##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                    to
 Commission file number 333-3959-01
 FelCor Lodging Limited Partnership
  Delaware
    
    75-2544994(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or
    
    Identification No.)organization)
 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas
    
    75062(Address of principal executive offices)
    
    (Zip Code)
 (972) 444-4900
 þ o
 o þ




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FELCOR LODGING LIMITED PARTNERSHIP
 INDEX
 PagePART I.  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Consolidated Balance Sheets June 30, 2005 and December 31, 2004 (unaudited)
    
    
    3Consolidated Statements of Operations  For the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)
    
    
    4Consolidated Statements of Comprehensive Income (Loss)  For the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)
    
    
    5Consolidated Statements of Cash Flows  For the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25General
    
    
    25Financial Comparison
    
    
    25Results of Operations
    
    
    26Non-GAAP Financial Measures
    
    
    29Hotel Portfolio Composition
    
    
    35Hotel Operating Statistics
    
    
    36Liquidity and Capital Resources
    
    
    38Inflation
    
    
    41Seasonality
    
    
    41Disclosure Regarding Forward-Looking Statements
    
    
    41Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4.
    
    Controls and Procedures
    
    
    43PART II.  OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    44SIGNATURE
    
    
    45Certification of CEO Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of Principal Financial Officer Pursuant to Section 906
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 June 30,
    
    December 31,2005
    
    2004ASSETSInvestment in hotels, net of accumulated depreciation of $994,414 at
June 30, 2005 and $948,631 at December 31, 2004
    
    $
    2,892,951
    
    
    $
    2,955,766Investment in unconsolidated entities
    
    
    106,380
    
    
    
    110,843Hotels held for sale
    
    
    31,860
    
    
    
    255Cash and cash equivalents
    
    
    124,945
    
    
    
    119,310Restricted cash
    
    
    29,634
    
    
    
    34,736Accounts receivable, net of allowance for doubtful accounts of $639 at
June 30, 2005 and $905 at December 31, 2004
    
    
    59,132
    
    
    
    51,845Deferred expenses, net of accumulated amortization of $16,324 at
June 30, 2005 and $14,935 at December 31, 2004
    
    
    16,364
    
    
    
    18,804Condominium development project
    
    
    6,480
    
    
    
    1,613Other assets
    
    
    27,090
    
    
    
    24,486Total assets
    
    $
    3,294,836
    
    
    $
    3,317,658LIABILITIES AND PARTNERS CAPITALDebt, net of discount of $3,949 at June 30, 2005 and
$4,529 at December 31, 2004
    
    $
    1,743,420
    
    
    $
    1,767,122Distributions payable
    
    
    9,362
    
    
    
    8,867Accrued expenses and other liabilities
    
    
    145,843
    
    
    
    124,922Minority interest in other partnerships
    
    
    48,442
    
    
    
    46,765Total liabilities and minority interest
    
    
    1,947,067
    
    
    
    1,947,676Commitments and contingenciesRedeemable units at redemption value, 2,788 units issued and outstanding at
June 30, 2005 and December 31, 2004
    
    
    40,372
    
    
    
    40,846Preferred units, $.01 par value, 20,000 units authorized:Series A Cumulative Convertible Preferred Units, 12,880 units
issued and outstanding at June 30, 2005 and December 31, 2004
    
    
    309,362
    
    
    
    309,362Series B Cumulative Redeemable Preferred Units, 14 and 68 units issued
and
outstanding at June 30, 2005 and December 31, 2004, respectively
    
    
    34,395
    
    
    
    169,395Series C Cumulative Redeemable Preferred Units, 54 units issued and
outstanding at June 30, 2005
    
    
    135,000
    
    
    
    Common units, 60,164 and 59,817 units issued and outstanding at
June 30, 2005 and December 31, 2004, respectively
    
    
    813,106
    
    
    
    834,599Accumulated other comprehensive income
    
    
    15,534
    
    
    
    15,780Total partners capital
    
    
    1,307,397
    
    
    
    1,329,136Total liabilities, redeemable units and partners capital
    
    $
    3,294,836
    
    
    $
    3,317,658
  3




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2005 and 2004
(unaudited, in thousands, except for per unit data)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Hotel operating revenue
    
    $
    325,553
    
    
    $
    302,445
    
    
    $
    620,481
    
    
    $
    582,440Retail space rental and other revenue
    
    
    120
    
    
    
    180
    
    
    
    276
    
    
    
    425Total revenues
    
    
    325,673
    
    
    
    302,625
    
    
    
    620,757
    
    
    
    582,865Expenses:Hotel departmental expenses
    
    
    111,103
    
    
    
    106,805
    
    
    
    212,836
    
    
    
    206,259Other property operating costs
    
    
    89,903
    
    
    
    84,240
    
    
    
    177,841
    
    
    
    167,230Management and franchise fees
    
    
    16,887
    
    
    
    15,863
    
    
    
    31,687
    
    
    
    30,179Taxes, insurance and lease expense
    
    
    32,524
    
    
    
    29,628
    
    
    
    63,341
    
    
    
    59,543Corporate expenses
    
    
    4,728
    
    
    
    4,380
    
    
    
    9,269
    
    
    
    7,742Depreciation
    
    
    30,485
    
    
    
    28,027
    
    
    
    60,093
    
    
    
    56,503Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    Total operating expenses
    
    
    285,630
    
    
    
    268,943
    
    
    
    555,717
    
    
    
    527,456Operating income
    
    
    40,043
    
    
    
    33,682
    
    
    
    65,040
    
    
    
    55,409Interest expense, net
    
    
    (33,471
    )
    
    
    (39,203
    )
    
    
    (66,170
    )
    
    
    (79,797
    )Charge-off of deferred financing costs
    
    
    
    
    
    
    (3,944
    )
    
    
    
    
    
    
    (4,174
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (28,246
    )
    
    
    
    
    
    
    (28,246
    )Impairment
    
    
    (732
    )
    
    
    
    
    
    
    (732
    )
    
    
    Gain on swap termination
    
    
    
    
    
    
    1,005
    
    
    
    
    
    
    
    1,005Income (loss) before equity in income of unconsolidated
entities, minority interests and gain on sales of assets
    
    
    5,840
    
    
    
    (36,706
    )
    
    
    (1,862
    )
    
    
    (55,803
    )Equity in income from unconsolidated entities
    
    
    3,837
    
    
    
    2,691
    
    
    
    4,968
    
    
    
    3,673Gain on sale of assets
    
    
    389
    
    
    
    
    
    
    
    389
    
    
    
    Minority interests
    
    
    (113
    )
    
    
    (498
    )
    
    
    15
    
    
    
    (567
    )Income (loss) from continuing operations
    
    
    9,953
    
    
    
    (34,513
    )
    
    
    3,510
    
    
    
    (52,697
    )Discontinued operations
    
    
    182
    
    
    
    762
    
    
    
    (2,232
    )
    
    
    (3,160
    )Net income (loss)
    
    
    10,135
    
    
    
    (33,751
    )
    
    
    1,278
    
    
    
    (55,857
    )Preferred distributions
    
    
    (9,809
    )
    
    
    (8,970
    )
    
    
    (19,900
    )
    
    
    (15,696
    )Issuance costs of redeemed preferred units
    
    
    (5,198
    )
    
    
    
    
    
    
    (5,198
    )
    
    
    Net loss applicable to common unitholders
    
    $
    (4,872
    )
    
    $
    (42,721
    )
    
    $
    (23,820
    )
    
    $
    (71,553
    )Basic and diluted loss per unit data:Net loss from continuing operations
    
    $
    (0.08
    )
    
    $
    (0.70
    )
    
    $
    (0.35
    )
    
    $
    (1.10
    )Net loss
    
    $
    (0.08
    )
    
    $
    (0.69
    )
    
    $
    (0.38
    )
    
    $
    (1.15
    )Weighted average common units outstanding
    
    
    62,192
    
    
    
    61,983
    
    
    
    62,151
    
    
    
    61,985
  4




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three and Six Months Ended June 30, 2005 and 2004
(unaudited, in thousands)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income (loss)
    
    $
    10,135
    
    
    $
    (33,751
    )
    
    $
    1,278
    
    
    $
    (55,857
    )Unrealized gain (loss) on swaps
    
    
    (880
    )
    
    
    
    
    
    
    747
    
    
    
    Foreign currency translation adjustment
    
    
    (749
    )
    
    
    (509
    )
    
    
    (993
    )
    
    
    (970
    )Comprehensive income (loss)
    
    $
    8,506
    
    
    $
    (34,260
    )
    
    $
    1,032
    
    
    $
    (56,827
    )
  5




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2005 and 2004
(unaudited, in thousands)
 Six Months Ended June 30,2005
    
    2004Cash flows from operating activities:Net income (loss)
    
    $
    1,278
    
    
    $
    (55,857
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation
    
    
    61,282
    
    
    
    61,065Loss (gain) on sale of assets
    
    
    (175
    )
    
    
    941Amortization of deferred financing fees
    
    
    1,670
    
    
    
    2,370Accretion of debt, net of discount
    
    
    579
    
    
    
    310Amortization of unearned compensation
    
    
    1,363
    
    
    
    1,101Equity in income from unconsolidated entities
    
    
    (4,968
    )
    
    
    (3,673
    )Distributions of income from unconsolidated entities
    
    
    240
    
    
    
    403Impairment loss
    
    
    1,291
    
    
    
    Bad debt reserve
    
    
    266
    
    
    
    273Charge-off of deferred financing costs
    
    
    
    
    
    
    4,174Loss on early extinguishment of debt
    
    
    
    
    
    
    28,246Minority interests
    
    
    (15
    )
    
    
    (243
    )Changes in assets and liabilities:Accounts receivable
    
    
    (7,887
    )
    
    
    (13,512
    )Restricted cash  operations
    
    
    (997
    )
    
    
    (9,611
    )Other assets
    
    
    (4,122
    )
    
    
    3,629Accrued expenses and other liabilities
    
    
    22,770
    
    
    
    172Net cash flow provided by operating activities
    
    
    72,575
    
    
    
    19,788Cash flows (used in) provided by investing activities:Acquisition of hotel
    
    
    
    
    
    
    (27,759
    )Acquisition of interest in venture
    
    
    (1,197
    )
    
    
    Cash from consolidation of venture
    
    
    3,204
    
    
    
    Improvements and additions to hotels
    
    
    (49,949
    )
    
    
    (34,005
    )Additions to condominium project
    
    
    (3,588
    )
    
    
    Proceeds from sale of assets
    
    
    8,926
    
    
    
    40,863Increase in restricted cash  investing
    
    
    5,524
    
    
    
