FelCor Reports Third Quarter Results

  FelCor Reports Third Quarter Results

             •RevPAR increased 6.2%, exceeding industry average

                  •Asset sale program proceeding as planned

           •Continues to lower cost of debt and extend maturities

Business Wire

IRVING, Texas -- November 01, 2012

FelCor Lodging Trust Incorporated (NYSE: FCH), today reported operating
results for the third quarter ended September30, 2012.

Summary:

  *Revenue per available room (“RevPAR”) for 66 same-store hotels (45 core
    and 21 non-strategic) increased 6.2% for the quarter.
  *Adjusted EBITDA was $53.2million.
  *Adjusted funds from operations ("FFO") per share was $0.08.
  *Net loss was $19.6million.
  *Sold three non-strategic hotels (one in August and two in October) for
    $95.5million. Proceeds were used to repay debt and the remaining
    $38million of accrued preferred dividends on October31. Expect to sell
    one additional non-strategic hotel for gross proceeds of $8.7million. To
    date, we have sold 19 of 39 hotels.
  *Closed five non-crossed 10-year secured loans bearing an average interest
    rate of 4.95%, raising $160.8million. Used a portion of the proceeds to
    repay a $107million mortgage loan (secured by seven properties) at 9.02%.

Third Quarter Operating Results:

RevPAR for 66 same-store hotels was $107.78, a 6.2% increase compared to the
same period in 2011. The increase reflects a 6.9% increase in average daily
rate (“ADR”) to $144.06 and a 50basis point decrease in occupancy to 74.8%.
RevPAR for our core hotels increased 6.6%, while RevPAR at our non-strategic
hotels increased 4.7%. RevPAR at newly-acquired and redeveloped hotels
increased 12.0% during the quarter and 14.3% during the month of September.

Commenting on third quarter results, Richard A. Smith, President and Chief
Executive Officer of FelCor, said, “I am pleased with our results, as our
RevPAR growth exceeded the industry average. Our efforts to remix customer
segments and increase ADR have been successful, and ADR growth exceeded our
expectations. While food and beverage profit was significantly above prior
year, it was below our expectations and impacted our margins. Nonetheless, our
operating results met the low-end of our expectations. Overall, lodging
fundamentals remain strong. Transient demand continues to be solid, and supply
growth is at historically low levels. These tailwinds will bolster U.S. RevPAR
for the next few years.”

Added Mr. Smith, “We have made great progress in repositioning the portfolio
and restructuring the balance sheet. As of today, we will have sold 10
non-strategic hotels this year, including four since the second quarter. Our
asset sale program is ahead of plan and we are currently in discussions with
buyers for an additional six hotels.Our strategy will result in a
high-growth, diversified portfolio that will outperform the industry for the
foreseeable future. We have used the sale proceeds to pay all the accrued
preferred dividends and to support our overall balance sheet restructuring
plan to lower our leverage and cost of capital. During the quarter, we repaid
our lone 2013 debt maturity and refinanced a 2014 debt maturity at a much
higher loan-to-value, while reducing the interest rate significantly.”

Hotel EBITDA was $59.2million, which was 8.4% higher than the same period in
2011. Hotel EBITDA and other same-store metrics reflect 66 same-store hotels.

Same-store Adjusted EBITDA was $51.6million, 9.9% higher than the
$46.9million for the same period in 2011. Adjusted EBITDA (which includes
Adjusted EBITDA for sold hotels prior to sale) was $53.2million, 2.4% higher
than the same period in 2011.

Adjusted FFO was $10.0million, or $0.08 per share, compared to $0.05 per
share for the same period in 2011. Net loss attributable to common
stockholders was $28.7million, or $0.23 per share for the quarter, compared
to a net loss of $32.5million, or $0.26 per share, for the same period in
2011.

EBITDA, Adjusted EBITDA, same-store Adjusted EBITDA, Hotel EBITDA, Hotel
EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per share are all non-GAAP
financial measures. See our discussion of “Non-GAAP Financial Measures”
beginning on page18 for a reconciliation of each of these measures to the
most comparable GAAP financial measure and for information regarding the use,
limitations and importance of these non-GAAP financial measures.

Year to Date Operating Results:

RevPAR for 66 same-store hotels was $104.31, a 5.1% increase compared to the
same period in 2011. The increase was driven by a 5.8% increase in ADR to
$141.91. Displacement from renovations and redevelopments adversely affected
revenue by $10million.

Hotel EBITDA was $174.8million, 6.1% higher than the $164.8million for the
same period in 2011.

Same-store Adjusted EBITDA was $147.0million, 8.1% higher than the
$136.0million for the same period in 2011. Adjusted EBITDA (which includes
Adjusted EBITDA for sold hotels prior to sale) was $160.8million, 0.2% higher
than the same period in 2011.

Adjusted FFO was $30.3million, or $0.24 per share, which is $0.07 per share
higher than the prior year. Net loss attributable to common stockholders was
$64.7million, or $0.52 per share for the nine months ended September30,
2012, compared to a net loss of $125.8million, or $1.10 per share, for the
same period in 2011.

Portfolio Repositioning:

During the quarter, we sold the 222-room Embassy Suites - Anaheim-North for
$25.5million.

On October 25, 2012, we completed the sale of the 370-room Embassy Suites -
New Orleans-Convention Center and the 296-room Embassy Suites -
Nashville-Airport for an aggregate purchase price of $70million. The hotels'
operating performance is included in discontinued operations during the third
quarter and year-to-date.

We have agreed to sell the Sheraton Crescent Hotel in Phoenix for
$8.7million. The buyer made a hard-money deposit toward the purchase price,
and we expect the sale to close in the immediate future.

Through today, we will have sold 19 of 39 non-strategic hotels as part of our
portfolio repositioning plan. Twentynon-strategic hotels remain to be sold.
Of those, 10 have been brought to market or are in the preliminary marketing
stage. We are currently in discussion with buyers to sell six of these hotels.
Ten remaining hotels will be brought to market in 2013. We will use the
proceeds from dispositions to repay debt and augment our balance sheet, which,
when fully restructured, will provide a flexible foundation for improved
long-term FFO and stockholder value.

Capital Expenditures:

We spent $26.9million and $101.0million on capital improvements at our
operating hotels during the three and nine months ended September30, 2012,
respectively (including our prorata share of joint venture expenditures).

During 2012, we anticipate spending approximately $85million on improvements
and renovations, a majority of which is focused on 12 hotels, including six of
our largest properties. We will also spend $35million this year on
value-enhancing redevelopment projects at three hotels: Morgans, the Embassy
Suites-Myrtle Beach-Oceanfront Resort and The Fairmont Copley Plaza. Please
see page 12 of this release for more detail on renovations.

Our redevelopment of the 4+ star Knickerbocker Hotel, located in midtown
Manhattan, is progressing as planned. We have spent $18million in excess of
the acquisition costs to date, and this project remains on schedule and on
budget, with opening scheduled at the end of 2013.

