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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

(Mark One)

| |     |                                                                                        
| | --- | ---------------------------------------------------------------------------------------
| | /X/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003


OR

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

For the transition period from        to


Commission file number 333-3959-01

FelCor Lodging Limited Partnership

(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|Delaware                        |  | 75-25444994        
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or                |  | Identification No.)
|organization)                   |  |                    

|                                                         |  |           
|-------------------------------------------------------- |  | ----------
|545 E. John Carpenter Freeway, Suite 1300, Irving, Texas |  | 75062     
|(Address of principal executive offices)                 |  | (Zip Code)

(972) 444-4900
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/   No
/   /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes /   /
  No /X/



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TABLE OF CONTENTS



|                                           |                                                                                               |                                                        |  |  |  |  |  | 
|------------------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  | 
|PART I.  FINANCIAL INFORMATION           
|                                           | Item 1. Financial Statements                                                                 
|                                           |                                                                                               | CONSOLIDATED BALANCE SHEETS                           
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS                 
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|                                           |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                                           |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS            
|                                           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                           |                                                                                               | General                                               
|                                           |                                                                                               | Financial Comparison                                  
|                                           |                                                                                               | Results of Operations                                 
|                                           |                                                                                               | Liquidity and Capital Resources                       
|                                           |                                                                                               | Inflation                                             
|                                           |                                                                                               | Seasonality                                           
|                                           |                                                                                               | Recent Accounting Announcements                       
|                                           |                                                                                               | Disclosure Regarding Forward Looking Statements       
|                                           | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                           | Item 4. Controls and Procedures                                                              
|PART II.  OTHER INFORMATION              
|                                           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                 
|Index to Exhibits                         
|EX-31.1 Certification of CEO - Section 302
|EX-31.2 Certification of CFO - Section 302
|EX-32.1 Certification of CEO - Section 906
|EX-32.2 Certification of CFO - Section 906



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FELCOR LODGING LIMITED PARTNERSHIP

INDEX

|                                |  |                                                                                                                                      |  |     
|------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                |  |                                                                                                                                      |  | Page
|                                |  |                                                                                                                                      |  |     
|PART I.  FINANCIAL INFORMATION | 
|Item 1.                         |  | Financial Statements                                                                                                                 |  | 3   
|                                |  | Consolidated Balance Sheets  September 30, 2003 (unaudited)
and December 31, 2002.                                                  |  | 3   
|                                |  | Consolidated Statements of Operations  For the Three and Nine Months
Ended September 30, 2003 and 2002 (unaudited)                  |  | 4   
|                                |  | Consolidated Statements of Comprehensive Income (Loss)  For the Three and Nine
Months Ended September 30, 2003 and 2002 (unaudited) |  | 5   
|                                |  | Consolidated Statements of Cash Flows  For the Nine Months
Ended September 30, 2003 and 2002 (unaudited)                            |  | 6   
|                                |  | Notes to Consolidated Financial Statements                                                                                           |  | 7   
|Item 2.                         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                |  |     
|                                |  | General                                                                                                                              |  | 28  
|                                |  | Financial Comparison                                                                                                                 |  | 29  
|                                |  | Results of Operations                                                                                                                |  | 30  
|                                |  | Liquidity and Capital Resources                                                                                                      |  | 39  
|                                |  | Inflation                                                                                                                            |  | 43  
|                                |  | Seasonality                                                                                                                          |  | 43  
|                                |  | Recent Accounting Announcements                                                                                                      |  | 44  
|                                |  | Disclosure Regarding Forward Looking Statements                                                                                      |  | 44  
|Item 3.                         |  | Quantitative and Qualitative Disclosures About Market Risk                                                                           |  | 44  
|Item 4.                         |  | Controls and Procedures                                                                                                              |  | 44  
|PART II.  OTHER INFORMATION    | 
|Item 6.                         |  | Exhibits and Reports on Form 8-K                                                                                                     |  | 45  
|SIGNATURE                       |  | 47                                                                                                                                  

2



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##### Table of Contents






PART I.  FINANCIAL INFORMATION




Item 1. Financial Statements

FELCOR LODGING LIMITED PARTNERSHIP




CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |              |           |  |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | --------- | ------- | --------- | ------------- | --------- | ------------ | --------- |  |  | 
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           | September 30, |           | December 31,
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           | 2003          |           | 2002        
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           | (unaudited)   |           |              |           | 
|ASSETS                                                                                                                                       |                                                                                                                                 |                                                           |           |         |           |               |           |             
|Investment in hotels, net of accumulated depreciation of $871,685
at September 30, 2003 and $782,166 at December 31, 2002                    |                                                                                                                                 | $                                                         | 3,275,831 |         |           | $             | 3,473,452 |             
|Investment in unconsolidated entities                                                                                                        |                                                                                                                                 |                                                           | 120,899   |         |           |               | 141,943   |             
|Hotels held for sale                                                                                                                         |                                                                                                                                 |                                                           | 82,031    |         |           |               |          |             
|Cash and cash equivalents                                                                                                                    |                                                                                                                                 |                                                           | 175,983   |         |           |               | 66,542    |             
|Accounts receivable, net of allowance for doubtful accounts of $1,106
at September 30, 2003 and $1,413 at December 31, 2002                  |                                                                                                                                 |                                                           | 52,893    |         |           |               | 48,548    |             
|Deferred expenses, net of accumulated amortization of $14,745
at September 30, 2003 and $13,357 at December 31, 2002                         |                                                                                                                                 |                                                           | 23,959    |         |           |               | 24,185    |             
|Other assets                                                                                                                                 |                                                                                                                                 |                                                           | 29,029    |         |           |               | 25,693    |             
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|                                                                                                                                             |                                                                                                                                 | Total assets                                              |           | $       | 3,760,625 |               |           | $            | 3,780,363 | 
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|LIABILITIES AND PARTNERS CAPITAL                                                                                                            |                                                                                                                                 |                                                           |           |         |           |               |           |             
|Debt, net of discount of $4,443 at September 30, 2003 and
$3,231 at December 31, 2002                                                        |                                                                                                                                 | $                                                         | 2,041,284 |         |           | $             | 1,877,134 |             
|Distributions payable                                                                                                                        |                                                                                                                                 |                                                           | 5,483     |         |           |               | 14,792    |             
|Accrued expenses and other liabilities                                                                                                       |                                                                                                                                 |                                                           | 156,873   |         |           |               | 150,385   |             
|Minority interest in other partnerships                                                                                                      |                                                                                                                                 |                                                           | 52,585    |         |           |               | 48,596    |             
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|                                                                                                                                             |                                                                                                                                 | Total liabilities                                         |           |         | 2,256,225 |               |           |              | 2,090,907 | 
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|Commitments and contingencies                                                                                                                |                                                                                                                                 |                                                           |           |         |           |               |           |             
|Redeemable units at redemption value, 3,054 and 3,290 units issued and
outstanding at September 30, 2003 and December 31, 2002, respectively |                                                                                                                                 |                                                           | 31,635    |         |           |               | 37,634    |             
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|Preferred units, $.01 par value, 20,000 units authorized:                                                                                    |                                                                                                                                 |                                                           |           |         |           |               |           |             
|                                                                                                                                             | Series A Cumulative Convertible Preferred Units, 5,980 units issued
and outstanding at September 30, 2003 and December 31, 2002 |                                                           |           | 149,512 |           |               |           | 149,512      |          
|                                                                                                                                             | Series B Cumulative Redeemable Preferred Units, 68 units issued
and outstanding at September 30, 2003 and December 31, 2002     |                                                           |           | 169,395 |           |               |           | 169,395      |          
|Common units, 64,797 and 64,420 units issued and outstanding at
September 30, 2003 and December 31, 2002, respectively                       |                                                                                                                                 |                                                           | 1,143,202 |         |           |               | 1,333,014 |             
|Accumulated other comprehensive income                                                                                                       |                                                                                                                                 |                                                           | 10,656    |         |           |               | (99       | )           
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|                                                                                                                                             |                                                                                                                                 | Total partners capital                                   |           |         | 1,472,765 |               |           |              | 1,651,822 | 
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             
|                                                                                                                                             |                                                                                                                                 | Total
liabilities, redeemable units and partners capital |           | $       | 3,760,625 |               |           | $            | 3,780,363 | 
|                                                                                                                                             |                                                                                                                                 |                                                           |           |         |           |               |           |             

The accompanying notes are an integral part of these consolidated financial statements.

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FELCOR LODGING LIMITED PARTNERSHIP




CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2003 and 2002
(unaudited, in thousands, except for per unit data)

|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |         |        |  
|------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------- | -------- | ------------------ | ------ | ----------------- | ------- | ------- | ------ | ---- | -------- | ------- | ------ | - | -------- | ------- | ------ | -
|                                                                                                        |                                               |                                     |          | Three Months Ended |        | Nine Months Ended
|                                                                                                        |                                               |                                     |          | September 30,      |        | September 30,    
|                                                                                                        |                                               |                                     |          |                    |        |                  
|                                                                                                        |                                               |                                     |          | 2003               |        | 2002              |         | 2003    |        | 2002
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |     
|Revenues:                                                                                               |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        | Hotel operating revenue                       |                                     | $        | 312,330            |        |                   | $       | 316,038 |        |      | $        | 919,920 |        |   | $        | 962,195 |       
|                                                                                                        | Retail space rental and other revenue         |                                     |          | 256                |        |                   |         | 353     |        |      |          | 875     |        |   |          | 1,451   |       
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Total revenues                                                                                          |                                               |                                     | 312,586  |                    |        |                   | 316,391 |         |        |      | 920,795  |         |        |   | 963,646  |        
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Expenses:                                                                                               |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        | Hotel departmental expenses                   |                                     |          | 113,876            |        |                   |         | 111,790 |        |      |          | 328,199 |        |   |          | 329,266 |       
|                                                                                                        | Other property operating costs                |                                     |          | 92,106             |        |                   |         | 87,877  |        |      |          | 267,998 |        |   |          | 258,220 |       
|                                                                                                        | Management and franchise fees                 |                                     |          | 16,752             |        |                   |         | 16,421  |        |      |          | 48,476  |        |   |          | 48,860  |       
|                                                                                                        | Taxes, insurance and lease expense            |                                     |          | 33,231             |        |                   |         | 32,044  |        |      |          | 97,369  |        |   |          | 98,325  |       
|                                                                                                        | Abandoned projects                            |                                     |          |                   |        |                   |         | 1,663   |        |      |          |        |        |   |          | 1,663   |       
|                                                                                                        | Corporate expenses                            |                                     |          | 3,299              |        |                   |         | 2,577   |        |      |          | 10,459  |        |   |          | 10,293  |       
|                                                                                                        | Depreciation                                  |                                     |          | 34,725             |        |                   |         | 36,044  |        |      |          | 104,898 |        |   |          | 109,491 |       
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Total operating expenses                                                                                |                                               |                                     | 293,989  |                    |        |                   | 288,416 |         |        |      | 857,399  |         |        |   | 856,118  |        
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Operating income                                                                                        |                                               |                                     | 18,597   |                    |        |                   | 27,975  |         |        |      | 63,396   |         |        |   | 107,528  |        
|Interest expense, net                                                                                   |                                               |                                     | (42,285  | )                  |        |                   | (40,528 | )       |        |      | (123,359 | )       |        |   | (122,736 | )      
|Charge-off of deferred financing costs                                                                  |                                               |                                     |         |                    |        |                   |        |         |        |      | (2,834   | )       |        |   |         |        
|Gain on early extinguishment of debt                                                                    |                                               |                                     |         |                    |        |                   |        |         |        |      | 1,260    |         |        |   |         |        
|Impairment loss                                                                                         |                                               |                                     | (107,720 | )                  |        |                   |        |         |        |      | (107,720 | )       |        |   |         |        
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Loss before equity in income of unconsolidated
entities, minority interests and gain on sales of assets |                                               |                                     | (131,408 | )                  |        |                   | (12,553 | )       |        |      | (169,257 | )       |        |   | (15,208  | )      
|                                                                                                        | Equity in income from unconsolidated entities |                                     |          | 1,674              |        |                   |         | 1,230   |        |      |          | 2,252   |        |   |          | 3,816   |       
|                                                                                                        | Gain (loss) on sale of assets                 |                                     |          | (47                | )      |                   |         |        |        |      |          | 106     |        |   |          | 5,861   |       
|                                                                                                        | Minority interests                            |                                     |          | 560                |        |                   |         | 779     |        |      |          | 421     |        |   |          | (761    | )     
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Loss from continuing operations                                                                         |                                               |                                     | (129,221 | )                  |        |                   | (10,544 | )       |        |      | (166,478 | )       |        |   | (6,292   | )      
|                                                                                                        | Discontinued operations                       |                                     |          | (3,711             | )      |                   |         | 1,119   |        |      |          | (10,798 | )      |   |          | 2,708   |       
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Net loss                                                                                                |                                               |                                     | (132,932 | )                  |        |                   | (9,425  | )       |        |      | (177,276 | )       |        |   | (3,584   | )      
|                                                                                                        | Preferred distributions                       |                                     |          | (6,727             | )      |                   |         | (6,727  | )      |      |          | (20,181 | )      |   |          | (19,565 | )     
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Net loss applicable to unitholders                                                                      |                                               | $                                   | (139,659 | )                  |        | $                 | (16,152 | )       |        | $    | (197,457 | )       |        | $ | (23,149  | )      
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|Loss per unit data:                                                                                     |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        | Basic:                                        |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |         |       
|                                                                                                        |                                               | Net loss from continuing operations |          | $                  | (2.20  | )                 |         | $       | (0.28  | )    |          | $       | (3.02  | ) |          | $       | (0.42  | )
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        |                                               | Net loss                            |          | $                  | (2.26  | )                 |         | $       | (0.26  | )    |          | $       | (3.20  | ) |          | $       | (0.38  | )
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        |                                               | Weighted average units outstanding  |          |                    | 61,851 |                   |         |         | 61,732 |      |          |         | 61,843 |   |          |         | 61,728 |  
|                                                                                                        | Diluted:                                      |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |         |       
|                                                                                                        |                                               | Net loss from continuing operations |          | $                  | (2.20  | )                 |         | $       | (0.28  | )    |          | $       | (3.02  | ) |          | $       | (0.42  | )
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        |                                               | Net loss                            |          | $                  | (2.26  | )                 |         | $       | (0.26  | )    |          | $       | (3.20  | ) |          | $       | (0.38  | )
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        
|                                                                                                        |                                               | Weighted average units outstanding  |          |                    | 61,851 |                   |         |         | 61,732 |      |          |         | 61,843 |   |          |         | 61,728 |  
|Cash distributions declared on partnership units                                                        |                                               | $                                   |         |                    |        | $                 | 0.15    |         |        | $    |         |         |        | $ | 0.45     |        
|                                                                                                        |                                               |                                     |          |                    |        |                   |         |         |        |      |          |         |        |   |          |        

The accompanying notes are an integral part of these consolidated financial statements.

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FELCOR LODGING LIMITED PARTNERSHIP




CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three and Nine Months Ended September 30, 2003 and 2002
(unaudited, in thousands)

|                                        |                    |   |                    |          |                   |   |        |        |      |   |          |          |   |   |        |        |  
|--------------------------------------- | ------------------ | - | ------------------ | -------- | ----------------- | - | ------ | ------ | ---- | - | -------- | -------- | - | - | ------ | ------ | -
|                                        |                    |   | Three Months Ended |          | Nine Months Ended
|                                        |                    |   | September 30,      |          | September 30,    
|                                        |                    |   |                    |          |                  
|                                        |                    |   | 2003               |          | 2002              |   | 2003   |        | 2002
|                                        |                    |   |                    |          |                   |   |        |        |     
|Net loss                                |                    | $ | (132,932           | )        |                   | $ | (9,425 | )      |      | $ | (177,276 | )        |   | $ | (3,584 | )     
|Foreign currency translation adjustment |                    |   | (181               | )        |                   |   | 2,762  |        |      |   | 10,755   |          |   |   | 78     |       
|                                        |                    |   |                    |          |                   |   |        |        |      |   |          |          |   |   |        |       
|                                        | Comprehensive loss |   | $                  | (133,113 | )                 |   | $      | (6,663 | )    |   | $        | (166,521 | ) |   | $      | (3,506 | )
|                                        |                    |   |                    |          |                   |   |        |        |      |   |          |          |   |   |        |       

The accompanying notes are an integral part of these consolidated financial statements.

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FELCOR LODGING LIMITED PARTNERSHIP




CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2003 and 2002
(unaudited, in thousands)

|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |         |   |         |         |  
|------------------------------------------------------ | ----------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------- | - | ----------------- | ------- | ------- | - | ------- | ------- | -
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   | Nine Months Ended
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   | September 30,    
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                  
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   | 2003              |         | 2002   
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|Cash flows from operating activities:                  |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|                                                       | Net loss                                                                                  |                                    | $                                                                        | (177,276                                                 | ) |                   | $       | (3,584  | )
|                                                       | Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |                                    |                                                                          |                                                          |   |                   |         |         |  
|                                                       |                                                                                           |                                    | Depreciation                                                             |                                                          |   | 109,113           |         |         |   | 114,592 |        
|                                                       |                                                                                           |                                    | Loss (gain) on sale of assets                                            |                                                          |   | 776               |         |         |   | (6,061  | )      
|                                                       |                                                                                           |                                    | Amortization of deferred financing fees                                  |                                                          |   | 3,660             |         |         |   | 4,010   |        
|                                                       |                                                                                           |                                    | Accretion of debt, net of discount                                       |                                                          |   | 399               |         |         |   | 307     |        
|                                                       |                                                                                           |                                    | Amortization of unearned compensation                                    |                                                          |   | 1,645             |         |         |   | 1,561   |        
|                                                       |                                                                                           |                                    | Equity in income from unconsolidated entities                            |                                                          |   | (2,252            | )       |         |   | (3,816  | )      
|                                                       |                                                                                           |                                    | Impairment loss                                                          |                                                          |   | 120,526           |         |         |   |        |        
|                                                       |                                                                                           |                                    | Charge-off of deferred finance costs, net of gain on debt
extinguishment |                                                          |   | 1,223             |         |         |   |        |        
|                                                       |                                                                                           |                                    | Minority interests                                                       |                                                          |   | (421              | )       |         |   | 761     |        
|                                                       |                                                                                           | Changes in assets and liabilities: |                                                                          |                                                          |   |                   |         |         |   |        
|                                                       |                                                                                           |                                    | Accounts receivable                                                      |                                                          |   | (4,359            | )       |         |   | (6,271  | )      
|                                                       |                                                                                           |                                    | Deferred expenses                                                        |                                                          |   | (5,001            | )       |         |   | (974    | )      
|                                                       |                                                                                           |                                    | Other assets                                                             |                                                          |   | (6,059            | )       |         |   | (6,578  | )      
|                                                       |                                                                                           |                                    | Accrued expenses and other liabilities                                   |                                                          |   | 2,735             |         |         |   | (2,921  | )      
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|                                                       |                                                                                           |                                    |                                                                          | Net cash flow provided by operating activities           |   |                   | 44,709  |         |   |         | 91,026  |  
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|Cash flows (used in) provided by investing activities: |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|                                                       | Acquisition of hotels                                                                     |                                    |                                                                          |                                                         |   |                   |         | (49,778 | )
|                                                       | Improvements and additions to hotels                                                      |                                    |                                                                          | (52,040                                                  | ) |                   |         | (34,953 | )
|                                                       | Proceeds from sale of assets                                                              |                                    |                                                                          | 12,185                                                   |   |                   |         | 29,001  |  
|                                                       | Cash from purchase of percentage interest in Interstate Joint Venture                     |                                    |                                                                          | 2,705                                                    |   |                   |         |        |  
|                                                       | Cash distributions from unconsolidated entities                                           |                                    |                                                                          | 4,384                                                    |   |                   |         | 7,806   |  
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|                                                       |                                                                                           |                                    |                                                                          | Net cash flow used in investing activities               |   |                   | (32,766 | )       |   |         | (47,924 | )
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|Cash flows (used in) provided by financing activities: |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|                                                       | Proceeds from borrowings                                                                  |                                    |                                                                          | 321,119                                                  |   |                   |         |        |  
|                                                       | Repayment of borrowings                                                                   |                                    |                                                                          | (194,308                                                 | ) |                   |         | (59,255 | )
|                                                       | Net proceeds from sale of preferred stock                                                 |                                    |                                                                          |                                                         |   |                   |         | 23,921  |  
|                                                       | Purchase of treasury stock                                                                |                                    |                                                                          |                                                         |   |                   |         | (113    | )
|                                                       | Distributions paid to other partnership minority interests                                |                                    |                                                                          |                                                         |   |                   |         | (2,058  | )
|                                                       | Distributions paid to common unitholders                                                  |                                    |                                                                          | (9,307                                                   | ) |                   |         | (21,768 | )
|                                                       | Distributions paid to preferred unitholders                                               |                                    |                                                                          | (20,181                                                  | ) |                   |         | (19,181 | )
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|                                                       |                                                                                           |                                    |                                                                          | Net cash flow provided by (used in) financing activities |   |                   | 97,323  |         |   |         | (78,454 | )
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|Effect of exchange rate changes on cash                |                                                                                           |                                    | 175                                                                      |                                                          |   |                   | (26     | )      
|Net change in cash and cash equivalents                |                                                                                           |                                    | 109,441                                                                  |                                                          |   |                   | (35,378 | )      
|Cash and cash equivalents at beginning of periods      |                                                                                           |                                    | 66,542                                                                   |                                                          |   |                   | 128,742 |        
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|Cash and cash equivalents at end of periods            |                                                                                           | $                                  | 175,983                                                                  |                                                          |   | $                 | 93,364  |        
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        
|Supplemental cash flow information 
Interest paid     |                                                                                           | $                                  | 126,141                                                                  |                                                          |   | $                 | 123,243 |        
|                                                       |                                                                                           |                                    |                                                                          |                                                          |   |                   |         |        

The accompanying notes are an integral part of these consolidated financial statements.