    3,055Capital contributions to unconsolidated entities
    
    
    (700
    )
    
    
    Distributions of capital from unconsolidated entities
    
    
    4,431
    
    
    
    2,726Net cash flow used in investing activities
    
    
    (33,349
    )
    
    
    (15,120
    )Cash flows (used in) provided by financing activities:Proceeds from borrowings
    
    
    
    
    
    
    344,490Repayment of borrowings
    
    
    (10,649
    )
    
    
    (537,606
    )Payment of deferred financing fees
    
    
    
    
    
    
    (2,221
    )Contributions from minority interest holders
    
    
    1,028
    
    
    
    Net proceeds from sale of preferred units
    
    
    130,468
    
    
    
    104,461Redemption of preferred unit
    
    
    (135,000
    )
    
    
    Distributions paid to minority interest holders
    
    
    
    
    
    
    (4,000
    )Distributions paid to preferred unitholders
    
    
    (19,405
    )
    
    
    (13,351
    )Net cash flow used in financing activities
    
    
    (33,558
    )
    
    
    (108,227
    )Effect of exchange rate changes on cash
    
    
    (33
    )
    
    
    (1,007
    )Net change in cash and cash equivalents
    
    
    5,635
    
    
    
    (104,566
    )Cash and cash equivalents at beginning of periods
    
    
    119,310
    
    
    
    231,885Cash and cash equivalents at end of periods
    
    $
    124,945
    
    
    $
    127,319Supplemental cash flow information Interest paid
    
    $
    64,756
    
    
    $
    89,538
  6




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##### Table of Contents



FELCOR
LODGING LIMITED PARTNERSHIP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Organization
 ® ®
    Brand
    
    Hotels
    
    RoomsEmbassy Suites Hotels
    
    
    55
    
    
    
    13,925Doubletree® and Doubletree Guest Suites
    
    
    10
    
    
    
    2,206Holiday Inn®  branded
    
    
    36
    
    
    
    12,221Crowne Plaza® and Crowne Plaza Suites®
    
    
    12
    
    
    
    4,025Sheraton® and Sheraton Suites®
    
    
    10
    
    
    
    3,269Other brands
    
    
    10
    
    
    
    2,482Total hotels
    
    
    133
    7




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Organization3⁄4(continued)
  2.
    
    Foreign Currency Translation
  3.
    
    Investment in Unconsolidated Entities
   June 30,
    
    December 31,2005
    
    2004Balance sheet information:Investment in hotels, net of accumulated depreciation
    
    $
    260,282
    
    
    $
    282,028Total assets
    
    $
    286,835
    
    
    $
    313,104Debt
    
    $
    207,678
    
    
    $
    218,292Total liabilities
    
    $
    211,147
    
    
    $
    237,597Equity
    
    $
    75,688
    
    
    $
    75,507
  8




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    Investment in Unconsolidated Entities  (continued)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Total revenues
    
    $
    21,039
    
    
    $
    18,093
    
    
    $
    37,268
    
    
    $
    32,411Net income
    
    $
    7,531
    
    
    $
    6,076
    
    
    $
    10,419
    
    
    $
    8,782
  4.
    
    Debt
  Balance OutstandingEncumbered
    
    Interest Rate at
    
    Maturity
    
    June 30,
    
    December 31,Hotels
    
    June 30, 2005
    
    Date
    
    2005
    
    2004Promissory note
    
    none
    
    
    5.14
    (a)
    
    June 2016
    
    $
    650
    
    
    $
    650Senior unsecured term notes
    
    none
    
    
    7.63
    
    
    October 2007
    
    
    122,892
    
    
    
    122,426Senior unsecured term notes
    
    none
    
    
    9.00
    
    
    June 2011
    
    
    298,535
    
    
    
    298,409Senior unsecured term notes
    
    none
    
    
    7.79
    (b)
    
    June 2011
    
    
    290,000
    
    
    
    290,000Total unsecured debt
    
    
    
    
    
    
    8.27
    
    
    
    
    
    
    
    712,077
    
    
    
    711,485Mortgage debt
    
    9 hotels
    
    
    6.52
    
    
    July 2009 - 2014
    
    
    105,189
    
    
    
    105,951Mortgage debt
    
    6 hotels
    
    
    4.74
    (c)
    
    August 2007
    
    
    85,511
    
    
    
    86,412Mortgage debt
    
    10 hotels
    
    
    5.13
    (c)
    
    May 2006
    
    
    142,905
    
    
    
    144,669Mortgage debt
    
    15 hotels
    
    
    7.24
    
    
    Nov. 2007
    
    
    125,779
    
    
    
    127,316Mortgage debt
    
    7 hotels
    
    
    7.32
    
    
    April 2009
    
    
    128,966
    
    
    
    130,458Mortgage debt
    
    6 hotels
    
    
    7.55
    
    
    June 2009
    
    
    67,306
    
    
    
    67,959Mortgage debt
    
    8 hotels
    
    
    8.70
    
    
    May 2010
    
    
    174,066
    
    
    
    175,504Mortgage debt
    
    7 hotels
    
    
    8.73
    
    
    May 2010
    
    
    134,660
    
    
    
    135,690Mortgage debt
    
    1 hotel
    
    
    5.81
    (a)
    
    August 2008
    
    
    15,500
    
    
    
    15,500Mortgage debt
    
    1 hotel
    
    
    7.23
    
    
    October 2005
    
    
    10,189
    
    
    
    10,521Mortgage debt
    
    3 hotels(d)
    
    
    7.48
    
    
    April 2011
    
    
    25,022
    
    
    
    49,476Mortgage debt
    
    1 hotel
    
    
    7.91
    
    
    December 2007
    
    
    10,585
    
    
    
    Other
    
    1 hotel
    
    
    9.17
    
    
    August 2011
    
    
    5,665
    
    
    
    6,181Total secured debt(e)
    
    
    75 hotels
    
    
    
    7.25
    
    
    
    
    
    
    
    1,031,343
    
    
    
    1,055,637Total(e)
    
    
    
    
    
    
    7.66
    %
    
    
    
    
    
    $
    1,743,420
    
    
    $
    1,767,122
 
 (a)
    
    Variable interest rate based on LIBOR. The six month LIBOR was 3.53% at June 30,
2005.(b)
    
    Variable interest rate based on LIBOR, however $100 million of these notes were
matched with interest rate swap agreements that effectively converted the variable
interest rate to a fixed rate of 7.8%.(c)
    
    Variable interest rate based on LIBOR. This debt may be extended at our option
for up to two, one-year periods, subject to meeting certain conditions.(d)
    
    $24 million of this debt was extinguished in July 2005 upon the surrender of
two hotels to their non-recourse mortgage holder. The remainder of this debt is
expected to be extinguished in the third quarter, upon the surrender of the remaining
hotel to its non-recourse mortgage holder.(e)
    
    Interest rates are calculated based on the weighted average outstanding debt at
June 30, 2005. 9




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    Debt3⁄4(continued)
    .
 5.
    
    Derivatives
  10




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    Derivatives  (continued)
        11




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    Preferred Units
  7.
    
    Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Room revenue
    
    $
    262,294
    
    
    $
    241,785
    
    
    $
    500,837
    
    
    $
    466,622Food and beverage revenue
    
    
    47,154
    
    
    
    45,021
    
    
    
    88,810
    
    
    
    85,194Other operating departments
    
    
    16,105
    
    
    
    15,639
    
    
    
    30,834
    
    
    
    30,624Total hotel operating revenue
    
    $
    325,553
    
    
    $
    302,445
    
    
    $
    620,481
    
    
    $
    582,440
  12




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    Hotel Operating Revenue, Departmental Expenses and Other
Property Operating Costs 
(continued)
  Three Months Ended June 30,2005
    
    2004% of Total
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    HotelDollars in
    
    Operating
    
    Dollars in
    
    OperatingThousands
    
    Revenue
    
    Thousands
    
    RevenueRoom
    
    $
    67,105
    
    
    
    20.6
    
    
    $
    63,661
    
    
    
    21.0Food and beverage
    
    
    35,856
    
    
    
    11.0
    
    
    
    35,275
    
    
    
    11.7Other operating departments
    
    
    8,142
    
    
    
    2.5
    
    
    
    7,869
    
    
    
    2.6Total hotel departmental expenses
    
    $
    111,103
    
    
    
    34.1
    
    
    $
    106,805
    
    
    
    35.3
 Six Months Ended June 30,2005
    
    2004% of Total
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    HotelDollars in
    
    Operating
    
    Dollars in
    
    OperatingThousands
    
    Revenue
    
    Thousands
    
    RevenueRoom
    
    $
    128,721
    
    
    
    20.7
    
    
    $
    123,352
    
    
    
    21.2Food and beverage
    
    
    68,748
    
    
    
    11.1
    
    
    
    67,676
    
    
    
    11.6Other operating departments
    
    
    15,367
    
    
    
    2.5
    
    
    
    15,231
    
    
    
    2.6Total hotel departmental expenses
    
    $
    212,836
    
    
    
    34.3
    
    
    $
    206,259
    
    
    
    35.4
  Three Months Ended June 30,2005
    
    2004% of Total
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    HotelDollars in
    
    Operating
    
    Dollars in
    
    OperatingThousands
    
    Revenue
    
    Thousands
    
    RevenueHotel general and administrative expense
    
    $
    29,406
    
    
    
    9.0
    
    
    $
    27,874
    
    
    
    9.2Marketing
    
    
    27,553
    
    
    
    8.5
    
    
    
    25,946
    
    
    
    8.6Repair and maintenance
    
    
    17,518
    
    
    
    5.4
    
    
    
    16,314
    
    
    
    5.4Energy
    
    
    15,426
    
    
    
    4.7
    
    
    
    14,106
    
    
    
    4.7Total other property operating costs
    
    $
    89,903
    
    
    
    27.6
    
    
    $
    84,240
    
    
    
    27.9
 Six Months Ended June 30,2005
    
    2004% of Total
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    HotelDollars in
    
    Operating
    
    Dollars in
    
    OperatingThousands

    
    Revenue
    
    Thousands
    
    RevenueHotel general and administrative expense
    
    $
    57,893
    
    
    
    9.3
    
    
    $
    54,982
    
    
    
    9.5Marketing
    
    
    53,859
    
    
    
    8.7
    
    
    
    50,874
    
    
    
    8.7Repair and maintenance
    
    
    34,495
    
    
    
    5.6
    
    
    
    32,666
    
    
    
    5.6Energy
    
    
    31,594
    
    
    
    5.1
    
    
    
    28,708
    
    
    
    4.9Total other property operating costs
    
    $
    177,841
    
    
    
    28.7
    
    
    $
    167,230
    
    
    
    28.7
 13




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    Hotel Operating Revenue, Departmental Expenses and Other
Property Operating Costs 
(continued)
  8.
    
