetteville, NC		(4	)		4,253		7,164		43		75			627			687		4,328		7,791		730		12,849		(1,899	)		10/8/2010		1997		32
Greensboro — Airport	Greensboro, NC		(4	)		1,017		1,618		56		62			145			326		1,079		1,763		382		3,224		(538	)		10/8/2010		1999		42
Greensboro — Wendover Ave.	Greensboro, NC		(4	)		1,047		—		33		113			107			366		1,160		107		399		1,666		(368	)		10/8/2010		1995		(6	)
Greensboro — Wendover Ave. — Big Tree Way	Greensboro, NC		(4	)		1,220		1,866		46		99			510			744		1,319		2,376		790		4,485		(1,113	)		10/8/2010		1996		31
Jacksonville — Camp Lejeune	Jacksonville, NC		(4	)		4,815		10,609		38		94			577			682		4,909		11,186		720		16,815		(2,059	)		10/8/2010		1998		38
Raleigh — RDU Airport	Morrisville, NC		(4	)		833		3,939		43		34			523			818		867		4,462		861		6,190		(1,079	)		10/8/2010		1997		32
Raleigh — Crabtree Valley	Raleigh, NC		(4	)		1,276		2,350		493		114			607			725		1,390		2,957		1,218		5,565		(915	)		12/13/2012		1998		20
Raleigh — North Raleigh — Wake Towne Dr.	Raleigh, NC		(4	)		634		1,414		34		63			400			836		697		1,814		870		3,381		(649	)		10/8/2010		1996		26
Raleigh — North Raleigh	Raleigh, NC		(4	)		1,120		4,043		38		75			350			598		1,195		4,393		636		6,224		(1,235	)		10/8/2010		1997		37
Raleigh — North Raleigh — Wake Forest Road	Raleigh, NC		(4	)		956		2,771		43		74			666			904		1,030		3,437		947		5,414		(835	)		10/8/2010		1997		32
Raleigh — Northeast	Raleigh, NC		(4	)		1,219		2,471		40		87			384			898		1,306		2,855		938		5,099		(671	)		10/8/2010		1999		38
Wilmington — New Centre Drive	Wilmington, NC		(4	)		713		3,123		39		74			323			797		787		3,446		836		5,069		(693	)		10/8/2010		1998		44
Winston-Salem — Hanes Mall Blvd.	Winston-Salem, NC		(4	)		776		2,573		40		76			146			303		852		2,719		343		3,914		(698	)		10/8/2010		1996		32
Omaha — West	Omaha, NE		(4	)		1,117		2,601		39		119			222			452		1,236		2,823		491		4,550		(838	)		10/8/2010		1997		27
Nashua — Manchester	Nashua, NH		(4	)		2,526		1,771		58		72			389			709		2,598		2,160		767		5,525		(896	)		10/8/2010		2001		41
Mt. Olive — Budd Lake	Budd Lake, NJ		(4	)		835		3,898		103		125			428	��		650		960		4,326		753		6,039		(1,327	)		10/8/2010		2003		43

168

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Philadelphia — Cherry Hill	Cherry Hill, NJ		(4	)		337		2,660		32		46		386		549		383		3,046		581		4,010		(820	)		10/8/2010		1998		38
Meadowlands — East Rutherford	E.Rutherford, NJ		(4	)		957		6,141		61		94		1,015		1,102		1,051		7,156		1,163		9,370		(2,078	)		10/8/2010		1999		39
Edison — Raritan Center	Edison, NJ		(4	)		1,363		8,976		48		116		626		991		1,479		9,602		1,039		12,120		(2,309	)		10/8/2010		1997		37
Elizabeth — Newark Airport	Elizabeth, NJ		(4	)		202		11,175		119		79		786		966		281		11,961		1,085		13,327		(4,059	)		10/8/2010		2002		42
Somerset — Franklin	Franklin, NJ		(4	)		761		4,096		63		58		423		626		819		4,519		689		6,027		(1,369	)		10/8/2010		2001		41
Philadelphia — Mt. Laurel — Pacilli Place	Mt Laurel, NJ		(4	)		455		4,318		58		60		326		741		515		4,644		799		5,958		(1,124	)		10/8/2010		1999		39
Philadelphia — Mt. Laurel — Crawford Place	Mt Laurel, NJ		(4	)		313		2,632		31		51		450		529		364		3,082		560		4,006		(845	)		10/8/2010		1998		38
Piscataway — Rutgers University	Piscataway, NJ		(4	)		907		6,348		62		174		737		861		1,081		7,085		923		9,089		(1,901	)		10/8/2010		1998		38
Princeton — West Windsor	Princeton, NJ		(4	)		3,758		2,042		45		70		470		674		3,828		2,512		719		7,059		(995	)		10/8/2010		2000		40
Ramsey — Upper Saddle River	Ramsey, NJ		(4	)		704		5,013		64		42		545		699		746		5,558		763		7,067		(1,454	)		10/8/2010		2001		41
Red Bank — Middletown	Red Bank, NJ		(4	)		2,846		2,652		52		96		552		816		2,942		3,204		868		7,014		(1,190	)		10/8/2010		2000		40
Meadowlands — Rutherford	Rutherford, NJ		(4	)		1,972		4,661		49		78		646		851		2,050		5,307		900		8,257		(1,640	)		10/8/2010		1999		39
Princeton — South Brunswick	S. Brunswick, NJ		(4	)		761		3,728		50		127		521		841		888		4,249		891		6,028		(1,573	)		10/8/2010		1999		39
Secaucus — Meadowlands	Secaucus, NJ		(4	)		1,644		13,946		122		103		715		883		1,747		14,661		1,005		17,413		(2,944	)		10/8/2010		2002		42
Secaucus — New York City Area	Secaucus, NJ		(4	)		307		20,368		73		111		1,260		1,340		418		21,628		1,413		23,459		(10,237	)		10/8/2010		2000		40
Hanover — Parsippany	Whippany, NJ		(4	)		3,549		6,181		60		102		860		989		3,651		7,041		1,049		11,741		(2,029	)		10/8/2010		1998		38
Newark — Woodbridge	Woodbridge, NJ		(4	)		1,814		9,316		61		166		974		1,158		1,980		10,290		1,219		13,489		(2,668	)		10/8/2010		1999		39
Albuquerque — Airport	Albuquerque, NM		(4	)		747		2,314		47		66		106		345		813		2,420		392		3,625		(876	)		10/8/2010		1999		24
Albuquerque — Rio Rancho	Albuquerque, NM		(4	)		1,051		4,453		38		55		157		354		1,106		4,610		392		6,108		(903	)		10/8/2010		1998		38
Albuquerque — Rio Rancho Blvd.	Rio Rancho, NM		(4	)		1,561		5,734		51		89		271		495		1,650		6,005		546		8,201		(1,193	)		10/8/2010		1998		39
Las Vegas — East Flamingo	Las Vegas, NV		(4	)		1,914		3,649		56		105		536		1,177		2,019		4,185		1,233		7,437		(1,030	)		10/8/2010		1998		38
Las Vegas — Midtown	Las Vegas, NV		(4	)		1,782		3,495		45		78		597		896		1,860		4,092		941		6,893		(832	)		10/8/2010		1998		38
Las Vegas — Valley View	Las Vegas, NV		(4	)		2,230		7,604		64		151		255		761		2,381		7,859		825		11,065		(1,737	)		10/8/2010		1995		32
Reno — South Meadows	Reno, NV		(4	)		1,771		4,821		84		65		139		291		1,836		4,960		375		7,171		(988	)		10/8/2010		2002		42
Albany — SUNY	Albany, NY		(4	)		1,246		6,462		47		119		989		1,029		1,365		7,451		1,076		9,892		(1,837	)		10/8/2010		1996		36
Buffalo — Amherst	Amherst, NY		(4	)		665		5,464		43		87		408		835		752		5,872		878		7,502		(1,536	)		10/8/2010		1997		37
Long Island — Bethpage	Bethpage, NY		(4	)		4,024		7,727		44		130		568		825		4,154		8,295		869		13,318		(1,829	)		10/8/2010		1999		39
Syracuse — Dewitt	East Syracuse, NY		(4	)		669		4,692		43		219		658		822		888		5,350		865		7,103		(1,557	)		10/8/2010		1996		36
White Plains — Elmsford	Elmsford, NY		(4	)		1,124		12,986		74		434		1,107		1,078		1,558		14,093		1,152		16,803		(2,984	)		10/8/2010		2000		40
Fishkill — Route 9	Fishkill, NY		(4	)		1,616		6,316		47		57		243		998		1,673		6,559		1,045		9,277		(1,226	)		10/8/2010		1998		38
Fishkill — Westage Center	Fishkill, NY		(4	)		946		5,653		111		80		388		680		1,026		6,041		791		7,858		(1,459	)		10/8/2010		2004		44
Long Island — Melville	Melville, NY		(4	)		7,498		10,315		73		88		618		988		7,586		10,933		1,061		19,580		(2,226	)		10/8/2010		2000		40
Rochester — Greece	Rochester, NY		(4	)		1,005		4,662		45		62		603		875		1,067		5,265		920		7,252		(1,478	)		10/8/2010		1996		36
Rochester — Henrietta	Rochester, NY		(4	)		1,061		7,451		45		70		527		898		1,131		7,978		943		10,052		(1,824	)		10/8/2010		1996		36
New York City — LaGuardia Airport	Whitestone, NY		(4	)		8,634		14,468		84		115		708		948		8,749		15,176		1,032		24,957		(2,863	)		10/8/2010		2001		41
Cincinnati — Blue Ash — Reed Hartman	Blue Ash, OH		(4	)		956		697		46		82		490		940		1,038		1,187		986		3,211		(610	)		10/8/2010		1997		38
Cincinnati — Blue Ash — Kenwood Road	Blue Ash, OH		(4	)		928		2,223		50		5		421		413		933		2,644		463		4,040		(677	)		10/8/2010		1998		29
Cincinnati — Blue Ash — Reagan Hwy.	Blue Ash, OH		(4	)		535		651		28		127		480		592		662		1,131		620		2,413		(351	)		10/8/2010		1991		31
Cleveland — Brooklyn	Brooklyn, OH		(4	)		1,006		3,280		42		101		492		852		1,107		3,772		894		5,773		(944	)		10/8/2010		1999		39
Columbus — East	Columbus, OH		(4	)		1,036		—		29		148		67		344		1,184		67		373		1,624		(291	)		10/8/2010		1989		(6	)
Columbus — Easton	Columbus, OH		(4	)		1,185		4,416		50		117		664		651		1,302		5,080		701		7,083		(1,231	)		10/8/2010		1999		39
Columbus — North	Columbus, OH		(4	)		824		1,251		43		120		154		396		944		1,405		439		2,788		(505	)		10/8/2010		1997		37
Columbus — Polaris	Columbus, OH		(4	)		1,431		5,351		61		111		745		1,085		1,542		6,096		1,146		8,784		(1,613	)		10/8/2010		1998		39
Columbus — Worthington	Columbus, OH		(4	)		781		1,115		36		77		280		333		858		1,395		369		2,622		(546	)		10/8/2010		1998		38
Akron — Copley — West	Copley, OH		(4	)		795		240		44		76		122		463		871		362		507		1,740		(331	)		10/8/2010		1996		26
Akron — Copley — East	Copley, OH		(4	)		875		1,080		35		87		226		329		962		1,306		364		2,632		(418	)		10/8/2010		1997		37
Dayton — North	Dayton, OH		(4	)		813		3,567		49		110		202		423		923		3,769		472		5,164		(940	)		10/8/2010		2000		40
Dayton — South	Dayton, OH		(4	)		500		1,899		29		109		300		339		609		2,199		368		3,176		(638	)		10/8/2010		1989		29
Columbus — Dublin	Dublin, OH		(4	)		1,329		1,294		38		77		443		686		1,406		1,737		724		3,867		(716	)		10/8/2010		1998		38
Columbus — Sawmill Rd.	Dublin, OH		(4	)		577		460		28		74		189		356		651		649		384		1,684		(351	)		10/8/2010		1990		30
Columbus — Tuttle	Dublin, OH		(4	)		863		3,396		50		89		446		750		952		3,842		800		5,594		(746	)		10/8/2010		1998		40
Dayton — Fairborn	Fairborn, OH		(4	)		757		2,848		34		99		144		469		856		2,992		503		4,351		(907	)		10/8/2010		1997		27
Cincinnati — Fairfield	Fairfield, OH		(4	)		459		1,293		28		158		190		303		617		1,483		331		2,431		(487	)		10/8/2010		1989		29
Findlay — Tiffin Avenue	Findlay, OH					671		2,596		77		91		201		326		762		2,797		403		3,962		(696	)		10/8/2010		1999		43
Toledo — Holland	Holland, OH		(4	)		1,002		2,986		45		58		150		290		1,060		3,136		335		4,531		(661	)		10/8/2010		1997		37
Toledo — Maumee	Maumee, OH		(4	)		912		740		34		76		102		316		988		842		350		2,180		(366	)		10/8/2010		1997		27