6



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##### Table of Contents






FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

In 1994, FelCor Lodging Limited Partnership, or FelCor LP, was established
with six hotels. We are the largest owner of full service, all-suite hotels in
the nation. Our sole general partner is FelCor Lodging Trust Incorporated, or
FelCor, the second largest lodging real estate investment trust, or REIT. At
September 30, 2003, FelCor owned an approximately 95% equity interest in our
operations. At September 30, 2003, our hotel portfolio included 76 full
service, all-suite hotels, and we are the owner of the greatest number of
Embassy Suites Hotels® and independently-owned Doubletree Guest Suites® hotels
in North America. Our portfolio also includes 79 hotels in the upscale and
full service segments.

At September 30, 2003, we had ownership interests in 177 hotels. We owned
a 100% real estate interest in 140 hotels, a 90% or greater interest in
entities owning seven hotels, a 60% interest in an entity owning two hotels, a
51% interest in an entity owning eight hotels and 50% interests in
unconsolidated entities that own 20 hotels. As a result of our ownership
interests in the operating lessees of 172 of these hotels, we reflect their
operating revenues and expenses in our consolidated statements of operations.
The operating revenues and expenses of the remaining five hotels are
unconsolidated.

At
September 30, 2003, we had an aggregate of 67,850,849 redeemable
and common units of FelCor
LP limited partnership interest outstanding.

The following table reflects the distribution, by brand, of the 172 hotels
included in our consolidated hotel operations at September 30, 2003:

|                                                               |                                         |  |     |    | 
|-------------------------------------------------------------- | --------------------------------------- |  | --- | -- | 
|Brand                                                          |                                         |  |     |   
|                                                               |                                         |  |     |   
|Hilton Hotels Corporation, or Hilton, brands:                  |                                         |  |     |   
|                                                               | Embassy Suites Hotels                   |  |     | 59 | 
|                                                               | Doubletree® and Doubletree Guest Suites |  |     | 12 | 
|                                                               | Hampton Inn®                            |  |     | 4  | 
|                                                               | Hilton and Hilton Suites®               |  |     | 2  | 
|                                                               | Homewood Suites®                        |  |     | 1  | 
|InterContinental Hotels Group brands:                          |                                         |  |     |   
|                                                               | Holiday Inn®                            |  |     | 40 | 
|                                                               | Crowne Plaza® and Crowne Plaza Suites®  |  |     | 18 | 
|                                                               | Holiday Inn Select®                     |  |     | 10 | 
|                                                               | Holiday Inn Express®                    |  |     | 3  | 
|                                                               | Staybridge Suites®                      |  |     | 1  | 
|Starwood Hotels & Resorts Worldwide Inc., or Starwood, brands: |                                         |  |     |   
|                                                               | Sheraton® and Sheraton Suites®          |  |     | 10 | 
|                                                               | Westin®                                 |  |     | 1  | 
|Marriott International, Inc., or Marriott brands:              |                                         |  |     |   
|                                                               | Fairfield Inn® by Marriott®             |  |     | 5  | 
|                                                               | Courtyard® by Marriott                  |  |     | 2  | 
|Other brands                                                   |                                         |  | 4   |   
|                                                               |                                         |  |     |   
|Total hotels                                                   |                                         |  | 172 |   
|                                                               |                                         |  |     |   

The hotels shown in the above table are located in the United States (35
states) and Canada (six hotels), with concentrations in Texas (39 hotels),
California (19 hotels), Florida (16 hotels) and Georgia (14 hotels).
Approximately 51% of our hotel room revenues were generated from hotels in
these four states during the quarter.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization  (continued)

At September 30, 2003, of the 172 consolidated hotels, (i) subsidiaries of
InterContinental Hotels Group, or IHG, managed 78, (ii) subsidiaries of Hilton
managed 71, (iii) subsidiaries of Starwood managed 11, (iv) subsidiaries of
Interstate Hotels Corporation, or IHC, managed 10, and (v) two independent
management companies managed one each.

Certain reclassifications have been made to prior period financial
information to conform to the current periods presentation with no effect to
previously reported net income (loss) or partners capital.

The financial information for the three and nine months ended September
30, 2003, and 2002, is unaudited. The preparation of the financial statements
in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. The accompanying financial
statements for the three and nine months ended September 30, 2003, and 2002,
include adjustments based on managements estimates (consisting of an
impairment charge and normal recurring accruals) which we consider necessary
for a fair presentation of the results for the periods. The financial
information should be read in conjunction with the consolidated financial
statements for the year ended December 31, 2002, included in our Annual Report
on Form 10-K for the year ended December 31, 2002 (Form 10-K). Operating
results for the three and nine months ended September 30, 2003, are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2003.

2. Acquisition of Hotels

Our hotel acquisitions consist almost exclusively of land, building,
furniture, fixtures and equipment, and inventory. We allocate the purchase
price among these asset classes based upon their respective values determined
in accordance with Statement of Financial Accounting Standards (SFAS) 141,
Business Combinations. When we acquire properties, we acquire them for use.
The only intangible assets typically acquired consist of miscellaneous
operating agreements all of which are of short duration and at market rates. We
do not acquire any significant in-place leases or other intangible assets
(e.g., management agreements, franchise agreements or trademarks) when we
acquire hotels. In conjunction with the acquisition of a hotel, we negotiate
new franchise and management agreements with the selected brand owner and
manager.

3. Investment in Unconsolidated Entities

We owned 50% interests in joint venture entities that owned 20 hotels at
September 30, 2003, and 29 hotels at September 30, 2002. We also owned a 50%
interest in entities that: own an undeveloped parcel of land; provide
condominium management services; develop condominiums in Myrtle Beach, South
Carolina; and lease four hotels. We account for our investments in these
unconsolidated entities under the equity method. We do not have any
majority-owned subsidiaries that are not consolidated in our financial
statements.

Effective June 1, 2003, we made a $0.2 million capital contribution to our
joint venture with IHC, which increased our ownership in that venture to more
than 50 percent. As a result, we began consolidating the eight hotels owned by
this venture. The consolidation of these eight hotels increased our net
investment in hotels by $73 million, increased our debt by $51 million and
reduced our investment in unconsolidated entities by $19 million.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Investment in Unconsolidated Entities  (continued)

Summarized combined financial information for 100% of our unconsolidated
entities is as follows (in thousands):

|                           |                                                       |  |               |         |              |  |   |         | 
|-------------------------- | ----------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                           |                                                       |  | September 30, |         | December 31,
|                           |                                                       |  | 2003          |         | 2002        
|                           |                                                       |  |               |         |             
|Balance sheet information: |                                                       |  |               |         |              |  |   |        
|                           | Investment in hotels, net of
accumulated depreciation |  | $             | 329,869 |              |  | $ | 383,249 | 
|                           | Total assets                                          |  | $             | 355,613 |              |  | $ | 408,979 | 
|                           | Debt                                                  |  | $             | 259,529 |              |  | $ | 278,978 | 
|                           | Total liabilities                                     |  | $             | 261,724 |              |  | $ | 279,887 | 
|                           | Equity                                                |  | $             | 93,889  |              |  | $ | 129,854 | 

Debt of our unconsolidated entities at September 30, 2003, consisted of
$214.3 million of non-recourse mortgage debt. It also included $22.7 million
of mortgage debt guaranteed by us and $22.5 million of mortgage debt guaranteed
by Hilton, on one of our joint venture partners. The debt guaranteed by us
consisted primarily of 50% of a loan related to the construction of a
residential condominium project in Myrtle Beach, South Carolina. The loan
commitment is for $97.6 million, of which approximately $45 million was
outstanding as of September 30, 2003. Our guarantee reduces from 50% to 25% of
the outstanding balance when the condominium project is completed and receives
a certificate of occupancy, which we expect to occur in late 2004.

Our guarantee is a payment guarantee and will require us to pay in the
event that the joint venture fails to pay interest or principal due under the
debt agreement. The loan matures in August 2005, and bears interest at LIBOR
plus 200 basis points. As of September 30, 2003, we had not established any
liability related to our guarantees of debt because it was not believed to be
probable that we would be required to perform under the guarantees.

Summarized combined statement of operations information for 100% of our
unconsolidated entities is as follows (in thousands):

|               |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|-------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|               |  | Three Months Ended |        | Nine Months Ended
|               |  | September 30,      |        | September 30,    
|               |  |                    |        |                  
|               |  | 2003               |        | 2002              |  | 2003 |        | 2002
|               |  |                    |        |                   |  |      |        |     
|Total revenues |  | $                  | 17,745 |                   |  | $    | 23,564 |      |  | $ | 60,613 |  |  | $ | 64,566 | 
|Net income     |  | $                  | 4,444  |                   |  | $    | 2,993  |      |  | $ | 8,161  |  |  | $ | 8,478  | 

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Debt

Debt outstanding consisted of the following (in thousands):

|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                     |           |         |  |           |           | 
|--------------------------- | ----------------------- | --------- | --------- | ---------- | ----- | ------------------ |  | ------------- | ---- | ------------- | ------- | ------------ |  | ------- | ------- | ------------------- | --------- | ------- |  | --------- | --------- | 
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         | Balance Outstanding
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                    
|                            |                         |           |           | Encumbered |       | Interest Rate at   |  | Maturity      |      | September 30, |         | December 31,
|                            |                         |           |           | Hotels     |       | September 30, 2003 |  | Date          |      | 2003          |         | 2002        
|                            |                         |           |           |            |       |                    |  |               |      |               |         |             
|Unsecured line of credit    |                         | none      |           |            | 4.37  | %(a)               |  | October 2004  |      | $             |        |              |  | $       |        |                    
|Promissory note             |                         | none      |           |            | 3.12  | (a)                |  | June 2016     |      |               | 650     |              |  |         | 650     |                    
|Senior unsecured term
notes |                         | none      |           |            | 4.33  | (b)                |  | Oct. 2004     |      |               | 174,856 |              |  |         | 174,760 |                    
|Senior unsecured term
notes |                         | none      |           |            | 5.16  | (b)                |  | Oct. 2007     |      |               | 124,592 |              |  |         | 124,518 |                    
|Senior unsecured term
notes |                         | none      |           |            | 10.00 |                    |  | Sept. 2008    |      |               | 596,697 |              |  |         | 596,195 |                    
|Senior unsecured term
notes |                         | none      |           |            | 9.00  |                    |  | June 2011     |      |               | 298,095 |              |  |         | 297,907 |                    
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                     |           |         |  |          
|                            | Total unsecured debt(c) |           |           |            |       |                    |  | 8.41          |      |               |         |              |  |         |         | 1,194,890           |           |         |  | 1,194,030 |          
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                     |           |         |  |          
|Secured debt facility       |                         | 14 hotels |           |            |      |                    |  | December 2004 |      |               |        |              |  |         |        |                    
|Mortgage debt               |                         | 10 hotels |           |            | 3.62  | (a)                |  | May 2006      |      |               | 148,914 |              |  |         |        |                    
|Mortgage debt               |                         | 15 hotels |           |            | 7.24  |                    |  | Nov. 2007     |      |               | 132,503 |              |  |         | 134,738 |                    
|Mortgage debt               |                         | 7 hotels  |           |            | 7.54  |                    |  | April 2009    |      |               | 92,917  |              |  |         | 94,288  |                    
|Mortgage debt               |                         | 6 hotels  |           |            | 7.55  |                    |  | June 2009     |      |               | 69,919  |              |  |         | 70,937  |                    
|Mortgage debt               |                         | 8 hotels  |           |            | 8.70  |                    |  | May 2010      |      |               | 178,758 |              |  |         | 180,534 |                    
|Mortgage debt               |                         | 7 hotels  |           |            | 8.73  |                    |  | May 2010      |      |               | 138,746 |              |  |         | 140,315 |                    
|Mortgage debt               |                         | 1 hotel   |           |            | 3.97  | (a)                |  | August 2008   |      |               | 15,500  |              |  |         |        |                    
|Mortgage debt               |                         | 1 hotel   |           |            | 7.17  |                    |  | October 2005  |      |               | 11,974  |              |  |         | 54,993  |                    
|Mortgage debt               |                         | 8 hotels  |           |            | 7.48  |                    |  | April 2011    |      |               | 50,507  |              |  |         |        |                    
|Other                       |                         | 1 hotel   |           |            | 9.17  |                    |  | August 2011   |      |               | 6,656   |              |  |         | 7,299   |                    
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                     |           |        
|                            | Total secured debt(c)   |           | 78 hotels |            |       | 7.24               |  |               |      |               |         |              |  | 846,394 |         |                     |           | 683,104 | 
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                     |           |        
|                            |                         | Total(c)  |           |            |       |                    |  |               | 7.93 | %             |         |              |  |         |         | $                   | 2,041,284 |         |  | $         | 1,877,134 | 
|                            |                         |           |           |            |       |                    |  |               |      |               |         |              |  |         |         |                     |           |         |  |          



|(a) |  | Floating interest rates are based on LIBOR, which was 1.1% as
of September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | At September 30, 2003, our $175 million publicly-traded notes
due October 2004 and our $125 million publicly traded notes due
October 2007, were matched with interest rate swap agreements that
effectively converted the fixed interest rate on the notes to a
floating interest rate tied to LIBOR. The differences to be paid or
received by us under the terms of the interest rate swap agreements
are accrued as interest rates change and recognized as an adjustment
to interest expense. The interest rate swaps decreased interest
expense by $1.9 million and $5.2 million for the three months and
nine months ended September 30, 2003, respectively.
|   
|(c) |  | Calculated based on the weighted average outstanding debt at
September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

We reported interest expense, net of interest income of $42.3 million and
$40.5 million and capitalized interest of $0.1 million and $0.4 million for the
three months ended September 30, 2003 and 2002, respectively. We reported
interest expense, net of interest income of $123.4 million and $122.7 million
and capitalized interest of $0.5 million and $0.6 million, for the nine months
ended September 30, 2003 and 2002, respectively.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Debt  (continued)

In June 2003, we entered into a non-recourse secured loan facility for up
to $200 million, with a delayed draw feature. This facility has an initial
term of 18 months, that can be extended for an additional six months at our
option, and carries a floating interest rate of LIBOR plus 225 to 275 basis
points, depending on the loan-to-value ratio of the facility. The outstanding
balances under the loan facility, once borrowed, are expected to be converted
into 10-year fixed rate commercial mortgage backed securities loans. We also
have the option of converting $75 million of the debt to floating-rate debt
based on LIBOR, with a three year maturity and two one year extension options.
At the date of this filing, no amounts had been borrowed, and we had $176
million available under this facility, which was secured by 14 hotels. The
amount available under this facility may be increased to a maximum of $200
million from improved performance of the hotels currently securing the facility
or as additional properties are mortgaged to secure borrowings thereunder.

On April 24, 2003, we completed a $150 million non-recourse mortgage loan,
at a floating interest rate of LIBOR plus 250 basis points, secured by 10 full
service hotels. The loan matures in May 2006, with two, one-year extension
options. The proceeds were used to pay off all outstanding borrowings under
our unsecured line of credit.

In May 2003, we made a prepayment of $7.1 million of secured debt and
recorded a gain from debt extinguishment of $0.3 million. In February 2003, we
made a prepayment of $5.2 million of secured debt and recorded a gain from debt
extinguishment of $1.0 million.

Effective March 31, 2003, we completed the refinancing of $15.5 million of
secured debt that was to mature in late 2003. Under the refinancing terms,
this fixed rate debt was converted to a floating interest rate of LIBOR plus
285 basis points effective August 2003. The new maturity is August 2008.

During the second quarter of 2003, we reduced the commitments under our
unsecured line of credit from $300 million to $50 million. The line of credit
has an accordion feature that allows us to increase the commitments to $200
million, subject to lender consent and the satisfaction of certain conditions.
As the result of this reduction in our line commitments, we charged-off
unamortized costs of $2.8 million during the second quarter. Effective
September 30, 2003, we amended certain financial covenants under our line of
credit to provide additional flexibility. Pricing under the line remained the
same and varies based upon leverage. There were no borrowings outstanding
under the line of credit at September 30, 2003.

In addition to financial covenants, our line of credit includes certain
other affirmative and negative covenants, including: restrictions on our
ability to create or acquire wholly-owned subsidiaries; restrictions on the
operation and ownership of our hotels; limitations on our ability to lease
property or guarantee leases of other persons; limitations on our ability to
make restricted payments (such as distributions on common and preferred units,
share repurchases and certain investments); limitations on our ability to merge
or consolidate with other persons, issue stock of our subsidiaries and sell all
or substantially all of our assets; restrictions on our ability to construct
new hotels or acquire hotels under construction; limitations on our ability to
change the nature of our business; limitations on our ability to modify certain
instruments; limitations on our ability to create liens; limitations on our
ability to enter into transactions with affiliates; and limitations on our
ability to enter into joint ventures. At September 30, 2003, we were in
compliance with all covenants under our line of credit.

At the date of this filing, we have no restrictions on our ability to use
our line of credit. However, at certain leverage levels, usage under the line
of line credit is restricted to fund operational cash flow shortfalls. At
these higher leverage levels, excess cash flow from operations and net cash
proceeds from sales, must first be used to reduce any outstanding balances
under our line of credit.

11



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FELCOR LODGING LIMITED
PARTNERSHIPNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Debt  (continued)

Failure to satisfy one or more of the financial or other covenants under
our line of credit would result in our inability to borrow under the line of
credit and a continuation of such default could result in an event of default,
notwithstanding our ability to meet our debt service obligations. If revenue
per available room declines continue or become more severe, we may be unable to
satisfy all of the covenant requirements under our line of credit. Other
events that would be events of default under our line of credit include a
default in the payment of other recourse indebtedness in the amount of $10
million or more, bankruptcy or a change of control.

Our other borrowings contain affirmative and negative covenants that are
generally equal to or less restrictive than those in our line of credit. Most
of our mortgage debt is non-recourse to us and contains provisions allowing for
the substitution of collateral upon satisfaction of certain conditions. Most
of our mortgage debt is prepayable, subject to various prepayment penalties,
yield maintenance or defeasance obligations.