    Taxes, Insurance and Lease Expense
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Operating lease expense (a)
    
    $
    17,952
    
    
    $
    16,555
    
    
    $
    32,946
    
    
    $
    30,871Real estate and other taxes
    
    
    10,844
    
    
    
    10,043
    
    
    
    23,348
    
    
    
    22,045Property insurance, general liability insurance and
other
    
    
    3,728
    
    
    
    3,030
    
    
    
    7,047
    
    
    
    6,627Total taxes, insurance and lease expense
    
    $
    32,524
    
    
    $
    29,628
    
    
    $
    63,341
    
    
    $
    59,543
 
 (a)
    
    Includes hotel lease expense of $15.6 million and $14.2 million associated with 14
hotels and 15 hotels owned by unconsolidated entities for the three months ended June 30,
2005 and 2004, respectively, and $28.1 million and $26.1 million for the six months ended
June 30, 2005 and 2004, respectively. Included in lease expense are $9.3 million and $7.3
million in percentage rent for the three months ended June 30, 2005 and 2004, respectively,
and $14.7 million and $12.2 million in percentage rent for the six months ended June 30,
2005 and 2004, respectively. 9.
    
    Impairment
   14




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    Discontinued Operations
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Operating revenue
    
    $
    6,166
    
    
    $
    32,811
    
    
    $
    14,240
    
    
    $
    68,186Operating expenses
    
    
    5,710
    
    
    
    31,114
    
    
    
    15,118
    
    
    
    70,154Operating income (loss)
    
    
    456
    
    
    
    1,697
    
    
    
    (878
    )
    
    
    (1,968
    )Direct interest costs
    
    
    (40
    )
    
    
    (534
    )
    
    
    (581
    )
    
    
    (1,060
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    (559
    )
    
    
    Loss on sale of assets
    
    
    (234
    )
    
    
    (1,214
    )
    
    
    (214
    )
    
    
    (941
    )Minority interest
    
    
    
    
    
    
    813
    
    
    
    
    
    
    
    809Income (loss) from discontinued operations
    
    $
    182
    
    
    $
    762
    
    
    $
    (2,232
    )
    
    $
    (3,160
    )
   15




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. Earnings (Loss) Per Unit
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Numerator:Income (loss) from continuing operations
    
    $
    9,953
    
    
    $
    (34,513
    )
    
    $
    3,510
    
    
    $
    (52,697
    )Less: Preferred distributions
    
    
    (9,809
    )
    
    
    (8,970
    )
    
    
    (19,900
    )
    
    
    (15,696
    )Issuance costs of redeemed preferred units
    
    
    (5,198
    )
    
    
    
    
    
    
    (5,198
    )
    
    
    Loss from continuing operations applicable
to common unitholders
    
    
    (5,054
    )
    
    
    (43,483
    )
    
    
    (21,588
    )
    
    
    (68,393
    )Discontinued operations
    
    
    182
    
    
    
    762
    
    
    
    (2,232
    )
    
    
    (3,160
    )Net loss applicable to common unitholders
    
    $
    (4,872
    )
    
    $
    (42,721
    )
    
    $
    (23,820
    )
    
    $
    (71,553
    )Denominator:Denominator for basic earnings per unit
    
    
    62,192
    
    
    
    61,983
    
    
    
    62,151
    
    
    
    61,985Denominator
for diluted earnings per unit  adjusted
weighted average units and assumed conversions
    
    
    62,192
    
    
    
    61,983
    
    
    
    62,151
    
    
    
    61,985Earnings (loss) per unit data:Basic:Loss from continuing operations
    
    $
    (0.08
    )
    
    $
    (0.70
    )
    
    $
    (0.35
    )
    
    $
    (1.10
    )Discontinued operations
    
    
    0.00
    
    
    
    0.01
    
    
    
    (0.03
    )
    
    
    (0.05
    )Net loss
    
    
    (0.08
    )
    
    $
    (0.69
    )
    
    $
    (0.38
    )
    
    $
    (1.15
    )Diluted:Loss from continuing operations
    
    $
    (0.08
    )
    
    $
    (0.70
    )
    
    $
    (0.35
    )
    
    $
    (1.10
    )Discontinued operations
    
    
    0.00
    
    
    
    0.01
    
    
    
    (0.03
    )
    
    
    (0.05
    )Net loss
    
    $
    (0.08
    )
    
    $
    (0.69
    )
    
    $
    (0.38
    )
    
    $
    (1.15
    )
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004FelCor restricted shares granted but not vested
    
    
    673
    
    
    
    382
    
    
    
    593
    
    
    
    255Series A convertible preferred units
    
    
    9,985
    
    
    
    8,202
    
    
    
    9,985
    
    
    
    8,202
  16




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12.
    
    FelCor Stock Based Compensation Plans
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Income (loss) from continuing operations, as reported
    
    $
    9,953
    
    
    $
    (34,513
    )
    
    $
    3,510
    
    
    $
    (52,697
    )Add stock based compensation included in
the net income or loss, as reported
    
    
    746
    
    
    
    519
    
    
    
    1,352
    
    
    
    1,022Less stock based compensation expense that
would have been included in the determination of net
income or loss if the fair value method had been applied
to all awards
    
    
    (749
    )
    
    
    (597
    )
    
    
    (1,357
    )
    
    
    (1,107
    )Income (loss) from continuing operations, pro forma
    
    $
    9,950
    
    
    $
    (34,591
    )
    
    $
    3,505
    
    
    $
    (52,782
    )Basic and diluted net loss per common unit:As reported
    
    $
    (0.08
    )
    
    $
    (0.70
    )
    
    $
    (0.35
    )
    
    $
    (1.10
    )Pro forma
    
    $
    (0.08
    )
    
    $
    (0.70
    )
    
    $
    (0.35
    )
    
    $
    (1.10
    )
  13.
    
    Subsequent Events
  14.
    
    Consolidating Financial Information
  17




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONSOLIDATING BALANCE SHEET
June 30, 2005
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    
    
    
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    141,099
    
    
    $
    995,299
    
    
    $
    1,756,553
    
    
    $
    
    
    
    $
    2,892,951Equity investment in consolidated entities
    
    
    1,773,634
    
    
    
    
    
    
    
    
    
    
    
    (1,773,634
    )
    
    
    Investment in unconsolidated entities
    
    
    75,628
    
    
    
    30,752
    
    
    
    
    
    
    
    
    
    
    
    106,380Assets held for sale
    
    
    29,591
    
    
    
    2,269
    
    
    
    
    
    
    
    
    
    
    
    31,860Cash and cash equivalents
    
    
    72,328
    
    
    
    43,992
    
    
    
    8,625
    
    
    
    
    
    
    
    124,945Restricted cash
    
    
    6,358
    
    
    
    2,221
    
    
    
    21,055
    
    
    
    
    
    
    
    29,634Accounts receivable
    
    
    5,156
    
    
    
    53,961
    
    
    
    15
    
    
    
    
    
    
    
    59,132Deferred assets
    
    
    7,475
    
    
    
    1,083
    
    
    
    7,806
    
    
    
    
    
    
    
    16,364Condominium development project
    
    
    6,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,480Other assets
    
    
    5,833
    
    
    
    20,898
    
    
    
    359
    
    
    
    
    
    
    
    27,090Total assets
    
    $
    2,123,582
    
    
    $
    1,150,475
    
    
    $
    1,794,413
    
    
    $
    (1,773,634
    )
    
    $
    3,294,836LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    752,747
    
    
    $
    158,217
    
    
    $
    832,456
    
    
    $
    
    
    
    $
    1,743,420Distributions payable
    
    
    9,362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,362Accrued expenses and other liabilities
    
    
    13,704
    
    
    
    115,444
    
    
    
    16,695
    
    
    
    
    
    
    
    145,843Minority interest  other partnerships
    
    
    
    
    
    
    150
    
    
    
    48,292
    
    
    
    
    
    
    
    48,442Total liabilities
    
    
    775,813
    
    
    
    273,811
    
    
    
    897,443
    
    
    
    
    
    
    
    1,947,067Redeemable units, at redemption value
    
    
    40,372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,372Preferred units
    
    
    478,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,757Common units
    
    
    827,746
    
    
    
    862,024
    
    
    
    896,970
    
    
    
    (1,773,634
    )
    
    
    813,106Accumulated other comprehensive income
    
    
    894
    
    
    
    14,640
    
    
    
    
    
    
    
    
    
    
    
    15,534Total partners capital
    
    
    1,307,397
    
    
    
    876,664
    
    
    
    896,970
    
    
    
    (1,773,634
    )
    
    
    1,307,397Total liabilities, redeemable units
and partners capital
    
    $
    2,123,582
    
    
    $
    1,150,475
    
    
    $
    1,794,413
    
    
    $
    (1,773,634
    )
    
    $
    3,294,836
 18




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2004
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    
    
    
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    193,695
    
    
    $
    1,015,155
    
    
    $
    1,746,916
    
    
    $
    
    
    
    $
    2,955,766Equity investment in consolidated entities
    
    
    1,769,874
    
    
    
    
    
    
    
    
    
    
    
    (1,769,874
    )
    
    
    Investment in unconsolidated entities
    
    
    76,190
    
    
    
    34,653
    
    
    
    
    
    
    
    
    
    
    
    110,843Assets held for sale
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    255Cash and cash equivalents
    
    
    84,829
    
    
    
    29,387
    
    
    
    5,094
    
    
    
    
    
    
    
    119,310Restricted cash
    
    
    9,287
    
    
    
    2,195
    
    
    
    23,254
    
    
    
    
    
    
    
    34,736Accounts receivable
    
    
    3,426
    
    
    
    48,411
    
    
    
    8
    
    
    
    
    
    
    
    51,845Deferred assets
    
    
    8,917
    
    
    
    1,218
    
    
    
    8,669
    
    
    
    
    
    
    
    18,804Condominium development project
    
    
    1,613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,613Other assets
    
    
    8,239
    
    
    
    16,185
    
    
    
    62
    
    
    
    
    
    
    
    24,486Total assets
    
    $
    2,156,070
    
    
    $
    1,147,459
    
    
    $
    1,784,003
    
    
    $
    (1,769,874
    )
    
    $
    3,317,658LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    776,790
    
    
    $
    160,337
    
    
    $
    829,995
    
    
    $
    
    
    