Balance Sheet:

At September30, 2012, we had $1.6billion of consolidated debt, with an
average interest rate of 7.5%. Our debt has a weighted average maturity of 4.8
years and none of our debt matures before June 2014. We had $112.1million of
cash and cash equivalents and $81.6million in restricted cash as of
September30, 2012.

During the quarter, we closed five single asset-mortgage loans totaling
$160.8million. The 10-year loans mature in 2022, bear an average fixed
interest rate of 4.95% and are not cross-collateralized. A portion of the
proceeds from the new loans were used to repay the 9.02% mortgage loan, which
had an outstanding balance of $107million and would have otherwise matured in
2014. The repaid loan was secured by a pool of seven hotels, including four of
the five hotels mortgaged to support the new loans. The remaining three hotels
that secured the repaid loan (two of which are non-strategic) are now
unencumbered.

We also repaid the remaining $60million balance of a CMBS loan using excess
proceeds from the new loan and recent asset sales. This repaid loan, which
would have otherwise matured in 2013, was secured by five properties. Of these
five properties, one property now secures a new loan and the remaining four
are now unencumbered.

On October 31, we paid dividends of $2.39 per share on our SeriesA Preferred
Stock and $2.45 per depositary share evidencing the SeriesC Preferred Stock.
The dividend payment to holders of the Series A Preferred Stock included the
current quarterly dividends of $0.4875 per share and accrued preferred
dividends of $1.9025 per share. The dividend payment to holders of the
SeriesC Preferred Stock included the current quarterly dividends of $0.50 per
depositary share and accrued preferred dividends of $1.95 per depositary
share. FelCor has now paid all of the outstanding accrued preferred dividends.

Andrew J. Welch, FelCor's Executive Vice President and Chief Financial
Officer, said, “Wecontinue to progress toward completely restructuring our
balance sheet, including reducing leverage, reducing our average interest rate
and extending and staggering our debt maturity profile. We have lowered our
weighted-average cost of debt by 23 basis points in the last twelve months and
expect to ultimately reduce our cost of debt to roughly 6.0%, as we repay and
refinance debt."

Outlook:

Our 2012 operating outlook reflects updated timing for asset sales and third
quarter results, which met the low-end of our expectations. We are increasing
the low-end of our Adjusted EBITDA guidance and maintaining the low-end of our
same-store Adjusted EBITDA guidance for 57 hotels.

During 2012, we anticipate:

  *Same-store RevPAR to increase between 5.5% and 6.0%;
  *Adjusted EBITDA to be between $200million and $204million;
  *Adjusted FFO per share to be between $0.21 and $0.25;
  *Net loss attributable to FelCor to be between $40million and $36million;
    and
  *Interest expense, including pro rata share of joint ventures, to be
    $129million.

Our previous outlook assumed the sale of 12 hotels (three of which have been
sold and one will be sold in the immediate future). For comparing to our
previous outlook, we are providing the following data that reconciles the
current Adjusted EBITDA outlook to 2012 Same-store Adjusted EBITDA (in
millions). Same-store Adjusted EBITDA reflects EBITDA for 57 hotels (i.e.,
giving pro forma effect to selling the remaining hotels):

                                        Low      Mid      High
Current Adjusted EBITDA Outlook          $ 200     $ 202     $ 204
Discontinued Operations^(a)              (29   )   (30   )   (31   )
Same-store Adjusted EBITDA (57 hotels)   $ 171    $ 172    $ 173 

(a) EBITDA from January1, 2012 through the dates of sale of nine hotels sold
to date and one hotel expected to sell in the immediate future, plus EBITDA
for the full year for eight remaining sale hotels.

About FelCor:

FelCor, a real estate investment trust, is the nation’s largest owner of
upper-upscale, all-suite hotels. FelCor owns interests in 67 properties
located in major markets throughout 22 states. FelCor’s diversified portfolio
of hotels and resorts are flagged under global brands such as: Doubletree ^ ®,
Embassy Suites Hotels^®, Hilton^®, Fairmont^®, Marriott^®, Renaissance^®,
Sheraton^®, Westin^® and Holiday Inn^®. Additional information can be found on
the Company’s Web site at www.felcor.com.

We invite you to listen to our third quarter earnings Conference Call on
Thursday, November1, 2012 at 10:00a.m. (Central Time). The conference call
will be Webcast simultaneously on FelCor’s Web site at www.felcor.com.
Interested investors and other parties who wish to access the call can go to
FelCor’s Web site and click on the conference call microphone icon on either
the “Investor Relations” or “News Releases” page. The conference call replay
also will be archived on the Company’s Web site.

With the exception of historical information, the matters discussed in this
news release include “forward-looking statements” within the meaning of the
federal securities laws. These forward-looking statements are identified by
their use of terms and phrases such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,”
“will,” “continue” and other similar terms and phrases, including references
to assumptions and forecasts of future results. Forward-looking statements are
not guarantees of future performance. Numerous risks and uncertainties, and
the occurrence of future events, may cause actual results to differ materially
from those anticipated at the time the forward-looking statements are made.
Current economic circumstances or an economic slowdown and the impact on the
lodging industry, operating risks associated with the hotel business,
relationships with our property managers, risks associated with our level of
indebtedness and our ability to meet debt covenants in our debt agreements,
our ability to complete acquisitions, dispositions and debt refinancing, the
availability of capital, the impact on the travel industry from security
precautions, our ability to continue to qualify as a Real Estate Investment
Trust for federal income tax purposes and numerous other factors may affect
future results, performance and achievements. Certain of these risks and
uncertainties are described in greater detail in our filings with the
Securities and Exchange Commission. Although we believe our current
expectations to be based upon reasonable assumptions, we can give no assurance
that our expectations will be attained or that actual results will not differ
materially. We undertake no obligation to update any forward-looking statement
to conform the statement to actual results or changes in our expectations.

                           SUPPLEMENTAL INFORMATION

                                 INTRODUCTION

The following information is presented in order to help our investors
understand FelCor’s financial position as of and for the three and nine month
period ended September30, 2012.

                              TABLE OF CONTENTS

                                                            Page
Consolidated Statements of Operations^(a)                    8
Consolidated Balance Sheets^(a)                              9
Consolidated Debt Summary                                    10
Schedule of Encumbered Hotels                                11
Capital Expenditures                                         12
Hotels Under Renovation or Redevelopment During 2012         12
Supplemental Financial Data                                  13
Discontinued Operations                                      14
Hotel Portfolio Composition                                  15
Detailed Operating Statistics by Brand                       16
Comparable Hotels Operating Statistics for Our Top Markets   17
Historical Operating Statistics                              18
Non-GAAP Financial Measures                                  18

(a) Our consolidated statements of operations and balance sheets have been
prepared without audit. Certain information and footnote disclosures normally
included in financial statements presented in accordance with GAAP have been
omitted. The consolidated statements of operations and balance sheets should
be read in conjunction with the consolidated financial statements and notes
thereto included in our most recent Quarterly Report on Form 10-Q.