Our publicly-traded senior unsecured notes require that we satisfy a total
leverage, a secured leverage and an interest coverage test in order to: incur
additional indebtedness, except under our line of credit or to refinance
maturing debt with replacement debt, as defined in our senior unsecured note
indentures; pay distributions in excess of the minimum distribution required to
meet FelCors REIT qualification test; repurchase FelCor common stock; or
merge. As of September 30, 2003, and the date of this filing, we have
satisfied all such incurrence tests. If revenue per available room declines
continue or become more severe, we may be unable to satisfy all of the
incurrence tests under our senior unsecured notes.

As a consequence of the prolonged economic slowdown, its impact on the
travel and lodging industries and our higher secured debt levels, Moodys
lowered its ratings on our $1.2 billion in senior unsecured debt to B1, in June
2003. This downgrade, coupled with a similar downgrade by Standard & Poors
earlier in the year to B, triggered a 50 basis point step-up in interest rates
on $900 million of our senior unsecured debt, which will continue in effect
unless and until either Moodys raises its ratings on our senior unsecured debt
to Ba3 or Standard & Poors raises its rating to BB-. On October 31, 2003,
Standard & Poors placed our credit ratings on watch, with negative
indications.

5. Derivatives

On the date we enter into a derivative contract, we designate the
derivative as a hedge to the exposure to changes in the fair value of a
recognized asset or liability or a firm commitment (referred to as a fair value
hedge), or the exposure to variable cash flows of a forecasted transaction
(referred to as a cash flow hedge). For a fair value hedge, the gain or loss
is recognized in earnings in the period of change, together with the offsetting
loss or gain on the hedged item attributable to the risk being hedged. The
effect of that accounting is to reflect in earnings the extent to which the
hedge is not effective in achieving offsetting changes in fair value. For a
cash flow hedge, the effective portion of the derivatives gain or loss is
initially reported as a component of other comprehensive income (outside
earnings) and subsequently reclassified into earnings when the forecasted
transaction affects earnings. The ineffective portion of the gain or loss is
reported in earnings immediately. At September 30, 2003, all of our
outstanding hedges were fair value hedges.

We formally document all relationships between hedging instruments and
hedged items, as well as our risk-management objective and strategy, relating
to our various hedge transactions. This process includes linking all
derivatives to specific assets and liabilities on the balance sheet or specific
firm commitments. We also formally assess (both at the hedges inception and
on an ongoing basis) whether the derivatives that are used in hedging
transactions have been highly effective in offsetting changes in the cash flows
or fair values of hedged items and whether those derivatives may be expected to
remain highly effective in future periods. When we determine that a derivative
is not (or has ceased to be) highly effective as a hedge, we will discontinue
hedge accounting, prospectively.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Derivatives  (continued)

In the normal course of business, we are exposed to the effect of interest
rate changes. We limit these risks by following established risk management
policies and procedures including the use of derivatives. It is our objective
to use interest rate hedges to manage our fixed and floating interest rate
position and not to engage in speculation on interest rates. We manage
interest rate risk based on the varying circumstances of anticipated
borrowings, and existing floating and fixed rate debt. We will generally seek
to pursue interest rate risk mitigation strategies that will result in the
least amount of reported earnings volatility under generally accepted
accounting principles, while still meeting strategic economic objectives and
maintaining adequate liquidity and flexibility. Instruments that meet these
hedging criteria are formally designated as hedges at the inception of the
derivative contract.

To manage the relative mix of our debt between fixed and variable rate
instruments, through September 30, 2003, we had entered into eleven interest
rate swap agreements with five financial institutions with an aggregate
notional value of $300 million. These interest rate swap agreements modify a
portion of the interest characteristics of our outstanding fixed rate debt,
without an exchange of the underlying principal amount, and effectively convert
fixed rate debt to a variable rate.

To determine the fair values of our derivative instruments, we use a
variety of methods and assumptions that are based on market conditions and
risks existing at each balance sheet date. All methods of assessing fair value
result in a general approximation of value, and such value may never actually
be realized.

The interest rate swap agreements held at September 30, 2003, are
designated as fair value hedges, are marked to market through the income
statement, but are offset by the change in fair value of our swapped
outstanding fixed rate debt. The estimated unrealized net gain on these
interest rate swap agreements was approximately $10.1 million at September 30,
2003, and represents the amount we would receive if the agreements were
terminated, based on current market rates.

The fixed rates we will receive and the variable rates we will pay under
these swaps, as of September 30, 2003, are summarized in the following table:

|              |  |                 |     |           |  |                 |   |            |  |                  |      |   |  |  |       |  
|------------- |  | --------------- | --- | --------- |  | --------------- | - | ---------- |  | ---------------- | ---- | - |  |  | ----- | -
|              |  |                 |     |           |  |                 |   |            |  | Weighted-average |      |   |  | 
|              |  | Notional Amount |     | Number of |  | Spread Paid in  |   | Fixed Rate
|Swap Maturity |  | (in millions)   |     | Swaps     |  | Excess of LIBOR |   | Received  
|              |  |                 |     |           |  |                 |   |           
|October 2004  |  | $               | 175 |           |  |                 | 6 |            |  |                  | 3.20 | % |  |  | 7.375 | %
|October 2007  |  |                 | 125 |           |  |                 | 5 |            |  |                  | 4.03 | % |  |  | 7.625 | %
|              |  |                 |     |           |  |                 |   |            |  |                  |      |   |  |  |       |  
|              |  | $               | 300 |           |  |                 |   |            |  |                  |      |   |  |  |       |  
|              |  |                 |     |           |  |                 |   |            |  |                  |      |   |  |  |       |  

The amounts paid or received by us under the terms of the interest rate
swap agreements are accrued as interest rates change and we recognize them as
an adjustment to interest expense, which will have a corresponding effect on
our future cash flows. The interest rate swaps decreased interest expense by
$1.9 million and $5.2 million for the three months and nine months ended
September 30, 2003, respectively. Our interest rate swaps have semi-annual
settlement dates in April and October. Agreements such as these contain a
credit risk in that the counterparties may be unable to fulfill the terms of
the agreement. We minimize that risk by evaluating the creditworthiness of our
counterparties, who are limited to major banks and financial institutions, and
we do not anticipate nonperformance by the counterparties. The Standard &
Poors credit ratings for the financial institutions that are counterparties to
our interest rate swap agreements range from A+ to AA-.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Derivatives  (continued)

To fulfill requirements under the $150 million non-recourse mortgage loan
executed in April 2003, we purchased 6% interest rate caps with a notional
amount of $150 million. We concurrently sold interest rate caps with identical
terms. These interest rate cap agreements have not been designated as hedges.
The changes in the fair value of both the purchased and sold interest rate caps
is $0.3 million at September 30, 2003, resulting in no net earnings impact.

6. Hotel Operating Revenue, Departmental Expenses and Other Property Operating
Costs

Hotel operating revenue from continuing operations was comprised of the
following (in thousands):

|                            |                                |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |         | 
|--------------------------- | ------------------------------ | - | ------------------ | ------- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                            |                                |   | Three Months Ended |         | Nine Months Ended
|                            |                                |   | September 30,      |         | September 30,    
|                            |                                |   |                    |         |                  
|                            |                                |   | 2003               |         | 2002              |   | 2003    |         | 2002
|                            |                                |   |                    |         |                   |   |         |         |     
|Room revenue                |                                | $ | 251,243            |         |                   | $ | 253,717 |         |      | $ | 731,205 |         |  | $ | 765,538 |        
|Food and beverage revenue   |                                |   | 44,570             |         |                   |   | 45,030  |         |      |   | 140,042 |         |  |   | 146,792 |        
|Other operating departments |                                |   | 16,517             |         |                   |   | 17,291  |         |      |   | 48,673  |         |  |   | 49,865  |        
|                            |                                |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|                            | Total hotel operating revenues |   | $                  | 312,330 |                   |   | $       | 316,038 |      |   | $       | 919,920 |  |   | $       | 962,195 | 
|                            |                                |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        

As indicated in the above table, approximately 99.9% of our revenue is
comprised of hotel operating revenues, which includes room revenue, food and
beverage revenue, and revenue from other hotel operating departments (such as
telephone, parking and business centers). These revenues are recorded net of
any sales or occupancy taxes collected from our guests. All rebates or
discounts are recorded, when allowed, as a reduction in revenue, and there are
no material contingent obligations with respect to rebates or discounts offered
by us. All revenues are recorded on an accrual basis, as earned. Appropriate
allowances are made for doubtful accounts and are recorded as a bad debt
expense. The remaining 0.1% of our revenue is from retail space rental revenue
and other sources.

We do not have any time-share arrangements and do not sponsor any points
programs for which we would have any contingent liability. We participate in
points programs sponsored by the brand owners of our hotels and we expense the
charges associated with those programs (typically consisting of a percentage of
the total guest charges incurred by a participating guest), as incurred. When
a guest redeems accumulated points at one of our hotels, the hotel bills the
sponsor for the services provided in redemption of such points and records
revenue in the amount of the charges billed to the sponsor. Associated with
the points programs, we have no loss contingencies or ongoing obligation beyond
what is paid to the brand owner at the time of the guests stay.

Included in total hotel operating revenue for the three months and nine
months ended September 30, 2003, was $5.8 million and $7.8 million,
respectively, of hotel operating revenue associated with the consolidation of
eight hotels in June 2003, which were previously unconsolidated.

Hotel departmental expenses from continuing operations were comprised of
the following (in thousands):

|                            |                                   |   |                    |         |                   |   |        |         |      |   |         |         |  |   |         |         | 
|--------------------------- | --------------------------------- | - | ------------------ | ------- | ----------------- | - | ------ | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                            |                                   |   | Three Months Ended |         | Nine Months Ended
|                            |                                   |   | September 30,      |         | September 30,    
|                            |                                   |   |                    |         |                  
|                            |                                   |   | 2003               |         | 2002              |   | 2003   |         | 2002
|                            |                                   |   |                    |         |                   |   |        |         |     
|Room                        |                                   | $ | 68,462             |         |                   | $ | 66,106 |         |      | $ | 192,776 |         |  | $ | 191,368 |        
|Food and beverage           |                                   |   | 37,265             |         |                   |   | 37,523 |         |      |   | 112,384 |         |  |   | 115,167 |        
|Other operating departments |                                   |   | 8,149              |         |                   |   | 8,161  |         |      |   | 23,039  |         |  |   | 22,731  |        
|                            |                                   |   |                    |         |                   |   |        |         |      |   |         |         |  |   |         |        
|                            | Total hotel departmental expenses |   | $                  | 113,876 |                   |   | $      | 111,790 |      |   | $       | 328,199 |  |   | $       | 329,266 | 
|                            |                                   |   |                    |         |                   |   |        |         |      |   |         |         |  |   |         |        

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Hotel Operating Revenue, Departmental Expenses and Other Property
Operating Costs  (continued)

Other property operating costs from continuing operations were comprised
of the following (in thousands):

|                                         |                                      |   |                    |        |                   |   |        |        |      |   |        |         |  |   |        |         | 
|---------------------------------------- | ------------------------------------ | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------ | ------- |  | - | ------ | ------- | 
|                                         |                                      |   | Three Months Ended |        | Nine Months Ended
|                                         |                                      |   | September 30,      |        | September 30,    
|                                         |                                      |   |                    |        |                  
|                                         |                                      |   | 2003               |        | 2002              |   | 2003   |        | 2002
|                                         |                                      |   |                    |        |                   |   |        |        |     
|Hotel general and administrative expense |                                      | $ | 29,131             |        |                   | $ | 28,643 |        |      | $ | 88,612 |         |  | $ | 88,171 |        
|Marketing                                |                                      |   | 27,008             |        |                   |   | 25,681 |        |      |   | 79,026 |         |  |   | 76,597 |        
|Repair and maintenance                   |                                      |   | 17,725             |        |                   |   | 16,851 |        |      |   | 51,574 |         |  |   | 49,141 |        
|Utilities                                |                                      |   | 18,242             |        |                   |   | 16,702 |        |      |   | 48,786 |         |  |   | 44,311 |        
|                                         |                                      |   |                    |        |                   |   |        |        |      |   |        |         |  |   |        |        
|                                         | Total other property operating costs |   | $                  | 92,106 |                   |   | $      | 87,877 |      |   | $      | 267,998 |  |   | $      | 258,220 | 
|                                         |                                      |   |                    |        |                   |   |        |        |      |   |        |         |  |   |        |        

Included in hotel departmental expenses and other property operating costs
were hotel compensation and benefit expenses of $103 million and $98 million
for the three months ended September 30, 2003 and 2002, respectively, and $300
million and $295 million for the nine months ended September 30, 2003 and 2002,
respectively.

Included in hotel operating expenses for the three months and nine months
ended September 30, 2003, was $4.6 million and $6.1 million, respectively,
associated with the consolidation of eight hotels in June 2003, which were
previously unconsolidated.

7. Taxes, Insurance and Lease Expense

Taxes, insurance and lease expense from continuing operations is comprised
of the following (in thousands):

|                                         |                                          |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |        | 
|---------------------------------------- | ---------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                         |                                          |   | Three Months Ended |        | Nine Months Ended
|                                         |                                          |   | September 30,      |        | September 30,    
|                                         |                                          |   |                    |        |                  
|                                         |                                          |   | 2003               |        | 2002              |   | 2003   |        | 2002
|                                         |                                          |   |                    |        |                   |   |        |        |     
|Operating lease expense (a)              |                                          | $ | 16,505             |        |                   | $ | 15,070 |        |      | $ | 45,706 |        |  | $ | 47,140 |       
|Real estate and other taxes              |                                          |   | 11,981             |        |                   |   | 13,414 |        |      |   | 37,713 |        |  |   | 39,454 |       
|Property and general liability insurance |                                          |   | 4,745              |        |                   |   | 3,560  |        |      |   | 13,950 |        |  |   | 11,731 |       
|                                         |                                          |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|                                         | Total taxes, insurance and lease expense |   | $                  | 33,231 |                   |   | $      | 32,044 |      |   | $      | 97,369 |  |   | $      | 98,325 | 
|                                         |                                          |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       



|(a) |  | Includes lease expense associated with 15 hotels owned by
unconsolidated entities. Included in lease expense is $4 million in
percentage rent for the three months ended September 30, 2003 and 2002,
and $10 million and $13 million in percentage rent for the nine months
ended September 30, 2003 and 2002, respectively.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8. Impairment Charges

We recorded impairment charges under the provisions of SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), of
$112.7 million ($107.7 million in continuing operations and $5.0 million in
discontinued operations) and $120.5 million ($107.7 million in continuing
operations and $12.8 million in discontinued operations) for the three and nine
months ended September 30, 2003, respectively.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Impairment Charges  (continued)

Our hotels are comprised of operations and cash flows that can clearly be
distinguished, operationally and for financial reporting purposes, from the
remainder of our operations. Accordingly, we consider our hotels to be
components as defined by SFAS 144 for purposes of determining impairment
charges and reporting discontinued operations.

The 2003 charges were primarily related to the third quarter decision to
sell 11 IHG-managed hotels, following an amendment to the management agreements
on these hotels. In addition, we recorded impairment charges on certain of the
28 remaining non-strategic hotels identified for sale in December 2002,
primarily triggered by decreases in fair value estimates for these hotels.

Of the 39 hotels noted in the previous paragraph, 10 hotels were
classified as held for sale. In accordance with SFAS 144, we do not consider
hotels as held for sale until it is probable that the sale will be completed
within one year. Once a hotel is held for sale the operations related to the
hotel are included in discontinued operations. We consider a hotel as held
for sale once we have executed a contract for sale, received a substantial
non-refundable deposit and allowed the buyer to complete their due diligence
review. Until a buyer has completed its due diligence review of the asset,
necessary approvals have been received and substantive conditions to the
buyers obligation to perform have been satisfied, we do not consider a sale to
be probable. Our previous experience selling hotels supports this policy.
These hotels were written down to the lower of cost or estimated fair value,
less selling costs, as of September 30, 2003, and all hotels designated as
held for sale at September 30, 2003, were sold in October 2003.

The 29 non-strategic hotels held for investment and included in our
continuing operations were tested for impairment using the undiscounted cash
flows for the shorter of the estimated remaining holding periods or the useful
life of the hotels. Those hotels that failed the impairment test described in
SFAS 144 were written down to their current estimated fair value, before any
selling expenses. These hotels continue to be depreciated over their remaining
useful lives.

We may be subject to additional impairment charges in the event that
operating results of individual hotels are materially different from our
forecasts, the economy and lodging industry remains weak, or if we shorten our
contemplated holding period for certain of our hotels.

9. Discontinued Operations

Condensed combined financial information for the 15 hotels included in
discontinued operations is as follows:

|                                           |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                           |  | Three Months Ended |        | Nine Months Ended
|                                           |  | September 30,      |        | September 30,    
|                                           |  |                    |        |                  
|                                           |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                           |  |                    |        |                   |  |      |        |     
|Hotel operating revenue                    |  | $                  | 13,002 |                   |  | $    | 15,192 |      |  | $ | 40,677  |   |  | $ | 44,472 |  
|Hotel operating expenses                   |  |                    | 11,683 |                   |  |      | 13,807 |      |  |   | 37,693  |   |  |   | 40,955 |  
|                                           |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|Operating income                           |  |                    | 1,319  |                   |  |      | 1,385  |      |  |   | 2,984   |   |  |   | 3,517  |  
|Direct interest costs                      |  |                    |       |                   |  |      | (266   | )    |  |   | (445    | ) |  |   | (809   | )
|Impairment loss                            |  |                    | (4,982 | )                 |  |      |       |      |  |   | (12,806 | ) |  |   |       |  
|Gain on the early extinguishment of debt   |  |                    | 351    |                   |  |      |       |      |  |   | 351     |   |  |   |       |  
|Loss on disposition                        |  |                    | (399   | )                 |  |      |       |      |  |   | (882    | ) |  |   |       |  
|                                           |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|Income (loss) from discontinued operations |  | $                  | (3,711 | )                 |  | $    | 1,119  |      |  | $ | (10,798 | ) |  | $ | 2,708  |  
|                                           |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Discontinued Operations  (continued)

In August 2003, we relinquished title to two low rise Harvey hotels in
Dallas through a foreclosure action. This resulted in a gain of $0.4 million
from the extinguishment of $9.6 million of debt (net of escrow balances). In
July 2003, we sold our Doubletree Guest Suites in Nashville, Tennessee, for net
proceeds of approximately $3.0 million. In May 2003, we sold two non-strategic
hotels, the 138-room Hampton Inn in Moline, Illinois, and the 132-room Hampton
Inn in Davenport, Iowa, for aggregate net sales proceeds of $6.5 million. From
the sale of these hotels we realized a net loss on disposition of $0.9 million.

The results of operations of these hotels for the three and nine months
ending September 30, 2003 and 2002 are included in discontinued operations in
the accompanying statement of operations.

10. Other Dispositions

In May 2003, we sold a parking garage adjacent to our Crowne Plaza  Union
Square hotel in San Francisco, California, for net sales proceeds of $5.6
million and realized a gain of $0.2 million.