169

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015																Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements			FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Cleveland — Middleburg Heights	Middleburg Heights, OH		(4	)		980		727		33		58		121		705		1,038		848			738		2,624		(473	)		10/8/2010		1997		27
Cleveland — Airport — North Olmsted	North Olmsted, OH		(4	)		1,169		909		45		126		127		680		1,295		1,036			725		3,056		(546	)		10/8/2010		1998		38
Cleveland — Great Northern Mall	North Olmsted, OH		(4	)		1,079		563		41		72		168		689		1,151		731			730		2,612		(438	)		10/8/2010		1997		27
Cleveland — Beachwood — Orange Place — South	Orange, OH		(4	)		1,619		—		76		78		631		692		1,697		631			768		3,096		(420	)		10/8/2010		2002		(6	)
Cleveland — Beachwood — Orange Place — North	Orange, OH		(4	)		1,288		2,514		59		97		609		1,122		1,385		3,123			1,181		5,689		(789	)		10/8/2010		1999		39
Cincinnati — Springdale —I-275	Springdale, OH		(4	)		852		1,843		45		56		203		401		908		2,046			446		3,400		(638	)		10/8/2010		1996		31
Cleveland — Westlake	Westlake, OH		(4	)		1,569		1,329		36		47		164		451		1,616		1,493			487		3,596		(460	)		10/8/2010		1997		40
Oklahoma City — Airport	Oklahoma City, OK		(4	)		1,197		1,835		37		88		514		747		1,285		2,349			784		4,418		(573	)		10/8/2010		1997		37
Oklahoma City — Northwest	Oklahoma City, OK		(4	)		1,252		3,553		47		86		511		952		1,338		4,064			999		6,401		(859	)		10/8/2010		1998		41
Oklahoma City — NW Expressway	Oklahoma City, OK		(4	)		1,152		2,983		43		91		473		886		1,243		3,456			929		5,628		(947	)		10/8/2010		1999		39
Tulsa — Central	Tulsa, OK		(4	)		900		4,798		43		82		257		413		982		5,055			456		6,493		(1,175	)		10/8/2010		1997		32
Tulsa — Midtown	Tulsa, OK		(4	)		807		2,461		35		86		159		415		893		2,620			450		3,963		(794	)		10/8/2010		1997		27
Portland — Beaverton	Beaverton, OR		(4	)		3,210		4,410		50		85		693		956		3,295		5,103			1,006		9,404		(1,673	)		10/8/2010		1997		32
Portland — Beaverton — Eider Court	Beaverton, OR		(4	)		1,856		5,825		44		93		508		747		1,949		6,333			791		9,073		(1,423	)		10/8/2010		1998		38
Portland — Hillsboro	Hillsboro, OR		(4	)		4,174		8,101		63		113		1,130		1,110		4,287		9,231			1,173		14,691		(1,978	)		10/8/2010		1998		40
Portland — Gresham	Portland, OR		(4	)		2,009		2,822		38		94		485		681		2,103		3,307			719		6,129		(931	)		10/8/2010		1998		38
Portland — Tigard	Tigard, OR		(4	)		3,425		4,456		48		75		710		972		3,500		5,166			1,020		9,686		(1,651	)		10/8/2010		1998		33
Philadelphia — Bensalem	Bensalem, PA		(4	)		1,408		6,689		38		83		572		697		1,491		7,261			735		9,487		(1,526	)		10/8/2010		1998		38
Allentown — Bethlehem	Bethlehem, PA		(4	)		1,054		3,922		96		52		399		681		1,106		4,321			777		6,204		(1,099	)		10/8/2010		2003		43
Pittsburgh — Carnegie	Carnegie, PA		(4	)		697		6,689		41		113		537		711		810		7,226			752		8,788		(1,698	)		10/8/2010		1997		37
Philadelphia — Exton	Exton, PA		(4	)		2,343		2,198		44		127		520		680		2,470		2,718			724		5,912		(1,060	)		10/8/2010		1999		39
Philadelphia — Horsham — Dresher Rd.	Horsham, PA		(4	)		1,691		5,111		49		95		791		967		1,786		5,902			1,016		8,704		(1,774	)		10/8/2010		1998		38
Philadelphia — Horsham — Welsh Rd.	Horsham, PA		(4	)		1,815		2,708		68		69		551		762		1,884		3,259			830		5,973		(1,225	)		10/8/2010		2001		41
Philadelphia — King of Prussia	King of Prussia, PA		(4	)		2,871		7,293		58		153		850		1,000		3,024		8,143			1,058		12,225		(2,123	)		10/8/2010		1998		38
Philadelphia — Malvern — Great Valley	Malvern, PA		(4	)		1,772		2,699		44		65		531		639		1,837		3,230			683		5,750		(1,091	)		10/8/2010		1999		39
Philadelphia — Malvern — Swedesford Rd.	Malvern, PA		(4	)		78		4,384		40		75		699		805		153		5,083			845		6,081		(1,906	)		10/8/2010		1999		39
Pittsburgh — Monroeville	Monroeville, PA		(4	)		1,731		10,487		42		118		485		668		1,849		10,972			710		13,531		(2,217	)		10/8/2010		1999		39
Philadelphia — Airport — Bartram Ave.	Philadelphia, PA		(4	)		1,654		7,808		52		114		494		907		1,768		8,302			959		11,029		(1,807	)		10/8/2010		1998		38
Philadelphia — Airport — Tinicum Blvd.	Philadelphia, PA		(4	)		1,610		9,057		57		95		877		1,086		1,705		9,934			1,143		12,782		(2,138	)		10/8/2010		1998		38
Pittsburgh — Airport	Pittsburgh, PA		(4	)		806		6,583		53		104		522		846		910		7,105			899		8,914		(1,406	)		10/8/2010		1998		39
Wilkes-Barre — Hwy. 315	Plains Township, PA					852		3,670		108		156		211		269		1,008		3,881			377		5,266		(863	)		10/8/2010		2003		43
Philadelphia — Plymouth Meeting	Plymouth Meeting, PA		(4	)		1,111		7,505		120		133		1,500		957		1,244		9,005			1,077		11,326		(2,237	)		10/8/2010		2003		43
Pittsburgh — West Mifflin	West Mifflin, PA		(4	)		885		7,893		95		114		410		595		999		8,303			690		9,992		(1,730	)		10/8/2010		2003		43
Providence — East Providence	East Providence, RI		(4	)		1,632		6,713		70		72		425		676		1,704		7,138			746		9,588		(1,575	)		10/8/2010		2002		42
Providence — Airport	Warwick, RI		(4	)		1,104		2,403		116		87		391		713		1,191		2,794			829		4,814		(884	)		10/8/2010		1997		44
Providence — Warwick	Warwick, RI		(4	)		1,563		4,097		69		107		91		492		1,670		4,188			561		6,419		(944	)		10/8/2010		2001		41
Providence — West Warwick	West Warwick, RI		(4	)		1,245		5,104		66		74		135		487		1,319		5,239			553		7,111		(1,069	)		10/8/2010		2001		41
Columbia — Ft. Jackson	Columbia, SC		(4	)		1,397		4,865		44		53		519		846		1,450		5,384			890		7,724		(1,138	)		10/8/2010		1997		32
Columbia — West — Interstate 126	Columbia, SC		(4	)		896		2,918		43		101		552		866		997		3,470			909		5,376		(846	)		10/8/2010		1996		31
Columbia — West — Stoneridge Dr.	Columbia, SC		(4	)		554		1,437		33		102		138		316		656		1,575	��		349		2,580		(588	)		10/8/2010		1995		25
Greenville — Airport	Greenville, SC		(4	)		727		3,464		40		30		257		859		757		3,721			899		5,377		(788	)		10/8/2010		1996		36