Consolidated Statements of Operations

(in thousands, except per share data)
                       Three Months Ended         Nine Months Ended
                        September 30,               September 30,
                        2012         2011          2012         2011
Revenues:
Hotel operating
revenue:
Room                    $ 188,886     $ 177,858     $ 544,664     $ 507,375
Food and beverage       33,673        30,288        109,472       104,102
Other operating         12,237        13,488        38,177        38,591
departments
Other revenue           1,441        1,394        2,672        2,630      
Total revenues          236,237      223,028      694,985      652,698    
Expenses:
Hotel departmental
expenses:
Room                    49,794        47,805        144,419       135,514
Food and beverage       29,176        26,892        89,354        82,935
Other operating         5,593         5,979         16,976        17,555
departments
Other
property-related        63,940        61,944        188,428       179,399
costs
Management and          10,895        10,245        32,188        30,033
franchise fees
Taxes, insurance and    25,353        23,015        71,983        64,231
lease expense
Corporate expenses      5,695         6,258         20,074        22,705
Depreciation and        31,749        29,891        92,544        88,960
amortization
Impairment loss         —             —             1,335         7,003
Other expenses          2,163        1,208        3,926        3,455      
Total operating         224,358      213,237      661,227      631,790    
expenses
Operating income        11,879        9,791         33,758        20,908
Interest expense, net   (31,359   )   (32,865   )   (93,547   )   (98,172    )
Debt extinguishment     (11,661   )   (21       )   (11,808   )   (27,599    )
Gain on involuntary     —            109          —            292        
conversion, net
Loss before equity in
income (loss) from      (31,141   )   (22,986   )   (71,597   )   (104,571   )
unconsolidated
entities
Equity in income
(loss) from             1,536        249          2,674        (1,303     )
unconsolidated
entities
Loss from continuing    (29,605   )   (22,737   )   (68,923   )   (105,874   )
operations
Income (loss) from
discontinued            10,050       (639      )   32,535       8,375      
operations
Net loss                (19,555   )   (23,376   )   (36,388   )   (97,499    )
Net loss attributable
to noncontrolling       386           378           440           269
interests in other
partnerships
Net loss attributable
to redeemable
noncontrolling          144          166          329          469        
interests in FelCor
LP
Net loss attributable   (19,025   )   (22,832   )   (35,619   )   (96,761    )
to FelCor
Preferred dividends     (9,678    )   (9,678    )   (29,034   )   (29,034    )
Net loss attributable
to FelCor common        $ (28,703 )   $ (32,510 )   $ (64,653 )   $ (125,795 )
stockholders
Basic and diluted per
common share data:
Loss from continuing    $ (0.31   )   $ (0.26   )   $ (0.78   )   $ (1.18    )
operations
Net loss                $ (0.23   )   $ (0.26   )   $ (0.52   )   $ (1.10    )
Basic and diluted
weighted average        123,640      123,062      123,648      113,908    
common shares
outstanding

Consolidated Balance Sheets

(in thousands)
                                                September 30,  December 31,
                                                 2012            2011
Assets
Investment in hotels, net of accumulated
depreciation of $931,508 and $987,895 at         $ 1,813,845     $ 1,953,795
September 30, 2012 and December 31, 2011,
respectively
Hotel development                                138,749         120,163
Investment in unconsolidated entities            57,352          70,002
Hotels held for sale                             40,822          —
Cash and cash equivalents                        112,119         93,758
Restricted cash                                  81,642          84,240
Accounts receivable, net of allowance for
doubtful accounts of $419 and $333 at            34,722          27,135
September 30, 2012 and December 31, 2011,
respectively
Deferred expenses, net of accumulated
amortization of $14,262 and $13,119 at           25,362          29,772
September 30, 2012 and December 31, 2011,
respectively
Other assets                                     27,040         24,363      
Total assets                                     $ 2,331,653    $ 2,403,228 
Liabilities and Equity
Debt, net of discount of $24,406 and $32,069
at September 30, 2012 and December 31, 2011,     $ 1,598,094     $ 1,596,466
respectively
Distributions payable                            46,306          76,293
Accrued expenses and other liabilities           159,817        140,548     
Total liabilities                                1,804,217      1,813,307   
Commitments and contingencies
Redeemable noncontrolling interests in FelCor
LP, 625 and 636 units issued and outstanding     3,236          3,026       
at September 30, 2012 and December 31, 2011
Equity:
Preferred stock, $0.01 par value, 20,000
shares authorized:
Series A Cumulative Convertible Preferred
Stock, 12,880 shares, liquidation value of       309,362         309,362
$322,011, issued and outstanding at September
30, 2012 and December 31, 2011
Series C Cumulative Redeemable Preferred
Stock, 68 shares, liquidation value of           169,412         169,412
$169,950, issued and outstanding at September
30, 2012 and December 31, 2011
Common stock, $0.01 par value, 200,000 shares
authorized; 124,229 and 124,281 shares issued    1,242           1,243
and outstanding at September 30, 2012 and
December 31, 2011, respectively
Additional paid-in capital                       2,353,538       2,353,251
Accumulated other comprehensive income           26,228          25,738
Accumulated deficit                              (2,362,324  )   (2,297,468  )
Total FelCor stockholders’ equity                497,458         561,538
Noncontrolling interests in other partnerships   26,742         25,357      
Total equity                                     524,200        586,895     
Total liabilities and equity                     $ 2,331,653    $ 2,403,228 

Consolidated Debt Summary

(dollars in thousands)
                                                             
             Encumbered   Interest      Maturity   September 30,   December
             Hotels                     Date       2012            31,
                          Rate (%)                                 2011
Line of      10          L +           August     $ 117,000       $ —
credit                    4.50          2014^(a)
Hotel
mortgage
debt
Mortgage                                June -
debt         5     ^(b)   6.66          August     65,935          67,375
                                        2014
Mortgage     7            L +    ^(c)   April      186,529         202,982
debt                      5.10          2015
Mortgage     1            5.81          July       10,521          10,876
debt                                    2016
Mortgage     4     ^(b)   4.95          October    128,500         —
debt                                    2022
Mortgage     1            4.94          October    32,250          —
debt                                    2022
Senior
notes
Senior                                  June
secured      6            6.75          2019       525,000         525,000
notes
Senior                                  October
secured      11           10.00         2014       467,499         459,931
notes^(d)
Other^(e)    —            L +           December   64,860          64,860
                          1.50          2012
Retired      —           —             —          —              265,442
debt
Total        45                                   $ 1,598,094    $ 1,596,466

(a)  Our $225 million line of credit can be extended for one year (to 2015),
      subject to satisfying certain conditions.
(b)   The hotels securing this debt are subject to separate loan agreements
      and are not cross-collateralized.
      LIBOR (for this loan) is subject to a 3% floor. We purchased an interest
(c)   rate cap ($202 million notional amount) that caps LIBOR at 5.4% and
      expires May 2013.
      These notes have $492 million in aggregate principal outstanding ($144
      million and $96,000 in aggregate principal amount was redeemed in June
(d)   2011 and January 2012, respectively) and were initially sold at a
      discount that provided an effective yield of 12.875% before transaction
      costs.
      This loan is related to our Knickerbocker redevelopment project and is
      fully secured by restricted cash and a mortgage. Because we were able to
      assume an existing loan when we purchased this hotel, we were not
(e)   required to pay any local mortgage recording tax. When that loan is
      transferred to a new lender and made part of our construction loan, we
      expect to only pay such tax to the extent of the incremental principal
      amount of the construction loan.