During the nine months ended September 30, 2002, we sold our Doubletree
Guest Suites hotel in Boca Raton, Florida, for net proceeds of $6.5 million and
recorded a net gain of $0.8 million. Additionally, we sold retail space
associated with the Allerton Hotel located in Chicago, Illinois, for net
proceeds of $16.7 million and recorded a net gain of approximately $5.1
million. We also recognized a $0.2 million gain related to the condemnation of
land adjacent to one of our hotels.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Earnings (Loss) Per Unit

The following table sets forth the computation of basic and diluted
earnings (loss) per unit (in thousands, except per unit data):

|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |         |         |  
|------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------- | - | ------------------ | ------ | ----------------- | - | ------- | ------ | ---- | - | -------- | ------- | - | - | ------- | ------- | -
|                    |                                                                                                 |                               |   | Three Months Ended |        | Nine Months Ended
|                    |                                                                                                 |                               |   | September 30,      |        | September 30,    
|                    |                                                                                                 |                               |   |                    |        |                  
|                    |                                                                                                 |                               |   | 2003               |        | 2002              |   | 2003    |        | 2002
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |     
|Numerator:          |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Loss from continuing operations                                                                 |                               | $ | (129,221           | )      |                   | $ | (10,544 | )      |      | $ | (166,478 | )       |   | $ | (6,292  | )      
|                    |                                                                                                 | Less: Preferred distributions |   |                    | (6,727 | )                 |   |         | (6,727 | )    |   |          | (20,181 | ) |   |         | (19,565 | )
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Loss from continuing operations applicable
to unitholders                                       |                               |   | (135,948           | )      |                   |   | (17,271 | )      |      |   | (186,659 | )       |   |   | (25,857 | )      
|                    | Discontinued operations                                                                         |                               |   | (3,711             | )      |                   |   | 1,119   |        |      |   | (10,798  | )       |   |   | 2,708   |        
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Net loss applicable to unitholders                                                              |                               | $ | (139,659           | )      |                   | $ | (16,152 | )      |      | $ | (197,457 | )       |   | $ | (23,149 | )      
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|Denominator:        |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Denominator for basic loss per unit                                                             |                               |   | 61,851             |        |                   |   | 61,732  |        |      |   | 61,843   |         |   |   | 61,728  |        
|                    | Effect of dilutive securities:                                                                  |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |         |        
|                    |                                                                                                 | FelCor stock options          |   |                    |       |                   |   |         |       |      |   |          |        |   |   |         |        |  
|                    |                                                                                                 | Restricted shares             |   |                    |       |                   |   |         |       |      |   |          |        |   |   |         |        |  
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Denominator for diluted loss per unit  adjusted
weighted average units and assumed conversions |                               |   | 61,851             |        |                   |   | 61,732  |        |      |   | 61,843   |         |   |   | 61,728  |        
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|Loss per unit data: |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|Basic:              |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Loss from continuing operations                                                                 |                               | $ | (2.20              | )      |                   | $ | (0.28   | )      |      | $ | (3.02    | )       |   | $ | (0.42   | )      
|                    | Discontinued operations                                                                         |                               |   | (0.06              | )      |                   |   | 0.02    |        |      |   | (0.18    | )       |   |   | 0.04    |        
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Net loss                                                                                        |                               | $ | (2.26              | )      |                   | $ | (0.26   | )      |      | $ | (3.20    | )       |   | $ | (0.38   | )      
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|Diluted:            |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Loss from continuing operations                                                                 |                               | $ | (2.20              | )      |                   | $ | (0.28   | )      |      | $ | (3.02    | )       |   | $ | (0.42   | )      
|                    | Discontinued operations                                                                         |                               |   | (0.06              | )      |                   |   | 0.02    |        |      |   | (0.18    | )       |   |   | 0.04    |        
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        
|                    | Net loss                                                                                        |                               | $ | (2.26              | )      |                   | $ | (0.26   | )      |      | $ | (3.20    | )       |   | $ | (0.38   | )      
|                    |                                                                                                 |                               |   |                    |        |                   |   |         |        |      |   |          |         |   |   |        

Securities that could potentially dilute basic earnings per unit in the
future that were not included in the computation of diluted earnings per unit,
because they would have been antidilutive for the periods presented, are as
follows (in thousands):

|                                         |  |                    |       |                   |  |      |       |      |  |  |       |  |  |  |       | 
|---------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                                         |  | Three Months Ended |       | Nine Months Ended
|                                         |  | September 30,      |       | September 30,    
|                                         |  |                    |       |                  
|                                         |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                                         |  |                    |       |                   |  |      |       |     
|FelCor stock Options                     |  |                    |      |                   |  |      |      |      |  |  |      |  |  |  | 24    | 
|Restricted shares granted but not vested |  |                    | 303   |                   |  |      | 325   |      |  |  | 303   |  |  |  | 325   | 
|Series A convertible preferred units     |  |                    | 4,636 |                   |  |      | 4,636 |      |  |  | 4,636 |  |  |  | 4,636 | 

Series A convertible preferred distributions that would be excluded from
net loss applicable to unitholders, if these preferred units were dilutive,
were $2.9 million for the three months, and $8.7 million for the nine months,
ended September 30, 2003 and 2002, respectively.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Stock Based Compensation Plans

FelCor applies APB Opinion 25 and related interpretations in accounting
for its stock based compensation plans for stock based compensation issued
prior to January 1, 2003. In 1995, SFAS 123, Accounting for Stock-Based
Compensation, was issued, which, if fully adopted by FelCor, would have
changed the methods we apply in recognizing the cost of the plans. As
permitted under the transition provisions of SFAS 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, we began recognizing
compensation expense in accordance with SFAS 123 for all new awards issued
after December 31, 2002. Had the compensation cost for all of FelCors
stock-based compensation plans been determined in accordance with SFAS 123, our
net income or loss and related per unit amount for the three and nine months
ended September 30, 2003 and 2002 would approximate the pro forma amounts below
(in thousands, except per unit data):

|                                                                                                                                                             |             |   |                    |       |                   |   |        |       |      |   |          |       |   |   |        |       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------- | - | ------------------ | ----- | ----------------- | - | ------ | ----- | ---- | - | -------- | ----- | - | - | ------ | ----- | -
|                                                                                                                                                             |             |   | Three Months Ended |       | Nine Months Ended
|                                                                                                                                                             |             |   | September 30,      |       | September 30,    
|                                                                                                                                                             |             |   |                    |       |                  
|                                                                                                                                                             |             |   | 2003               |       | 2002              |   | 2003   |       | 2002
|                                                                                                                                                             |             |   |                    |       |                   |   |        |       |     
|Net loss, as reported                                                                                                                                        |             | $ | (132,932           | )     |                   | $ | (9,425 | )     |      | $ | (177,276 | )     |   | $ | (3,584 | )    
|Add stock based compensation included in
the net loss, as reported                                                                                           |             |   | 565                |       |                   |   | 526    |       |      |   | 1,645    |       |   |   | 1,561  |      
|Less stock based compensation expense that
would have been included in the
determination of net loss if the fair
value method had been applied to all
awards |             |   | (589               | )     |                   |   | (642   | )     |      |   | (1,766   | )     |   |   | (1,925 | )    
|                                                                                                                                                             |             |   |                    |       |                   |   |        |       |      |   |          |       |   |   |        |      
|Net loss, pro forma                                                                                                                                          |             | $ | (132,956           | )     |                   | $ | (9,541 | )     |      | $ | (177,397 | )     |   | $ | (3,948 | )    
|                                                                                                                                                             |             |   |                    |       |                   |   |        |       |      |   |          |       |   |   |        |      
|Basic net loss per unit:                                                                                                                                     |             |   |                    |       |                   |   |        |       |      |   |          |       |   |   |        |      
|                                                                                                                                                             | As reported |   | $                  | (2.26 | )                 |   | $      | (0.26 | )    |   | $        | (3.20 | ) |   | $      | (0.38 | )
|                                                                                                                                                             | Pro forma   |   | $                  | (2.26 | )                 |   | $      | (0.26 | )    |   | $        | (3.20 | ) |   | $      | (0.38 | )
|Diluted net loss per unit:                                                                                                                                   |             |   |                    |       |                   |   |        |       |      |   |          |       |   |   |        |      
|                                                                                                                                                             | As reported |   | $                  | (2.26 | )                 |   | $      | (0.26 | )    |   | $        | (3.20 | ) |   | $      | (0.38 | )
|                                                                                                                                                             | Pro forma   |   | $                  | (2.26 | )                 |   | $      | (0.26 | )    |   | $        | (3.20 | ) |   | $      | (0.38 | )

The effects of applying SFAS 123 in this pro forma disclosure are not
necessarily indicative of future results.

13. Consolidating Financial Information

Certain of the Companys wholly-owned subsidiaries (FelCor/CSS Holdings,
L.P.; FelCor/CSS Hotels, L.L.C.; FelCor/LAX Hotels L.L.C.; FelCor Eight Hotels,
L.L.C.; FelCor/St. Paul Holdings, L.P.; FelCor/LAX Holdings, L.P.; FHAC Nevada
Holdings, L.L.C.; FelCor TRS Holdings, L.P.; Kingston Plantation Development
Corp.; FHAC Texas Holdings, L.P.; FelCor Omaha Hotel Company, L.L.C.; FelCor
Country Villa Hotel, L.L.C.; FelCor Moline Hotel, L.L.C.; FelCor Canada Co. and
FelCor Hotel Asset Company, L.L.C., collectively, Subsidiary Guarantors),
together with FelCor and one of its wholly-owned subsidiaries (FelCor Nevada
Holdings, L.L.C.), are guarantors of senior debt. The following tables present
consolidating information for the Subsidiary Guarantors.

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Consolidating Financial Information  (continued)

CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2003
(in thousands)

|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |           |  |  | 
|------------------------------------------ | --------------------------------------------------------- | - | --------- | --------- | ----------- | - | ---------- | --------- | ------------ | - | ------------- | --------- | ------------ | - | ---------- | ---------- | ----- | - | --------- | --------- |  |  | 
|                                           |                                                           |   |           |           |             |   |            |           | Subsidiary   |   | Non-Guarantor |           |              |   |            |            | Total
|                                           |                                                           |   |           |           | FelCor L.P. |   | Guarantors |           | Subsidiaries |   | Eliminations  |           | Consolidated
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |             
|ASSETS                                     |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Net investment in hotel properties         |                                                           | $ | 298,214   |           |             | $ | 1,212,977  |           |              | $ | 1,764,640     |           |              | $ |           |            |       | $ | 3,275,831 |          
|Equity investment in consolidated entities |                                                           |   | 2,257,289 |           |             |   |           |           |              |   |              |           |              |   | (2,257,289 | )          |       |   |          |          
|Investment in unconsolidated entities      |                                                           |   | 97,399    |           |             |   | 23,500     |           |              |   |              |           |              |   |           |            |       |   | 120,899   |          
|Assets held for sale                       |                                                           |   | 6         |           |             |   | 82,025     |           |              |   |              |           |              |   |           |            |       |   | 82,031    |          
|Cash and cash equivalents                  |                                                           |   | 128,013   |           |             |   | 31,547     |           |              |   | 16,423        |           |              |   |           |            |       |   | 175,893   |          
|Accounts receivable                        |                                                           |   | 1,051     |           |             |   | 51,823     |           |              |   | 19            |           |              |   |           |            |       |   | 52,983    |          
|Deferred assets                            |                                                           |   | 17,755    |           |             |   | 820        |           |              |   | 5,384         |           |              |   |           |            |       |   | 23,959    |          
|Other assets                               |                                                           |   | 4,239     |           |             |   | 21,435     |           |              |   | 3,355         |           |              |   |           |            |       |   | 29,029    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total assets                                              |   | $         | 2,803,966 |             |   | $          | 1,424,127 |              |   | $             | 1,789,821 |              |   | $          | (2,257,289 | )     |   | $         | 3,760,625 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|LIABILITIES AND PARTNERS CAPITAL          |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Debt                                       |                                                           | $ | 1,261,443 |           |             | $ | 124,279    |           |              | $ | 655,562       |           |              | $ |           |            |       | $ | 2,041,284 |          
|Distributions payable                      |                                                           |   | 5,483     |           |             |   |           |           |              |   |              |           |              |   |           |            |       |   | 5,483     |          
|Accrued expenses and other liabilities     |                                                           |   | 23,855    |           |             |   | 109,841    |           |              |   | 23,177        |           |              |   |           |            |       |   | 156,873   |          
|Minority interest  - other partnerships    |                                                           |   | 8,785     |           |             |   | (3,193     | )         |              |   | 46,993        |           |              |   |           |            |       |   | 52,585    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total liabilities                                         |   |           | 1,299,566 |             |   |            | 230,927   |              |   |               | 725,732   |              |   |            |           |       |   |           | 2,256,225 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Redeemable units, at redemption value      |                                                           |   | 31,635    |           |             |   |           |           |              |   |              |           |              |   |           |            |       |   | 31,635    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Preferred units                            |                                                           |   | 318,907   |           |             |   |           |           |              |   |              |           |              |   |           |            |       |   | 318,907   |          
|Common units                               |                                                           |   | 1,153,858 |           |             |   | 1,182,544  |           |              |   | 1,064,089     |           |              |   | (2,257,289 | )          |       |   | 1,143,202 |          
|Accumulated other comprehensive income     |                                                           |   |          |           |             |   | 10,656     |           |              |   |              |           |              |   |           |            |       |   | 10,656    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total partners capital                                   |   |           | 1,472,765 |             |   |            | 1,193,200 |              |   |               | 1,064,089 |              |   |            | (2,257,289 | )     |   |           | 1,472,765 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total liabilities, redeemable units
and partners capital |   | $         | 2,803,966 |             |   | $          | 1,424,127 |              |   | $             | 1,789,821 |              |   | $          | (2,257,289 | )     |   | $         | 3,760,625 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Consolidating Financial Information  (continued)

CONSOLIDATING BALANCE SHEET
December 31, 2002
(in thousands)

|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |           |  |  | 
|------------------------------------------ | --------------------------------------------------------- | - | --------- | --------- | ----------- | - | ---------- | --------- | ------------ | - | ------------- | --------- | ------------ | - | ---------- | ---------- | ----- | - | --------- | --------- |  |  | 
|                                           |                                                           |   |           |           |             |   |            |           | Subsidiary   |   | Non-Guarantor |           |              |   |            |            | Total
|                                           |                                                           |   |           |           | FelCor L.P. |   | Guarantors |           | Subsidiaries |   | Eliminations  |           | Consolidated
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |             
|ASSETS                                     |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Net investment in hotel properties         |                                                           | $ | 464,473   |           |             | $ | 1,529,637  |           |              | $ | 1,479,342     |           |              | $ |           |            |       | $ | 3,473,452 |          
|Equity investment in consolidated entities |                                                           |   | 2,325,436 |           |             |   |           |           |              |   |              |           |              |   | (2,325,436 | )          |       |   |          |          
|Investment in unconsolidated entities      |                                                           |   | 120,406   |           |             |   | 21,537     |           |              |   |              |           |              |   |           |            |       |   | 141,943   |          
|Cash and cash equivalents                  |                                                           |   | 24,725    |           |             |   | 24,479     |           |              |   | 17,338        |           |              |   |           |            |       |   | 66,542    |          
|Accounts receivable                        |                                                           |   | 1,250     |           |             |   | 45,969     |           |              |   | 1,329         |           |              |   |           |            |       |   | 48,548    |          
|Deferred assets                            |                                                           |   | 19,697    |           |             |   | 937        |           |              |   | 3,551         |           |              |   |           |            |       |   | 24,185    |          
|Other assets                               |                                                           |   | 2,369     |           |             |   | 19,538     |           |              |   | 3,786         |           |              |   |           |            |       |   | 25,693    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total assets                                              |   | $         | 2,958,356 |             |   | $          | 1,642,097 |              |   | $             | 1,505,346 |              |   | $          | (2,325,436 | )     |   | $         | 3,780,363 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|LIABILITIES AND PARTNERS CAPITAL          |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |          
|Debt                                       |                                                           | $ | 1,215,925 |           |             | $ | 101,371    |           |              | $ | 559,838       |           |              | $ |           |            |       | $ | 1,877,134 |          
|Distributions payable                      |                                                           |   | 14,792    |           |             |   |           |           |              |   |              |           |              |   |           |            |       |   | 14,792    |          
|Accrued expenses and other liabilities     |                                                           |   | 38,086    |           |             |   | 96,566     |           |              |   | 15,733        |           |              |   |           |            |       |   | 150,385   |          
|Minority interest  - other partnerships    |                                                           |   | 97        |           |             |   |           |           |              |   | 48,499        |           |              |   |           |            |       |   | 48,596    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total liabilities                                         |   |           | 1,268,900 |             |   |            | 197,937   |              |   |               | 624,070   |              |   |            |           |       |   |           | 2,090,907 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Redeemable units, at redemption value      |                                                           |   | 37,634    |           |             |   |           |           |              |   |              |           |              |   |           |            |       |   | 37,634    |          
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|Preferred units                            |                                                           |   | 318,907   |           |             |   |           |           |              |   |              |           |              |   |           |            |       |   | 318,907   |          
|Common units                               |                                                           |   | 1,332,915 |           |             |   | 1,444,259  |           |              |   | 881,276       |           |              |   | (2,325,436 | )          |       |   | 1,333,014 |          
|Accumulated other comprehensive loss       |                                                           |   |          |           |             |   | (99        | )         |              |   |              |           |              |   |           |            |       |   | (99       | )        
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total partners capital                                   |   |           | 1,651,822 |             |   |            | 1,444,160 |              |   |               | 881,276   |              |   |            | (2,325,436 | )     |   |           | 1,651,822 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          
|                                           | Total liabilities, redeemable units and
partners capital |   | $         | 2,958,356 |             |   | $          | 1,642,097 |              |   | $             | 1,505,346 |              |   | $          | (2,325,436 | )     |   | $         | 3,780,363 | 
|                                           |                                                           |   |           |           |             |   |            |           |              |   |               |           |              |   |            |            |       |   |           |          

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FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Consolidating Financial Information  (continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2003
(in thousands)

|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |         | 
|-------------------------------------------------------------------------------------------------------- | ------------------------ | - | ----------- | ----- | ---------- | - | ------------ | ------- | ------------- | - | ------------ | ------ |  | - | ------- | ------- | - | - | -------- | ------- | 
|                                                                                                         |                          |   |             |       |            |   | Subsidiary   |         | Non-Guarantor |   |              |        |  |   | Total  
|                                                                                                         |                          |   | FelCor L.P. |       | Guarantors |   | Subsidiaries |         | Eliminations  |   | Consolidated
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |             
|Revenues:                                                                                                |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Hotel operating revenue                                                                                  |                          | $ | 23          |       |            | $ | 312,307      |         |               | $ |             |        |  | $ |        |         |   | $ | 312,330  |        
|Percentage lease revenue                                                                                 |                          |   | 10,597      |       |            |   | 42,554       |         |               |   | 42,544       |        |  |   | (95,695 | )       |   |   |         |        
|Other revenue                                                                                            |                          |   | (3,146      | )     |            |   | 3,402        |         |               |   |             |        |  |   |        |         |   |   | 256      |        
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|                                                                                                         | Total revenue            |   |             | 7,474 |            |   |              | 358,263 |               |   |              | 42,544 |  |   |         | (95,695 | ) |   |          | 312,586 | 
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Expenses:                                                                                                |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Hotel operating expense                                                                                  |                          |   | 30          |       |            |   | 222,704      |         |               |   |             |        |  |   |        |         |   |   | 222,734  |        
|Taxes, insurance and lease expense                                                                       |                          |   | 133         |       |            |   | 123,749      |         |               |   | 5,044        |        |  |   | (95,695 | )       |   |   | 33,231   |        
|Corporate expenses                                                                                       |                          |   | 236         |       |            |   | 2,087        |         |               |   | 976          |        |  |   |        |         |   |   | 3,299    |        
|Depreciation                                                                                             |                          |   | 3,761       |       |            |   | 13,377       |         |               |   | 17,587       |        |  |   |        |         |   |   | 34,725   |        
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|                                                                                                         | Total operating expenses |   |             | 4,160 |            |   |              | 361,917 |               |   |              | 23,607 |  |   |         | (95,695 | ) |   |          | 293,989 | 
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Operating income (loss)                                                                                  |                          |   | 3,314       |       |            |   | (3,654       | )       |               |   | 18,937       |        |  |   |        |         |   |   | 18,597   |        
|Interest expense, net                                                                                    |                          |   | (27,002     | )     |            |   | (2,531       | )       |               |   | (12,752      | )      |  |   |        |         |   |   | (42,285  | )      
|Charge-off of deferred financing cost                                                                    |                          |   |            |       |            |   |             |         |               |   |             |        |  |   |        |         |   |   |         |        
|Gain on early extinguishment of debt                                                                     |                          |   |            |       |            |   |             |         |               |   |             |        |  |   |        |         |   |   |         |        
|Impairment loss                                                                                          |                          |   |            |       |            |   | (92,675      | )       |               |   | (15,045      | )      |  |   |        |         |   |   | (107,720 | )      
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Loss before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets |                          |   | (23,688     | )     |            |   | (98,860      | )       |               |   | (8,860       | )      |  |   |        |         |   |   | (131,408 | )      
|Equity in loss from consolidated entities                                                                |                          |   | (110,817    | )     |            |   |             |         |               |   |             |        |  |   | 110,817 |         |   |   |         |        
|Equity in income from unconsolidated
entities                                                            |                          |   | 1,460       |       |            |   | 214          |         |               |   |             |        |  |   |        |         |   |   | 1,674    |        
|Gain on sale of asset                                                                                    |                          |   | (47         | )     |            |   |             |         |               |   |             |        |  |   |        |         |   |   | (47      | )      
|Minority interests in other partnerships                                                                 |                          |   | 160         |       |            |   | 734          |         |               |   | (334         | )      |  |   |        |         |   |   | 560      |        
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Loss from continuing operations                                                                          |                          |   | (132,932    | )     |            |   | (97,912      | )       |               |   | (9,194       | )      |  |   | 110,817 |         |   |   | (129,221 | )      
|Discontinued operations from
consolidated entities                                                       |                          |   |            |       |            |   | (3,711       | )       |               |   |             |        |  |   |        |         |   |   | (3,711   | )      
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Net loss                                                                                                 |                          |   | (132,932    | )     |            |   | (101,623     | )       |               |   | (9,194       | )      |  |   | 110,817 |         |   |   | (132,932 | )      
|Preferred distributions                                                                                  |                          |   | (6,727      | )     |            |   |             |         |               |   |             |        |  |   |        |         |   |   | (6,727   | )      
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        
|Net loss applicable to unitholders                                                                       |                          | $ | (139,659    | )     |            | $ | (101,623     | )       |               | $ | (9,194       | )      |  | $ | 110,817 |         |   | $ | (139,659 | )      
|                                                                                                         |                          |   |             |       |            |   |              |         |               |   |              |        |  |   |         |         |   |   |          |        