170

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)							Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements			Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Greenville — Haywood Mall	Greenville, SC		(4	)		672		1,082		33		85			104		382		757		1,186		415		2,358		(510	)		10/8/2010		1995		25
Columbia — Northwest/Harbison	Irmo, SC		(4	)		816		3,607		59		87			768		1,003		903		4,375		1,062		6,340		(1,010	)		10/8/2010		1999		44
Charleston — Mt. Pleasant	Mt. Pleasant, SC		(4	)		1,713		5,571		39		74			521		753		1,787		6,092		792		8,671		(1,535	)		10/8/2010		1998		38
Charleston — Northwoods Blvd.	N. Charleston, SC		(4	)		563		2,087		35		84			417		701		647		2,504		736		3,887		(989	)		10/8/2010		1996		26
Charleston — Airport	N. Charleston, SC		(4	)		1,580		5,652		49		75			992		1,019		1,655		6,644		1,068		9,367		(1,274	)		10/8/2010		1999		39
Charleston — North Charleston	N. Charleston, SC		(4	)		1,124		4,483		46		88			1,063		849		1,212		5,546		895		7,653		(1,686	)		10/8/2010		1996		31
Nashville — Brentwood	Brentwood, TN		(4	)		668		1,588		33		79			580		730		747		2,168		763		3,678		(648	)		10/8/2010		1990		20
Nashville — Brentwood — South	Brentwood, TN		(4	)		1,271		3,746		44		98			676		852		1,369		4,422		896		6,687		(1,086	)		10/8/2010		1996		31
Chattanooga — Airport	Chattanooga, TN		(4	)		1,045		3,840		44		44			451		377		1,089		4,291		421		5,801		(971	)		10/8/2010		1996		31
Nashville — Franklin — Cool Springs	Franklin, TN		(4	)		1,898		3,263		46		83			700		897		1,981		3,963		943		6,887		(1,074	)		10/8/2010		1998		33
Knoxville — Cedar Bluff	Knoxville, TN		(4	)		768		3,224		36		44			278		265		812		3,502		301		4,615		(816	)		10/8/2010		1997		32
Knoxville — West Hills	Knoxville, TN		(4	)		570		1,826		29		47			87		314		617		1,913		343		2,873		(546	)		10/8/2010		1990		30
Memphis — Airport	Memphis, TN		(4	)		329		1,900		66		33			660		1,044		362		2,560		1,110		4,032		(659	)		10/8/2010		1998		38
Memphis — Apple Tree	Memphis, TN		(4	)		1,052		—		29		62			753		743		1,114		753		772		2,639		(286	)		10/8/2010		1990		(6	)
Memphis — Cordova	Memphis, TN		(4	)		736		1,937		34		54			462		530		790		2,399		564		3,753		(714	)		10/8/2010		1996		26
Memphis — Mt. Moriah	Memphis, TN		(4	)		827		1,670		45		156			811		473		983		2,481		518		3,982		(826	)		10/8/2010		1999		39
Memphis — Germantown	Memphis, TN		(4	)		1,445		4,416		60		101			606		1,081		1,546		5,022		1,141		7,709		(1,166	)		10/8/2010		1999		39
Memphis — Germantown West	Memphis, TN		(4	)		849		3,071		42		62			553		789		911		3,624		831		5,366		(913	)		10/8/2010		1999		39
Memphis — Wolfchase Galleria	Memphis, TN		(4	)		1,137		5,177		75		90			456		1,074		1,227		5,633		1,149		8,009		(1,070	)		10/8/2010		1999		41
Nashville — Airport	Nashville, TN		(4	)		1,033		3,649		42		111			647		780		1,144		4,296		822		6,262		(954	)		10/8/2010		1997		32
Nashville — Airport — Elm Hill Pike	Nashville, TN		(4	)		812		1,543		33		267			346		852		1,079		1,889		885		3,853		(626	)		10/8/2010		1993		23
Nashville — Airport — Music City	Nashville, TN		(4	)		2,779		2,379		56		65			580		996		2,844		2,959		1,052		6,855		(905	)		10/8/2010		1997		32
Nashville — Vanderbilt	Nashville, TN		(4	)		1,918		9,993		78		43			643		831		1,961		10,636		909		13,506		(2,075	)		10/8/2010		2002		42
Amarillo — West	Amarillo, TX		(4	)		489		3,478		45		49			470		716		538		3,948		761		5,247		(799	)		10/8/2010		2000		40
Arlington	Arlington, TX		(4	)		1,155		871		43		72			881		888		1,227		1,752		931		3,910		(1,293	)		10/8/2010		1995		30
Arlington — Six Flags	Arlington, TX		(4	)		814		4,330		57		122			776		1,253		936		5,106		1,310		7,352		(1,481	)		10/8/2010		1997		27
Austin — Round Rock — South	Austin, TX		(4	)		676		3,755		96		65			570		745		741		4,325		841		5,907		(1,297	)		10/8/2010		2003		43
Austin — Arboretum — Capital of Texas Hwy.	Austin, TX		(4	)		734		4,455		43		75			615		693		809		5,070		736		6,615		(1,283	)		10/8/2010		1999		39
Austin — Arboretum — North	Austin, TX		(4	)		1,080		5,322		56		45			662		1,273		1,125		5,984		1,329		8,438		(1,522	)		10/8/2010		1998		40
Austin — Arboretum — South	Austin, TX		(4	)		1,059		2,857		44		89			817		1,132		1,148		3,674		1,176		5,998		(1,543	)		10/8/2010		1995		30
Austin — Downtown — 6th St.	Austin, TX		(4	)		1,915		12,925		50		79			584		879		1,994		13,509		929		16,432		(2,536	)		10/8/2010		2000		40
Austin — Downtown — Town Lake	Austin, TX		(4	)		3,043		11,933		58		64			841		1,188		3,107		12,774		1,246		17,127		(2,697	)		10/8/2010		1998		38
Austin — Metro	Austin, TX		(4	)		677		1,768		53		64			81		1,120		741		1,849		1,173		3,763		(576	)		10/8/2010		1998		41
Austin — North Central	Austin, TX		(4	)		1,711		—		58		101			503		1,463		1,812		503		1,521		3,836		(643	)		10/8/2010		1998		(6	)
Austin — Northwest — Lakeline Mall	Austin, TX		(4	)		601		2,842		75		79			449		789		680		3,291		864		4,835		(1,205	)		10/8/2010		2002		42
Austin — Northwest — Research Park	Austin, TX		(4	)		1,028		5,422		59		144			1,161		1,323		1,172		6,583		1,382		9,137		(1,761	)		10/8/2010		1998		41
Austin — Round Rock — North	Austin, TX		(4	)		604		3,676		50		164			727		917		768		4,403		967		6,138		(1,124	)		10/8/2010		1998		28
Austin — Southwest	Austin, TX		(4	)		4,628		3,811		84		54			579		830		4,682		4,390		914		9,986		(1,376	)		10/8/2010		2002		42
Dallas — Bedford	Bedford, TX		(4	)		540		2,600		53		127			96		657		667		2,696		710		4,073		(660	)		10/8/2010		1998		41
Corpus Christi — Staples	Corpus Christi, TX		(4	)		1,246		5,337		47		91			149		472		1,337		5,486		519		7,342		(1,150	)		10/8/2010		1998		38
Dallas — Coit Road	Dallas, TX		(4	)		555		1,430		42		125			286		772		680		1,716		814		3,210		(659	)		10/8/2010		1994		29
Dallas — Frankford Road	Dallas, TX		(4	)		891		1,301		131		79			1,158		1,152		970		2,459		1,283		4,712		(1,000	)		10/8/2010		2002		42
Dallas — Greenville Avenue	Dallas, TX		(4	)		581		3,125		42		81			200		468		662		3,325		510		4,497		(825	)		10/8/2010		1998		38
Dallas — Market Center	Dallas, TX		(4	)		748		4,625		71		77			416		820		825		5,041		891		6,757		(916	)		10/8/2010		1997		39
Dallas — Vantage Point Dr.	Dallas, TX		(4	)		581		3,317		50		117			253		547		698		3,570		597		4,865		(975	)		10/8/2010		1997		35
El Paso — Airport	El Paso, TX		(4	)		951		6,206		55		68			366		491		1,019		6,572		546		8,137		(1,441	)		10/8/2010		1997		32
El Paso — West	El Paso, TX		(4	)		918		3,271		34		98			270		462		1,016		3,541		496		5,053		(964	)		10/8/2010		1997		27
Dallas — Farmers Branch	Farmers Branch, TX		(4	)		511		1,451		38		55			302		841		566		1,753		879		3,198		(557	)		10/8/2010		1998		28
Fort Worth — City View	Fort Worth, TX		(4	)		724		2,888		43		76			572		844		800		3,460		887		5,147		(936	)		10/8/2010		1999		39
Fort Worth — Fossil Creek	Fort Worth, TX		(4	)		695		3,944		50		(3	)		473		740		692		4,417		790		5,899		(842	)		10/8/2010		1998		40
Fort Worth — Medical Center	Fort Worth, TX		(4	)		1,811		3,954		39		48			486		743		1,859		4,440		782		7,081		(1,124	)		10/8/2010		1996		31
Fort Worth — Southwest	Fort Worth, TX		(4	)		1,102		3,734		46		65			388		668		1,167		4,122		714		6,003		(770	)		10/8/2010		1998		40
Houston — Galleria — Uptown	Houston, TX		(4	)		890		9,696		66		70			900		996		960		10,596		1,062		12,618		(2,271	)		10/8/2010		1998		38