Schedule of Encumbered Hotels

(dollars in millions)
                                         
                       September 30, 2012
Consolidated Debt      Balance              Encumbered Hotels
                                            Charlotte SouthPark - DT, Dana
                                            Point - DTGS, Houston Medical
                                            Center - HI, Myrtle Beach - HLT,
                                            Mandalay Beach - ES, Nashville
Line of credit             $   117        Airport - ES, Philadelphia
                                            Independence Mall - HI, Pittsburgh
                                            University Center - HI, Santa
                                            Barbara Goleta - HI and Santa
                                            Monica at the Pier - HI
                                            Atlanta Buckhead - ES, Atlanta
                                            Galleria - SS, Boston

Mortgage debt               $   187         Marlboro - ES, Burlington - SH,
                                            Orlando South - ES, Philadelphia
                                            Society Hill - SH and South San
                                            Francisco - ES
                                            Birmingham - ES, Ft. Lauderdale -
CMBS debt^(a)               $   129         ES, Minneapolis Airport - ES, and
                                            Napa Valley - ES
                                            Atlanta Airport - ES, Austin -
CMBS debt^(a)               $   66          DTGS, BWI Airport - ES, Orlando
                                            Airport - HI and Phoenix Biltmore
                                            - ES
CMBS debt                   $   32          Deerfield Beach - ES
CMBS debt                   $   11          Indianapolis North - ES
                                            Boston Copley - FMT, Los Angeles
                                            International Airport - ES, Indian
Senior secured notes        $   525         Wells Esmeralda Resort & Spa -
                                            REN, St. Petersburg Vinoy Resort &
                                            Golf Club - REN, Morgans and
                                            Royalton
                                            Atlanta Airport - SH, Boston
                                            Beacon Hill - HI, Myrtle Beach
                                            Resort - ES, Nashville Opryland
                                            -Airport - HI, New Orleans French
                                            Quarter - HI, Orlando Walt Disney
Senior secured notes        $   467         World^® - DTGS, San Diego on the
                                            Bay - HI, San Francisco Waterfront
                                            - ES, San Francisco Fisherman’s
                                            Wharf - HI, San Francisco Union
                                            Square - MAR and Toronto Airport -
                                            HI
                                            
(a) The hotels securing this debt are subject to separate loan agreements and
are not cross-collateralized.

Capital Expenditures

(in thousands)
                                                   
                            Three Months Ended        Nine Months Ended
                            September 30,             September 30,
                            2012        2011         2012         2011
Improvements and
additions to                $ 26,636     $ 22,226     $ 99,985      $ 57,470
majority-owned hotels
Partners’ pro rata share
of additions to             (190     )   (286     )   (819      )   (726     )
consolidated joint
venture hotels
Pro rata share of
additions to                440         778         1,804        2,250    
unconsolidated hotels
Total additions to          $ 26,886    $ 22,718    $ 100,970    $ 58,994 
hotels^(a)
                                                                             
(a) Includes capitalized interest, property taxes, ground leases and certain
employee costs.

Hotels Under Renovation or Redevelopment During 2012
                                                            
                        Primary Areas              Start Date   End Date
Renovations
                        guestrooms, corridors,
Austin-DTGS             public areas, entrance,    Jun-2011     Feb-2012
                        F&B upgrade
Mandalay Beach-ES       guestrooms, corridors,     Oct-2011     May-2012
                        lobby, exterior
Philadelphia Society    guest rooms, corridors,
Hill-SH                 public areas, meeting      Nov-2011     Apr-2012
                        space, re-concept F&B
Napa Valley-ES          guestrooms, corridors,     Nov-2011     Apr-2012  ^(a)
                        public areas
Charlotte               guestrooms, corridors,
SouthPark-DT            exterior, lobby, upgrade   Nov-2011     May-2012
                        F&B
Pittsburgh University   guestrooms, public         Dec-2011     Mar-2012
Center-HI               areas, meeting space
Boston Beacon Hill-HI   guestrooms, lobby, F&B     Dec-2011     Apr-2012
Renaissance Esmeralda   guestrooms, corridors      Jun-2012     Oct-2012
Resort
LAX South - ES          guestrooms, corridors      Sep-2012     Mar-2013
Redevelopments
Myrtle Beach            public space, lobby,       Oct-2011     Apr-2012
Oceanfront Resort-ES    re-concept F&B
                        guestrooms, corridors,
Boston Copley           public areas, meeting      Nov-2011     July-2012
Plaza-FMT               space, fitness area,
                        re-concept F&B
                        guestroom additions,
Morgans                 public areas, fitness      Feb-2012     Dec-2012
                        area, re-concept F&B
                                                                          
(a) The public area renovation will begin in the fourth quarter 2012.

Supplemental Financial Data

(in thousands, except per share information)
                                                            
                                              September 30,   December 31,
Total Enterprise Value                        2012            2011
Common shares outstanding                     124,229         124,281
Units outstanding                             625            636         
Combined shares and units outstanding         124,854         124,917
Common stock price                            $ 4.74         $ 3.05      
Market capitalization                         $ 591,808       $ 380,997
Series A preferred stock^(a)                  309,362         309,362
Series C preferred stock^(a)                  169,412         169,412
Consolidated debt                             1,598,094       1,596,466
Noncontrolling interests of consolidated debt (2,831      )   (2,894      )
Pro rata share of unconsolidated debt         74,449          75,178
Hotel development                             (138,749    )   (120,163    )
Cash and cash equivalents                     (112,119    )   (93,758     )
Total enterprise value (TEV)                  $ 2,489,426    $ 2,314,600 
                                                                          
(a) Book value based on issue price.

