Exhibit 99.1

















Independent Auditors’ Report


To The Members


DP Fee Holding Co., LLC and


DP Lease Holding, LLC





We have audited the accompanying combined financial statements of DP Fee Holding Co., LLC and DP Lease Holding, LLC, which comprise the combined balance sheets as of December 31, 2013 and 2012, and the related combined statements of operations and comprehensive income, members’ equity (deficit) and cash flows for the years ended December 31, 2013 and 2012 and for the period July 29, 2011 to December 31, 2011, and the related notes to the combined financial statements.





Management’s Responsibility for the Financial Statements


Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.





Auditors’ Responsibility


Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.





An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.





We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.





Opinion


In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of DP Fee Holding Co., LLC and DP Lease Holding, LLC as of December 31, 2013 and 2012, and the results of its combined operations and its cash flows for the years ended December 31, 2013 and 2012 and the period July 29, 2011 to December 31, 2011, in accordance with accounting principles generally accepted in the United States of America.





/s/ PKF O’Connor Davies


A Division of O’Connor Davies, LLP





New York, New York


February 26, 2014





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DP Fee Holding Co., LLC and


DP Lease Holding, LLC





Combined Balance Sheets





December 3120132012ASSETSCurrent AssetsCash and cash equivalents$18,375,767$39,880,893Cash in escrow11,217,99412,216,435Accounts receivable, net of allowance of $65,063 in 2013 and $62,408  in 20129,779,7639,660,841Inventory436,389362,925Prepaid expenses8,659,9188,356,165Total Current Assets48,469,83170,477,259Property and equipment (net)420,678,462408,348,954Deferred expenses (net)7,241,1427,041,312Other assets437,712162,053Total Assets$476,827,147$486,029,578LIABILITIES AND MEMBERS' EQUITY (DEFICIT)Current LiabilitiesAccounts payable$4,486,552$3,642,853Taxes payable1,683,4552,613,417Accrued expenses8,335,1214,236,987Security and deposits2,632,7122,038,718Other liabilities606,441501,857Total Current Liabilities17,744,28113,033,832Long-term debt460,000,000410,000,000Long-term debt-related party50,000,00050,000,000Total Liabilities527,744,281473,033,832Members' equity (deficit)(50,917,134)12,995,746Total Liabilities and Members' Equity (Deficit)$476,827,147$486,029,578See notes to combined financial statements

















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DP Fee Holding Co., LLC and


DP Lease Holding, LLC





Combined Statements of Operations and Comprehensive Income








For the Year Ended December 31For the Period July 29 to December 31201320122011REVENUESRooms$153,316,360$155,412,003$74,143,205Food and beverage14,091,73513,684,5645,366,389Telephone1,474,8981,516,623677,186Other income4,084,9434,104,8001,937,524Total Revenues172,967,936174,717,99082,124,304EXPENSESRooms46,368,96345,218,51719,215,710Food and beverage13,587,32912,826,0695,028,374Telephone870,645772,062305,314Administrative and general21,942,14020,612,2419,443,332Advertising and marketing10,429,8139,995,5624,219,840Property operations and maintenance6,336,1035,921,3822,425,805Utilities5,219,9625,451,4492,105,255Pre-opening expenses280,43679,06982,431Other expenses129,64598,082—Rent expense71,42576,68031,160Real estate taxes15,022,03513,808,2675,941,690Interest expense23,043,04926,923,20911,592,015Insurance836,364704,235355,633Depreciation17,007,48515,907,4396,655,248Loss on disposal of assets——132,082Reorganization costs——8,458,076Total Expenses161,145,394158,394,26375,991,965Net Income11,822,54216,323,7276,132,339OTHER COMPREHENSIVE INCOMEChange in fair value of derivative asset—26,851159,413Comprehensive Income$11,822,542$16,350,578$6,291,752See notes to combined financial statements





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DP Fee Holding Co., LLC and DP Lease Holding, LLC





Combined Statements of Members' Equity (Deficit)


For the Period July 29, 2011 to December 31, 2011 and the


Years Ended December 31, 2013 and 2012





TotalAccumulated Other Comprehensive Income (Loss)Members' Equity (Deficit)Balance at July 29, 2011$(156,597,063)$(186,264)$(156,410,799)Contributions129,254,312—129,254,312Distributions(37,278,923)—(37,278,923)Change in fair value of derivative asset159,413159,413—Net income6,132,339—6,132,339Balance at December 31, 2011(58,329,922)(26,851)(58,303,071)Contributions55,565,747—55,565,747Distributions(590,657)—(590,657)Change in fair value of derivative asset26,85126,851—Net income16,323,727—16,323,727Balance at December 31, 201212,995,746—12,995,746Contributions2,572,859—2,572,859Distributions(78,308,281)—(78,308,281)Net income11,822,542—11,822,542Balance at December 31, 2013$(50,917,134)$—$(50,917,134)See notes to combined financial statements