    $
    1,767,122Distributions payable
    
    
    8,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,867Accrued expenses and other liabilities
    
    
    (764
    )
    
    
    106,047
    
    
    
    19,639
    
    
    
    
    
    
    
    124,922Minority interest  other partnerships
    
    
    1,195
    
    
    
    (5,353
    )
    
    
    50,923
    
    
    
    
    
    
    
    46,765Total liabilities
    
    
    786,088
    
    
    
    261,031
    
    
    
    900,557
    
    
    
    
    
    
    
    1,947,676Redeemable units, at redemption value
    
    
    40,846
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,846Preferred units
    
    
    478,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,757Common units
    
    
    850,379
    
    
    
    870,648
    
    
    
    883,446
    
    
    
    (1,769,874
    )
    
    
    834,599Accumulated other comprehensive income
    
    
    
    
    
    
    15,780
    
    
    
    
    
    
    
    
    
    
    
    15,780Total partners capital
    
    
    1,329,136
    
    
    
    886,428
    
    
    
    883,446
    
    
    
    (1,769,874
    )
    
    
    1,329,136Total liabilities, redeemable units
and partners capital
    
    $
    2,156,070
    
    
    $
    1,147,459
    
    
    $
    1,784,003
    
    
    $
    (1,769,874
    )
    
    $
    3,317,658
 19




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2005
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    
    
    
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    325,553
    
    
    $
    
    
    
    $
    
    
    
    $
    325,553Percentage lease revenue
    
    
    7,955
    
    
    
    
    
    
    
    57,793
    
    
    
    (65,748
    )
    
    
    Other revenue
    
    
    457
    
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    120Total revenue
    
    
    8,412
    
    
    
    325,216
    
    
    
    57,793
    
    
    
    (65,748
    )
    
    
    325,673Expenses:Hotel operating expense
    
    
    
    
    
    
    217,893
    
    
    
    
    
    
    
    
    
    
    
    217,893Taxes, insurance and lease expense
    
    
    1,680
    
    
    
    89,519
    
    
    
    7,073
    
    
    
    (65,748
    )
    
    
    32,524Corporate expenses
    
    
    279
    
    
    
    2,513
    
    
    
    1,936
    
    
    
    
    
    
    
    4,728Depreciation
    
    
    1,827
    
    
    
    11,153
    
    
    
    17,505
    
    
    
    
    
    
    
    30,485Total operating expenses
    
    
    3,786
    
    
    
    321,078
    
    
    
    26,514
    
    
    
    (65,748
    )
    
    
    285,630Operating income
    
    
    4,626
    
    
    
    4,138
    
    
    
    31,279
    
    
    
    
    
    
    
    40,043Interest expense, net
    
    
    (14,809
    )
    
    
    (2,686
    )
    
    
    (15,976
    )
    
    
    
    
    
    
    (33,471
    )Impairment
    
    
    
    
    
    
    (732
    )
    
    
    
    
    
    
    
    
    
    
    (732
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (10,183
    )
    
    
    720
    
    
    
    15,303
    
    
    
    
    
    
    
    5,840Equity in income from consolidated
entities
    
    
    16,724
    
    
    
    
    
    
    
    
    
    
    
    (16,724
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    3,277
    
    
    
    560
    
    
    
    
    
    
    
    
    
    
    
    3,837Gain on sale of assets
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Minority interests in other partnerships
    
    
    
    
    
    
    410
    
    
    
    (523
    )
    
    
    
    
    
    
    (113
    )Income from continuing operations
    
    
    10,207
    
    
    
    1,690
    
    
    
    14,780
    
    
    
    (16,724
    )
    
    
    9,953Discontinued operations from
consolidated entities
    
    
    (72
    )
    
    
    254
    
    
    
    
    
    
    
    
    
    
    
    182Net income
    
    
    10,135
    
    
    
    1,944
    
    
    
    14,780
    
    
    
    (16,724
    )
    
    
    10,135Preferred distributions
    
    
    (9,809
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,809
    )Issuance costs of redeemed preferred
units
    
    
    (5,198
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,198
    )Net loss applicable to unitholders
    
    $
    (4,872
    )
    
    $
    1,944
    
    
    $
    14,780
    
    
    $
    (16,724
    )
    
    $
    (4,872
    )
 20




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2004
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    
    
    
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    302,445
    
    
    $
    
    
    
    $
    
    
    
    $
    302,445Percentage lease revenue
    
    
    7,515
    
    
    
    
    
    
    
    52,006
    
    
    
    (59,521
    )
    
    
    Other revenue
    
    
    180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180Total revenue
    
    
    7,695
    
    
    
    302,445
    
    
    
    52,006
    
    
    
    (59,521
    )
    
    
    302,625Expenses:Hotel operating expense
    
    
    
    
    
    
    206,908
    
    
    
    
    
    
    
    
    
    
    
    206,908Taxes, insurance and lease expense
    
    
    (639
    )
    
    
    82,905
    
    
    
    6,883
    
    
    
    (59,521
    )
    
    
    29,628Corporate expenses
    
    
    747
    
    
    
    2,000
    
    
    
    1,633
    
    
    
    
    
    
    
    4,380Depreciation
    
    
    2,110
    
    
    
    10,344
    
    
    
    15,573
    
    
    
    
    
    
    
    28,027Total operating expenses
    
    
    2,218
    
    
    
    302,157
    
    
    
    24,089
    
    
    
    (59,521
    )
    
    
    268,943Operating income
    
    
    5,477
    
    
    
    288
    
    
    
    27,917
    
    
    
    
    
    
    
    33,682Interest expense, net
    
    
    (23,703
    )
    
    
    (2,716
    )
    
    
    (12,784
    )
    
    
    
    
    
    
    (39,203
    )Charge-off of deferred financing cost
    
    
    (32,190
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,190
    )Gain on swap termination
    
    
    1,005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (49,411
    )
    
    
    (2,428
    )
    
    
    15,133
    
    
    
    
    
    
    
    (36,706
    )Equity in income from consolidated
entities
    
    
    12,753
    
    
    
    
    
    
    
    
    
    
    
    (12,753
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    2,570
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    2,691Minority interests in other partnerships
    
    
    (318
    )
    
    
    
    
    
    
    (180
    )
    
    
    
    
    
    
    (498
    )Income (loss) from continuing operations
    
    
    (34,406
    )
    
    
    (2,307
    )
    
    
    14,953
    
    
    
    (12,753
    )
    
    
    (34,513
    )Discontinued operations from
consolidated entities
    
    
    655
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    762Net income (loss)
    
    
    (33,751
    )
    
    
    (2,200
    )
    
    
    14,953
    
    
    
    (12,753
    )
    
    
    (33,751
    )Preferred distributions
    
    
    (8,970
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,970
    )Net income (loss) applicable to
unitholders
    
    $
    (42,721
    )
    
    $
    (2,200
    )
    
    $
    14,953
    
    
    $
    (12,753
    )
    
    $
    (42,721
    )
 21




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2005
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    
    
    
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    620,481
    
    
    $
    
    
    
    $
    
    
    
    $
    620,481Percentage lease revenue
    
    
    13,841
    
    
    
    
    
    
    
    115,132
    
    
    
    (128,973
    )
    
    
    Other revenue
    
    
    613
    
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    276Total revenue
    
    
    14,454
    
    
    
    620,144
    
    
    
    115,132
    
    
    
    (128,973
    )
    
    
    620,757Expenses:Hotel operating expense
    
    
    
    
    
    
    422,364
    
    
    
    
    
    
    
    
    
    
    
    422,364Taxes, insurance and lease expense
    
    
    3,925
    
    
    
    174,056
    
    
    
    14,333
    
    
    
    (128,973
    )
    
    
    63,341Asset disposition costs
    
    
    650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650Corporate expenses
    
    
    531
    
    
    
    5,000
    
    
    
    3,738
    
    
    
    
    
    
    
    9,269Depreciation
    
    
    3,999
    
    
    
    22,018
    
    
    
    34,076
    
    
    
    
    
    
    
    60,093Total operating expenses
    
    
    9,105
    
    
    
    623,438
    
    
    
    52,147
    
    
    
    (128,973
    )
    
    
    555,717Operating income (loss)
    
    
    5,349
    
    
    
    (3,294
    )
    
    
    62,985
    
    
    
    
    
    
    
    65,040Interest expense, net
    
    
    (28,829
    )
    
    
    (6,095
    )
    
    
    (31,246
    )
    
    
    
    
    
    
    (66,170
    )Impairment
    
    
    
    
    
    
    (732
    )
    
    
    
    
    
    
    
    
    
    
    (732
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (23,480
    )
    
    
    (10,121
    )
    
    
    31,739
    
    
    
    
    
    
    
    (1,862
    )Equity in income from consolidated
entities
    
    
    19,533
    
    
    
    
    
    
    
    
    
    
    
    (19,533
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    4,801
    
    
    
    167
    
    
    
    
    
    
    
    
    
    
    
    4,968Gain on sale of assets
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Minority interests in other partnerships
    
    
    
    
    
    
    718
    
    
    
    (703
    )
    
    
    
    
    
    
    15Income (loss) from continuing operations
    
    
    1,243
    
    
    
    (9,236
    )
    
    
    31,036
    
    
    
    (19,533
    )
    
    
    3,510Discontinued operations from
consolidated entities
    
    
    35
    
    
    
    (2,267
    )
    
    
    
    
    
    
    
    
    
    
    (2,232
    )Net income (loss)
    
    
    1,278
    
    
    
    (11,503
    )
    
    
    31,036
    
    
    
    (19,533
    )
    
    
    1,278Preferred distributions
    
    
    (19,900
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,900
    )Issuance costs of redeemed preferred
units
    
    
    (5,198
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (5,198
    )Net income (loss) applicable to
unitholders
    
    $
    (23,820
    )
    
    $
    (11,503
    )
    
    $
    31,036
    
    
    $
    (19,533
    )
    
    $
    (23,820
    )
 22




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2004
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    
    
    
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    582,440
    
    
    $
    
    
    
    $
    
    
    
    $
    582,440Percentage lease revenue
    
    
    14,609
    
    
    
    
    
    
    
    107,306
    
    
    
    (121,915
    )
    
    
    Other revenue
    
    
    425
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    425Total revenue
    
    
    15,034
    
    
    
    582,440
    
    
    
    107,306
    
    
    
    (121,915
    )
    
    
    582,865Expenses:Hotel operating expense
    
    
    
    
    
    
    403,668
    
    
    
    
    
    
    
    
    
    
    
    403,668Taxes, insurance and lease expense
    
    
    718
    
    
    