Discontinued Operations

(in thousands)


                
Discontinued operations include the results of operations for two hotels
designated as held for sale, for seven hotels sold in 2012, and eight hotels
sold in 2011. Condensed financial information for the hotels included in
discontinued operations is as follows:
                                                                          
                   Three Months Ended             Nine Months Ended
                   September 30,                  September 30,           
                   2012          2011            2012        2011       
Operating          $  7,558       $ 25,477        $ 49,506     $ 99,556
revenue
Operating          (7,065    )    (25,684  ) ^(a) (40,831  )   (97,265  ) ^(a)
expenses
Operating          493            (207     )      8,675        2,291
income (loss)
Interest           (239      )    (799     )      (1,991   )   (4,548   )
expense, net
Debt               (126      )    (334     )      (790     )   3,282
extinguishment
Loss on
involuntary        —              —               —            (12      )
conversion, net
of tax
Gain on sale,      9,922         701            26,641      7,362     
net of tax
Income (loss)
from               10,050         (639     )      32,535       8,375
discontinued
operations
Depreciation
and                946            4,313           4,933        16,099
amortization
Interest           239            800             1,991        4,551
expense
Noncontrolling
interest in        —             13             —           13        
other
partnerships
EBITDA from
discontinued       11,235         4,487           39,459       29,038
operations
Impairment loss    —              946             —            6,247
Hurricane loss     228            —               228          —
Debt               126            334             790          (3,282   )
extinguishment
Loss on
involuntary        —              —               —            12
conversion, net
of tax
Gain on sale,      (9,922    )    (701     )      (26,641  )   (7,362   ) 
net of tax
Adjusted EBITDA
from               $  1,667      $ 5,066        $ 13,836    $ 24,653  
discontinued
operations
                                                                          
(a) Includes a $946,000 impairment charge for the three months ended
September30, 2011 and a $6.2million impairment charge for the nine months
ended September30, 2011.

Hotel Portfolio Composition


                                                        
The following table illustrates the distribution of same-store hotels.
                                                            
                                            % of Total      2011 Hotel EBITDA
Brand                  Hotels   Rooms       Rooms
                                                            (in thousands)^(a)
Embassy Suites Hotels  21      5,743      30             $      79,999
Holiday Inn            9        3,120       16              32,543
Doubletree and Hilton  5        1,206       6               15,352
Sheraton and Westin    4        1,604       8               15,203
Renaissance and        3        1,321       7               11,357
Marriott
Fairmont               1        383         3               5,700
Morgans and Royalton   2       282        1              3,845
Core hotels            45       13,659      71              163,999
Non-strategic hotels   21      5,505      29             46,989
Same-store hotels      66      19,164     100            $      210,988

Market
San Francisco area     4        1,637       9               $      16,813
Boston                 3        916         5               14,031
Los Angeles area       3        677         4               13,731
South Florida          3        923         5               13,116
New York area          4        817         4               9,703
Philadelphia           2        728         4               8,808
Atlanta                3        952         5               8,420
Myrtle Beach           2        640         3               7,862
Dallas                 2        784         4               7,153
San Diego              1        600         3               6,144
Other markets          18      4,985      25             58,218
Core hotels            45       13,659      71              163,999
Non-strategic hotels   21      5,505      29             46,989
Same-store hotels      66      19,164     100            $      210,988
                                                            
Location
Urban                  16       4,931       26              $      64,858
Airport                10       3,267       17              35,579
Resort                 10       2,928       16              35,204
Suburban               9       2,533      12             28,358
Core hotels            45       13,659      71              163,999
Non-strategic hotels   21      5,505      29             46,989
Same-store hotels      66      19,164     100            $      210,988
                                                                   
(a) Hotel EBITDA is more fully described on page 26.

The following tables set forth occupancy, ADR and RevPAR for the three and
nine months ended September30, 2012 and 2011, and the percentage changes
therein for the periods presented, for our same-store Consolidated Hotels
included in continuing operations.

Detailed Operating Statistics by Brand
              
                Occupancy (%)
                Three Months                   Nine Months        
                Ended                            Ended
                September 30,                   September 30,    
                2012     2011       %Variance   2012     2011       %Variance
Embassy         76.7      80.1       (4.3  )     76.4      77.9       (1.9   )
Suites Hotels
Holiday Inn     82.1      82.4       (0.3  )     76.9      76.5       0.5
Doubletree      78.1      76.2       2.5         71.9      70.9       1.4
and Hilton
Sheraton and    69.0      67.1       2.8         65.8      67.8       (2.9   )
Westin
Renaissance     68.3      63.0       8.4         71.3      68.9       3.4
and Marriott
Fairmont        81.7      83.1       (1.7  )     62.0      73.5       (15.7  )
Morgans and     85.6      86.3       (0.8  )     83.2      86.1       (3.4   )
Royalton
Core hotels     76.7      77.4       (0.9  )     74.1      75.0       (1.2   )
(45)
Non-strategic   70.1      70.1       (0.1  )     72.0      71.4       0.8
hotels (24)
Same-store      74.8      75.3       (0.7  )     73.5      74.0       (0.6   )
hotels (66)
                                                                      
                ADR ($)
                Three Months                     Nine Months
                Ended                            Ended
                September 30,                   September 30,    
                2012      2011       %Variance   2012      2011       %Variance
Embassy         146.48    137.34     6.7         145.14    137.96     5.2
Suites Hotels
Holiday Inn     155.56    141.23     10.1        143.96    131.10     9.8
Doubletree      142.08    132.03     7.6         139.02    132.94     4.6
and Hilton
Sheraton and    114.61    111.93     2.4         112.28    111.93     0.3
Westin
Renaissance     171.56    155.56     10.3        194.01    177.49     9.3
and Marriott
Fairmont        275.15    249.60     10.2        281.34    245.10     14.8
Morgans and     295.74    284.71     3.9         289.76    274.93     5.4
Royalton
Core hotels     154.26    143.37     7.6         151.69    142.65     6.3
(45)
Non-strategic   116.60    111.31     4.8         117.12    112.27     4.3
hotels (24)
Same-store      144.06    134.74     6.9         141.91    134.17     5.8
hotels (66)
                                                                      
                RevPAR ($)
                Three Months                     Nine Months
                Ended                            Ended
                September 30,                   September 30,    
                2012      2011       %Variance   2012      2011       %Variance
Embassy         112.30    110.00     2.1         110.84    107.41     3.2
Suites Hotels
Holiday Inn     127.79    116.39     9.8         110.66    100.30     10.3
Doubletree      111.00    100.61     10.3        99.99     94.28      6.1
and Hilton
Sheraton and    79.09     75.15      5.2         73.91     75.89      (2.6   )
Westin
Renaissance     117.18    97.98      19.6        138.32    122.33     13.1
and Marriott
Fairmont        224.93    207.53     8.4         174.41    180.20     (3.2   )
Morgans and     253.11    245.67     3.0         241.05    236.74     1.8
Royalton
Core hotels     118.37    111.02     6.6         112.43    106.96     5.1
(45)
Non-strategic   81.73     78.06      4.7         84.30     80.19      5.1
hotels (24)
Same-store      107.78    101.49     6.2         104.31    99.23      5.1
hotels (66)