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DP Fee Holding Co., LLC and


DP Lease Holding, LLC





Combined Statements of Cash Flows


For the Year Ended December 31For the Period July 29 to December 31201320122011CASH FLOWS FROM OPERATING ACTIVITIESNet Income$11,822,542$16,323,727$6,132,339Adjustments to reconcile net income to net cash flows provided by operating activitiesDepreciation17,007,48515,907,4396,655,248Amortization of deferred financing costs1,712,9224,945,3812,297,451Loss on disposal of assets——132,082Changes in Certain Other AccountsCash in escrow998,44120,697,241563,831Accounts receivable(118,922)248,904(278,869)Inventory(73,464)(10,215)(2,939)Prepaid expenses(303,753)(1,042,477)(592,125)Other assets(275,659)29,65955,906Accounts payable843,699(349,994)(3,718,768)Taxes payable(929,962)21,529758,663Accrued expenses4,098,134(13,314,694)1,766,458Security and deposits593,994(46,668)(3,237,820)Other liabilities104,584(74,172)266,268Total Adjustments23,657,49927,011,9334,665,386Net Cash Provided by Operating Activities35,480,04143,335,66010,797,725CASH FLOWS (USED) BY INVESTING ACTIVITIESCapital expenditures(29,336,993)(11,197,314)(7,698,127)CASH FLOWS FROM FINANCING ACTIVITIESPayment of deferred expenses(1,912,752)(7,156,812)(6,365,602)Proceeds from long-term debt50,000,000460,000,000—Payment on long-term debt—(580,979,455)(15,577,472)Contributions2,572,85955,565,747129,254,312Distributions(78,308,281)(590,657)(37,278,923)Net Cash Provided (Used) by Financing Activities(27,648,174)(73,161,177)70,032,315Net Increase (Decrease) in Cash and Cash Equivalents(21,505,126)(41,022,831)73,131,913Cash and cash equivalents, beginning of period39,880,89380,903,7247,771,811Cash and cash equivalents, end of period$18,375,767$39,880,893$80,903,724Supplemental Disclosure of Cash Flow InformationCash paid during the period for interest$20,308,844$34,216,010$6,799,362





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Supplemental Disclosure of Non-Cash Flow InformationThe Company recorded a decrease in assets related to an interest rate cap agreement$—$26,851$159,413In connection with its acquisition of a 49% interest in the Company, the newly admitted member funded a $40,175,941 distribution to the existing member during 2011.See notes to combined financial statements









































































































































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1.  Organization and Basis of Presentation





The accompanying combined financial statements and notes thereto include the assets, liabilities and operations of DP Fee Holding Co., LLC (“Fee Holding”) and DP Lease Holding, LLC (“Lease Holding”) and their wholly-owned subsidiaries (collectively the “Company”).  The statements have been combined to reflect the ownership and operations of the following hotels (the “Hotels”):


Affinia DumontAffinia GardensAffinia ShelburneAffinia 50The BenjaminAffinia Manhattan





On July 29, 2011, Denihan Ownership Company, LLC (“DOC”), the sole member of Fee Holding, and Cardinals Owner LLC (“Cardinals”) closed on an investment contemplated by a Contribution Agreement dated June 20, 2011 and entered into an Amended and Restated Operating Agreement of Fee Holding (collectively, the “Agreements”), whereby Cardinals was admitted as a new 49 percent member of Fee Holding in exchange for $165.3 million.  Pursuant to the Agreements, DOC was deemed to have contributed net assets worth 51 percent of the common equity of Fee Holding and $84.4 million of preferred capital.  Concurrently, the members formed a new entity, DP Lease Holding, LLC.  Wholly-owned subsidiaries of Fee Holding entered into operating lease agreements with wholly-owned subsidiaries of Lease Holding to lease the defined operations of the above listed Hotels.  Subsequent to the investment transaction, in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) the assets and liabilities of the Company continue to be reported at historical cost.  The Company incurred approximately $8.5 million in costs related to this reorganization.