22



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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Consolidating Financial Information  (continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2002
(in thousands)

|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |         | 
|------------------------------------------------------------------------------------------------------------------ | ------------------------ | - | ----------- | ------ | ---------- | - | ------------ | ------- | ------------- | - | ------------ | ------ |  | - | ------- | ------- | - | - | ------- | ------- | 
|                                                                                                                   |                          |   |             |        |            |   | Subsidiary   |         | Non-Guarantor |   |              |        |  |   | Total  
|                                                                                                                   |                          |   | FelCor L.P. |        | Guarantors |   | Subsidiaries |         | Eliminations  |   | Consolidated
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |             
|Revenues:                                                                                                          |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Hotel operating revenue                                                                                            |                          | $ |            |        |            | $ | 315,632      |         |               | $ | 406          |        |  | $ |        |         |   | $ | 316,038 |        
|Percentage lease revenue                                                                                           |                          |   | 16,303      |        |            |   | 47,637       |         |               |   | 33,578       |        |  |   | (97,518 | )       |   |   |        |        
|Other revenue                                                                                                      |                          |   | 353         |        |            |   |             |         |               |   |             |        |  |   |        |         |   |   | 353     |        
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|                                                                                                                   | Total revenue            |   |             | 16,656 |            |   |              | 363,269 |               |   |              | 33,984 |  |   | $       | (97,518 | ) |   | $       | 316,391 | 
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Expenses:                                                                                                          |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Hotel operating expense                                                                                            |                          |   | 282         |        |            |   | 215,363      |         |               |   | 443          |        |  |   |        |         |   |   | 216,088 |        
|Taxes, insurance and other                                                                                         |                          |   | 863         |        |            |   | 122,526      |         |               |   | 6,173        |        |  |   | (97,518 | )       |   |   | 32,044  |        
|Corporate expenses                                                                                                 |                          |   | 293         |        |            |   | 1,821        |         |               |   | 463          |        |  |   |        |         |   |   | 2,577   |        
|Depreciation                                                                                                       |                          |   | 6,252       |        |            |   | 15,918       |         |               |   | 13,874       |        |  |   |        |         |   |   | 36,044  |        
|Abandoned project costs                                                                                            |                          |   | 1,663       |        |            |   |             |         |               |   |             |        |  |   |        |         |   |   | 1,663   |        
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|                                                                                                                   | Total operating expenses |   |             | 9,353  |            |   |              | 355,628 |               |   |              | 20,953 |  |   |         | (97,518 | ) |   |         | 288,416 | 
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Operating income                                                                                                   |                          |   | 7,303       |        |            |   | 7,641        |         |               |   | 13,031       |        |  |   |        |         |   |   | 27,975  |        
|Interest expense, net                                                                                              |                          |   | (26,429     | )      |            |   | (2,687       | )       |               |   | (11,412      | )      |  |   |        |         |   |   | (40,528 | )      
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Income (loss) before equity in income
from unconsolidated entities, minority
interests, and gain on sale of assets |                          |   | (19,126     | )      |            |   | 4,954        |         |               |   | 1,619        |        |  |   |        |         |   |   | (12,553 | )      
|Equity in income from consolidated
entities                                                                        |                          |   | 6,727       |        |            |   |             |         |               |   |             |        |  |   | (6,727  | )       |   |   |        |        
|Equity in income from unconsolidated
entities                                                                      |                          |   | 1,607       |        |            |   | (377         | )       |               |   |             |        |  |   |        |         |   |   | 1,230   |        
|Minority interests in other partnerships                                                                           |                          |   |            |        |            |   |             |         |               |   | 779          |        |  |   |        |         |   |   | 779     |        
|Gain on sale of assets                                                                                             |                          |   |            |        |            |   |             |         |               |   |             |        |  |   |        |         |   |   |        |        
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Income (loss) from continuing
operations                                                                           |                          |   | (10,792     | )      |            |   | 4,577        |         |               |   | 2,398        |        |  |   | (6,727  | )       |   |   | (10,544 | )      
|Discontinued operations from
consolidated entities                                                                 |                          |   | 1,367       |        |            |   | (403         | )       |               |   | 155          |        |  |   |        |         |   |   | 1,119   |        
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Net income (loss)                                                                                                  |                          |   | (9,425      | )      |            |   | 4,174        |         |               |   | 2,553        |        |  |   | (6,727  | )       |   |   | (9,425  | )      
|Preferred distributions                                                                                            |                          |   | (6,727      | )      |            |   |             |         |               |   |             |        |  |   |        |         |   |   | (6,727  | )      
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        
|Net income (loss) applicable to
unitholders                                                                        |                          | $ | (16,152     | )      |            | $ | 4,174        |         |               | $ | 2,553        |        |  | $ | (6,727  | )       |   | $ | (16,152 | )      
|                                                                                                                   |                          |   |             |        |            |   |              |         |               |   |              |        |  |   |         |         |   |   |         |        

23



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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Consolidating Financial Information  (continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2003
(in thousands)

|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |         | 
|----------------------------------------------------------------------------------------------------------------- | ------------------------ | - | ----------- | ------ | ---------- | - | ------------ | --------- | ------------- | - | ------------ | ------- |  | - | -------- | -------- | - | - | -------- | ------- | 
|                                                                                                                  |                          |   |             |        |            |   | Subsidiary   |           | Non-Guarantor |   |              |         |  |   | Total   
|                                                                                                                  |                          |   | FelCor L.P. |        | Guarantors |   | Subsidiaries |           | Eliminations  |   | Consolidated
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |             
|Revenues:                                                                                                         |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Hotel operating revenue                                                                                           |                          | $ | 23          |        |            | $ | 918,437      |           |               | $ | 1,460        |         |  | $ |         |          |   | $ | 919,920  |        
|Percentage lease revenue                                                                                          |                          |   | 41,615      |        |            |   | 123,855      |           |               |   | 127,441      |         |  |   | (292,911 | )        |   |   |         |        
|Other revenue                                                                                                     |                          |   | (2,814      | )      |            |   | 3,611        |           |               |   | 78           |         |  |   |         |          |   |   | 875      |        
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|                                                                                                                  | Total revenue            |   |             | 38,824 |            |   |              | 1,045,903 |               |   |              | 128,979 |  |   |          | (292,911 | ) |   | $        | 920,795 | 
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Expenses:                                                                                                         |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Hotel operating expense                                                                                           |                          |   | 151         |        |            |   | 643,653      |           |               |   | 869          |         |  |   |         |          |   |   | 644,673  |        
|Taxes, insurance and lease expense                                                                                |                          |   | 6,285       |        |            |   | 365,442      |           |               |   | 18,553       |         |  |   | (292,911 | )        |   |   | 97,369   |        
|Corporate expenses                                                                                                |                          |   | 1,064       |        |            |   | 6,134        |           |               |   | 3,261        |         |  |   |         |          |   |   | 10,459   |        
|Depreciation                                                                                                      |                          |   | 15,030      |        |            |   | 43,142       |           |               |   | 46,726       |         |  |   |         |          |   |   | 104,898  |        
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|                                                                                                                  | Total operating expenses |   |             | 22,530 |            |   |              | 1,058,371 |               |   |              | 69,409  |  |   |          | (292,911 | ) |   |          | 857,399 | 
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Operating (loss) income                                                                                           |                          |   | 16,294      |        |            |   | (12,468      | )         |               |   | 59,570       |         |  |   |         |          |   |   | 63,396   |        
|Interest expense, net                                                                                             |                          |   | (78,259     | )      |            |   | (8,423       | )         |               |   | (36,677      | )       |  |   |         |          |   |   | (123,359 | )      
|Charge-off of deferred financing cost                                                                             |                          |   | (2,830      | )      |            |   | (4           | )         |               |   |             |         |  |   |         |          |   |   | (2,834   | )      
|Gain on early extinguishment of debt                                                                              |                          |   | 929         |        |            |   |             |           |               |   | 331          |         |  |   |         |          |   |   | 1,260    |        
|Impairment loss                                                                                                   |                          |   |            |        |            |   | (84,851      | )         |               |   | (22,869      | )       |  |   |         |          |   |   | (107,720 | )      
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets |                          |   | (63,866     | )      |            |   | (105,746     | )         |               |   | 355          |         |  |   |         |          |   |   | (169,257 | )      
|Equity in loss from consolidated entities                                                                         |                          |   | (116,056    | )      |            |   |             |           |               |   |             |         |  |   | 116,056  |          |   |   |         |        
|Equity in income from unconsolidated
entities                                                                     |                          |   | 2,547       |        |            |   | (295         | )         |               |   |             |         |  |   |         |          |   |   | 2,252    |        
|Gain (loss) on sale of assets                                                                                     |                          |   | (47         | )      |            |   | 153          |           |               |   |             |         |  |   |         |          |   |   | 106      |        
|Minority interests in other partnerships                                                                          |                          |   | 146         |        |            |   | 644          |           |               |   | (369         | )       |  |   |         |          |   |   | 421      |        
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Loss from continuing operations                                                                                   |                          |   | (177,276    | )      |            |   | (105,244     | )         |               |   | (14          | )       |  |   | 116,056  |          |   |   | (166,478 | )      
|Discontinued operations from
consolidated entities                                                                |                          |   |            |        |            |   | (10,798      | )         |               |   |             |         |  |   |         |          |   |   | (10,798  | )      
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Net loss                                                                                                          |                          |   | (177,276    | )      |            |   | (116,042     | )         |               |   | (14          | )       |  |   | 116,056  |          |   |   | (177,276 | )      
|Preferred distributions                                                                                           |                          |   | (20,181     | )      |            |   |             |           |               |   |             |         |  |   |         |          |   |   | (20,181  | )      
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Net loss applicable to unitholders                                                                                |                          | $ | (197,457    | )      |            | $ | (116,042     | )         |               | $ | (14          | )       |  | $ | 116,056  |          |   | $ | (197,457 | )      
|                                                                                                                  |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        

24



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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.     Consolidating Financial Information  (continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2002
(in thousands)

|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |         | 
|------------------------------------------------------------------------------------------------------------------ | ------------------------ | - | ----------- | ------ | ---------- | - | ------------ | --------- | ------------- | - | ------------ | ------- |  | - | -------- | -------- | - | - | -------- | ------- | 
|                                                                                                                   |                          |   |             |        |            |   | Subsidiary   |           | Non-Guarantor |   |              |         |  |   | Total   
|                                                                                                                   |                          |   | FelCor L.P. |        | Guarantors |   | Subsidiaries |           | Eliminations  |   | Consolidated
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |             
|Revenues:                                                                                                          |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Hotel operating revenue                                                                                            |                          | $ |            |        |            | $ | 960,121      |           |               | $ | 2,074        |         |  | $ |         |          |   | $ | 962,195  |        
|Percentage lease revenue                                                                                           |                          |   | 47,110      |        |            |   | 140,954      |           |               |   | 115,620      |         |  |   | (303,684 | )        |   |   |         |        
|Other revenue                                                                                                      |                          |   | 1,406       |        |            |   |             |           |               |   | 45           |         |  |   |         |          |   |   | 1,451    |        
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|                                                                                                                   | Total revenue            |   |             | 48,516 |            |   |              | 1,101,075 |               |   |              | 117,739 |  |   |          | (303,684 | ) |   |          | 963,646 | 
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Expenses:                                                                                                          |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Hotel operating expense                                                                                            |                          |   | 282         |        |            |   | 634,585      |           |               |   | 1,479        |         |  |   |         |          |   |   | 636,346  |        
|Taxes, insurance and other                                                                                         |                          |   | 3,628       |        |            |   | 379,876      |           |               |   | 18,505       |         |  |   | (303,684 | )        |   |   | 98,325   |        
|Corporate expenses                                                                                                 |                          |   | 1,222       |        |            |   | 6,450        |           |               |   | 2,621        |         |  |   |         |          |   |   | 10,293   |        
|Depreciation                                                                                                       |                          |   | 17,850      |        |            |   | 48,441       |           |               |   | 43,200       |         |  |   |         |          |   |   | 109,491  |        
|Abandoned project costs                                                                                            |                          |   | 1,663       |        |            |   |             |           |               |   |             |         |  |   |         |          |   |   | 1,663    |        
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|                                                                                                                   | Total operating expenses |   |             | 24,645 |            |   |              | 1,069,352 |               |   |              | 65,805  |  |   |          | (303,684 | ) |   |          | 856,118 | 
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Operating income                                                                                                   |                          |   | 23,871      |        |            |   | 31,723       |           |               |   | 51,934       |         |  |   |         |          |   |   | 107,528  |        
|Interest expense, net                                                                                              |                          |   | (80,716     | )      |            |   | (7,835       | )         |               |   | (34,185      | )       |  |   |         |          |   |   | (122,736 | )      
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Income (loss) before equity in income
from unconsolidated entities, minority
interests, and gain on sale of assets |                          |   | (56,845     | )      |            |   | 23,888       |           |               |   | 17,749       |         |  |   |         |          |   |   | (15,208  | )      
|Equity in income from consolidated
entities                                                                        |                          |   | 44,642      |        |            |   |             |           |               |   |             |         |  |   | (44,642  | )        |   |   |         |        
|Equity in income from unconsolidated
entities                                                                      |                          |   | 4,664       |        |            |   | (848         | )         |               |   |             |         |  |   |         |          |   |   | 3,816    |        
|Minority interests in other partnerships                                                                           |                          |   |            |        |            |   |             |           |               |   | (761         | )       |  |   |         |          |   |   | (761     | )      
|Gain on sale of assets                                                                                             |                          |   |            |        |            |   | 5,861        |           |               |   |             |         |  |   |         |          |   |   | 5,861    |        
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Income (loss) from continuing operations                                                                           |                          |   | (7,539      | )      |            |   | 28,901       |           |               |   | 16,988       |         |  |   | (44,642  | )        |   |   | (6,292   | )      
|Discontinued operations from
consolidated entities                                                                 |                          |   | 3,955       |        |            |   | (1,904       | )         |               |   | 657          |         |  |   |         |          |   |   | 2,708    |        
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Net income (loss)                                                                                                  |                          |   | (3,584      | )      |            |   | 26,997       |           |               |   | 17,645       |         |  |   | (44,642  | )        |   |   | (3,584   | )      
|Preferred distributions                                                                                            |                          |   | (19,565     | )      |            |   |             |           |               |   |             |         |  |   |         |          |   |   | (19,565  | )      
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        
|Net income (loss) applicable to
unitholders                                                                        |                          | $ | (23,149     | )      |            | $ | 26,997       |           |               | $ | 17,645       |         |  | $ | (44,642  | )        |   | $ | (23,149  | )      
|                                                                                                                   |                          |   |             |        |            |   |              |           |               |   |              |         |  |   |          |          |   |   |          |        

25



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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.     Consolidating Financial Information  (continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2003
(in thousands)

|                                                 |  |             |         |            |  |              |        |               |  |       |         |   |  |   |         |  
|------------------------------------------------ |  | ----------- | ------- | ---------- |  | ------------ | ------ | ------------- |  | ----- | ------- | - |  | - | ------- | -
|                                                 |  |             |         |            |  | Subsidiary   |        | Non-Guarantor |  | Total
|                                                 |  | FelCor L.P. |         | Guarantors |  | Subsidiaries |        | Consolidated 
|                                                 |  |             |         |            |  |              |        |              
|Cash flows from (used in) operating activities   |  | $           | (41,553 | )          |  | $            | 22,995 |               |  | $     | 63,267  |   |  | $ | 44,709  |  
|Cash flows used in investing activities          |  |             | (7,682  | )          |  |              | (6,488 | )             |  |       | (18,596 | ) |  |   | (32,766 | )
|Cash flows from (used in) financing activities   |  |             | 152,523 |            |  |              | (9,614 | )             |  |       | (45,586 | ) |  |   | 97,323  |  
|Effect of exchange rates changes on cash         |  |             |        |            |  |              | 175    |               |  |       |        |   |  |   | 175     |  
|                                                 |  |             |         |            |  |              |        |               |  |       |         |   |  |   |         |  
|Change in cash and cash equivalents              |  |             | 103,288 |            |  |              | 7,068  |               |  |       | (915    | ) |  |   | 109,441 |  
|Cash and cash equivalents at beginning of period |  |             | 24,725  |            |  |              | 24,479 |               |  |       | 17,338  |   |  |   | 66,542  |  
|                                                 |  |             |         |            |  |              |        |               |  |       |         |   |  |   |         |  
|Cash and equivalents at end of period            |  | $           | 128,013 |            |  | $            | 31,547 |               |  | $     | 16,423  |   |  | $ | 175,983 |  
|                                                 |  |             |         |            |  |              |        |               |  |       |         |   |  |   |         |  

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2002
(in thousands)

|                                                 |  |             |         |            |  |              |         |               |  |       |         |   |  |   |         |  
|------------------------------------------------ |  | ----------- | ------- | ---------- |  | ------------ | ------- | ------------- |  | ----- | ------- | - |  | - | ------- | -
|                                                 |  |             |         |            |  | Subsidiary   |         | Non-Guarantor |  | Total
|                                                 |  | FelCor L.P. |         | Guarantors |  | Subsidiaries |         | Consolidated 
|                                                 |  |             |         |            |  |              |         |              
|Cash
flows from (used in) operating activities   |  | $           | (43,269 | )          |  | $            | 72,094  |               |  | $     | 62,201  |   |  | $ | 91,026  |  
|Cash flows from (used in) investing activities   |  |             | (51,847 | )          |  |              | (5,617  | )             |  |       | 9,540   |   |  |   | (47,924 | )
|Cash flows from (used in) financing activities   |  |             | 68,584  |            |  |              | (79,457 | )             |  |       | (67,581 | ) |  |   | (78,454 | )
|Effect of exchange rates changes on cash         |  |             |         |            |  |              | (26     | )             |  |       |         |   |  |   | (26     | )
|                                                 |  |             |         |            |  |              |         |               |  |       |         |   |  |   |         |  
|Change in cash and cash equivalents              |  |             | (26,532 | )          |  |              | (13,006 | )             |  |       | 4,160   |   |  |   | (35,378 | )
|Cash and cash equivalents at beginning of period |  |             | 68,463  |            |  |              | 47,318  |               |  |       | 12,961  |   |  |   | 128,742 |  
|                                                 |  |             |         |            |  |              |         |               |  |       |         |   |  |   |         |  
|Cash and equivalents at end of period            |  | $           | 41,931  |            |  | $            | 34,312  |               |  | $     | 17,121  |   |  | $ | 93,364  |  
|                                                 |  |             |         |            |  |              |         |               |  |       |         |   |  |   |         |  

14. Contingencies

We lease a hotel under a lease that expires in 2004, subject to our right,
exercisable during the fourth quarter of this year, to extend the term of the
lease under certain conditions. On July 31, 2003, the lessor under this lease
asserted that we were in default of our obligations for maintenance, repair and
replacement under the lease, and asserted that the cost of correcting the
alleged deficiencies was approximately $13.9 million. On November 3, 2003, we
reached a settlement with the lessor regarding a portion of the lessors claim,
pursuant to which we paid the lessor $296,000 in full satisfaction and
discharge of certain maintenance obligations under our lease that the lessor
had valued in its original claim at $470,300. We have not yet completed our
evaluation of the remainder of the lessors claims to determine whether or not
the remaining claims have any merit.