Comparable Hotels Operating Statistics for Our Top Markets
              
                Occupancy (%)
                Three Months Ended                  Nine Months Ended      
                September 30,                         September 30,        
                2012        2011         %Variance   2012        2011         %Variance
San Francisco   89.7         89.5        0.2         82.4         81.0         1.7
area
Boston          81.4         84.5         (3.7  )     70.4         79.2         (11.1  )
Los Angeles     80.2         86.4         (7.2  )     81.0         80.3         0.8
area
South Florida   72.7         74.2         (2.0  )     78.5         79.2         (0.9   )
New York area   78.5         83.7         (6.2  )     76.8         78.9         (2.6   )
Philadelphia    72.8         75.6         (3.8  )     66.6         72.0         (7.4   )
Atlanta         75.6         75.9         (0.5  )     75.0         76.7         (2.2   )
Myrtle Beach    82.1         80.4         2.0         66.5         64.8         2.6
Dallas          60.7         61.2         (0.8  )     65.2         65.1         0.2
San Diego       88.3         87.9         0.5         83.2         80.4         3.4
Other markets   72.9         72.0         1.3         72.1         72.4         (0.4   )
Core hotels     76.7         77.4         (0.9  )     74.1         75.0         (1.2   )
(45)
Non-strategic   70.1         70.1         (0.1  )     72.0         71.4         0.8
hotels (21)
Same-store      74.8      75.3      (0.7  )   73.5      74.0      (0.6   )
hotels (66)
                ADR ($)
                Three Months Ended                    Nine Months Ended
                September 30,                         September 30,        
                2012         2011         %Variance   2012         2011         %Variance
San Francisco   190.07       165.02       15.2        171.84       148.81       15.5
area
Boston          217.57       197.56       10.1        206.71       185.42       11.5
Los Angeles     173.31       162.41       6.7         156.34       151.80       3.0
area
South Florida   115.28       113.30       1.7         147.52       142.58       3.5
New York area   205.13       195.32       5.0         202.24       193.30       4.6
Philadelphia    145.95       131.40       11.1        147.82       133.01       11.1
Atlanta         107.82       104.65       3.0         108.54       104.87       3.5
Myrtle Beach    174.37       169.53       2.9         153.84       149.24       3.1
Dallas          105.38       99.74        5.6         105.98       110.01       (3.7   )
San Diego       138.88       127.11       9.3         130.99       121.13       8.1
Other markets   138.39       129.66       6.7         143.81       137.13       4.9
Core hotels     154.26       143.37       7.6         151.69       142.65       6.3
(45)
Non-strategic   116.60       111.31       4.8         117.12       112.27       4.3
hotels (21)
Same-store      144.06    134.74    6.9      141.91    134.17    5.8    
hotels (66)
                RevPAR ($)
                Three Months Ended                    Nine Months Ended
                September 30,                         September 30,        
                2012         2011         %Variance   2012         2011         %Variance
San Francisco   170.41       147.69       15.4        141.59       120.59       17.4
area
Boston          177.00       166.90       6.1         145.53       146.77       (0.8   )
Los Angeles     139.00       140.32       (0.9  )     126.59       121.96       3.8
area
South Florida   83.83        84.05        (0.3  )     115.85       112.96       2.6
New York area   160.99       163.48       (1.5  )     155.35       152.47       1.9
Philadelphia    106.19       99.33        6.9         98.51        95.75        2.9
Atlanta         81.46        79.44        2.5         81.43        80.47        1.2
Myrtle Beach    143.13       136.38       4.9         102.26       96.73        5.7
Dallas          63.98        61.03        4.8         69.08        71.59        (3.5   )
San Diego       122.69       111.78       9.8         108.93       97.41        11.8
Other markets   100.89       93.35        8.1         103.75       99.28        4.5
Core hotels     118.37       111.02       6.6         112.43       106.96       5.1
(45)
Non-strategic   81.73        78.06        4.7         84.30        80.19        5.1
hotels (21)
Same-store      107.78    101.49    6.2      104.31    99.23     5.1    
hotels (66)

Historical Operating Statistics
                          
                            Occupancy (%)

                            
                            Q4 2011  2011     Q1 2012  Q2 2012  Q3 2012
Core hotels (45)            67.2      73.0      68.1      77.5      76.7
Non-strategic hotels (21)   66.1      70.1      72.1      73.8      70.1
Same-store hotels (66)      66.9      72.1      69.3      76.4      74.8
                                                                    
                                                                    
                            ADR ($)

                            
                            Q4 2011   2011      Q1 2012   Q2 2012   Q3 2012
Core hotels (45)            144.55    143.10    144.75    155.22    154.26
Non-strategic hotels (21)   111.10    111.99    118.32    116.44    116.60
Same-store hotels (66)      135.19    134.42    136.81    144.41    144.06
                                                                    
                                                                    
                            RevPAR ($)

                            
                            Q4 2011   2011      Q1 2012   Q2 2012   Q3 2012
Core hotels (45)            97.11     104.43    98.62     120.25    118.37
Non-strategic hotels (21)   73.40     78.48     85.27     85.92     81.73
Same-store hotels (66)      90.40     96.97     94.76     110.34    107.78

                         Non-GAAP Financial Measures

We refer in this release to certain “non-GAAP financial measures.” These
measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, same-store
Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, are measures of our
financial performance that are not calculated and presented in accordance with
generally accepted accounting principles (“GAAP”). The following tables
reconcile each of these non-GAAP measures to the most comparable GAAP
financial measure. Immediately following the reconciliations, we include a
discussion of why we believe these measures are useful supplemental measures
of our performance and the limitations of such measures.

Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)
                
                  Three Months Ended September 30,
                  2012                                 2011
                  Dollars      Shares     Per Share   Dollars      Shares     Per Share
                                            Amount                               Amount
Net loss          $ (19,555 )                           $ (23,376 )
Noncontrolling    530                                   544
interests
Preferred         (9,678    )                           (9,678    )
dividends
Net loss
attributable to   (28,703   )   123,640     $ (0.23 )   (32,510   )  123,062     $ (0.26 )
FelCor common
stockholders
Depreciation
and               31,749        —           0.26        29,891       —           0.24
amortization
Depreciation,
discontinued
operations and    3,664         —           0.03        7,508        —           0.06
unconsolidated
entities
Impairment
loss,             —             —           —           946          —           0.01
discontinued
operations
Gain on sale of   (9,922    )   —           (0.08   )   (701      )  —           (0.01   )
hotels
Gain on
involuntary       —             —           —           (109      )  —           —
conversion
Noncontrolling
interests in      (144      )   626         (0.01   )   (166      )  638         —
FelCor LP
Conversion of
unvested          —            —          —          —           709        —       
restricted
stock
FFO               (3,356    )   124,266     (0.03   )   4,859        124,409     0.04
Acquisition       16            —           —           413          —           0.01
costs
Hurricane loss    851           —           0.01        —            —           —
Hurricane loss,
discontinued
operations and    231           —           —           —            —           —
unconsolidated
entities
Debt
extinguishment,
including         11,786        —           0.09        355          —           —
discontinued
operations
Severance costs   71            —           —           —            —           —
Abandoned         219           —           —           —            —           —
projects
Pre-opening       202           —           —           —            —           —
costs
Conversion of
unvested          —            358        0.01       —           —          —       
restricted
stock
Adjusted FFO      $ 10,020     124,624    $ 0.08     $ 5,627     124,409    $ 0.05  

Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)
                