171

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)							Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements			Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Houston — Galleria — Westheimer	Houston, TX		(4	)		729		9,020		45		57			613		767		786		9,633		812		11,231		(1,981	)		10/8/2010		1999		39
Houston — Greenspoint	Houston, TX		(4	)		381		840		39		155			463		902		536		1,303		941		2,780		(1,025	)		10/8/2010		1998		28
Houston — Med. Ctr. — Greenway Plaza	Houston, TX		(4	)		603		8,266		46		100			649		787		703		8,915		833		10,451		(1,888	)		10/8/2010		1998		38
Houston — Katy Freeway — Energy Corridor	Houston, TX					2,040		5,507		549		20			697		859		2,060		6,204		1,408		9,672		(656	)		12/31/2013		1998		40
Houston — Katy Frwy — Beltway 8	Houston, TX		(4	)		304		2,701		44		81			587		783		385		3,288		827		4,500		(1,225	)		10/8/2010		1999		39
Houston — Med. Ctr. — NRG Park — Braeswood Blvd.	Houston, TX		(4	)		998		10,111		122		119			934		1,153		1,117		11,045		1,275		13,437		(2,416	)		10/8/2010		1997		38
Houston — Med. Ctr. — NRG Park — Fannin St.	Houston, TX		(4	)		1,311		7,833		53		142			1,053		1,381		1,453		8,886		1,434		11,773		(2,710	)		10/8/2010		1995		30
Houston — Med. Ctr. — NRG Park — Kirby	Houston, TX		(4	)		544		5,470		60		129			510		848		673		5,980		908		7,561		(1,043	)		10/8/2010		1997		39
Houston — NASA — Johnson Space Center	Houston, TX		(4	)		535		4,068		44		122			906		415		657		4,974		459		6,090		(1,162	)		10/8/2010		1998		38
Houston — Northwest	Houston, TX		(4	)		499		4,878		50		56			197		435		555		5,075		485		6,115		(934	)		10/8/2010		1997		39
Houston — Sugar Land	Houston, TX					1,882		5,904		549		7			734		733		1,889		6,638		1,282		9,809		(826	)		12/31/2013		1998		40
Houston — Westchase — Richmond	Houston, TX		(4	)		286		3,074		38		76			597		772		362		3,671		810		4,843		(737	)		10/8/2010		1998		43
Houston — Westchase — Westheimer	Houston, TX		(4	)		646		6,571		43		56			751		1,103		702		7,322		1,146		9,170		(2,351	)		10/8/2010		1997		27
Houston — Willowbrook	Houston, TX		(4	)		836		4,187		48		91			907		1,121		927		5,094		1,169		7,190		(1,802	)		10/8/2010		1995		30
Houston — Willowbrook — HWY 249	Houston, TX		(4	)		329		3,432		38		77			688		729		406		4,120		767		5,293		(904	)		10/8/2010		1998		38
Dallas — DFW Airport N.	Irving, TX		(4	)		698		1,510		130		94			147		861		792		1,657		991		3,440		(755	)		10/8/2010		2003		43
Dallas — Las Colinas — Carnaby St.	Irving, TX		(4	)		1,220		3,061		51		120			177		396		1,340		3,238		447		5,025		(897	)		10/8/2010		1996		31
Dallas — Las Colinas — Green Park Dr.	Irving, TX		(4	)		875		2,338		98		74			644		862		949		2,982		960		4,891		(959	)		10/8/2010		1998		43
Laredo — Del Mar	Laredo, TX		(4	)		513		2,959		63		86			197		383		599		3,156		446		4,201		(803	)		10/8/2010		2001		41
Dallas — Las Colinas — Meadow Creek Dr.	Las Colinas, TX		(4	)		844		3,605		84		89			355		1,069		933		3,960		1,153		6,046		(922	)		10/8/2010		1998		40
Dallas — Lewisville	Lewisville, TX		(4	)		564		1,020		38		82			478		673		646		1,498		711		2,855		(951	)		10/8/2010		1998		38
Lubbock — Southwest	Lubbock, TX		(4	)		571		4,931		76		44			437		703		615		5,368		779		6,762		(1,037	)		10/8/2010		2002		42
Dallas — Plano	Plano, TX		(4	)		735		4,386		90		79			894		1,284		814		5,280		1,374		7,468		(1,287	)		10/8/2010		1999		41
Dallas — Plano Parkway — Medical Center	Plano, TX		(4	)		649		1,999		45		148			381		671		797		2,380		716		3,893		(558	)		10/8/2010		1997		41
Dallas — Plano Parkway	Plano, TX		(4	)		776		3,662		118		47			564		841		823		4,226		959		6,008		(1,008	)		10/8/2010		1996		43
Dallas — Richardson	Richardson, TX		(4	)		1,014		5,535		144		105			986		1,733		1,119		6,521		1,877		9,517		(1,569	)		10/8/2010		2002		42
San Antonio — Airport	San Antonio, TX		(4	)		1,443		4,710		53		94			344		463		1,537		5,054		516		7,107		(1,258	)		10/8/2010		1995		30
San Antonio — Colonnade	San Antonio, TX		(4	)		865		5,060		52		76			369		730		941		5,429		782		7,152		(1,009	)		10/8/2010		1998		40
Houston — The Woodlands	Spring, TX		(4	)		455		5,700		55		69			645		938		524		6,345		993		7,862		(1,941	)		10/8/2010		1998		26
Houston — Stafford	Stafford, TX		(4	)		389		1,774		35		107			176		469		496		1,950		504		2,950		(647	)		10/8/2010		1997		34
Waco — Woodway	Waco, TX		(4	)		553		4,053		47		50			164		407		603		4,217		454		5,274		(894	)		10/8/2010		2001		41
Houston — NASA — Bay Area Blvd.	Webster, TX		(4	)		516		5,301		45		63			324		589		579		5,625		634		6,838		(1,107	)		10/8/2010		1997		40
Salt Lake City — Union Park	Midvale, UT		(4	)		1,236		4,122		47		87			725		1,006		1,323		4,847		1,053		7,223		(1,357	)		10/8/2010		1997		37
Salt Lake City — Sugar House	Salt Lake City, UT		(4	)		2,166		7,029		39		180			637		788		2,346		7,666		827		10,839		(1,802	)		10/8/2010		1998		33
Salt Lake City — Sandy	Sandy, UT		(4	)		977		3,949		45		144			474		841		1,121		4,423		886		6,430		(1,217	)		10/8/2010		1998		38
Salt Lake City — West Valley Center	West Valley, UT		(4	)		1,183		3,592		43		133			457		842		1,316		4,049		885		6,250		(1,139	)		10/8/2010		1997		37
Washington, D.C. — Alexandria — Landmark	Alexandria, VA		(4	)		3,627		10,696		44		115			535		757		3,742		11,231		801		15,774		(2,177	)		10/8/2010		1999		39
Washington, DC — Alexandria — Eisenhower Ave.	Alexandria, VA		(4	)		5,147		14,424		60		78			679		979		5,225		15,103		1,039		21,367		(3,211	)		10/8/2010		1999		39
Washington, D.C. — Centreville — Manassas	Centreville, VA		(4	)		1,542		4,922		105		76			494		695		1,618		5,416		800		7,834		(1,416	)		10/8/2010		2004		44
Washington, D.C. — Chantilly	Chantilly, VA		(4	)		2,655		3,015		511		137			890		598		2,792		3,905		1,109		7,806		(959	)		12/13/2012		1998		22
Washington, D.C. — Chantilly — Airport	Chantilly, VA		(4	)		1,402		3,390		40		(6	)		582		702		1,396		3,972		742		6,110		(1,295	)		10/8/2010		1998		38