    166,156
    
    
    
    14,584
    
    
    
    (121,915
    )
    
    
    59,543Corporate expenses
    
    
    1,000
    
    
    
    3,874
    
    
    
    2,868
    
    
    
    
    
    
    
    7,742Depreciation
    
    
    4,674
    
    
    
    19,765
    
    
    
    32,064
    
    
    
    
    
    
    
    56,503Total operating expenses
    
    
    6,392
    
    
    
    593,463
    
    
    
    49,516
    
    
    
    (121,915
    )
    
    
    527,456Operating income (loss)
    
    
    8,642
    
    
    
    (11,023
    )
    
    
    57,790
    
    
    
    
    
    
    
    55,409Interest expense, net
    
    
    (48,930
    )
    
    
    (5,447
    )
    
    
    (25,420
    )
    
    
    
    
    
    
    (79,797
    )Charge-off of deferred financing cost
    
    
    (32,420
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,420
    )Gain on swap termination
    
    
    1,005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (71,703
    )
    
    
    (16,470
    )
    
    
    32,370
    
    
    
    
    
    
    
    (55,803
    )Loss on sale of assets
    
    
    
    
    
    
    (11
    )
    
    
    11
    
    
    
    
    
    
    
    Equity in income from consolidated
entities
    
    
    11,198
    
    
    
    
    
    
    
    
    
    
    
    (11,198
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    4,096
    
    
    
    (423
    )
    
    
    
    
    
    
    
    
    
    
    3,673Minority interests in other partnerships
    
    
    (251
    )
    
    
    
    
    
    
    (316
    )
    
    
    
    
    
    
    (567
    )Income (loss) from continuing operations
    
    
    (56,660
    )
    
    
    (16,904
    )
    
    
    32,065
    
    
    
    (11,198
    )
    
    
    (52,697
    )Discontinued operations from
consolidated entities
    
    
    803
    
    
    
    (3,969
    )
    
    
    6
    
    
    
    
    
    
    
    (3,160
    )Net income (loss)
    
    
    (55,857
    )
    
    
    (20,873
    )
    
    
    32,071
    
    
    
    (11,198
    )
    
    
    (55,857
    )Preferred distributions
    
    
    (15,696
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,696
    )Net income (loss) applicable to
unitholders
    
    $
    (71,553
    )
    
    $
    (20,873
    )
    
    $
    32,071
    
    
    $
    (11,198
    )
    
    $
    (71,553
    )
 23




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##### Table of Contents



FELCOR LODGING LIMTED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2005
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    (5,209
    )
    
    $
    11,773
    
    
    $
    66,011
    
    
    $
    72,575Cash flows from (used in) investing activities
    
    
    (3,460
    )
    
    
    (6,072
    )
    
    
    (23,817
    )
    
    
    (33,349
    )Cash flows from (used in) financing activities
    
    
    (3,832
    )
    
    
    8,937
    
    
    
    (38,663
    )
    
    
    (33,558
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    (33
    )Change in cash and cash equivalents
    
    
    (12,501
    )
    
    
    14,605
    
    
    
    3,531
    
    
    
    5,635Cash and cash equivalents at beginning of period
    
    
    84,829
    
    
    
    29,387
    
    
    
    5,094
    
    
    
    119,310Cash and equivalents at end of period
    
    $
    72,328
    
    
    $
    43,992
    
    
    $
    8,625
    
    
    $
    124,945
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2004
(in thousands)
 Subsidiary
    
    Non-Guarantor
    
    TotalFelCor L.P.
    
    Guarantors
    
    Subsidiaries
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    (38,905
    )
    
    $
    2,336
    
    
    $
    56,357
    
    
    $
    19,788Cash flows from (used in) investing activities
    
    
    (77
    )
    
    
    (16,049
    )
    
    
    1,006
    
    
    
    (15,120
    )Cash flows from (used in) financing activities
    
    
    (73,654
    )
    
    
    26,476
    
    
    
    (61,049
    )
    
    
    (108,227
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    (1,007
    )
    
    
    
    
    
    
    (1,007
    )Change in cash and cash equivalents
    
    
    (112,636
    )
    
    
    (12,763
    )
    
    
    (3,686
    )
    
    
    (103,559
    )Cash and cash equivalents at beginning of period
    
    
    168,224
    
    
    
    59,241
    
    
    
    4,420
    
    
    
    231,885Cash and equivalents at end of period
    
    $
    55,588
    
    
    $
    70,997
    
    
    $
    734
    
    
    $
    127,319
 24




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 General
      
 Financial Comparison (in thousands of dollars, except RevPAR and hotel operating margin)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,% Change
    
    
    
    
    
    
    
    
    
    % Change2005
    
    2004
    
    2004-2005
    
    2005
    
    2004
    
    2004-2005RevPAR
    
    
    76.83
    
    
    
    70.12
    
    
    
    9.6
    
    
    
    73.23
    
    
    
    67.69
    
    
    
    8.2Hotel operating profit(1)
    
    
    75,136
    
    
    
    65,909
    
    
    
    14.0
    
    
    
    134,776
    
    
    
    119,229
    
    
    
    13.0Hotel operating margin(1)
    
    
    23.1
    %
    
    
    21.8
    %
    
    
    6.0
    
    
    
    21.7
    %
    
    
    20.5
    %
    
    
    5.9Income (loss) from continuing
operations(2)
    
    
    9,953
    
    
    
    (34,513
    )
    
    
    128.8
    
    
    
    3,510
    
    
    
    (52,697
    )
    
    
    106.7Funds From Operations
(FFO)(1) (3)
    
    
    28,062
    
    
    
    (9,489
    )
    
    
    395.7
    
    
    
    41,856
    
    
    
    (5,927
    )
    
    
    806.2Earnings Before Interest, Taxes,
Depreciation and Amortization
(EBITDA)(1)(4)
    
    
    79,938
    
    
    
    40,527
    
    
    
    97.2
    
    
    
    140,101
    
    
    
    94,755
    
    
    
    47.9
 
 (1)
    
    Included in the Financial Comparison are non-GAAP financial measures, including FFO,
EBITDA, hotel operating profit and hotel operating margin. Further discussions of the use,
limitations and importance of, and detailed reconciliations to the most comparable GAAP
measure, of these non-GAAP financial measures are found elsewhere in this Managements
Discussion and Analysis of Financial Condition and Results of Operations. 25




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##### Table of Contents



(2)
    
    Included in the income (loss) from continuing operations are the following amounts (in
thousands): Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Charge off of deferred debt costs
    
    $
    
    
    
    $
    3,944
    
    
    $
    
    
    
    $
    4,174Early extinguishment of debt
    
    
    
    

    
    
    28,246
    
    
    
    
    
    
    
    28,246Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    (1,005
    )Impairment
    
    
    732
    
    
    
    
    
    
    
    732
    
    
    
    
 (3)
    
    In accordance with the guidance provided by the Securities and Exchange Commission, or
SEC, on non-GAAP financial measures, FFO has not been adjusted to add back the following
items included in net income (loss) (in thousands):
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred debt costs
    
    $
    
    
    
    $
    3,944
    
    
    $
    
    
    
    $
    4,174Early extinguishment of debt
    
    
    
    
    
    
    28,246
    
    
    
    
    
    
    
    28,246Issuance costs of redeemed preferred units
    
    
    5,198
    
    
    
    
    
    
    
    5,198
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    (1,005
    )
    
    
    
    

    
    
    (1,005
    )Impairment loss
    
    
    732
    
    
    
    
    
    
    
    1,291
    
    
    
    Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900
 (4)
    
    Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been
adjusted for the following amounts included in net income (loss) (in thousands):
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred debt costs
    
    $
    
    
    
    $
    3,944
    
    
    $
    
    
    
    $
    4,174Early extinguishment of debt
    
    
    
    
    
    
    28,246
    
    
    
    
    
    
    
    28,246Issuance costs of redeemed preferred units
    
    
    5,198
    
    
    
    
    
    
    
    5,198
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    (1,005
    )Impairment loss
    
    
    732
    
    
    
    
    
    
    
    1,291
    
    
    
    Loss (gain) on sale of assets
    
    
    (155
    )
    
    
    1,214
    
    
    
    (175
    )
    
    
    941Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900
 
 Results of Operations
 Comparison of the Three Months Ended June 30, 2005 and 2004
    26




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27




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Comparison of the Six Months Ended June 30, 2005 and 2004
        28




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Non-GAAP Financial Measures
   Reconciliation of Net Income (Loss) to FFO
(in thousands, except per unit data)
 Three Months Ended June 30,2005
    
    2004Per Unit
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    Units
    
    Amount
    
    Dollars
    
    Units
    
    AmountNet income (loss)
    
    $
    10,135
    
    
    
    
    
    
    
    
    
    
    $
    (33,751
    )Preferred distributions
    
    
    (9,809
    )
    
    
    
    
    
    
    
    
    
    
    (8,970
    )Issuance costs of redeemed preferred units
    
    
    (5,198
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common unitholders
    
    
    (4,872
    )
    
    
    62,192
    
    
    $
    (0.08
    )
    
    
    (42,721
    )
    
    
    61,983
    
    
    $
    (0.69
    )Depreciation from continuing operations
    
    
    30,485
    
    
    
    
    
    
    
    0.49
    
    
    
    28,027
    
    
    
    
    
    
    
    0.45Depreciation from unconsolidated
entities and discontinued operations
    
    
    2,604
    
    
    
    
    
    
    
    0.04
    
    
    
    3,991
    
    
    
    
    
    
    
    0.07Loss (gain) on sale of assets
    
    
    (155
    )
    
    
    
    
    
    
    (0.00
    )
    
    
    1,214
    
    
    
    
    
    
    
    0.02Conversion of options and unvested
restricted stock
    
    
    
    
    
    
    339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FFO
    
    $
    28,062
    
    
    
    62,531
    
    
    $
    0.45
    
    
    $
    (9,489
    )
    
    
    61,983
    
    
    $
    (0.15
    )
 29




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##### Table of Contents



Reconciliation of Net Income (Loss) to FFO
(in thousands, except per unit data)
 Six Months Ended June 30,2005
    
    2004Per Unit
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    Units
    
    Amount
    
    Dollars
    
    Units
    
    AmountNet income (loss)
    
    $
    1,278
    
    
    
    
    
    
    
    
    
    
    $
    (55,857
    )Preferred distributions
    
    
    (19,900
    )
    
    
    
    
    
    
    
    
    
    
    (15,696
    )Issuance costs of redeemed preferred units
    
    
    (5,198
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common unitholders
    
    
    (23,820
    )
    