                  Nine Months Ended September 30,
                  2012                                 2011
                  Dollars      Shares     Per Share  Dollars      Shares     Per Share
                                            Amount                               Amount
Net loss          $ (36,388 )                          $ (97,499 )
Noncontrolling    769                                  738
interests
Preferred         (29,034   )                          (29,034   )
dividends
Net loss
attributable to   (64,653   )   123,648     $ (0.52 )  (125,795  )   113,908     $ (1.10 )
FelCor common
stockholders
Depreciation
and               92,544        —           0.75       88,960        —           0.78
amortization
Depreciation,
discontinued
operations and    13,315        —           0.11       25,750        —           0.23
unconsolidated
entities
Gain on
involuntary       —             —           —          (292      )   —           —
conversion
Loss on
involuntary
conversion,       —             —           —          12            —           —
discontinued
operations
Impairment loss   1,335         —           0.01       7,003         —           0.06
Impairment
loss,             —             —           —          6,247         —           0.05
discontinued
operations
Gain on sale of   (26,641   )   —           (0.22   )  (7,362    )   —           (0.06   )
hotels
Noncontrolling
interests in      (329      )   630         —          (469      )   453         (0.01   )
FelCor LP
Conversion of
unvested          —            280        —         —            —          —       
restricted
stock
FFO               15,571        124,558     0.13       (5,946    )   114,361     (0.05   )
Acquisition       114           —           —          1,359         —           0.01
costs
Hurricane loss    851           —           0.01       —             —           —
Hurricane loss,
discontinued
operations and    231           —           —          —             —           —
unconsolidated
entities
Debt
extinguishment,
including         12,598        —           0.10       24,316        —           0.21
discontinued
operations
Severance costs   451           —           —          —             —           —
Abandoned         219           —           —          —             —           —
projects
Pre-opening       245           —           —          —             —           —
costs
Conversion of
unvested          —            —          —         —            828        —       
restricted
stock
Adjusted FFO      $ 30,280     124,558    $ 0.24    $ 19,729     115,189    $ 0.17  

Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Same-store Adjusted
EBITDA

(in thousands)
                                                  
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2012         2011          2012         2011
Net loss                 $ (19,555 )   $ (23,376 )   $ (36,388 )   $ (97,499 )
Depreciation and         31,749        29,891        92,544        88,960
amortization
Depreciation,
discontinued
operations and           3,664         7,508         13,315        25,750
unconsolidated
entities
Interest expense         31,393        32,924        93,664        98,323
Interest expense,
discontinued
operations and           934           2,009         4,060         8,016
unconsolidated
entities
Noncontrolling
interests in other       386          378          440          269       
partnerships
EBITDA                   48,571        49,334        167,635       123,819
Impairment loss          —             —             1,335         7,003
Impairment loss,
discontinued             —             946           —             6,247
operations
Hurricane loss           851           —             851           —
Hurricane loss,
discontinued
operations and           231           —             231           —
unconsolidated
entities
Debt extinguishment,
including discontinued   11,786        355           12,598        24,316
operations
Acquisition costs        16            413           114           1,359
Gain on sale of hotels   (9,922    )   (701      )   (26,641   )   (7,362    )
Gain on involuntary      —             (109      )   —             (292      )
conversion
Loss on involuntary
conversion,              —             —             —             12
discontinued
operations
Amortization of stock    1,210         1,766         3,748         5,343
compensation
Severance costs          71            —             451           —
Abandoned projects       219           —             219           —
Pre-opening costs        202          —            245          —         
Adjusted EBITDA          53,235        52,004        160,786       160,445
Adjusted EBITDA from
discontinued             (1,667    )   (5,066    )   (13,836   )   (24,653   )
operations
Adjusted EBITDA from     —            —            —            165       
acquired hotels^(a)
Same-store Adjusted      $ 51,568     $ 46,938     $ 146,950    $ 135,957 
EBITDA
                                                                             
(a) For same-store metrics, we have included the two hotels acquired in May
2011 for all periods presented.

Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)
                                                  
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2012         2011          2012         2011
Same-store operating
revenue:
Room                     $ 188,886     $ 177,858     544,664       516,384
Food and beverage        33,673        30,288        109,472       105,999
Other operating          12,237       13,488       38,177       39,140    
departments
Same-store operating     234,796       221,634       692,313       661,523
revenue
Same-store operating
expense:
Room                     49,794        47,805        144,419       139,330
Food and beverage        29,176        26,892        89,354        85,343
Other operating          5,593         5,979         16,976        17,719
departments
Other property related   63,940        61,944        188,428       182,859
costs
Management and           10,895        10,245        32,188        30,376
franchise fees
Taxes, insurance and     16,170       14,149       46,135       41,099    
lease expense
Same-store operating     175,568      167,014      517,500      496,726   
expense
Hotel EBITDA             $ 59,228     $ 54,620     $ 174,813    $ 164,797 
Hotel EBITDA Margin      25.2      %   24.6      %   25.3      %   24.9      %

Reconciliation of Same-store Operating Revenue and Same-store Operating
Expense to Total Revenue, Total Operating Expense and Operating Income

(in thousands)
                                                  
                   Three Months Ended                Nine Months Ended
                   September 30,                     September 30,
                   2012             2011            2012         2011
Same-store
operating          $  234,796        $  221,634      $ 692,313     $ 661,523
revenue^(a)
Other revenue      1,441             1,394           2,672         2,630
Revenue from       —                —              —            (11,455   )
acquired hotels
Total revenue      236,237           223,028         694,985       652,698
Same-store
operating          175,568           167,014         517,500       496,726
expense^(a)
Consolidated
hotel lease        10,910            10,582          31,339        29,383
expense^(b)
Unconsolidated
taxes,             (1,727      )     (1,716      )   (5,491    )   (5,152    )
insurance and
lease expense
Corporate          5,695             6,258           20,074        22,705
expenses
Depreciation
and                31,749            29,891          92,544        88,960
amortization
Impairment loss    —                 —               1,335         7,003
Hurricane loss     851               —               851           —
Expenses from
acquired           —                 —               —             (11,290   )
hotels^(a)
Other expenses     1,312            1,208          3,075        3,455     
Total operating    224,358          213,237        661,227      631,790   
expenses
Operating          $  11,879        $  9,791       $ 33,758     $ 20,908  
income

      For same-store metrics, we have included the two hotels acquired in May
(a)  2011 for all periods presented as if they were acquired at the beginning
      of the period.
      Consolidated hotel lease expense represents the percentage lease expense
(b)   of our 51% owned operating lessees. The offsetting percentage lease
      revenue is included in equity in income from unconsolidated entities.