172

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)						Gross Amount Carried at Close of Period December 31, 2015															Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Land and Improvements		Building and Improvements		FF&E		Total (2)		Accumulated Depreciation			Date Acquired		Date of Construction
Washington, D.C. — Chantilly — Dulles South	Chantilly, VA		(4	)		1,166		5,159		46		92		485		683		1,258		5,644		729		7,631		(1,494	)		10/8/2010		2000		40
Chesapeake — Churchland Blvd.	Chesapeake, VA		(4	)		647		2,762		57		40		93		386		687		2,855		443		3,985		(714	)		10/8/2010		2001		42
Chesapeake — Crossways Blvd.	Chesapeake, VA		(4	)		1,171		4,773		47		68		667		976		1,239		5,440		1,023		7,702		(1,304	)		10/8/2010		1996		32
Chesapeake — Greenbrier Circle	Chesapeake, VA		(4	)		807		5,349		109		55		344		747		862		5,693		856		7,411		(1,034	)		10/8/2010		2005		44
Washington, D.C. — Fairfax	Fairfax, VA		(4	)		1,799		3,734		49		90		725		711		1,889		4,459		760		7,108		(1,368	)		10/8/2010		1999		39
Washington, D.C. — Fairfax — Fair Oaks Mall	Fairfax, VA		(4	)		936		5,713		61		42		470		701		978		6,183		762		7,923		(1,536	)		10/8/2010		2000		40
Washington, D.C. — Fairfax — Fair Oaks	Fairfax, VA		(4	)		4,167		4,053		693		216		670		421		4,383		4,723		1,114		10,220		(1,400	)		12/13/2012		1998		26
Washington, D.C. — Falls Church — Merrifield	Fairfax, VA		(4	)		4,389		6,653		910		246		718		306		4,635		7,371		1,216		13,222		(1,555	)		12/13/2012		1998		33
Richmond — Innsbrook	Glen Allen, VA		(4	)		1,069		1,991		45		55		455		850		1,124		2,446		895		4,465		(703	)		10/8/2010		1997		27
Richmond — West End — I-64	Glen Allen, VA		(4	)		1,999		2,496		501		126		556		632		2,125		3,052		1,133		6,310		(873	)		12/13/2012		1997		19
Hampton — Coliseum	Hampton, VA		(4	)		1,049		2,120		97		85		414		847		1,134		2,534		944		4,612		(850	)		10/8/2010		2003		43
Washington, D.C. — Herndon — Dulles	Herndon, VA		(4	)		1,159		5,808		150		43		266		688		1,202		6,074		838		8,114		(1,334	)		10/8/2010		2005		45
Lynchburg — University Blvd.	Lynchburg, VA		(4	)		1,259		4,899		94		65		380		811		1,324		5,279		905		7,508		(1,176	)		10/8/2010		2003		43
Newport News — I-64 — Jefferson Avenue	Newport News, VA		(4	)		982		2,655		34		60		304		793		1,042		2,959		827		4,828		(827	)		10/8/2010		1997		27
Newport News — Oyster Point	Newport News, VA		(4	)		688		2,950		44		68		313		595		756		3,263		639		4,658		(866	)		10/8/2010		1996		32
Washington, D.C. — Reston	Reston, VA		(4	)		5,766		7,250		795		161		706		410		5,927		7,956		1,205		15,088		(1,556	)		12/13/2012		1998		34
North Chesterfield — Arboretum	Richmond, VA		(4	)		1,368		3,745		45		32		389		729		1,400		4,134		774		6,308		(1,047	)		10/8/2010		1998		38
Richmond — W. Broad Street — Glenside — North	Richmond, VA		(4	)		1,008		4,037		55		54		131		418		1,062		4,168		473		5,703		(854	)		10/8/2010		1999		40
Richmond — W. Broad Street — Glenside — South	Richmond, VA		(4	)		660		1,677		39		84		1,247		513		744		2,924		552		4,220		(1,008	)		10/8/2010		1997		32
Roanoke — Airport	Roanoke, VA		(4	)		844		1,949		35		30		242		362		874		2,191		397		3,462		(613	)		10/8/2010		1998		34
Washington, D.C. — Springfield	Springfield, VA		(4	)		3,417		15,207		134		93		453		752		3,510		15,660		886		20,056		(2,865	)		10/8/2010		2004		44
Washington, D.C. — Sterling	Sterling, VA		(4	)		1,375		5,167		39		92		462		686		1,467		5,629		725		7,821		(1,320	)		10/8/2010		1998		38
Washington, DC — Sterling — Dulles	Sterling, VA		(4	)		4,709		2,618		707		183		681		520		4,892		3,299		1,227		9,418		(971	)		12/13/2012		1998		23
Washington, D.C. — Tysons Corner	Vienna, VA		(4	)		3,716		12,425		49		79		609		838		3,795		13,034		887		17,716		(2,733	)		10/8/2010		1999		39
Virginia Beach — Independence Blvd.	Virginia Beach, VA		(4	)		1,769		6,115		43		115		666		915		1,884		6,781		958		9,623		(1,558	)		10/8/2010		1996		31
Seattle — Bellevue — Downtown	Bellevue, WA		(4	)		3,672		9,062		55		71		663		924		3,743		9,725		979		14,447		(2,065	)		10/8/2010		1998		38
Seattle — Bellevue — Factoria	Bellevue, WA		(4	)		2,697		8,912		55		48		1,117		1,049		2,745		10,029		1,104		13,878		(2,358	)		10/8/2010		1997		32
Seattle — Redmond	Bellevue, WA		(4	)		6,206		16,067		71		66		784		1,069		6,272		16,851		1,140		24,263		(3,527	)		10/8/2010		1998		33
Seattle — Bothell — West	Bothell, WA		(4	)		1,236		5,978		64		69		375		586		1,305		6,353		650		8,308		(1,485	)		10/8/2010		2001		41
Seattle — Bothell — Canyon Park	Bothell, WA		(4	)		2,266		7,932		57		91		792		930		2,357		8,724		987		12,068		(2,152	)		10/8/2010		1998		39
Seattle — Everett — North	Everett, WA		(4	)		1,175		6,615		38		51		436		718		1,226		7,051		756		9,033		(1,693	)		10/8/2010		1997		37
Seattle — Everett — Silverlake	Everett, WA		(4	)		4,008		9,000		54		155		624		900		4,163		9,624		954		14,741		(1,868	)		10/8/2010		1999		40
Seattle — Federal Way	Federal Way, WA		(4	)		761		4,918		38		78		516		663		839		5,434		701		6,974		(1,439	)		10/8/2010		1999		39
Tacoma — Fife	Fife, WA		(4	)		814		4,397		38		69		546		718		883		4,943		756		6,582		(1,382	)		10/8/2010		1997		37
Seattle — Kent	Kent, WA		(4	)		923		3,724		43		58		623		842		981		4,347		885		6,213		(1,205	)		10/8/2010		1998		38
Seattle — Lynnwood	Lynnwood, WA		(4	)		1,829		5,408		41		54		572		780		1,883		5,980		821		8,684		(1,439	)		10/8/2010		1998		38
Seattle — Mukilteo	Mukilteo, WA		(4	)		1,894		8,893		84		48		275		556		1,942		9,168		640		11,750		(1,821	)		10/8/2010		2002		42
Seattle — Renton	Renton, WA		(4	)		1,714		5,924		62		71		613		1,173		1,785		6,537		1,235		9,557		(1,640	)		10/8/2010		1998		39
Seattle — Northgate	Seattle, WA		(4	)		1,214		8,655		86		69		526		812		1,283		9,181		898		11,362		(2,046	)		10/8/2010		2002		42
Tacoma — South	Tacoma, WA		(4	)		1,162		6,871		40		129		502		792		1,291		7,373		832		9,496		(1,579	)		10/8/2010		1998		40
Seattle — Southcenter	Tukwila, WA		(4	)		1,005		4,129		35		78		1,499		734		1,083		5,628		769		7,480		(1,409	)		10/8/2010		1998		33
Seattle — Tukwila	Tukwila, WA		(4	)		1,056		4,724		38		49		514		596		1,105		5,238		634		6,977		(1,441	)		10/8/2010		1997		32
Olympia — Tumwater	Tumwater, WA		(4	)		1,428		5,495		70		79		410		769		1,507		5,905		839		8,251		(1,477	)		10/8/2010		2001		41
Portland — Vancouver	Vancouver, WA		(4	)		1,122		5,671		42		69		533		861		1,191		6,204		903		8,298		(1,596	)		10/8/2010		1997		37
Appleton — Fox Cities	Appleton, WI		(4	)		1,129		3,042		39		133		180		610		1,262		3,222		649		5,133		(804	)		10/8/2010		1997		37
Milwaukee — Brookfield	Brookfield, WI		(4	)		2,579		5,647		49		53		758		981		2,632		6,405		1,030		10,067		(1,259	)		10/8/2010		1998		38