    
    62,151
    
    
    $
    (0.38
    )
    
    
    (71,553
    )
    
    
    61,985
    
    
    $
    (1.15
    )Depreciation from continuing operations
    
    
    60,093
    
    
    
    
    
    
    
    0.96
    
    
    
    56,503
    
    
    
    
    
    
    
    0.91Depreciation from unconsolidated
entities and discontinued operations
    
    
    5,758
    
    
    
    
    
    
    
    0.09
    
    
    
    8,182
    
    
    
    
    
    
    
    0.13Loss (gain) on sale of assets
    
    
    (175
    )
    
    
    
    
    
    
    0.00
    
    
    
    941
    
    
    
    
    
    
    
    0.01Conversion of options and unvested
restricted stock
    
    
    
    
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FFO
    
    $
    41,856
    
    
    
    62,470
    
    
    $
    0.67
    
    
    $
    (5,927
    )
    
    
    61,985
    
    
    $
    (0.10
    )
  Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred debt costs
    
    $
    
    
    
    $
    3,944
    
    
    $
    
    
    
    $
    4,174Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900Issuance costs of redeemed preferred units
    
    
    5,198
    
    
    
    
    
    
    
    5,198
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    28,246
    
    
    
    
    
    
    
    28,246Impairment loss
    
    
    732
    
    
    
    
    
    
    
    1,291
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    (1,005
    )
 30




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Reconciliation of Net Income (Loss) to EBITDA
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income (loss)
    
    $
    10,135
    
    
    $
    (33,751
    )
    
    $
    1,278
    
    
    $
    (55,857
    )Depreciation from continuing operations
    
    
    30,485
    
    
    
    28,027
    
    
    
    60,093
    
    
    
    56,503Depreciation from unconsolidated
entities and
discontinued operations
    
    
    2,604
    
    
    
    3,991
    
    
    
    5,758
    
    
    
    8,182Interest expense
    
    
    34,273
    
    
    
    39,798
    
    
    
    67,614
    
    
    
    81,114Interest expense from unconsolidated
entities
and discontinued operations
    
    
    1,687
    
    
    
    1,943
    
    
    
    4,007
    
    
    
    3,791Amortization expense
    
    
    755
    
    
    
    519
    
    
    
    1,352
    
    
    
    1,022EBITDA
    
    $
    79,939
    
    
    $
    40,527
    
    
    $
    140,102
    

    
    $
    94,755
  Three Months Ended
    
    Six MonthsJune 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred debt costs
    
    $
    
    
    
    $
    3,944
    
    
    $
    
    
    
    $
    4,174Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900(Gain) loss on sale of assets
    
    
    (155
    )
    
    
    1,214
    
    
    
    (175
    )
    
    
    941Early extinguishment of debt
    
    
    
    
    
    
    28,246
    
    
    
    
    
    
    
    28,246Impairment
    
    
    732
    
    
    
    
    
    
    
    1,291
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    (1,005
    )
  Hotel Operating Profit
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Total revenue
    
    $
    325,673
    
    
    $
    302,625
    
    
    $
    620,757
    
    
    $
    582,865Retail space rental and other revenue
    
    
    (120
    )
    
    
    (180
    )
    
    
    (276
    )
    
    
    (425
    )Hotel revenue
    
    
    325,553
    
    
    
    302,445
    
    
    
    620,481
    
    
    
    582,440Hotel operating expenses
    
    
    (250,417
    )
    
    
    (236,536
    )
    
    
    (485,705
    )
    
    
    (463,211
    )Hotel operating profit
    
    $
    75,136
    
    
    $
    65,909
    
    
    $
    134,776
    
    
    $
    119,229Hotel operating margin
    
    
    23.1
    %
    
    
    21.8
    %
    
    
    21.7
    %
    
    
    20.5
    %
 31




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##### Table of Contents



Hotel Operating Expense Composition
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Hotel departmental expenses:Room
    
    $
    67,105
    
    
    $
    63,661
    
    
    $
    128,721
    
    
    $
    123,352Food and beverage
    
    
    35,856
    
    
    
    35,275
    
    
    
    68,748
    
    
    
    67,676Other operating departments
    
    
    8,142
    
    
    
    7,869
    
    
    
    15,367
    
    
    
    15,231Other property related costs:Administrative and general
    
    
    29,406
    
    
    
    27,874
    
    
    
    57,893
    
    
    
    54,982Marketing and advertising
    
    
    27,553
    
    
    
    25,946
    
    
    
    53,859
    
    
    
    50,874Repairs and maintenance
    
    
    17,518
    
    
    
    16,314
    
    
    
    34,495
    
    
    
    32,666Energy
    
    
    15,426
    
    
    
    14,106
    
    
    
    31,594
    
    
    
    28,708Taxes, insurance and lease expense
    
    
    32,524
    
    
    
    29,628
    
    
    
    63,341
    
    
    
    59,543Total other property related costs
    
    
    122,427
    
    
    
    113,868
    
    
    
    241,182
    
    
    
    226,773Management and franchise fees
    
    
    16,887
    
    
    
    15,863
    
    
    
    31,687
    
    
    
    30,179Hotel operating expenses
    
    $
    250,417
    
    
    $
    236,536
    
    
    $
    485,705
    
    
    $
    463,211Reconciliation of total operating expenses to hotel operating expenses:Total operating expenses
    
    $
    285,630
    
    
    $
    268,943
    
    
    $
    555,717
    
    
    $
    527,456Corporate expenses
    
    
    (4,728
    )
    
    
    (4,380
    )
    
    
    (9,269
    )
    
    
    (7,742
    )Depreciation
    
    
    (30,485
    )
    
    
    (28,027
    )
    
    
    (60,093
    )
    
    
    (56,503
    )Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    (650
    )
    
    
    Hotel operating expenses
    
    $
    250,417
    
    
    $
    236,536
    
    
    $
    485,705
    
    
    $
    463,211
 32




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##### Table of Contents



Reconciliation of Net Income (Loss) to Hotel Operating Profit
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income (loss)
    
    $
    10,135
    
    
    $
    (33,751
    )
    
    $
    1,278
    
    
    $
    (55,857
    )Discontinued operations
    
    
    (182
    )
    
    
    (762
    )
    
    
    2,232
    
    
    
    3,160Equity in income from unconsolidated
entities
    
    
    (3,837
    )
    
    
    (2,691
    )
    
    
    (4,968
    )
    
    
    (3,673
    )Minority interests
    
    
    113
    
    
    
    498
    
    
    
    (15
    )
    
    
    567Interest expense, net
    
    
    33,471
    
    
    
    39,203
    
    
    
    66,170
    
    
    
    79,797Charge-off of deferred financing costs
    
    
    
    
    
    
    3,944
    
    
    
    
    
    
    
    4,174Impairment
    
    
    732
    
    
    
    
    
    
    
    732
    
    
    
    Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    28,246
    
    
    
    
    
    
    
    28,246Gain on swap termination
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    (1,005
    )Corporate expenses
    
    
    4,728
    
    
    
    4,380
    
    
    
    9,269
    
    
    
    7,742Depreciation
    
    
    30,485
    
    
    
    28,027
    
    
    
    60,093
    
    
    
    56,503Retail space rental and other revenue
    
    
    (120
    )
    
    
    (180
    )
    
    
    (276
    )
    
    
    (425
    )Gain on sale of assets
    
    
    (389
    )
    
    
    
    
    
    
    (389
    )
    
    
    Hotel operating profit
    
    $
    75,136
    
    
    $
    65,909
    
    
    $
    134,776
    
    
    $
    119,229
 Reconciliation of Ratio of Operating Income to Total Revenue to Hotel Operating Margin
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Ratio of operating income to total revenue
    
    
    12.3
    
    
    
    11.1
    
    
    
    10.5
    
    
    
    9.5Less:Retail space and rental and other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plus:Corporate expenses
    
    
    1.4
    
    
    
    1.4
    
    
    
    1.4
    
    
    
    1.3Depreciation
    
    
    9.4
    
    
    
    9.3
    
    
    
    9.7
    
    
    
    9.7Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    Hotel operating margin
    
    
    23.1
    %
    
    
    21.8
    %
    
    
    21.7
    %
    
    
    20.5
    %
  FFO and EBITDA
  33




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##### Table of Contents



Hotel Operating Profit and Operating Margin
  Use and Limitations of Non-GAAP Measures
    34




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##### Table of Contents



Hotel Portfolio Composition
  % of
    
    % of 2004 HotelBrand
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitEmbassy Suites Hotel
    
    
    55
    
    
    
    13,925
    
    
    
    37
    %
    
    
    52
    %Holiday Inn-branded
    
    
    36
    
    
    
    12,221
    
    
    
    32
    
    
    
    22Sheraton-branded
    
    
    10
    
    
    
    3,269
    
    
    
    9
    
    
    
    10Doubletree-branded
    
    
    10
    
    
    
    2,206
    
    
    
    6
    
    
    
    6Crowne Plaza
    
    
    12
    
    
    
    4,025
    
    
    
    11
    
    
    
    5Other
    
    
    7
    
    
    
    1,811
    
    
    
    5
    
    
    
    5
 % of
    
    % of 2004 HotelTop Markets
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitAtlanta
    
    
    10
    
    
    
    3,061
    
    
    
    8
    %
    
    
    9
    %Dallas
    
    
    12
    
    
    
    3,586
    
    
    
    10
    
    
    
    5Los Angeles Area
    
    
    6
    
    
    
    1,435
    
    
    
    4
    
    
    
    5Orlando
    
    
    6
    
    
    
    2,219
    
    
    
    6
    
    
    
    5Boca Raton/Ft.
Lauderdale
    
    
    4
    
    
    
    1,118
    
    
    
    3
    
    
    
    4New Orleans
    
    
    2
    
    
    
    746
    
    
    
    2
    
    
    
    4Minneapolis
    
    
    4
    
    
    
    955
    
    
    
    3
    
    
    
    4Philadelphia
    
    
    3
    
    
    
    1,174
    
    
    
    3
    
    
    
    3San Diego
    
    
    1
    
    
    
    600
    
    
    
    2
    
    
    
    3Phoenix
    
    
    3
    
    
    
    798
    
    
    
    2
    
    
    
    3San Antonio
    
    
    4
    
    
    
    1,189
    
    
    
    3
    
    
    
    3Northern New Jersery
    
    
    3
    
    
    
    759
    
    
    
    2
    
    
    
    3Chicago
    
    
    4
    
    
    
    1,239
    
    
    
    3
    
    
    
    3San Francisco Bay Area
    
    
    8
    
    
    
    2,690
    
    
    
    7
    
    
    