The preferred capital was a separate non-voting capital account of Fee Holding which earned a preferred return as defined in the agreements, on the unreturned preferred capital balance.  The DOC member may take a loan from the Company up to the amount of unreturned preferred capital or may convert all or a portion of the preferred capital to common capital upon the Company requiring additional capital from its members in order to maintain the 51 percent ownership interest.  After the later of (a) 27 months from July 29, 2011 or (b) the date on which Fee Holding refinances, modifies or extends its then existing credit facility, Fee Holding will distribute, under certain conditions, any unreturned preferred capital to the DOC member at the DOC member’s request.  During the year ended December 31, 2013, the unreturned preferred capital was distributed to the DOC member.





The table below reflects the change in the preferred capital account for the years ended December 31, 2013 and 2012 and the period July 29, 2011 to December 31, 2011:


201320122011Balance, beginning of period$18,779,568$76,613,241$84,420,262Capital call(2,677,874)(57,833,673)(7,807,021)Distribution(16,101,694)——Balance, end of period$—$18,779,568$76,613,241





The Company prepares its financial statements in conformity with US GAAP.  In combination, all significant intercompany accounts and transactions have been eliminated.





2.  Summary of Significant Accounting Policies





Use of Estimates





The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.





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Certain estimates used by management are particularly susceptible to changes, such as the useful lives and recoverability of costs of property and equipment.  Management believes that the estimates used are adequate based on the information currently available.





Significant Concentrations





Certain amounts of the Company's cash is on deposit in one bank which exceeds federally insured limits.  The Company has not experienced any loss on its deposits.





Approximately 72% of the Hotels' workforce employed by the management company at December 31, 2013 and 2012 is covered by collective bargaining agreements which expire on April 20, 2014 and June 30, 2019.





Allowance for Uncollectible Accounts Receivable





The allowance for uncollectible accounts is established through a provision for bad debts charged to expenses.  Accounts receivable are charged against the allowance for uncollectible accounts when management believes the collectability of principal is unlikely.  Recoveries of accounts receivable previously written off are recorded when received.





The allowance is an amount that management believes will be adequate to absorb estimated losses on existing accounts receivable, based on an evaluation of the collectability of accounts receivable and prior bad debt experience. This evaluation also takes into consideration factors such as:  changes in the nature and volume of the accounts receivable, overall accounts receivable quality, review of specific accounts receivable balances, and current economic conditions that may affect the customer’s ability to pay.  While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions.





Revenue Recognition





The Company recognizes rooms, food and beverage, telephone and other operating revenues when services are rendered.  Advance deposits on rooms are recorded as a liability until services are provided to the customers.





Fair Value of Financial Instruments





The estimated fair value of the Company’s cash, accounts receivable, accounts payable and accrued expenses approximate carrying amounts due to the short-term maturities of these instruments.  The carrying value of the long-term debt approximates fair value since the current interest rate approximates market rates.  The carrying value of the related party long term debt is not readily determinable as no similar market exists.





Property and Equipment





Property and equipment is stated at cost.





Depreciation of buildings and improvements and furniture, fixtures and equipment is computed using the straight line method over various estimated useful lives as follows:





Buildings and improvements10 - 40 yearsFurniture, fixtures and equipment3 - 7 years








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At December 31, 2013 and 2012 property and equipment consists of the following:





20132012Land$81,182,501$81,182,501Buildings and improvements387,829,870368,288,967Furniture, fixtures and equipment63,728,14153,932,051Total532,740,512503,403,519Accumulated depreciation(112,062,050)(95,054,565)Net$420,678,462$408,348,954





Cash and Cash Equivalents





The Company considers all instruments with an original maturity of three months or less to be cash equivalents.





Impairment of Long-Lived Assets





The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amounts of the asset to aggregate future net cash flows (undiscounted and without interest) expected to be generated by the asset.  If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value.  No impairment loss has been recognized during the years ended December 31, 2013 and 2012 or the period July 29, 2011 to December 31, 2011.





Inventory





Inventory is valued at the lower of cost (first-in, first-out) or market.





Deferred Expenses





Expenditures incurred in connection with obtaining long-term debt are being amortized using a method which approximates the interest method over the term of the related debt.  $1,712,922, $4,945,381 and $2,297,451 has been charged to interest expense for the years ended December 31, 2013 and 2012 and the period July 29, 2011 to December 31, 2011, respectively.  Accumulated amortization amounted to $1,712,922 at December 31, 2013.  All amounts related to the prior loan (see note 3) have been fully amortized during 2012.