173

Extended Stay America, Inc. and Subsidiaries and ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2015 (continued)

(dollars in thousands)

					Initial Cost						Cost Capitalized Subsequent to Acquisition(1)								Gross Amount Carried at Close of Period December 31, 2015																		Depreciable Lives (Years)(3)
Description	Location	Encumbrances			Land and Improvements		Building and Improvements		FF&E		Land and Improvements			Building and Improvements			FF&E		Land and Improvements			Building and Improvements			FF&E		Total (2)			Accumulated Depreciation			Date Acquired		Date of Construction
Madison — Junction Court	Madison, WI		(4	)		1,197		2,790		39		57			489			703		1,254			3,279			742		5,275			(686	)		10/8/2010		1998		38
Madison — Old Sauk Rd.	Madison, WI		(4	)		1,332		2,506		46		145			398			691		1,477			2,904			737		5,118			(664	)		10/8/2010		1998		39
Milwaukee — Waukesha	Waukesha, WI		(4	)		1,311		3,215		44		76			260			630		1,387			3,475			674		5,536			(833	)		10/8/2010		1997		37
Milwaukee — Wauwatosa	Wauwatosa, WI		(4	)		1,732		5,151		44		110			511			985		1,842			5,662			1,029		8,533			(1,162	)		10/8/2010		1997		41
Land Available for Development	Bloomington, MN					1,821		—		—		(146	)		—			—		1,675			—			—		1,675			—			10/8/2010
ESH Hospitality, Inc. and Subsidiaries, Investment In Real Estate					$	1,241,238	$	2,567,787	$	45,985	$	58,133		$	301,156		$	471,641	$	1,299,371		$	2,868,943		$	517,626	$	4,685,940		$	(765,034	)
Canada Operating Lessee	Canada		—			—		—		544		104			13			4,447		104			13			4,991		5,108			(2,206	)		10/8/2010
Impairment on the Operating Lessees (5)	Various		—			—		—		—		(882	)		(9,729	)		—		(882	)		(9,729	)		—		(10,611	)		—
Management Business	Charlotte, NC		—			—		—		—		—			—			22,833		—			—			22,833		22,833			(14,689	)		9/1/2011
Extended Stay America, Inc. and Subsidiaries, Investment in Real Estate			—		$	1,241,238	$	2,567,787	$	46,529	$	57,355		$	291,440		$	498,921	$	1,298,593		$	2,859,227		$	545,450	$	4,703,270		$	(781,929	)

(1) Costs capitalized subsequent to acquisition are presented net of disposals, impairment charges and translation of real estate denominated in foreign currency.

(2) The aggregate cost for federal income tax purposes as of December 31, 2015 for Extended Stay America, Inc. and ESH Hospitality, Inc. was $4,730,901 and $4,712,741, respectively.

(3) Depreciable lives are based on the largest asset — hotel building(s); however, a portion of the real estate at each hotel property consists of items with a useful life less than that of the building(s).

(4) Each of these properties serve as collateral for ESH REIT's 2012 Mortgage Loan.

(5) These amounts represent cumulative impairment charges recognized since the IPO. For real estate owned as of December 31, 2015, the total cumulative impairment charges recognized by ESH REIT and the Operating Lessees were $0 and $10,611, respectively.

(6) The majority of the depreciable real estate at this property consists of furniture, fixtures and equipment, which have estimated useful lives of 3 to 10 years.

174

Extended Stay America, Inc. and Subsidiaries and

ESH Hospitality, Inc. and Subsidiaries

Schedule III—Real Estate and Accumulated Depreciation

(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, 2015, 2014 and 2013 were as follows:

	Year Ended December 31, 2015		Year Ended December 31, 2014		Year Ended December 31, 2013
Balance, beginning of the period	$	4,709,962	$	4,566,688	$	4,385,964
Additions during period:
Capital Expenditures		212,767		167,910		180,157
Acquisitions		—		—		16,429
Deductions during period:
Dispositions and other		210,448		22,336		12,532
Impairment		9,011		2,300		3,330
Balance, end of period	$	4,703,270	$	4,709,962	$	4,566,688

The Company’s changes in accumulated depreciation for the years ended December 31, 2015, 2014 and 2013 were as follows:

	Year Ended December 31, 2015		Year Ended December 31, 2014		Year Ended December 31, 2013
Balance, beginning of the period	$	622,514	$	439,371	$	275,342
Additions during period:
Depreciation		202,531		185,833		166,679
Deductions during period:
Dispositions and other		43,116		2,690		2,650
Balance, end of period	$	781,929	$	622,514	$	439,371

ESH REIT’s changes in investment in real estate for the years ended December 31, 2015, 2014 and 2013 were as follows:

	Year Ended December 31, 2015		Year Ended December 31, 2014		Year Ended December 31, 2013
Balance, beginning of the period	$	4,686,608	$	4,546,418	$	4,385,964
Additions during period:
Capital Expenditures		207,642		162,131		179,104
Acquisitions		—		—		16,429
Deductions during period:
Dispositions and other		208,310		21,941		31,749
Impairment		—		—		3,330
Balance, end of period	$	4,685,940	$	4,686,608	$	4,546,418

ESH REIT’s changes in accumulated depreciation for the years ended December 31, 2015, 2014 and 2013 were as follows:

	Year Ended December 31, 2015		Year Ended December 31, 2014		Year Ended December 31, 2013
Balance, beginning of the period	$	606,960	$	426,479	$	275,342
Additions during period:
Depreciation		199,044		183,033		165,998
Deductions during period:
Dispositions and other		40,970		2,552		14,861
Balance, end of period	$	765,034	$	606,960	$	426,479

(concluded)

175

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

None.