    3Houston
    
    
    4
    
    
    
    1,403
    
    
    
    4
    
    
    
    3Washington DC
    
    
    1
    
    
    
    437
    
    
    
    1
    
    
    
    3
 % of
    
    % of 2004 HotelTop Four States
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitCalifornia
    
    
    19
    
    
    
    5,536
    
    
    
    15
    %
    
    
    16
    %Texas
    
    
    26
    
    
    
    7,515
    
    
    
    20
    
    
    
    14Florida
    
    
    16
    
    
    
    5,343
    
    
    
    14
    
    
    
    12Georgia
    
    
    12
    
    
    
    3,415
    
    
    
    9
    
    
    
    9
 % of
    
    % of 2004 HotelLocation
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitSuburban
    
    
    58
    
    
    
    14,743
    
    
    
    39
    %
    
    
    39
    %Urban
    
    
    31
    
    
    
    10,069
    
    
    
    27
    
    
    
    27Airport
    
    
    26
    
    
    
    8,183
    
    
    
    22
    
    
    
    22Resort
    
    
    13
    
    
    
    4,044
    
    
    
    11
    
    
    
    12Interstate
    
    
    2
    
    
    
    418
    
    
    
    1
    
    
    
    0
 % of
    
    % of 2004 HotelSegment
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitUpscale all-suite
    
    
    68
    
    
    
    16,791
    
    
    
    45
    %
    
    
    59
    %Full service
    
    
    37
    
    
    
    12,385
    
    
    
    33
    
    
    
    23Upscale
    
    
    23
    
    
    
    7,843
    
    
    
    21
    
    
    
    17Limited service
    
    
    2
    
    
    
    438
    
    
    
    1
    
    
    
    1
 35




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##### Table of Contents



Hotel Operating Statistics
  Operating Statistics by Brand
 Occupancy (%)Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    %Variance
    
    2005
    
    2004
    
    % VarianceEmbassy Suites Hotels
    
    
    76.5
    
    
    
    72.6
    
    
    
    5.3
    
    
    
    73.7
    
    
    
    71.2
    
    
    
    3.6Holiday Inn-branded hotels
    
    
    70.6
    
    
    
    69.1
    
    
    
    2.2
    
    
    
    66.8
    
    
    
    65.7
    
    
    
    1.7Sheraton-branded hotels
    
    
    67.3
    
    
    
    66.0
    
    
    
    2.0
    
    
    
    64.5
    
    
    
    65.0
    
    
    
    (0.8
    )Doubletree-branded hotels
    
    
    72.2
    
    
    
    70.1
    
    
    
    3.1
    
    
    
    68.7
    
    
    
    69.4
    
    
    
    (1.0
    )Crowne Plaza hotels
    
    
    70.1
    
    
    
    65.2
    
    
    
    7.6
    
    
    
    66.8
    
    
    
    63.4
    
    
    
    5.3Other hotels
    
    
    61.6
    
    
    
    64.5
    
    
    
    (4.5
    )
    
    
    59.2
    
    
    
    59.4
    
    
    
    (0.3
    )Total hotels
    
    
    72.1
    
    
    
    69.5
    
    
    
    3.7
    
    
    
    68.9
    
    
    
    67.4
    
    
    
    2.3
 ADR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    % Variance
    
    2005
    

    2004
    

    % VarianceEmbassy Suites Hotels
    
    
    121.15
    
    
    
    117.39
    
    
    
    3.2
    
    
    
    123.54
    
    
    
    118.31
    
    
    
    4.4Holiday Inn-branded hotels
    
    
    88.75
    
    
    
    83.31
    
    
    
    6.5
    
    
    
    86.75
    
    
    
    82.28
    
    
    
    5.4Sheraton-branded hotels
    
    
    111.02
    
    
    
    96.82
    
    
    
    14.7
    
    
    
    109.48
    
    
    
    97.19
    
    
    
    12.6Doubletree-branded hotels
    
    
    110.96
    
    
    
    105.10
    
    
    
    5.6
    
    
    
    112.28
    
    
    
    104.45
    
    
    
    7.5Crowne Plaza hotels
    
    
    101.57
    
    
    
    96.44
    
    
    
    5.3
    
    
    
    97.22
    
    
    
    92.79
    
    
    
    4.8Other hotels
    
    
    102.73
    
    
    
    95.57
    
    
    
    7.5
    
    
    
    97.32
    
    
    
    91.44
    
    
    
    6.4Total hotels
    
    
    106.57
    
    
    
    100.83
    
    
    
    5.7
    
    
    
    106.27
    
    
    
    100.50
    
    
    
    5.7
 RevPAR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceEmbassy Suites Hotels
    
    
    92.63
    
    
    
    85.23
    
    
    
    8.7
    
    
    
    91.08
    
    
    
    84.22
    
    
    
    8.1Holiday Inn-branded hotels
    
    
    62.65
    
    
    
    57.56
    
    
    
    8.8
    
    
    
    57.95
    
    
    
    54.07
    
    
    
    7.2Sheraton-branded hotels
    
    
    74.70
    
    
    
    63.89
    
    
    
    16.9
    
    
    
    70.62
    
    
    
    63.22
    
    
    
    11.7Doubletree-branded hotels
    
    
    80.13
    
    
    
    73.65
    
    
    
    8.8
    
    
    
    77.09
    
    
    
    72.44
    
    
    
    6.4Crowne Plaza hotels
    
    
    71.24
    
    
    
    62.85
    
    
    
    13.3
    
    
    
    64.92
    
    
    
    58.84
    
    
    
    10.3Other hotels
    
    
    63.29
    
    
    
    61.64
    
    
    
    2.7
    
    
    
    57.63
    
    
    
    54.32
    
    
    
    6.1Total hotels
    
    
    76.83
    
    
    
    70.12
    
    
    
    9.6
    
    
    
    73.23
    
    
    
    67.69
    
    
    
    8.2
 36




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##### Table of Contents



Operating Statistics for Our Top Markets
 Occupancy (%)Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceAtlanta
    
    
    71.0
    
    
    
    67.5
    
    
    
    5.2
    
    
    
    70.9
    
    
    
    67.5
    
    
    
    4.9Dallas
    
    
    51.4
    
    
    
    53.5
    
    
    
    (3.9
    )
    
    
    52.3
    
    
    
    52.9
    
    
    
    (1.1
    )Los Angeles Area
    
    
    75.4
    
    
    
    71.9
    
    
    
    5.0
    
    
    
    73.4
    
    
    
    72.4
    
    
    
    1.3Orlando
    
    
    75.3
    
    
    
    79.3
    
    
    
    (5.0
    )
    
    
    77.6
    
    
    
    77.6
    
    
    
    0.0Boca Raton/Ft. Lauderdale
    
    
    80.3
    
    
    
    77.0
    
    
    
    4.3
    
    
    
    85.2
    
    
    
    82.0
    
    
    
    4.0New Orleans
    
    
    73.5
    
    
    
    75.5
    
    
    
    (2.7
    )
    
    
    73.7
    
    
    
    70.8
    
    
    
    4.0Minneapolis
    
    
    75.5
    
    
    
    69.4
    
    
    
    8.8
    
    
    
    70.5
    
    
    
    66.0
    
    
    
    6.8Philadelphia
    
    
    81.4
    
    
    
    72.8
    
    
    
    11.7
    
    
    
    71.1
    
    
    
    64.5
    
    
    
    10.2San Diego
    
    
    84.0
    
    
    
    83.3
    
    
    
    0.9
    
    
    
    82.8
    
    
    
    84.8
    
    
    
    (2.4
    )Phoenix
    
    
    74.9
    
    
    
    71.8
    
    
    
    4.3
    
    
    
    78.1
    
    
    
    76.5
    
    
    
    2.1San Antonio
    
    
    81.7
    
    
    
    72.7
    
    
    
    12.4
    
    
    
    75.6
    
    
    
    71.0
    
    
    
    6.5Northern New Jersey
    
    
    77.1
    
    
    
    71.1
    
    
    
    8.4
    
    
    
    71.1
    
    
    
    68.0
    
    
    
    4.6Chicago
    
    
    80.9
    
    
    
    76.4
    
    
    
    5.8
    
    
    
    71.2
    
    
    
    69.3
    
    
    
    2.8San Francisco Bay Area
    
    
    72.9
    
    
    
    67.5
    
    
    
    8.0
    
    
    
    67.6
    
    
    
    64.6
    
    
    
    4.6Houston
    
    
    73.1
    
    
    
    72.0
    
    
    
    1.5
    
    
    
    71.2
    
    
    
    72.8
    
    
    
    (2.3
    )Washington DC
    
    
    83.0
    
    
    
    78.5
    
    
    
    5.8
    
    
    
    75.1
    
    
    
    74.4
    
    
    
    1.0
 ADR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceAtlanta
    
    
    91.09
    
    
    
    86.04
    
    
    
    5.9
    
    
    
    91.12
    
    
    
    87.53
    
    
    
    4.1Dallas
    
    
    94.11
    
    
    
    90.60
    
    
    
    3.9
    
    
    
    94.84
    
    
    
    90.74
    
    
    
    4.5Los Angeles Area
    
    
    117.32
    
    
    
    111.17
    
    
    
    5.5
    
    
    
    115.94
    
    
    
    109.28
    
    
    
    6.1Orlando
    
    
    83.64
    
    
    
    75.20
    
    
    
    11.2
    
    
    
    89.44
    
    
    
    79.41
    
    
    
    12.6Boca Raton/Ft. Lauderdale
    
    
    120.37
    
    
    
    107.17
    
    
    
    12.3
    
    
    
    141.19
    
    
    
    124.07
    
    
    
    13.8New Orleans
    
    
    135.87
    
    
    
    144.35
    
    
    
    (5.9
    )
    
    
    141.58
    
    
    
    145.94
    
    
    
    (3.0
    )Minneapolis
    
    
    123.75
    
    
    
    123.37
    
    
    
    0.3
    
    
    
    123.30
    
    
    
    121.97
    
    
    
    1.1Philadelphia
    
    
    124.08
    
    
    
    110.20
    
    
    
    12.6
    
    
    
    114.94
    
    
    
    104.08
    
    
    
    10.4San Diego
    
    
    138.43
    
    
    
    124.69
    
    
    
    11.0
    
    
    
    130.74
    
    
    
    119.72
    
    
    
    9.2Phoenix
    
    
    111.95
    
    
    
    101.45
    
    
    
    10.3
    
    
    
    129.83
    
    
    
    120.55
    
    
    
    7.7San Antonio
    
    
    91.24
    
    
    
    87.15
    
    
    