Accounting for Derivative Instruments and Hedging Activities





All derivative instruments are recorded on the balance sheet at fair value. Changes in fair value of derivatives are recorded each period in current earnings or other comprehensive income (loss), depending on whether the derivative is designated as part of a hedge transaction and, if it is, depending on the type of hedge transaction.





For cash-flow hedge transactions in which the Company hedges the variability of cash flows related to a variable-rate asset, liability or a forecasted transaction, changes in fair value of the derivative instrument are reported in other comprehensive income (loss).  The gains and losses on the derivative instrument that are reported in other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are impacted by the variability of cash flows of the hedged item.





Income Taxes





Fee Holding and Lease Holding are limited liability companies, which are not recognized as taxable entities for Federal or State tax purposes.  As such, no provision has been made for income taxes since such taxes, if any, are the responsibility of the ultimate members of Fee Holding and Lease Holding.





The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Management has determined that the Company had no uncertain tax positions that would require recognition or disclosure in the financial statements.





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The Company’s tax returns since 2011 remain open to examination by the respective taxing authorities. There is currently one examination in progress.





Advertising Costs





Advertising costs are expensed as incurred.





Reclassification





Certain 2012 and 2011 amounts have been reclassified to conform to the 2013 presentation.





Subsequent Events





Management of the Company has evaluated significant events subsequent to the balance sheet date through the date the combined financial statements were issued and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the combined financial statements.





3.  Long-Term Debt





On July 9, 2007, the six Hotels were financed with $600 million in debt obligations ($280 million in the form of mortgage debt and $320 million in mezzanine loans).  The mortgage debt was cross collateralized among all of the properties.  The mezzanine portion of the financing was secured by the Company’s ownership interest in the properties and is reflected in the total long­-term debt in the combined balance sheet.





Under the terms of this agreement, the Company was required to fund certain defined escrows.





Annual interest effective August 1, 2009 ranged from LIBOR plus 2.75% to LIBOR plus 3.25%.





On February 1, 2012, the Company exercised the option to extend the loans until February 1, 2013 and purchased an interest rate cap with an aggregate notional amount of $600 million.  The interest rate cap fixed the LIBOR rate at a maximum rate of 2% and had an expiration date of February 1, 2013.





On December 27, 2012, the Company refinanced its existing loans.  The Company was financed with $460 million in debt obligations ($410 million in the form of mortgage debt and $50 million in the form of a member loan).





The $410 million loan bears interest of 3.673% per annum and matures on January 6, 2018. The loan is secured by the property of five Hotels (the Affinia Dumont is excluded).  Under the terms of the agreement, the Company is required to fund the following escrows:





Furniture, fixtures and equipment


Real estate tax


Insurance


Debt service


Deferred Maintenance


Affinia Gardens capital reserve


Excess cash flows





The specified guarantors have guaranteed the completion of specified renovation projects.





The $50 million member loan bears interest at a rate of 9.75% per annum through February 4, 2018.  The interest rate then increases 100 basis points for each successive 30 day period until the maximum interest rate of 13.5% is attained.  The loan matures on the earlier of July 4, 2018, the refinance of mortgage loan or upon sale of the Hotels.  The loan may be prepaid at any time, subject to certain provisions, as defined in the agreement.  Interest expense related to this loan amounted to $4,875,000, $66,781 and $0 for the years ended December 31, 2013 and 2012 and the period July 29, 2011 to December 31, 2011, respectively.





On April 4, 2013, the Affinia Dumont was financed with $50 million in mortgage debt. The loan bears interest at 3.14% per annum and requires interest only payments through the maturity date on May 1, 2018. The loan is secured by the





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Affinia Dumont property. The Affinia Dumont is required to fund the following escrow accounts:





Furniture, fixtures and equipment


Real estate tax


Insurance





The loan is non-recourse to the borrowers with the exception of certain limited obligations of the borrowers arising out of or in connection with certain events or acts, among which is fraud or material misrepresentation.  Further, the loans would become recourse to the guarantors if certain events occur, amongst which is any borrower filing a voluntary bankruptcy petition.





The loan may not be prepaid within the first 36 months. After that, the loan can be paid in full, subject to a prepayment penalty as defined. Beginning on November 1, 2017 the loan can be prepaid without being subject to the prepayment penalty.