Item 9A. Controls and Procedures

Controls and Procedures (Extended Stay America, Inc.)

Disclosure Controls and Procedures

As of December 31, 2015, Extended Stay America, Inc. reviewed, under the direction of the Chief Executive Officer and Chief Financial Officer, the disclosure controls and procedures of Extended Stay America, Inc., 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 Extended Stay America, Inc. concluded that the disclosure controls and procedures of Extended Stay America, Inc. were effective to ensure that information required to be disclosed in the reports that Extended Stay America, Inc. 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 Extended Stay America, Inc., including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in Extended Stay America, Inc.’s internal control over financial reporting that occurred during the most recent fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, Extended Stay America, Inc.’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The management of Extended Stay America, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). The management of Extended Stay America, Inc., under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an assessment of the effectiveness of its internal control over financial reporting for Extended Stay America, Inc. as of December 31, 2015. The assessment was performed using the criteria for effective internal control reflected in theInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the assessment of the system of internal control for Extended Stay America, Inc., the management of Extended Stay America, Inc. believes that as of December 31, 2015, internal control over financial reporting of Extended Stay America, Inc. was effective.

176

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 internal control over financial reporting of Extended Stay America, Inc. and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated February 23, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding the Company’s retrospective adoption of an accounting standards update regarding the presentation of debt issuance costs.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 23, 2016

177

Controls and Procedures (ESH Hospitality, Inc.)

Disclosure Controls and Procedures

As of December 31, 2015, ESH Hospitality, Inc. reviewed, under the direction of the Chief Executive Officer and Chief Financial Officer, the disclosure controls and procedures of ESH Hospitality, Inc., 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 ESH Hospitality, Inc. concluded that the disclosure controls and procedures of ESH Hospitality, Inc. were effective to ensure that information required to be disclosed in the reports that ESH Hospitality, Inc. 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 ESH Hospitality, Inc., including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in ESH Hospitality, Inc.’s internal control over financial reporting that occurred during the most recent fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, ESH Hospitality, Inc.’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The management of ESH Hospitality, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). The management of ESH Hospitality, Inc., under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an assessment of the effectiveness of its internal control over financial reporting for ESH Hospitality, Inc. as of December 31, 2015. The assessment was performed using the criteria for effective internal control reflected in theInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the assessment of the system of internal control for ESH Hospitality, Inc., the management of ESH Hospitality, Inc. believes that as of December 31, 2015, internal control over financial reporting of ESH Hospitality, Inc. was effective.

178

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 internal control over financial reporting of ESH Hospitality, Inc. and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated February 23, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding the Company’s retrospective adoption of an accounting standards update regarding the presentation of debt issuance costs.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 23, 2016

179

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 Holdings Inc., and Travelport Limited, which may be considered the Company’s affiliates.

On December 10, 2015, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized a combined Paired Share repurchase program for up to $100 million of the Paired Shares. On February 23, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase of the combined Paired Share repurchase program from $100 million to up to $200 million of Paired Shares. The program expires on December 31, 2016. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice. As of December 31, 2015, we have not repurchased any Paired Shares pursuant to the combined Paired Share repurchase program.

180

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 25, 2016 (“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 Proxy Materials and the Annual Meeting” 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 “Executive Compensation—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.

181

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2015 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 (a)			Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) (c)
Equity compensation plans approved by security holders		1,333,494	(1)		—		6,050,035	(2)
Equity compensation plans not approved by security holders		—			—		—
Total		1,333,494	(1)		—		6,050,035	(2)

(1) Includes 1,323,349 Paired Shares underlying restricted stock unit awards made under the amended and restated Extended Stay America, Inc. Long-Term Incentive Plan, assuming, as applicable, 100% vesting based on achievement of performance conditions, and 10,145 Paired Shares underlying time-vesting restricted stock unit awards made under the amended and restated ESH Hospitality, Inc. Long-Term Incentive Plan.

(2) This number represents the aggregate number of securities available for future issuance under both the amended and restated Extended Stay America, Inc. Long-Term Incentive Plan and the amended and restated ESH Hospitality, Inc. Long-Term Incentive Plan.

Item 13. Certain Relationships and Related Transactions, 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 headings “Independent Registered Public Accounting Firm’s Fees and Services” in our Proxy Statements, which information is incorporated by reference herein.

182

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, 2015” included in Item 8 of this combined annual report on Form 10-K.

(a) (3) List of Exhibits

Exhibit Number	Description
2.1	Purchase and Sale Agreement, by and between ESA P Portfolio L.L.C., ESH/TN Properties L.L.C and ESH Strategies Branding LLC, collectively, as Seller, and DW Crossland Owner LLC, as Buyer, dated as of September 18, 2015 (filed as Exhibit 2.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed September 21, 2015, 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).
4.2	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).
4.3	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).
4.4	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).
4.4.1	Joinder to Registration Rights Agreement, by and among Extended Stay America, Inc. and ESH Hospitality, Inc. (filed as Exhibit 4.1 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed October 27, 2015, and incorporated by reference herein).

183

Exhibit Number	Description
4.5	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).
4.6	Indenture, dated May 15, 2015, among ESH Hospitality, Inc., the Borrower, Certain Subsidiaries of ESH Hospitality, Inc., as Subsidiary Guarantors, and Deutsche Bank Trust Company Americas, as Trustee (filed as Exhibit 4.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed May 18, 2015, and incorporated herein by reference).
4.7	Form of 5.25% Senior Notes due 2025 (included as part of Exhibit 4.6 above).
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 onForm 8-K (File No. 001-36190) filed November 18, 2013, and incorporated herein by reference).
10.1.1	First Amendment to Management Agreement, between ESA P Portfolio Operating Lessee LLC and ESA Management, LLC, dated July 28, 2014 (filed as Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed November 7, 2014, and incorporated herein by reference).
10.1.2*	Agreement Regarding Management Agreement, between ESA P Portfolio Operating Lessee LLC and ESA Management, LLC, dated December 8, 2015.
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 ULC and ESA Management, 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 (filed as Exhibit 10.4 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed March 20, 2014, and incorporated herein by reference).
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).
10.5.3	Third Amendment to Trademark License Agreement, dated as of July 28, 2014, by and between ESH Strategies Branding LLC and ESA P Portfolio Operating Lessee Inc. (filed as Exhibit 10.2 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed November 7, 2014, and incorporated herein by reference).
10.5.4*	Fourth Amendment to Trademark License Agreement, dated as of December 8, 2015, by and between ESH Strategies Branding LLC and ESA P Portfolio Operating Lessee Inc.

184

Exhibit Number	Description
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 (filed as Exhibit 10.7 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed March 20, 2014, and incorporated herein by reference).
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).
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 L.L.C., 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 L.L.C., 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

185

Exhibit Number	Description
	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).
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†	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).
10.15.1†	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).
10.16†	Amended and Restated Employment Agreement by and between ESA Management, LLC and Jonathan Halkyard entered into as of December 16, 2014 (filed as Exhibit 10.3 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed December 17, 2014, and incorporated herein by reference).
10.17†	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).
10.17.1†	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).
10.17.2†	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).
10.17.3†	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).
10.17.4†	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).

186

Exhibit Number	Description
10.18†	Amended and Restated Extended Stay America, Inc. Long-Term Incentive Plan (filed as Annex A to Extended Stay America, Inc.’s Definitive Proxy Statement on Schedule 14A (File No. 001-36190) filed April 21, 2015, and incorporated herein by reference).
10.19†	Amended and Restated ESH Hospitality, Inc. Long-Term Incentive Plan (filed as Annex A to ESH Hospitality, Inc.’s Definitive Proxy Statement on Schedule 14A (File No. 001-36190) filed April 21, 2015, and incorporated herein by reference).
10.20	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).
10.20.1	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 10.23.1 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.20.2	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 10.23.2 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.20.3	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 10.23.3 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.20.4	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 10.23.4 to the Registrants’ Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.20.5	Fifth Amendment to Lease Agreement, dated as of November 11, 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 LLC, as Tenant (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).
10.20.6	Sixth Amendment to Lease Agreement, dated as of July 28, 2014, 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 (filed as Exhibit 10.3 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed November 7, 2014, and incorporated herein by reference).
10.20.7*	Seventh Amendment to Lease Agreement, dated as of December 8, 2015, 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.
10.20.8*	Eighth Amendment to Lease Agreement, dated as of February 22, 2016, 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.