    4.7
    
    
    
    88.85
    
    
    
    86.08
    
    
    
    3.2Northern New Jersey
    
    
    139.54
    
    
    
    136.78
    
    
    
    2.0
    
    
    
    136.97
    
    
    
    135.52
    
    
    
    1.1Chicago
    
    
    120.46
    
    
    
    108.45
    
    
    
    11.1
    
    
    
    110.18
    
    
    
    102.09
    
    
    
    7.9San Francisco Bay Area
    
    
    114.74
    
    
    
    114.24
    
    
    
    0.4
    
    
    
    112.88
    
    
    
    111.28
    
    
    
    1.4Houston
    
    
    72.65
    
    
    
    67.98
    
    
    
    6.9
    
    
    
    71.37
    
    
    
    71.11
    
    
    
    0.4Washington DC
    
    
    147.80
    
    
    
    127.60
    
    
    
    15.8
    
    
    
    147.86
    
    
    
    126.82
    
    
    
    16.6
 RevPAR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceAtlanta
    
    
    64.67
    
    
    
    58.04
    
    
    

    11.4
    
    
    
    64.57
    
    
    
    59.11
    
    
    
    9.2Dallas
    
    
    48.38
    
    
    
    48.46
    
    
    
    (0.2
    )
    
    
    49.63
    
    
    
    48.03
    
    
    
    3.3Los Angeles Area
    
    
    88.51
    
    
    
    79.88
    
    
    
    10.8
    
    
    
    85.08
    
    
    
    79.12
    
    
    
    7.5Orlando
    
    
    63.02
    
    
    
    59.65
    
    
    
    5.7
    
    
    
    69.45
    
    
    
    61.64
    
    
    
    12.7Boca Raton/Ft. Lauderdale
    
    
    96.71
    
    
    
    82.54
    
    
    
    17.2
    
    
    
    120.33
    
    
    
    101.72
    
    
    
    18.3New Orleans
    
    
    99.82
    
    
    
    109.04
    
    
    
    (8.5
    )
    
    
    104.36
    
    
    
    103.39
    
    
    
    0.9Minneapolis
    
    
    93.43
    
    
    
    85.62
    
    
    
    9.1
    
    
    
    86.93
    
    
    
    80.52
    
    
    
    8.0Philadelphia
    
    
    100.97
    
    
    
    80.25
    
    
    
    25.8
    
    
    
    81.71
    
    
    
    67.13
    
    
    
    21.7San Diego
    
    
    116.35
    
    
    
    103.87
    
    
    
    12.0
    
    
    
    108.23
    
    
    
    101.58
    
    
    
    6.6Phoenix
    
    
    83.87
    
    
    
    72.86
    
    
    
    15.1
    
    
    
    101.46
    
    
    
    92.24
    
    
    
    10.0San Antonio
    
    
    74.58
    
    
    
    63.39
    
    
    
    17.6
    
    
    
    67.20
    
    
    
    61.13
    
    
    
    9.9Northern New Jersey
    
    
    107.52
    
    
    
    97.21
    
    
    
    10.6
    
    
    
    97.42
    
    
    
    92.19
    
    
    
    5.7Chicago
    
    
    97.45
    
    
    
    82.91
    
    
    
    17.5
    
    
    
    78.48
    
    
    
    70.77
    
    
    
    10.9San Francisco Bay Area
    
    
    83.64
    
    
    
    77.10
    
    
    
    8.5
    
    
    
    76.31
    
    
    
    71.91
    
    
    
    6.1Houston
    
    
    53.07
    
    
    
    48.93
    
    
    
    8.5
    
    
    
    50.80
    
    
    
    51.78
    
    
    
    (1.9
    )Washington DC
    
    
    122.75
    
    
    
    100.11
    
    
    
    22.6
    
    
    
    111.10
    
    
    
    94.36
    
    
    
    17.7
 37




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Liquidity and Capital Resources
       38




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.
    39




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Reconciliation of Estimated Net Loss to Estimated FFO and EBITDA
 Third Quarter 2005 Guidance
    
    Full Year 2005 Guidance(b)Low Guidance
    
    High Guidance
    
    Low Guidance
    
    High GuidancePer Unit
    
    
    
    
    
    Per Unit
    
    
    
    
    
    Per Unit
    
    
    
    
    
    Per UnitDollars
    
    Amount(a)
    
    Dollars
    
    Amount(a)
    
    Dollars
    
    Amount(a)
    
    Dollars
    
    Amount(a)Net income (loss)
    
    $
    1
    
    
    
    
    
    
    $
    2
    
    
    
    
    
    
    $
    (15
    )
    
    
    
    
    
    $
    (13
    )Preferred distributions
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Issuance costs of redeemed
preferred units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Net income (loss)
applicable to common
unitholders
    
    
    (9
    )
    
    $
    (0.15
    )
    
    
    (8
    )
    
    $
    (0.19
    )
    
    
    (59
    )
    
    $
    (0.95
    )
    
    
    (57
    )
    
    $
    (0.92
    )Depreciation
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    133Issuance costs of redeemed
preferred units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5FFO
    
    $
    24
    
    
    $
    0.38
    
    
    $
    25
    
    
    $
    0.40
    
    
    $
    79
    
    
    $
    1.26
    
    
    $
    81
    
    
    $
    1.29Net income (loss)
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    $
    (13
    )Depreciation
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    133Interest expense
    
    
    34
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    137
    
    
    
    
    
    
    
    137Interest expense from
unconsolidated entities
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Amortization expense
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3EBITDA
    
    $
    71
    
    
    
    
    
    
    $
    72
    
    
    
    
    
    
    $
    266
    
    
    
    
    
    
    $
    268
 
 (a)
    
    Weighted average units are 62.7 million.(b)
    
    Included in full year net loss, FFO and EBITDA guidance are the following estimated
amounts (in millions, except per unit amounts): Per UnitDollar
    
    AmountAsset disposition costs
    
    $
    (1
    )
    
    $
    (0.02
    )Impairment
    
    
    (1
    )
    
    
    (0.02
    )
 40




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Inflation
  
 Seasonality
  
 Disclosure Regarding Forward-Looking Statements
  
    
    general economic and lodging industry conditions, including the anticipated
continuation of the current recovery in the economy, the realization of anticipated job
growth, the impact of the United States military involvement in the Middle East and
elsewhere, future acts of terrorism, and the impact on the travel industry of high fuel
costs and increased security precautions, the impact that the bankruptcy of one or more
major air carriers may have on our revenues and receivables;
    
    our overall debt levels and our ability to obtain new financing and service debt;
    
    our inability to retain earnings;
    
    our liquidity and capital expenditures;
    
    our growth strategy and acquisition activities;
    
    our inability to sell the hotels held for sale at anticipated prices; and
    
    competitive conditions in the lodging industry.
  41




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and Qualitative Disclosures About Market Risk
   Expected Maturity Date
at June 30, 2005
(dollars in thousands)
 Fair2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueLiabilitiesFixed rate:Debt
    
    $
    18,484
    
    
    $
    17,779
    
    
    $
    271,368
    
    
    $
    16,328
    
    
    $
    201,629
    
    
    $
    687,216
    
    
    
    
    
    
    $
    1,212,804
    
    
    $
    1,204,728Average interest
rate
    
    
    7.48
    %
    
    
    7.79
    %
    
    
    7.48
    %
    
    
    7.94
    %
    
    
    7.40
    %
    
    
    8.53
    %
    
    
    
    
    
    
    8.07
    %Floating rate:Debt
    
    
    2,728
    
    
    
    143,018
    
    
    
    2,015
    
    
    
    17,618
    
    
    
    78,537
    
    
    
    290,650
    
    
    
    
    
    
    
    534,566
    
    
    
    534,566Average interest
rate
    
    
    5.00
    %
    
    
    5.12
    %
    
    
    4.74
    %
    
    
    5.68
    %
    
    
    4.74
    %
    
    
    7.79
    %
    
    
    
    
    
    
    6.53
    %Total debt
    
    $
    21,212
    
    
    $
    160,797
    
    
    $
    273,383
    
    
    $
    33,946
    
    
    $
    280,166
    
    
    $
    977,866
    
    
    
    
    
    
    $
    1,747,370Net discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,950
    )Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,743,420Interest rate derivativesInterest rate swaps
Variable to fixed
    
    
    
    
    
    
    
    
    
    $
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000
    
    
    $
    894Average pay rate
    
    
    
    
    
    
    
    
    
    
    7.80
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.80
    %Average receive
rate
    
    
    
    
    
    
    
    
    
    
    7.79
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.79
    %
  42




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Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
  43




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PART II.  OTHER INFORMATION
 
 Item 6. Exhibits.
  Exhibit Number
    
    Description of Exhibit10.34.1
    
    Construction Loan Agreement, dated April 27, 2005, among
Grande Palms, L.L.C. and Bank of America, N.A., as
Administrative Agent, and the other financial institutions
party thereto, and Bank of America Securities, as Lead
Arranger, for a maximum principal loan amount of $69.8
million (filed as Exhibit 10.34.1 to the June 2005
10-Q and incorporated herein by reference).10.34.2
    
    Guaranty Agreement, dated April 27, 2005, by FelCor Lodging
Limited Partnership in favor of Bank of America, N.A. on
behalf of the lenders (filed as Exhibit 10.34.2 to the
June 2005 10-Q and incorporated herein by reference).10.34.3
    
    Form of Promissory Note, each dated April 27, 2005, made by
Grande Palms, L.L.C., each separately payable to the order
of Bank of America, N.A. ($25 million), Bank of Montreal
($20 million) and The Bank of Nova Scotia ($24.8 million)
(filed as Exhibit 10.34.3 to the June 2005 10-Q and
incorporated herein by reference).10.34.4
    
    Mortgage, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated April 27, 2005, made by
Grande Palms, L.L.C. for the benefit of Bank of America,
N.A., as Administrative Agent under the Construction Loan
Agreement referenced in Exhibit 10.34.1 (filed as
Exhibit 10.34.4 to the June 2005 10-Q and incorporated
herein by reference).31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Principal Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350).32.2
    
    Certification of the Principal Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350).
 44




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##### Table of Contents



SIGNATURE
   FELCOR LODGING LIMITED PARTNERSHIPa Delaware Limited PartnershipBy:
    
    FelCor Lodging Trust Incorporated
Its General Partner
 By:
    /s/ Lester C. JohnsonLester C. JohnsonSenior Vice President and
Principal Accounting Officer 45




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit Number
    
    Description of Exhibit31.1
    
    Certification of the Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of the Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of the Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).32.2
    
    Certification of the Principal Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).