Reconciliation of Forecasted Net Loss to Forecasted Adjusted FFO and

Adjusted EBITDA

(in millions, except per share and unit data)
                           
                             Full Year 2012 Guidance
                             Low Guidance              High Guidance
                             Dollars   Per Share      Dollars  Per Share
                                         Amount^(a)               Amount^(a)
Net loss attributable to     $ (40 )                    $ (36 )
FelCor^(b)
Preferred dividends          (39   )                    (39   )
Net loss attributable to     (79   )     $  (0.64  )    (75   )   $  (0.60  )
FelCor common stockholders
Gain on sale of hotels       (50   )                    (50   )
Depreciation^(c)             141                        141
Impairment                   1                         1     
FFO                          13          $  0.10        17        $  0.13
Debt extinguishment          13                         13
Hurricane loss               1                         1     
Adjusted FFO                 $ 27       $  0.21       $ 31     $  0.25   
                                                                  
Net loss attributable to     $ (40 )                    $ (36 )
FelCor^(b)
Depreciation^(c)             141                        141
Interest expense^(c)         129                        129
Amortization expense         5                         5     
EBITDA                       235                        239
Gain on sale of hotels       (50   )                    (50   )
Impairment                   1                          1
Debt extinguishment          13                         13
Hurricane loss               1                         1     
Adjusted EBITDA              $ 200                     $ 204 

(a)  Weighted average shares and units are 124.6 million.
(b)   For guidance, we have assumed no gains or losses on future asset sales.
(c)   Includes pro rata portion of unconsolidated entities.

Substantially all of our non-current assets consist of real estate. Historical
cost accounting for real estate assets implicitly assumes that the value of
real estate assets diminishes predictably over time. Since real estate values
instead have historically risen or fallen with market conditions, most
industry investors consider supplemental measures of performance, which are
not measures of operating performance under GAAP, to be helpful in evaluating
a real estate company’s operations. These supplemental measures are not
measures of operating performance under GAAP. However, we consider these
non-GAAP measures to be supplemental measures of a hotel REIT’s performance
and should be considered along with, but not as an alternative to, net income
(loss) attributable to FelCor as a measure of our operating performance.

FFO and EBITDA

The National Association of Real Estate Investment Trusts (“NAREIT”) defines
FFO as net income or loss attributable to parent (computed in accordance with
GAAP), excluding gains or losses from sales of property, plus depreciation,
amortization and impairment losses. FFO for unconsolidated partnerships and
joint ventures are calculated on the same basis. We compute FFO in accordance
with standards established by NAREIT. This may not be comparable to FFO
reported by other REITs that do not define the term in accordance with the
current NAREIT definition or that interpret the current NAREIT definition
differently than we do.

EBITDA is a commonly used measure of performance in many industries. We define
EBITDA as net income or loss attributable to parent (computed in accordance
with GAAP) plus interest expenses, income taxes, depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect EBITDA on the same basis.

Adjustments to FFO and EBITDA

We adjust FFO and EBITDA when evaluating our performance because management
believes that the exclusion of certain additional items, including but not
limited to those described below, provides useful supplemental information to
investors regarding our ongoing operating performance and that the
presentation of Adjusted FFO, and Adjusted EBITDA when combined with GAAP net
income attributable to FelCor, EBITDA and FFO, is beneficial to an investor’s
better understanding of our operating performance.

• Gains and losses related to extinguishment of debt and interest rate swaps -
We exclude gains and losses related to extinguishment of debt and interest
rate swaps from FFO and EBITDA because we believe that it is not indicative of
ongoing operating performance of our hotel assets. This also represents an
acceleration of interest expense or a reduction of interest expense, and
interest expense is excluded from EBITDA.

  *Cumulative effect of a change in accounting principle - Infrequently, the
    Financial Accounting Standards Board promulgates new accounting standards
    that require the consolidated statements of operations to reflect the
    cumulative effect of a change in accounting principle. We exclude these
    one-time adjustments in computing Adjusted FFO and Adjusted EBITDA because
    they do not reflect our actual performance for that period.

In addition, to derive Adjusted EBITDA we exclude gains or losses on the sale
of depreciable assets and impairment losses because we believe that including
them in EBITDA is not consistent with reflecting the ongoing performance of
our remaining assets. Additionally, the gain or loss on sale of depreciable
assets and impairment losses represents either accelerated depreciation or
excess depreciation in previous periods, and depreciation is excluded from
EBITDA.

Hotel EBITDA and Hotel EBITDA Margin

Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance
in the hotel industry and give investors a more complete understanding of the
operating results over which our individual hotels and brand/managers have
direct control. We believe that Hotel EBITDA and Hotel EBITDA margin are
useful to investors by providing greater transparency with respect to two
significant measures that we use in our financial and operational
decision-making. Additionally, using these measures facilitates comparisons
with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel
EBITDA margin by eliminating all revenues and expenses from continuing
operations not directly associated with hotel operations, including
corporate-level expenses, depreciation and amortization, and expenses related
to our capital structure. We eliminate corporate-level costs and expenses
because we believe property-level results provide investors with supplemental
information into the ongoing operational performance of our hotels and the
effectiveness of management on a property-level basis.

We eliminate depreciation and amortization because, even though depreciation
and amortization are property-level expenses, we do not believe that these
non-cash expenses, which are based on historical cost accounting for real
estate assets, and implicitly assume that the value of real estate assets
diminishes predictably over time, accurately reflect an adjustment in the
value of our assets. We also eliminate consolidated percentage rent paid to
unconsolidated entities, which is effectively eliminated by noncontrolling
interests and equity in income from unconsolidated subsidiaries, and include
the cost of unconsolidated taxes, insurance and lease expense, to reflect the
entire operating costs applicable to our Consolidated Hotels. Hotel EBITDA and
Hotel EBITDA margins are presented on a same-store basis.

Use and Limitations of Non-GAAP Measures

Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted
EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to
evaluate the performance of our hotels and to facilitate comparisons between
us and other lodging REITs, hotel owners who are not REITs and other capital
intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in evaluating
hotel-level performance and the operating efficiency of our hotel managers.

The use of these non-GAAP financial measures has certain limitations. These
non-GAAP financial measures as presented by us, may not be comparable to
non-GAAP financial measures as calculated by other real estate companies.
These measures do not reflect certain expenses or expenditures that we
incurred and will incur, such as depreciation, interest and capital
expenditures. Management compensates for these limitations by separately
considering the impact of these excluded items to the extent they are material
to operating decisions or assessments of our operating performance. Our
reconciliations to the most comparable GAAP financial measures, and our
consolidated statements of operations and cash flows, include interest
expense, capital expenditures, and other excluded items, all of which should
be considered when evaluating our performance, as well as the usefulness of
our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction
with results presented in accordance with GAAP. They should not be considered
as alternatives to operating profit, cash flow from operations, or any other
operating performance measure prescribed by GAAP. These non-GAAP financial
measures reflect additional ways of viewing our operations that we believe,
when viewed with our GAAP results and the reconciliations to the corresponding
GAAP financial measures, provide a more complete understanding of factors and
trends affecting our business than could be obtained absent this disclosure.
Management strongly encourages investors to review our financial information
in its entirety and not to rely on a single financial measure.

Contact:

FelCor Lodging Trust Incorporated
Stephen A. Schafer, 972-444-4912
Vice President Strategic Planning & Investor Relations
sschafer@felcor.com
 
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