26



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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Subsequent Events

In October 2003, we sold the following non-strategic assets:



| |  |  | Five non-strategic hotels, consisting of Embassy Suites
Hotels in Phoenix, Arizona, Syracuse, New York, and Flagstaff,
Arizona, and Doubletree Guest Suites hotels in Columbus, Ohio,
and Dayton, Ohio, with a total of 894 suites, for an aggregate of
$50 million;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Four Holiday Inn hotels located in Ontario, Canada,
with a total of 630 rooms, for $32 million;                                                                                                                                                                     
|
| |  |  | A Holiday Inn hotel located in Texarkana, Arkansas, and
a Crowne Plaza hotel located in Greenville, South Carolina, for
combined proceeds of $8.5 million; and                                                                                                      
|
| |  |  | A parking garage adjacent to our Crowne Plaza hotel in
Philadelphia, Pennsylvania, for $6.8 million.                                                                                                                                                                

The net realized gain on the October 2003 asset sales was approximately
$3.2 million, which assumes the completion of a tax free exchange for the
Canadian hotels for both US and Canadian purposes.

16. Recent Accounting Announcements

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
150 Accounting for Certain Financial Instruments with Characteristics of both
Liability and Equity, which became effective during the three
months ended September 30, 2003. Neither SFAS 150 or
subsequently issued FASB staff positions have a material impact on our consolidated financial statements.

27



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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations




General

For background information relating to us and the definition of certain
capitalized terms used herein, reference is made to Notes 1 and 2 of Notes to
Consolidated Financial Statements of FelCor Lodging Limited Partnership
appearing elsewhere herein.

We identified three strategic objectives for 2003: reposition our
portfolio; improve the competitive positioning of our hotel portfolio; and
maintain our financial flexibility. We have made the following progress in
meeting these objectives through the date of this filing:



| |  |  | Repositioning our portfolio
| | - |  | ---------------------------



| |  |  | At the end of 2002, we identified 33 non-strategic hotels
for sale, which were generally smaller hotels in secondary and
tertiary markets, with about one-third of these hotels in Texas
where we intend to reduce our concentration of hotels.                                                                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | To date, we have disposed of 16 of the 33 hotels
identified in late 2002, (including 11 subsequent to September 30,
2003) and have 17 remaining to sell.                                                                                                                                                                                     
|
| |  |  | During the third quarter we identified an additional 11
InterContential Hotels Group, or IHG, managed hotels to sell,
after amending the management agreements to provide us with
greater flexibility to sell certain hotels. The hotels identified
as non-strategic, are generally in high supply growth markets with
low barriers to entry.
|
| |  |  | The 28 non-strategic hotels held at November 1, 2003,
represent 16% of our available rooms, while only comprising 5% of
our hotel-level EBITDA. Of these non-strategic hotels, we
estimate that six will generate negative hotel-level EBITDA of
approximately $0.05 per unit for the full year 2003.                                        



| |  |  | Improve the competitive positioning of our hotels
| | - |  | -------------------------------------------------



| |  |  | We continue to provide the necessary capital spending to
add long-term value to our hotels. We spent approximately $52
million, on capital expenditures for our hotels during the nine
months ended September 30, 2003, or 6% of revenues. We expect to
spend approximately $70 million, including both replacement and
revenue enhancing projects, for the full year 2003, or
approximately 6% of revenues.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Earlier this year, we re-branded an independent hotel to
a Staybridge Suites® hotel. This hotel had an 18% increase in
revenue per available room, or RevPAR, in the third quarter in a
difficult Dallas market.                                                                                                                                                                                            
|
| |  |  | We acquired two hotels in 2002 and subsequently renovated
and rebranded them. The Doubletree hotel in Charlotte, South
Carolina improved RevPAR by 10.1% in the third quarter over the
prior year period and the Hilton Myrtle Beach hotel improved
RevPAR by 8.3% for the same periods.                                                                                                                    



| |  |  | Maintaining our financial flexibility
| | - |  | -------------------------------------



| |  |  | In October 2003, we executed an agreement with IHG
amending the management agreements covering 58 of the hotels we
currently own, and also affecting 14 hotels previously sold. We
also extended the management agreements on 27 hotels that we plan
to hold long term, in exchange for increased flexibility in asset
sales, where we will use the proceeds to pay down debt. We also
received the right to rebrand three independent hotels managed by
IHG to brands that will add incremental value to our portfolio.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | At the end of the quarter we had cash on hand of $176
million. After the asset sales that closed in October of 2003, we
have approximately $270 million in cash.                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | In addition to our cash position we have access to $176
million under our $200 million secured debt facility and $50
million under our unsecured line of credit. The secured debt
facility provides a source for the repayment of the October 2004
maturity of our $175 million in senior unsecured notes.                                                                                                                                                                                                              

28



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##### Table of Contents






Financial Comparison (in millions, except Revenue Per Available Room
(RevPAR), operating margin and percentage change)

|                                                                             |  |                    |        |                   |  |      |       |      |  |   |        |   |  |   |       |  
|---------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                                                             |  | Three Months Ended |        | Nine Months Ended
|                                                                             |  | September 30,      |        | September 30,    
|                                                                             |  |                    |        |                  
|                                                                             |  | 2003               |        | 2002              |  | 2003 |       | 2002
|                                                                             |  |                    |        |                   |  |      |       |     
|RevPAR                                                                       |  | $                  | 60.54  |                   |  | $    | 62.02 |      |  | $ | 60.08  |   |  | $ | 63.20 |  
|Operating Margin(1)                                                          |  |                    | 28.7   | %                 |  |      | 31.6  | %    |  |   | 29.9   | % |  |   | 33.9  | %
|Net loss(2)                                                                  |  | $                  | (132.9 | )                 |  | $    | (9.4  | )    |  | $ | (177.3 | ) |  | $ | (3.6  | )
|Funds From Operations (FFO)(2)                                             |  | $                  | (101.3 | )                 |  | $    | 24.6  |      |  | $ | (79.8  | ) |  | $ | 93.8  |  
|FFO per unit(2)                                                              |  | $                  | (1.63  | )                 |  | $    | 0.40  |      |  | $ | (1.28  | ) |  | $ | 1.51  |  
|Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA)(2) |  | $                  | (49.8  | )                 |  | $    | 75.5  |      |  | $ | 73.0   |   |  | $ | 247.2 |  



---

|(1) |  | Operating margin is calculated by dividing hotel operating revenue in
excess of hotel departmental expenses, other property operating costs,
and management and franchise fees by hotel operating revenue.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Consistent with recently clarified SEC guidance, FFO and EBITDA have
not been adjusted for the following amounts included in net loss (in
thousands):                                                     

|                                     |                         |   |                    |          |                   |   |        |   |      |   |          |          |   |   |        |   | 
|------------------------------------ | ----------------------- | - | ------------------ | -------- | ----------------- | - | ------ | - | ---- | - | -------- | -------- | - | - | ------ | - | 
|                                     |                         |   | Three Months Ended |          | Nine Months Ended
|                                     |                         |   | September 30,      |          | September 30,    
|                                     |                         |   |                    |          |                  
|                                     |                         |   | 2003               |          | 2002              |   | 2003   |   | 2002
|                                     |                         |   |                    |          |                   |   |        |   |     
|Impairment loss:                     |                         |   |                    |          |                   |   |        |   |      |   |          |          |   |   |        |  
|                                     | Continuing operations   |   | $                  | (107,720 | )                 |   | $      |  |      |   | $        | (107,720 | ) |   | $      |  | 
|                                     | Discontinued operations |   |                    | (4,982   | )                 |   |        |  |      |   |          | (12,806  | ) |   |        |  | 
|                                     |                         |   |                    |          |                   |   |        |   |      |   |          |          |   |   |        |  
|                                     | Total impairment loss   |   |                    | (112,702 | )                 |   |        |  |      |   |          | (120,526 | ) |   |        |  | 
|Charge off of deferred debt costs    |                         |   |                   |          |                   |   |       |   |      |   | (2,834   | )        |   |   |       |  
|Gain on early extinguishment of debt |                         |   | 351                |          |                   |   |       |   |      |   | 1,611    |          |   |   |       |  
|Abandoned projects                   |                         |   |                   |          |                   |   | (1,663 | ) |      |   |         |          |   |   | (1,663 | )
|                                     |                         |   |                    |          |                   |   |        |   |      |   |          |          |   |   |        |  
|                                     |                         | $ | (112,351           | )        |                   | $ | (1,663 | ) |      | $ | (121,749 | )        |   | $ | (1,663 | )
|                                     |                         |   |                    |          |                   |   |        |   |      |   |          |          |   |   |        |  
|Per unit amounts                     |                         | $ | (1.81              | )        |                   | $ | (0.03  | ) |      | $ | (1.96    | )        |   | $ | (0.03  | )
|                                     |                         |   |                    |          |                   |   |        |   |      |   |          |          |   |   |        |  

For a discussion of the computation of FFO and EBITDA, and a
reconciliation thereof to net income (loss), see Results of Operations  Funds
From Operations and EBITDA below.

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Results of Operations

Comparison of the Three Months Ended September 30, 2003 and 2002

We recognized a net loss of $132.9 million for the three months ended
September 30, 2003, compared to a net loss of $9.4 million for the same period
in 2002. The principal reason for the increased net loss in the third quarter
of 2003, compared to 2002, was an impairment charge of $112.7 million. The
impairment charge primarily related to the third quarter decision to sell 11
IHG-managed hotels, following an amendment to the management agreements on
these hotels, and an additional impairment charge on certain of the 28
remaining non-strategic hotels identified for sale in December 2002.

Total revenue decreased by $3.8 million compared to the same period in
2002. The primary component of the decrease in total revenue was a decrease in
room revenue of $2.5 million. One of the hotel industrys principal
measurements of room revenue is RevPAR. Our consolidated hotel portfolio
RevPAR for the three months ended September 30, 2003, was $60.54, or 2.4% below
that of the same period in 2002. The decrease in RevPAR resulted from a 2.7%
decrease in average daily rate, or ADR, somewhat offset by a 0.3% increase in
occupied rooms as a percentage of available rooms, or Occupancy. The decrease
in RevPAR principally reflected a decline in business travel for the three
months ended September 30, 2003, compared to the same period in the prior year.
The sluggish economy and soft corporate transient demand continues to
adversely affect the lodging industry. Included in total revenue for the third
quarter of 2003 was $5.8 million of revenue associated with the consolidation
of eight hotels in June 2003, which were previously unconsolidated.

Total operating expenses increased by $5.6 million, to $294 million, for
the three months ended September 30, 2003, compared to the same period in 2002.
This increase primarily consisted of increases in hotel operating expenses
(defined as hotel departmental expenses, other property operating costs and
management and franchise fees) and operating lease expense.

Hotel operating expenses increased by $6.6 million (of which $4.6 million
was associated with the consolidation of eight hotels in June 2003, which were
previously unconsolidated), for the three months ended September 30, 2003,
compared to the same period in 2002, and hotel operating margins, as a
percentage of hotel operating revenues, decreased by 290 basis points, compared
to the same period last year. The deterioration in margins is principally
related to a 2.7% decline in ADR, and increases, as a percentage of hotel
revenue, in energy costs (60 basis points), repairs and maintenance (30 basis
points) and marketing (50 basis points). In addition, included in departmental
and administrative and general expenses were increases in employee wages and
benefit costs (in spite of a lower headcount) compared to prior year, which
resulted in an increase in these costs as a percentage of total revenue of 100
basis points.

Depreciation expense decreased by $1.3 million in the current quarter,
compared to the same quarter of 2002, primarily from a increase in fully
depreciated furniture, fixtures and equipment.

Taxes, insurance and lease expense increased $1.2 million, compared to the
same period of 2002, principally from an increase in operating lease expense of
$1.4 million and property and general liability insurance expense of $1.2
million. These increases were partially offset by a decrease in real estate
and other taxes of $1.4 million. The comparative increase in operating lease
expense resulted from an adjustment that reduced lease expense in the third
quarter of 2002 by $1.5 million. Real estate and other taxes decreased
primarily from an adjustment to reflect the expected resolution of prior years
disputed property taxes.

Interest expense, net of interest income, increased $1.8 million for the
three months ended September 30, 2003, from the same period in 2002. This net
increase primarily relates to a $2.3 million increase from a higher average
debt balance, partially offset by a $0.6 million decrease from a lower average
interest cost. The higher average debt balance relates to our decision in the
first quarter of 2003, to carry excess cash.

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During the third quarter, we recorded a $112.7 million impairment charge
primarily related to the decision to sell 11 IHG-managed hotels, following an
amendment to the management agreements on these hotels, and an
additional impairment charge on certain of the 28 remaining non-strategic
hotels identified for sale in December 2002. Of the impairment charge, $107.7
million was recorded as part of continuing operations and $5.0 million was
recorded in discontinued operations. The 30 non-strategic hotels are
under-performing and generally in markets that no longer meet our long-term
investment strategy. Although we expect to sell these hotels over the next 36
months, the impaired assets were written down to our estimate of todays fair
market value.

Discontinued operations reflects all income and direct expenses associated
with five hotels sold during the nine months ended September 30, 2003, and 10
hotels held for sale at September 30, 2003. Discontinued operations for these
hotels reflected a loss for the quarter ended September 30, 2003, of $3.7
million, principally as the result of a $5.0 million impairment charge
associated with six of the hotels held for sale at September 30, 2003.

Comparison of the Nine Months Ended September 30, 2003 and 2002

We recorded a net loss of $177.3 million for the nine months ended
September 30, 2003, compared to net loss of $3.6 million for the same period in
2002. The principal component of the difference between the net loss in 2003,
compared to the net loss in 2002, were the impairment charges of $107.7 million
from continuing operations and $12.8 million from discontinued operations. The
impairment charge primarily related to the third quarter decision to sell 11
IHG-managed hotels, following an amendment to the management agreements on
these hotels, and an additional impairment charge on certain of the 28
remaining non-strategic hotels identified for sale in December 2002.

For the nine months ended September 30, 2003, total revenue decreased $43
million. The primary component of the decrease in total revenue was a decrease
in room revenue of $34.3 million. One of the hotel industrys principal
measurements of room revenue is RevPAR. Our hotel portfolio RevPAR for the
nine months ended September 30, 2003, was $60.08, or 4.9% below that of the
same period in 2002. The decrease in RevPAR was comprised of a 4.0% decrease in
ADR, and a 1.0% decrease in Occupancy. The decrease in RevPAR reflected a
decline in both business and leisure travel for the nine months ended September
30, 2003, compared to the same period in the prior year. Travel was negatively
affected during the nine months ended September 30, 2003, by the conflict in
Iraq, the issuance of heightened terror alerts, the SARS outbreak, and the
sluggish economy. Included in total revenue for the nine months of 2003 was
$7.8 million of revenue associated with the consolidation of eight hotels in
June 2003, which were previously unconsolidated.

Total operating expenses increased by $1.3 million, to $857.4 million, for
the nine months ended September 30, 2003, compared to the same period in 2002.
This increase primarily consisted of increases in other property operating
costs that were partially offset by decreases in depreciation and other
operating expenses.

Hotel operating expenses increased by $8.3 million, (of which $6.1 million
was associated with the consolidation of eight hotels in June 2003, which were
previously unconsolidated) for the nine months ended September 30, 2003,
compared to the same period in 2002. Hotel operating margins as a percentage of
hotel operating revenue decreased by 400 basis points compared to the same
period last year. The deterioration in margins is principally related to a 4.0%
decline in ADR and increases, as a percentage of hotel revenue, in energy costs
(70 basis points), repairs and maintenance (50 basis points) and marketing (60
basis points). In addition, included in departmental and administrative and
general expenses were increases in employee wages and benefit costs (in spite
of a lower headcount) compared to prior year, which resulted in an increase in
these costs, as a percentage of total revenue, of 130 basis points.

Depreciation expense decreased by $4.6 million, primarily due to an
increase in fully depreciated furniture, fixtures and equipment.

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Taxes, insurance and lease expense decreased $1.0 million, compared to the
same period of 2002, principally as the result of decreases in operating lease
expense of $1.4 million and a $1.7 million decrease in real estate and other
taxes. These decreases were partially offset by increases in property and
general liability insurance expense of $2.2 million. The decrease in operating
lease expense is principally from the decrease in hotel revenue for those
hotels with participating leases. The decrease in real estate and other taxes
resulted primarily from the resolution of prior year disputed property taxes.

Interest expense, net of interest income, increased $0.6 million for the
nine months ended September 30, 2003, from the same period in 2002. This net
increase results from higher average debt balances, offset by a lower average
interest cost. The higher average debt balance relates to our decision, in the
first quarter of 2003, to carry excess cash.

The nine months ended September 30, 2003, included a $2.8 million
charge-off of line of credit costs related to the reduction in our outstanding
line of credit commitments from $300 million to $50 million, and a $1.3 million
gain on early extinguishment of debt.

We recorded $121.7 million of impairment losses during the nine months of
2003, of which $112.7 million related to the third quarter 2003, decision to
sell 11 IHG-managed hotels, following an amendment to the management agreements
on these hotels, and an additional impairment charge on certain of the 19
remaining non-strategic hotels identified for sale in December 2002. The 30
non-strategic hotels are under-performing and generally in markets that no
longer meet our long-term investment strategy. Although we expect to sell
these hotels over the next 36 months, the impaired assets were written down to
our estimate of todays fair market value. In the second quarter of 2003, we
recorded a $7.8 million impairment charge related to two low rise Harvey hotels
in Dallas. We relinquished title to these hotels through a foreclosure action
in August 2003.

Equity in income of unconsolidated entities decreased $1.6 million for the
nine months ended September 30, 2003, compared to the same period in 2002. The
change relates principally to a 3.8% decrease in RevPAR at our unconsolidated
hotels.

During the nine months ended September 30, 2003, we realized a $0.2
million gain from the sale of a parking garage adjacent to one of our hotels.
During the nine months ended September 30, 2002, we realized a gain of $5.1
million on the sale of retail space and $0.8 million on the sale of a hotel.

Minority interest decreased our net loss by $0.4 million for the nine
months ended September 30, 2003, and increased our net loss by $0.8 million for
the nine months ended September 30, 2002. Minority interest represents the
proportionate share of the income or loss of other consolidated subsidiaries
allocable to minority interest holders.

Discontinued operations reflected a $10.8 million loss in 2003 compared to
income of $2.7 million in 2002. Included in discontinued operations for 2003,
was a realized loss of $0.9 million on the sale of three hotels in the nine
months ended September 30, 2003, and a $12.8 million impairment loss. These
losses were partially offset by $3.0 million of operating income from the sold
hotels and 12 additional hotels that were held for sale and a gain of $0.4
million on the early extinguishment of debt. Discontinued operations in 2002
represented the operating income of these 15 hotels.