187

Exhibit Number	Description
10.21	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).
10.21.1	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).
10.21.2	Second Amendment to Lease Agreement, dated as of November 11, 2013, 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 (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).
10.21.3*	Third Amendment to Lease Agreement, dated as of February 22, 2016, 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.
10.22	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).
10.22.1	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).
10.22.2*	Second Amendment to Lease Agreement, dated as of February 22, 2016, by and between ESA UD Properties L.L.C., as Landlord, and ESA 2007 Operating Lessee Inc., as Tenant.
10.23	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 (filed as Exhibit 10.7 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed March 20, 2014, and incorporated herein by reference).
10.24	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).
10.25	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).
10.26	Credit Agreement among Extended Stay America, Inc., as Borrower, The Several Lenders from Time to Time Parties Thereto, 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).

188

Exhibit Number	Description
10.26.1	First Amendment to Credit Agreement, dated as of June 23, 2014, among Extended Stay America, Inc., the Borrower, The Lenders Signatory Thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.27.1 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed February 26, 2015, and incorporated herein by reference).
10.26.2	Second Amendment to Credit Agreement, dated as of April 15, 2015, among Extended Stay America, Inc., the Borrower, The Lenders Signatory Thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed July 30, 2015, and incorporated herein by reference).
10.27	Credit Agreement among ESH Hospitality, Inc., as Borrower, The Several Lenders from Time to Time Parties Thereto, 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).
10.27.1	First Amendment to Credit Agreement, dated as of June 23, 2014, among ESH Hospitality, Inc., the Borrower, The Lenders Signatory Thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.28.1 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed February 26, 2015, and incorporated herein by reference).
10.27.2	Second Amendment to Credit Agreement, dated as of April 15, 2015, among ESH Hospitality, Inc., the Borrower, The Lenders Signatory Thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.2 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed July 30, 2015, and incorporated herein by reference).
10.28†	Extended Stay America Incentive Plan for Executives (as implemented for 2014) (filed as Exhibit 10.29 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed February 26, 2015, and incorporated herein by reference).
10.29†	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 (filed as Exhibit 10.31 to the Registrants’ Annual Report on Form 10-K (File No. 001-36190) filed March 20, 2014, and incorporated herein by reference).
10.30†	Form of Share Distribution Notice (filed as Exhibit 10.32 to the Registrants’ Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-190052), and incorporated herein by reference).
10.31†	Extended Stay America, Inc. Executive Severance Plan, adopted June 19, 2014 (file as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed June 23, 2014, and incorporated herein by reference).
10.32†	Form of Participation Agreement under the Extended Stay America, Inc. Executive Severance Plan (Employees of ESA Management, LLC) (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36190) filed June 23, 2014, and incorporated herein by reference).
10.33	Credit Agreement among ESH Hospitality, Inc., as Borrower, the Several Lenders from Time to Time Parties Thereto, Goldman Sachs Bank USA, Citigroup Global Markets Inc., Deutsche Bank Securities, Inc. and J.P. Morgan Securities LLC, as Syndication Agents, and Goldman Sachs Bank USA, as Administrative Agent, dated as of June 23, 2014 (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed June 27, 2014, and incorporated herein by reference).

189

Exhibit Number	Description
10.34†	Consulting Agreement, dated as of July 21, 2014, between ESA Management, LLC and Peter Crage (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed July 21, 2014, and incorporated herein by reference).
10.35†	Letter Agreement, dated as of December 11, 2014, between Extended Stay America, Inc. and ESH Hospitality, Inc. and John R. Dent (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed December 17, 2014, and incorporated herein by reference).
10.36†	Letter Agreement, dated as of December 9, 2014, between Extended Stay America, Inc. and Tom Bardenett (filed as Exhibit 10.2 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed December 17, 2014, and incorporated herein by reference).
10.37†	Form of Amended and Restated Extended Stay America, Inc. Long-Term Incentive Plan Restricted Stock Unit Agreement (Time-Vesting & Performance-Vesting) (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed May 21, 2015, and incorporated herein by reference).
10.38†	Form of Amended and Restated Extended Stay America, Inc. Long-Term Incentive Plan Restricted Stock Unit Agreement (Time-Vesting) (filed as Exhibit 10.2 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed May 22, 2015, and incorporated herein by reference).
10.39†	Form of Amended and Restated Extended Stay America, Inc. Long-Term Incentive Plan Restricted Stock Unit Agreement (Time-Vesting) for Directors (filed as Exhibit 10.6 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed on July 30, 2015, and incorporated herein by reference).
10.40†	Form of Amended and Restated ESH Hospitality, Inc. Long-Term Incentive Plan Restricted Stock Unit Agreement (Time-Vesting) for Directors (filed as Exhibit 10.8 to the Registrants’ Quarterly Report on Form 10-Q (File No. 001-36190) filed on July 30, 2015, and incorporated herein by reference).
10.41†	Extended Stay America, Inc. Annual Incentive Plan (filed as Annex B to Extended Stay America, Inc.’s Definitive Proxy Statement on Schedule 14A (File No. 001-36190) filed April 21, 2015, and incorporated herein by reference).
10.42†	Letter Agreement by and between Extended Stay America, Inc. and Gerardo Lopez dated July 17, 2015 (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed July 21, 2015, and incorporated herein by reference).
10.43†	Restricted Stock Unit Agreement by and between Extended Stay America, Inc. and Gerardo I. Lopez dated September 3, 2015 (filed as Exhibit 10.1 to the Registrants’ Current Report onForm 8-K (File No. 001-36190) filed September 4, 2015, and incorporated herein by reference).
10.44†	Letter Agreement by and between Extended Stay America, Inc., ESH Hospitality, Inc. and James L. Donald, entered into on August 24, 2015 (filed as Exhibit 10.1 to the Registrants’ Current Report on Form 8-K (File No. 001-36190) filed August 24, 2015, and incorporated herein by reference).
10.45*	Guaranty Agreement, executed as of November 13, 2013, by ESH Hospitality, Inc.
10.46*	Right of Contribution Agreement, dated as of November 11, 2013, among ESH Hospitality, Inc. and Extended Stay America, Inc.
10.47*	Pari Passu Intercreditor Agreement, dated as of June 23, 2014, among ESH Hospitality, Inc., each of the other Grantors (as defined), JPMorgan Chase Bank, N.A., as administrative agent under the Revolving Credit Agreement (as defined), Goldman Sachs Bank USA, as administrative agent under the Term Loan Agreement (as defined), and each Additional Agent from time to time party thereto.

190

Exhibit Number	Description
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.

† Management contract or compensatory plan or arrangement.

191

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/    GERARDO I. LOPEZ
	Gerardo I. Lopez
	Chief Executive Officer

Date: February 23, 2016

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/    GERARDO I. LOPEZ Gerardo I. Lopez	Chief Executive Officer and Director (Principal Executive Officer)	February 23, 2016
/s/    JONATHAN S. HALKYARD Jonathan S. Halkyard	Chief Financial Officer (Principal Financial and Accounting Officer)	February 23, 2016
/s/    DOUGLAS G. GEOGA Douglas G. Geoga	Director	February 23, 2016
/s/    WILLIAM A. KUSSELL William A. Kussell	Director	February 23, 2016
/s/    RICHARD F. WALLMAN Richard F. Wallman	Director	February 23, 2016
/s/    WILLIAM J. STEIN William J. Stein	Director	February 23, 2016
/s/    MICHAEL A. BARR Michael A. Barr	Director	February 23, 2016
/s/    WILLIAM D. RAHM William D. Rahm	Director	February 23, 2016

192

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/    GERARDO I. LOPEZ
	Gerardo I. Lopez
	Chief Executive Officer

Date: February 23, 2016

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/    GERARDO I. LOPEZ Gerardo I. Lopez	Chief Executive Officer and Director (Principal Executive Officer)	February 23, 2016
/s/    JONATHAN S. HALKYARD Jonathan S. Halkyard	Chief Financial Officer (Principal Financial and Accounting Officer)	February 23, 2016
/S/    DOUGLAS G. GEOGA Douglas G. Geoga	Director	February 23, 2016
/s/    RICHARD F. WALLMAN Richard F. Wallman	Director	February 23, 2016
/s/    CHRIS K. DANIELLO Chris K. Daniello	Director	February 23, 2016
/s/    KEVIN W. DINNIE Kevin W. Dinnie	Director	February 23, 2016
/s/    LISA PALMER Lisa Palmer	Director	February 23, 2016
/s/    TY E. WALLACH Ty E. Wallach	Director	February 23, 2016

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