4.  Derivative Asset and Other Comprehensive Income





Effective August 1, 2010, the Company entered into an interest rate cap agreement with the intent to manage interest rate exposure on its long-term debt, with an aggregate notional amount of $600,000,000.  This agreement fixed the LIBOR rate at a maximum rate of 2% and had an expiration date of February 1, 2013. The interest rate differentials under such agreements were entered into to minimize the risks associated with financial activities.  The Company was exposed to credit risk in the event of non-performance by these counterparties; however, the Company considered non-performance to be remote.





The Company’s derivative asset had no value as of December 31, 2012 and 2011.  The difference between the carrying value and fair market value of the interest rate cap has been recorded through members’ equity (deficit), as accumulated other comprehensive income as of December 31, 2012 and 2011.





The Company follows a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets.  Level 1 inputs have the highest reliability and are related to assets with unadjusted quoted prices in active markets.  Level 2 inputs relate to assets with other than quoted prices in active markets which may include quoted prices for similar assets or liabilities or other inputs which can be corroborated by observable market data.  Level 3 inputs are unobservable inputs and are used to the extent that observable inputs do not exist.  The derivative asset was valued using level 2 inputs.





5.  Operating Leases





The Company, as lessor under various operating leases with third parties, will receive rents over the next five years and thereafter over the remaining terms of the leases as follows:





2014$2,960,05720152,500,92620162,092,03620171,668,99820181,066,168Thereafter4,485,272Total$14,773,457





Certain leases contain provisions for additional rents and renewal options.





6.  Related Party Transactions





The Company received financing from one of its members (see note 3).





The Company is charged by a related party for laundry and other expenses consisting of accounting, advertising, executive office, human resources, management information, reservation and sales, security and technical services.  Amounts charged to operations for laundry and other services amounted to $1,987,661 and $16,528,599, respectively, for the year





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ended December 31, 2013.  Amounts charged to operations for laundry and other services amounted to $1,865,113 and $15,588,579, respectively, for the year ended December 31, 2012.  Amounts charged to operations for laundry and other services amounted to $807,115 and $6,678,286, respectively, for the period July 29, 2011 to December 31, 2011.  The Company uses a purchasing company, which is related to one of the Company’s members through common ownership.  The purchasing company provides goods to the Company at cost.





At December 31, 2013 and 2012, amounts due from (to) related parties were included in the following balance sheet account:





20132012Accounts payable$(2,838,362)$(2,635,709)





Amounts due (to) related parties are noninterest-bearing and have no specified date of repayment, but are expected to be settled in the normal course of business.





The Company entered into agreements, with an entity related to one of the Company’s members through common ownership, for the management of the day-to-day operations of the Hotels.  The agreements provide for a base management fee calculated at 3% of gross operating revenues, as defined, and an incentive management fee calculated at 15% of defined net operating income.  In addition, the agreements provide for a marketing fee calculated at 1.5% of gross operating revenues, as defined.  For the year ended December 31, 2013, the Company incurred basic management fees of $5,175,677 and marketing fees of $2,587,783.  For the year ended December 31, 2012, the Company incurred basic management fees of $5,223,889 and marketing fees of $2,610,828.  For the period July 29, 2011 to December 31, 2011, the Company incurred basic management fees of $2,456,450 and marketing fees of $1,228,225.  Incentive fees were not incurred.  In addition, the Company also reimburses the management company for all costs incurred in the operation of the Hotels including payroll and payroll related costs.  Certain management company employees who operate the Company’s hotels are represented by the New York Hotel Trades Council and the Hotel Association of New York City, Inc. (the “Union”) and are subject to collective bargaining agreements.  Costs reimbursed to the management company for pension and health benefits paid to the Union amounted to $1,905,266 and $4,913,997, respectively for the year ended December 31, 2013.  For the year ended December 31, 2012, the costs reimbursed for pension and health benefits amounted to $2,121,316 and $5,343,509, respectively.  For the period July 29, 2011 to December 31, 2011, the costs reimbursed for pension and health benefits amounted to $824,829 and $2,082,145, respectively.





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|7. | Litigation




Lawsuits which arose in the normal course of business are pending against the Company.  In the opinion of management the eventual disposition of these legal actions, based upon available insurance coverage and the assessment of the merits of such actions by counsel, will not have a material adverse effect on the financial position of the Company.





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|8. | Commitments




During 2013, the Company entered into various contracts with contractors and other vendors for capital improvements.  At December 31, 2013 the Company had commitments of $34,951,604, of which $29,533,310 had been incurred as of December 31, 2013 and is included in property and equipment in the accompanying combined balance sheet.