Funds From Operations and EBITDA

Historical cost accounting for real estate assets implicitly assumes that
the value of real estate assets diminish predictably over time. Since real
estate values instead have historically risen or fallen with market conditions,
most industry investors consider supplemental measurements of performance to be
helpful in evaluating a real estate companys operations. We consider Funds
From Operations, or FFO, and Earnings Before Interest, Taxes, Depreciation, and
Amortization, or EBITDA, to be supplemental measures of a REITs performance
and should be considered along with, but not as an alternative to, net income
as a measure of our operating performance.

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The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
(NAREIT) defines FFO as net income or loss (computed in accordance with
generally accepted accounting principles), excluding gains or losses from sales
of property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect funds from operations
on the same basis. We believe that FFO and EBITDA are helpful to investors as
a supplemental measure of the performance of an equity REIT. We compute FFO in
accordance with standards established by NAREIT. This may not be comparable to
FFO reported by other REITs that do not define the term in accordance with the
current NAREIT definition, or that interpret the current NAREIT definition
differently than we do.

FFO and EBITDA should not be considered as an alternative to net
income, operating profit, cash flow from operations, or any other
operating performance measure prescribed by GAAP. Neither should FFO,
FFO per unit and EBITDA be considered as a measure of our liquidity or
indicative of funds available for our cash needs, including our ability
to make cash distributions. FFO per unit does not measure, and should not
be used as a measure of amounts that accrue directly to unitholders
benefit.

33



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##### Table of Contents



The following tables detail our computation of FFO and EBITDA (in
thousands):

Reconciliation of Net Loss to FFO
(in thousands, except per unit data)

|         |                                                                       |   |                                  |        |       |  |        |     |         |   |          |       |        |   |        |        |   |  |        |     |          |   |       |       |  
|-------- | --------------------------------------------------------------------- | - | -------------------------------- | ------ | ----- |  | ------ | --- | ------- | - | -------- | ----- | ------ | - | ------ | ------ | - |  | ------ | --- | -------- | - | ----- | ----- | -
|         |                                                                       |   | Three Months Ended September 30,
|         |                                                                       |   |                                 
|         |                                                                       |   | 2003                             |        | 2002 
|         |                                                                       |   |                                  |        |      
|         |                                                                       |   |                                  |        |       |  |        |     |         |   | Per Unit |       |        |   |        |        |   |  |        |     | Per Unit
|         |                                                                       |   | Dollars                          |        | Units |  | Amount |     | Dollars |   | Units    |       | Amount
|         |                                                                       |   |                                  |        |       |  |        |     |         |   |          |       |       
|Net loss |                                                                       | $ | (132,932                         | )      |       |  | 61,851 |     |         | $ | (2.15    | )     |        | $ | (9,425 | )      |   |  | 61,732 |     |          | $ | (0.15 | )    
|         | Depreciation from continuing
operations                               |   |                                  | 34,725 |       |  |        |    |         |   |          | 0.56  |        |   |        | 36,044 |   |  |        |    |          |   |       | 0.58  |  
|         | Depreciation from unconsolidated
entities and discontinued
operations |   |                                  | 3,228  |       |  |        |    |         |   |          | 0.06  |        |   |        | 4,709  |   |  |        |    |          |   |       | 0.08  |  
|         | Gain on sale of assets                                                |   |                                  | 446    |       |  |        |    |         |   |          | 0.01  |        |   |        |       |   |  |        |    |          |   |       |      |  
|         | Preferred distributions                                               |   |                                  | (6,727 | )     |  |        |    |         |   |          | (0.11 | )      |   |        | (6,727 | ) |  |        |    |          |   |       | (0.11 | )
|         | Conversion of options and unvested
restricted stock                   |   |                                  |       |       |  |        | 303 |         |   |          |      |        |   |        |       |   |  |        | 324 |          |   |       |      |  
|         |                                                                       |   |                                  |        |       |  |        |     |         |   |          |       |        |   |        |        |   |  |        |     |          |   |       |      
|FFO      |                                                                       | $ | (101,260                         | )      |       |  | 62,154 |     |         | $ | (1.63    | )     |        | $ | 24,601 |        |   |  | 62,056 |     |          | $ | 0.40  |      
|         |                                                                       |   |                                  |        |       |  |        |     |         |   |          |       |        |   |        |        |   |  |        |     |          |   |       |      

|         |                                                                     |   |                                 |         |       |  |        |     |         |   |          |       |        |   |        |         |   |  |        |     |          |   |       |       |  
|-------- | ------------------------------------------------------------------- | - | ------------------------------- | ------- | ----- |  | ------ | --- | ------- | - | -------- | ----- | ------ | - | ------ | ------- | - |  | ------ | --- | -------- | - | ----- | ----- | -
|         |                                                                     |   | Nine Months Ended September 30,
|         |                                                                     |   |                                
|         |                                                                     |   | 2003                            |         | 2002 
|         |                                                                     |   |                                 |         |      
|         |                                                                     |   |                                 |         |       |  |        |     |         |   | Per Unit |       |        |   |        |         |   |  |        |     | Per Unit
|         |                                                                     |   | Dollars                         |         | Units |  | Amount |     | Dollars |   | Units    |       | Amount
|         |                                                                     |   |                                 |         |       |  |        |     |         |   |          |       |       
|Net loss |                                                                     | $ | (177,276                        | )       |       |  | 61,843 |     |         | $ | (2.86    | )     |        | $ | (3,584 | )       |   |  | 61,728 |     |          | $ | (0.06 | )    
|         | Depreciation from continuing
operations                             |   |                                 | 104,898 |       |  |        |    |         |   |          | 1.70  |        |   |        | 109,491 |   |  |        |    |          |   |       | 1.77  |  
|         | Depreciation from unconsolidated
entities and discounted operations |   |                                 | 11,947  |       |  |        |    |         |   |          | 0.19  |        |   |        | 13,341  |   |  |        |    |          |   |       | 0.21  |  
|         | Gain (loss) on sale of assets                                       |   |                                 | 776     |       |  |        |    |         |   |          | 0.01  |        |   |        | (5,861  | ) |  |        |    |          |   |       | (0.09 | )
|         | Preferred distributions                                             |   |                                 | (20,181 | )     |  |        |    |         |   |          | (0.32 | )      |   |        | (19,565 | ) |  |        |    |          |   |       | (0.32 | )
|         | Conversion of options and unvested
restricted stock                 |   |                                 |        |       |  |        | 303 |         |   |          |      |        |   |        |        |   |  |        | 349 |          |   |       |      |  
|         |                                                                     |   |                                 |         |       |  |        |     |         |   |          |       |        |   |        |         |   |  |        |     |          |   |       |      
|FFO      |                                                                     | $ | (79,836                         | )       |       |  | 62,146 |     |         | $ | (1.28    | )     |        | $ | 93,822 |         |   |  | 62,077 |     |          | $ | 1.51  |      
|         |                                                                     |   |                                 |         |       |  |        |     |         |   |          |       |        |   |        |         |   |  |        |     |          |   |       |      

Consistent with recently clarified SEC guidance, FFO has not been adjusted for
the following amounts included in net loss (in thousands):

|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  
|------------------------------------ |  | ------------------ | -------- | ----------------- |  | ---- | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                                     |  | Three Months Ended |          | Nine Months Ended
|                                     |  | September 30,      |          | September 30,    
|                                     |  |                    |          |                  
|                                     |  | 2003               |          | 2002              |  | 2003 |        | 2002
|                                     |  |                    |          |                   |  |      |        |     
|Impairment loss                      |  | $                  | (112,702 | )                 |  | $    |       |      |  | $ | (120,526 | ) |  | $ |       |  
|Charge off of deferred debt costs    |  |                    |         |                   |  |      |       |      |  |   | (2,834   | ) |  |   |       |  
|Gain on early extinguishment of debt |  |                    | 351      |                   |  |      |       |      |  |   | 1,611    |   |  |   |       |  
|Abandoned projects                   |  |                    |         |                   |  |      | (1,663 | )    |  |   |         |   |  |   | (1,663 | )
|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  
|                                     |  | $                  | (112,351 | )                 |  | $    | (1,663 | )    |  | $ | (121,749 | ) |  | $ | (1,663 | )
|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  
|Per unit amounts                     |  | $                  | (1.81    | )                 |  | $    | (0.03  | )    |  | $ | (1.96    | ) |  | $ | (0.03  | )
|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  

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##### Table of Contents



Reconciliation of Net Loss to EBITDA
(in thousands)

|                                                                          |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------- |  | ------------------ | -------- | ----------------- |  | ---- | ------ | ---- |  | - | -------- | - |  | - | ------- | -
|                                                                          |  | Three Months Ended |          | Nine Months Ended
|                                                                          |  | September 30,      |          | September 30,    
|                                                                          |  |                    |          |                  
|                                                                          |  | 2003               |          | 2002              |  | 2003 |        | 2002
|                                                                          |  |                    |          |                   |  |      |        |     
|Net loss                                                                  |  | $                  | (132,932 | )                 |  | $    | (9,425 | )    |  | $ | (177,276 | ) |  | $ | (3,584  | )
|Depreciation from continuing operations                                   |  |                    | 34,725   |                   |  |      | 36,044 |      |  |   | 104,898  |   |  |   | 109,491 |  
|Depreciation from unconsolidated entities and
discontinued operations     |  |                    | 3,228    |                   |  |      | 4,709  |      |  |   | 11,947   |   |  |   | 13,341  |  
|Loss (gain) on sale of assets                                             |  |                    | 446      |                   |  |      |       |      |  |   | 776      |   |  |   | (5,861  | )
|Interest expense                                                          |  |                    | 42,777   |                   |  |      | 41,073 |      |  |   | 124,780  |   |  |   | 124,488 |  
|Interest expense from unconsolidated
entities and
discontinued operations |  |                    | 1,378    |                   |  |      | 2,529  |      |  |   | 6,199    |   |  |   | 7,804   |  
|Amortization expense                                                      |  |                    | 565      |                   |  |      | 526    |      |  |   | 1,645    |   |  |   | 1,561   |  
|                                                                          |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |         |  
|EBITDA                                                                    |  | $                  | (49,813  | )                 |  | $    | 75,456 |      |  | $ | 72,969   |   |  | $ | 247,240 |  
|                                                                          |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |         |  



Consistent with recently clarified SEC guidance, EBITDA has not been adjusted
for the following amounts included in net loss (in thousands):


|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  
|------------------------------------ |  | ------------------ | -------- | ----------------- |  | ---- | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                                     |  | Three Months Ended |          | Nine Months Ended
|                                     |  | September 30,      |          | September 30,    
|                                     |  |                    |          |                  
|                                     |  | 2003               |          | 2002              |  | 2003 |        | 2002
|                                     |  |                    |          |                   |  |      |        |     
|Impairment loss                      |  | $                  | (112,702 | )                 |  | $    |       |      |  | $ | (120,526 | ) |  | $ |       |  
|Charge off of deferred debt costs    |  |                    |         |                   |  |      |       |      |  |   | (2,834   | ) |  |   |       |  
|Gain on early extinguishment of debt |  |                    | 351      |                   |  |      |       |      |  |   | 1,611    |   |  |   |       |  
|Abandoned projects                   |  |                    |         |                   |  |      | (1,663 | )    |  |   |         |   |  |   | (1,663 | )
|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  
|                                     |  | $                  | (112,351 | )                 |  | $    | (1,663 | )    |  | $ | (121,749 | ) |  | $ | (1,663 | )
|                                     |  |                    |          |                   |  |      |        |      |  |   |          |   |  |   |        |  

35



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##### Table of Contents



Hotel Portfolio Composition

The following tables set forth, as of September 30, 2003, for our
consolidated hotel portfolio of 172 hotels, distribution by brand, by our top
metropolitan markets, by selected states, by type of location, and by market
segment. For comparative purposes, also set forth below is the percentage of
EBITDA contributed by each grouping for the year ended December 31, 2002.

|                       |  |        |    |       |  |                  |        |                  |  |  |    |   |  |  |    |  
|---------------------- |  | ------ | -- | ----- |  | ---------------- | ------ | ---------------- |  |  | -- | - |  |  | -- | -
|Brand                  |  | Hotels |    | Rooms |  | % of Total Rooms |        | % of 2002 EBITDA
|                       |  |        |    |       |  |                  |        |                 
|Embassy Suites Hotels® |  |        | 59 |       |  |                  | 14,842 |                  |  |  | 32 | % |  |  | 46 | %
|Holiday Inn®-branded   |  |        | 53 |       |  |                  | 16,017 |                  |  |  | 34 |   |  |  | 24 |  
|Crowne Plaza®          |  |        | 18 |       |  |                  | 5,963  |                  |  |  | 13 |   |  |  | 9  |  
|Sheraton®-branded      |  |        | 10 |       |  |                  | 3,269  |                  |  |  | 7  |   |  |  | 7  |  
|Doubletree®-branded    |  |        | 12 |       |  |                  | 2,537  |                  |  |  | 5  |   |  |  | 6  |  
|Other                  |  |        | 20 |       |  |                  | 4,252  |                  |  |  | 9  |   |  |  | 7  |  

|                       |  |        |    |       |  |                  |       |                  |  |  |    |   |  |  |   |  
|---------------------- |  | ------ | -- | ----- |  | ---------------- | ----- | ---------------- |  |  | -- | - |  |  | - | -
|Top Markets            |  | Hotels |    | Rooms |  | % of Total Rooms |       | % of 2002 EBITDA
|                       |  |        |    |       |  |                  |       |                 
|Atlanta                |  |        | 12 |       |  |                  | 3,514 |                  |  |  | 8  | % |  |  | 8 | %
|Dallas                 |  |        | 16 |       |  |                  | 4,885 |                  |  |  | 10 |   |  |  | 8 |  
|San Francisco Bay Area |  |        | 9  |       |  |                  | 3,255 |                  |  |  | 7  |   |  |  | 5 |  
|Orlando                |  |        | 6  |       |  |                  | 2,220 |                  |  |  | 5  |   |  |  | 4 |  
|Houston                |  |        | 9  |       |  |                  | 2,262 |                  |  |  | 5  |   |  |  | 4 |  
|New Orleans            |  |        | 2  |       |  |                  | 746   |                  |  |  | 2  |   |  |  | 3 |  
|Philadelphia           |  |        | 3  |       |  |                  | 1,174 |                  |  |  | 2  |   |  |  | 3 |  
|Phoenix                |  |        | 5  |       |  |                  | 1,245 |                  |  |  | 3  |   |  |  | 3 |  
|Minneapolis            |  |        | 4  |       |  |                  | 955   |                  |  |  | 2  |   |  |  | 3 |  
|Chicago                |  |        | 4  |       |  |                  | 1,239 |                  |  |  | 3  |   |  |  | 3 |  

|                |  |        |    |       |  |                  |        |                  |  |  |    |   |  |  |    |  
|--------------- |  | ------ | -- | ----- |  | ---------------- | ------ | ---------------- |  |  | -- | - |  |  | -- | -
|Top Four States |  | Hotels |    | Rooms |  | % of Total Rooms |        | % of 2002 EBITDA
|                |  |        |    |       |  |                  |        |                 
|California      |  |        | 19 |       |  |                  | 6,023  |                  |  |  | 13 | % |  |  | 14 | %
|Texas           |  |        | 39 |       |  |                  | 10,544 |                  |  |  | 23 |   |  |  | 17 |  
|Florida         |  |        | 16 |       |  |                  | 5,346  |                  |  |  | 11 |   |  |  | 10 |  
|Georgia         |  |        | 14 |       |  |                  | 3,868  |                  |  |  | 8  |   |  |  | 9  |  

|         |  |        |    |       |  |                  |        |                  |  |  |    |   |  |  |    |  
|-------- |  | ------ | -- | ----- |  | ---------------- | ------ | ---------------- |  |  | -- | - |  |  | -- | -
|Location |  | Hotels |    | Rooms |  | % of Total Rooms |        | % of 2002 EBITDA
|         |  |        |    |       |  |                  |        |                 
|Suburban |  |        | 79 |       |  |                  | 19,443 |                  |  |  | 42 | % |  |  | 40 | %
|Urban    |  |        | 35 |       |  |                  | 11,252 |                  |  |  | 24 |   |  |  | 26 |  
|Airport  |  |        | 31 |       |  |                  | 9,435  |                  |  |  | 20 |   |  |  | 22 |  
|Highway  |  |        | 15 |       |  |                  | 3,072  |                  |  |  | 6  |   |  |  | 3  |  
|Resort   |  |        | 12 |       |  |                  | 3,678  |                  |  |  | 8  |   |  |  | 9  |  

|                  |  |        |    |       |  |                  |        |                  |  |  |    |   |  |  |    |  
|----------------- |  | ------ | -- | ----- |  | ---------------- | ------ | ---------------- |  |  | -- | - |  |  | -- | -
|Segment           |  | Hotels |    | Rooms |  | % of Total Rooms |        | % of 2002 EBITDA
|                  |  |        |    |       |  |                  |        |                 
|Upscale all-suite |  |        | 76 |       |  |                  | 18,219 |                  |  |  | 39 | % |  |  | 53 | %
|Full service      |  |        | 53 |       |  |                  | 16,494 |                  |  |  | 35 |   |  |  | 26 |  
|Upscale           |  |        | 30 |       |  |                  | 10,087 |                  |  |  | 22 |   |  |  | 19 |  
|Limited service   |  |        | 13 |       |  |                  | 2,080  |                  |  |  | 4  |   |  |  | 2  |  

|                     |  |        |    |       |  |                  |       |                  |  |  |    |   |  |  |   |  
|-------------------- |  | ------ | -- | ----- |  | ---------------- | ----- | ---------------- |  |  | -- | - |  |  | - | -
|                     |  | Hotels |    | Rooms |  | % of Total Rooms |       | % of 2002 EBITDA
|                     |  |        |    |       |  |                  |       |                 
|Non-Strategic Hotels |  |        | 39 |       |  |                  | 8,918 |                  |  |  | 19 | % |  |  | 8 | %

36



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##### Table of Contents



Hotel Operating Statistics

The following tables set forth historical occupancy, ADR and RevPAR at
September 30, 2003 and 2002, and the percentage changes therein between the
periods presented, for our 172 consolidated hotels:

Operating Statistics by Brand

|                           |              |  |                                  |      |                                 |  |            |      |      |  |      |     |            |  |      |      |  |  |      |      |  |  |      |      |  
|-------------------------- | ------------ |  | -------------------------------- | ---- | ------------------------------- |  | ---------- | ---- | ---- |  | ---- | --- | ---------- |  | ---- | ---- |  |  | ---- | ---- |  |  | ---- | ---- | -
|                           |              |  | Occupancy (%)                   
|                           |              |  |                                 
|                           |              |  | Three Months Ended September 30, |      | Nine Months Ended September 30,
|                           |              |  |                                  |      |                                
|                           |              |  | 2003                             |      | 2002                            |  | % Variance |      | 2003 |  | 2002 |     | % Variance
|                           |              |  |                                  |      |                                 |  |            |      |      |  |      |     |           
|Embassy Suites Hotels      |              |  | 69.7                             |      |                                 |  | 69.7       |      |      |  | 0.0  |     |            |  | 68.6 |      |  |  | 68.8 |      |  |  | (0.2 | )   
|Holiday Inn-branded hotels |              |  | 65.4                             |      |                                 |  | 65.5       |      |      |  | (0.1 | )   |            |  | 62.5 |      |  |  | 63.6 |      |  |  | (1.7 | )   
|Crowne Plaza hotels        |              |  | 57.9                             |      |                                 |  | 60.0       |      |      |  | (3.6 | )   |            |  | 57.2 |      |  |  | 60.0 |      |  |  | (4.6 | )   
|Doubletree-branded hotels  |              |  | 68.8                             |      |                                 |  | 68.5       |      |      |  | 0.4  |     |            |  | 67.6 |      |  |  | 66.3 |      |  |  | 1.9  |     
|Sheraton-branded hotels    |              |  | 61.5                             |      |                                 |  | 59.2       |      |      |  | 4.0  |     |            |  | 60.3 |      |  |  | 59.1 |      |  |  | 2.0  |     
|Other hotels               |              |  | 61.3                             |      |                                 |  | 57.9       |      |      |  | 5.8  |     |            |  | 58.6 |      |  |  | 58.9 |      |  |  | (0.5 | )   
|                           | Total hotels |  |                                  | 65.3 |                                 |  |            | 65.2 |      |  |      | 0.3 |            |  |      | 63.5 |  |  |      | 64.2 |  |  |      | (1.0 | )

|                           |              |  |                                  |       |                                 |  |            |       |      |  |      |      |            |  |        |       |  |  |        |       |  |  |      |      |  
|-------------------------- | ------------ |  | -------------------------------- | ----- | ------------------------------- |  | ---------- | ----- | ---- |  | ---- | ---- | ---------- |  | ------ | ----- |  |  | ------ | ----- |  |  | ---- | ---- | -
|                           |              |  | ADR ($)                         
|                           |              |  |                                 
|                           |              |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                           |              |  |                                  |       |                                
|                           |              |  | 2003                             |       | 2002                            |  | % Variance |       | 2003 |  | 2002 |      | % Variance
|                           |              |  |                                  |       |                                 |  |            |       |      |  |      |      |           
|Embassy Suites Hotels      |              |  | 112.98                           |       |                                 |  | 115.59     |       |      |  | (2.3 | )    |            |  | 115.61 |       |  |  | 119.89 |       |  |  | (3.6 | )   
|Holiday Inn-branded hotels |              |  | 77.05                            |       |                                 |  | 79.98      |       |      |  | (3.7 | )    |            |  | 77.33  |       |  |  | 80.94  |       |  |  | (4.5 | )   
|Crowne Plaza hotels        |              |  | 87.97                            |       |                                 |  | 89.64      |       |      |  | (1.9 | )    |            |  | 89.37  |       |  |  | 93.92  |       |  |  | (4.8 | )   
|Doubletree-branded hotels  |              |  | 96.96                            |       |                                 |  | 96.26      |       |      |  | 0.7  |      |            |  | 100.40 |       |  |  | 102.08 |       |  |  | (1.7 | )   
|Sheraton-branded hotels    |              |  | 91.91                            |       |                                 |  | 96.20      |       |      |  | (4.5 | )    |            |  | 94.79  |       |  |  | 101.51 |       |  |  | (6.6 | )   
|Other hotels               |              |  | 78.56                            |       |                                 |  | 80.84      |       |      |  | (2.8 | )    |            |  | 80.50  |       |  |  | 84.23  |       |  |  | (4.4 | )   
|                           | Total hotels |  |                                  | 92.64 |                                 |  |            | 95.19 |      |  |      | (2.7 | )          |  |        | 94.54 |  |  |        | 98.47 |  |  |      | (4.0 | )

|                           |              |  |                                  |       |                                 |  |            |       |      |  |      |      |            |  |       |       |  |  |       |       |  |  |      |      |  
|-------------------------- | ------------ |  | -------------------------------- | ----- | ------------------------------- |  | ---------- | ----- | ---- |  | ---- | ---- | ---------- |  | ----- | ----- |  |  | ----- | ----- |  |  | ---- | ---- | -
|                           |              |  | RevPAR ($)                      
|                           |              |  |                                 
|                           |              |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                           |              |  |                                  |       |                                
|                           |              |  | 2003                             |       | 2002                            |  | % Variance |       | 2003 |  | 2002 |      | % Variance
|                           |              |  |                                  |       |                                 |  |            |       |      |  |      |      |           
|Embassy Suites Hotels      |              |  | 78.70                            |       |                                 |  | 80.55      |       |      |  | (2.3 | )    |            |  | 79.32 |       |  |  | 82.44 |       |  |  | (3.8 | )   
|Holiday Inn-branded hotels |              |  | 50.41                            |       |                                 |  | 52.37      |       |      |  | (3.7 | )    |            |  | 48.36 |       |  |  | 51.48 |       |  |  | (6.1 | )   
|Crowne Plaza hotels        |              |  | 50.93                            |       |                                 |  | 53.82      |       |      |  | (5.4 | )    |            |  | 51.15 |       |  |  | 56.36 |       |  |  | (9.3 | )   
|Doubletree-branded hotels  |              |  | 66.69                            |       |                                 |  | 65.95      |       |      |  | 1.1  |      |            |  | 67.83 |       |  |  | 67.71 |       |  |  | 0.2  |     
|Sheraton-branded hotels    |              |  | 56.56                            |       |                                 |  | 56.94      |       |      |  | (0.7 | )    |            |  | 57.12 |       |  |  | 59.95 |       |  |  | (4.7 | )   
|Other hotels               |              |  | 48.13                            |       |                                 |  | 46.82      |       |      |  | 2.8  |      |            |  | 47.19 |       |  |  | 49.64 |       |  |  | (4.9 | )   
|                           | Total hotels |  |                                  | 60.54 |                                 |  |            | 62.02 |      |  |      | (2.4 | )          |  |       | 60.08 |  |  |       | 63.20 |  |  |      | (4.9 | )

37



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##### Table of Contents



Operating Statistics for our Top 10 Markets

|                       |  |                                  |      |                                 |  |            |      |      |  |      |      |            |  |  |      |  |  |  |      |  |  |  |      |  
|---------------------- |  | -------------------------------- | ---- | ------------------------------- |  | ---------- | ---- | ---- |  | ---- | ---- | ---------- |  |  | ---- |  |  |  | ---- |  |  |  | ---- | -
|                       |  | Occupancy (%)                   
|                       |  |                                 
|                       |  | Three Months Ended September 30, |      | Nine Months Ended September 30,
|                       |  |                                  |      |                                
|                       |  | 2003                             |      | 2002                            |  | % Variance |      | 2003 |  | 2002 |      | % Variance
|                       |  |                                  |      |                                 |  |            |      |      |  |      |      |           
|Atlanta                |  |                                  | 69.9 |                                 |  |            | 69.3 |      |  |      | 0.9  |            |  |  | 66.7 |  |  |  | 68.5 |  |  |  | (2.7 | )
|Dallas                 |  |                                  | 48.4 |                                 |  |            | 47.6 |      |  |      | 1.7  |            |  |  | 49.0 |  |  |  | 51.1 |  |  |  | (4.0 | )
|San Francisco Bay Area |  |                                  | 72.9 |                                 |  |            | 74.6 |      |  |      | (2.3 | )          |  |  | 65.9 |  |  |  | 67.0 |  |  |  | (1.7 | )
|Orlando                |  |                                  | 69.3 |                                 |  |            | 64.6 |      |  |      | 7.3  |            |  |  | 69.8 |  |  |  | 68.4 |  |  |  | 2.1  |  
|Houston                |  |                                  | 63.9 |                                 |  |            | 61.3 |      |  |      | 4.3  |            |  |  | 64.0 |  |  |  | 65.5 |  |  |  | (2.3 | )
|New Orleans            |  |                                  | 60.0 |                                 |  |            | 59.5 |      |  |      | 0.9  |            |  |  | 65.0 |  |  |  | 68.8 |  |  |  | (5.5 | )
|Philadelphia           |  |                                  | 65.7 |                                 |  |            | 63.3 |      |  |      | 3.8  |            |  |  | 61.8 |  |  |  | 63.0 |  |  |  | (1.9 | )
|Phoenix                |  |                                  | 55.0 |                                 |  |            | 53.3 |      |  |      | 3.2  |            |  |  | 67.3 |  |  |  | 60.8 |  |  |  | 10.7 |  
|Minneapolis            |  |                                  | 75.1 |                                 |  |            | 78.6 |      |  |      | (4.5 | )          |  |  | 66.3 |  |  |  | 68.5 |  |  |  | (3.2 | )
|Chicago                |  |                                  | 75.3 |                                 |  |            | 67.6 |      |  |      | 11.4 |            |  |  | 68.7 |  |  |  | 63.5 |  |  |  | 8.2  |  

|                       |  |                                  |        |                                 |  |            |        |      |  |      |      |            |  |  |        |  |  |  |        |  |  |  |      |  
|---------------------- |  | -------------------------------- | ------ | ------------------------------- |  | ---------- | ------ | ---- |  | ---- | ---- | ---------- |  |  | ------ |  |  |  | ------ |  |  |  | ---- | -
|                       |  | ADR ($)                         
|                       |  |                                 
|                       |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                       |  |                                  |        |                                
|                       |  | 2003                             |        | 2002                            |  | % Variance |        | 2003 |  | 2002 |      | % Variance
|                       |  |                                  |        |                                 |  |            |        |      |  |      |      |           
|Atlanta                |  |                                  | 83.31  |                                 |  |            | 85.49  |      |  |      | (2.6 | )          |  |  | 85.52  |  |  |  | 90.06  |  |  |  | (5.0 | )
|Dallas                 |  |                                  | 80.77  |                                 |  |            | 85.47  |      |  |      | (5.5 | )          |  |  | 83.40  |  |  |  | 90.00  |  |  |  | (7.3 | )
|San Francisco Bay Area |  |                                  | 110.46 |                                 |  |            | 114.94 |      |  |      | (3.9 | )          |  |  | 109.13 |  |  |  | 118.65 |  |  |  | (8.0 | )
|Orlando                |  |                                  | 65.98  |                                 |  |            | 69.17  |      |  |      | (4.6 | )          |  |  | 74.25  |  |  |  | 79.45  |  |  |  | (6.6 | )
|Houston                |  |                                  | 68.47  |                                 |  |            | 72.12  |      |  |      | (5.1 | )          |  |  | 71.45  |  |  |  | 74.33  |  |  |  | (3.9 | )
|New Orleans            |  |                                  | 106.25 |                                 |  |            | 108.55 |      |  |      | (2.1 | )          |  |  | 131.24 |  |  |  | 137.00 |  |  |  | (4.2 | )
|Philadelphia           |  |                                  | 105.55 |                                 |  |            | 109.29 |      |  |      | (3.4 | )          |  |  | 105.27 |  |  |  | 116.68 |  |  |  | (9.8 | )
|Phoenix                |  |                                  | 80.18  |                                 |  |            | 82.89  |      |  |      | (3.3 | )          |  |  | 98.33  |  |  |  | 107.67 |  |  |  | (8.7 | )
|Minneapolis            |  |                                  | 125.02 |                                 |  |            | 128.98 |      |  |      | (3.1 | )          |  |  | 123.01 |  |  |  | 125.84 |  |  |  | (2.2 | )
|Chicago                |  |                                  | 108.78 |                                 |  |            | 119.83 |      |  |      | (9.2 | )          |  |  | 108.52 |  |  |  | 119.98 |  |  |  | (9.6 | )

|                       |  |                                  |       |                                 |  |            |        |      |  |      |      |            |  |  |       |  |  |  |       |  |  |  |       |  
|---------------------- |  | -------------------------------- | ----- | ------------------------------- |  | ---------- | ------ | ---- |  | ---- | ---- | ---------- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | -
|                       |  | RevPAR ($)                      
|                       |  |                                 
|                       |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                       |  |                                  |       |                                
|                       |  | 2003                             |       | 2002                            |  | % Variance |        | 2003 |  | 2002 |      | % Variance
|                       |  |                                  |       |                                 |  |            |        |      |  |      |      |           
|Atlanta                |  |                                  | 58.26 |                                 |  |            | 59.25  |      |  |      | (1.7 | )          |  |  | 57.03 |  |  |  | 61.74 |  |  |  | (7.6  | )
|Dallas                 |  |                                  | 39.07 |                                 |  |            | 40.65  |      |  |      | (3.9 | )          |  |  | 40.87 |  |  |  | 45.96 |  |  |  | (11.1 | )
|San Francisco Bay Area |  |                                  | 80.53 |                                 |  |            | 85.79  |      |  |      | (6.1 | )          |  |  | 71.91 |  |  |  | 79.55 |  |  |  | (9.6  | )
|Orlando                |  |                                  | 45.71 |                                 |  |            | 44.67  |      |  |      | 2.3  |            |  |  | 51.83 |  |  |  | 54.34 |  |  |  | (4.6  | )
|Houston                |  |                                  | 43.77 |                                 |  |            | 44.21  |      |  |      | (1.0 | )          |  |  | 45.77 |  |  |  | 48.71 |  |  |  | (6.0  | )
|New Orleans            |  |                                  | 63.74 |                                 |  |            | 64.55  |      |  |      | (1.3 | )          |  |  | 85.37 |  |  |  | 94.28 |  |  |  | (9.5  | )
|Philadelphia           |  |                                  | 69.35 |                                 |  |            | 69.17  |      |  |      | 0.3  |            |  |  | 65.08 |  |  |  | 73.51 |  |  |  | (11.5 | )
|Phoenix                |  |                                  | 44.12 |                                 |  |            | 44.20  |      |  |      | (0.2 | )          |  |  | 66.20 |  |  |  | 65.49 |  |  |  | 1.1   |  
|Minneapolis            |  |                                  | 93.86 |                                 |  |            | 101.38 |      |  |      | (7.4 | )          |  |  | 81.58 |  |  |  | 86.21 |  |  |  | (5.4  | )
|Chicago                |  |                                  | 81.90 |                                 |  |            | 80.98  |      |  |      | 1.1  |            |  |  | 74.60 |  |  |  | 76.24 |  |  |  | (2.2  | )

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Liquidity and Capital Resources

Our principal source of cash to meet our cash requirements, including
distributions to unitholders and repayments of indebtedness, is from the
results of operations of our hotels. For the nine months ended September 30,
2003, net cash flow provided by operating activities, consisting primarily of
hotel operations, was $45 million. We currently expect that our cash flow
provided by operating activities for 2003 (before fourth quarter changes in
working capital) will be approximately $46 million to $50 million using current
RevPAR forecasts. We expect 2003 preferred distribution payments to be $27
million, and 2003 capital expenditures to be approximately $70 million, of
which $52 million has been spent during the nine months ended September 30,
2003. We have closed on non-strategic assets sales of $113 million through
October 31, 2003, at which date we had cash on hand of approximately $265
million. We have no remaining debt maturities during the remainder of 2003,
other than $5 million in normal recurring principal payments. Cash necessary
to fund cash flow shortfalls and distributions, if any, will be funded from our
cash balances, which were $176 million at September 30, 2003, proceeds from the
sale of hotels or additional borrowings. We expect FelCors Board of Directors
to defer future common distributions until our hotels experience a 2% to 4%
increase in RevPAR over 2002 levels, and to determine the amount of preferred
distributions, if any, for each quarterly period, based upon the operating
results of that quarter, economic conditions, other operating trends and
minimum REIT distribution requirements. We do not expect to declare any
distributions on our redeemable or common units during 2003.

Recent events, including the threat of additional terrorist attacks, U.S.
military involvement in the Middle East and the bankruptcy of several major
corporations, have had an adverse impact on the capital markets. These events,
new terrorist attacks or additional bankruptcies could further adversely affect
the availability and cost of capital for our business. In addition, should the
anticipated recovery of the overall economy, and of the lodging industry,
continue to be delayed significantly, that too could adversely affect our
operating cash flow and the availability and cost of capital for our business.
As a consequence of the prolonged economic slowdown, its impact on the travel
and lodging industries and our higher secured debt levels, Moodys lowered its
ratings on our $1.2 billion in senior unsecured debt one level, to B1 in June
2003. This downgrade, along with a similar downgrade by Standard & Poors
earlier this year to B, triggered a 50 basis point step-up in interest rates on
$900 million of our $1.2 billion in senior unsecured debt, which will continue
in effect unless and until either Moodys raises its rating on our senior
unsecured debt to Ba3 or Standard & Poors increases its rating to BB-.
On October 31, 2003, Standard & Poors placed our credit rating on watch with
negative indications.

We are also subject to the risks of fluctuating hotel operating margins at
our hotels, including but not limited to increases in wage and benefit costs,
repair and maintenance expenses, utilities, insurance, and other operating
expenses that can fluctuate disproportionately to revenues. These operating
expenses are difficult to predict and control, resulting in an increased risk
of volatility in our results of operations. The economic slowdown and the
sharp drop in Occupancy and ADR that began in 2001, have resulted both in
declines in RevPAR and in an erosion in our operating margins. If the declines
in hotel RevPAR and/or operating margins worsen or continue for a protracted
time, they could have a material adverse effect on our operations, earnings and
cash flow.

Effective June 1, 2003, we made a $0.2 million capital contribution to our
joint venture with Interstate Hotels, which increased our ownership in that
venture to more than 50 percent. As a result, we began consolidating the eight
hotels, owned by this venture. The consolidation of these eight hotels
increased our investment in hotels by $73 million, our debt by $51 million and
reduced our investment in unconsolidated entities by $19 million.

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In June 2003, we entered into a non-recourse secured debt facility with
JPMorgan Chase Bank for up to $200 million. This secured facility has an
initial term of 18 months, that can be extended for an additional six months at
FelCors option, and carries a floating interest rate of LIBOR plus 225 to 275
basis points. The outstanding balances under the loan facility, once borrowed,
are expected to be converted into 10-year fixed rate commercial mortgage backed
securities loans through JPMorgan Chase Bank. We also have the option of
converting $75 million of the debt to floating-rate debt based on LIBOR, with a
three year maturity and two one year extension options. At the date of this
filing, no amounts had been borrowed, and we had $176 million available, under
this facility, which is secured by 14 hotels. The amount available under this
facility may be increased to a maximum of $200 million as additional properties
are mortgaged to secure borrowings thereunder or from improved performance of
the hotels currently securing the facility.

On April 24, 2003, we entered into a $150 million non-recourse mortgage
loan, at a floating interest rate of LIBOR plus 250 basis points secured by 10
full service hotels. The loan matures in May 2006, with two, one-year
extension options. The proceeds were used to pay off all outstanding
borrowings under our unsecured line of credit. We have no remaining debt
maturing during 2003, other than $5 million in normal recurring principal
payments. Our next significant debt maturity is our $175 million of senior
notes maturing in October 2004. We expect to satisfy this obligation primarily
from our excess cash and additional secured debt capacity. However, we also
anticipate that we will have positive cash flow from operations and net sales
proceeds from the sale of non-strategic hotels that may be available as
secondary sources of funds for repayment of this debt in the next 12 months.

In the first nine months of 2003, we prepaid $12.3 million of secured debt
and recognized gains in the aggregate amount of $1.3 million from the early
extinguishment of debt.

In June 2003, we reduced our unsecured line of credit commitments from
$300 million to $50 million, and obtained more relaxed covenant levels.
Effective September 30, 2003, we again amended certain financial covenants to
allow for greater flexibility. In addition to financial covenants, our
unsecured line of credit includes certain other affirmative and negative
covenants, including: restrictions on our ability to create or acquire
wholly-owned subsidiaries; restrictions on the operation and ownership of our
hotels; limitations on our ability to lease property or guarantee leases of
other persons; limitations on our ability to make restricted payments (such as
distributions on common and preferred stock, share repurchases and certain
investments); limitations on our ability to merge or consolidate with other
persons, to issue stock of our subsidiaries and to sell all or substantially
all of our assets; restrictions on our ability to construct new hotels or
acquire hotels under construction; limitations on our ability to change the
nature of our business; limitations on our ability to modify certain
instruments; limitations on our ability to create liens; limitations on our
ability to enter into transactions with affiliates; and limitations on our
ability to enter into joint ventures. At September 30, 2003, and at the date
of this filing, we were in compliance with all of these covenants. At the date
of this filing, we have no restrictions on our ability to use our line of
credit. However, at certain leverage levels, usage under the line of line
credit is restricted to fund operational cash flow shortfalls. At these higher
leverage levels, excess cash flow from operations and net cash proceeds from
asset sales, must first be used to reduce any outstanding balances under our
line of credit.

Unless our business and cash flow stabilizes, we may not be able to
satisfy the current financial covenant requirements. In such an event, we may
need to obtain further amendments from our lenders under the line of credit to
continue to be able to borrow under it. We are not certain whether, to what
extent, or upon what terms the lenders may be willing to further relax the
covenants. Further amendments to our line of credit may result in additional
restrictions on us that, together with any limitation on our ability to borrow
under the line, may adversely affect our ability to run our business and manage
our financial affairs.

Our other borrowings contain affirmative and negative covenants that are
generally equal to or less restrictive than those in our line of credit. Most
of our mortgage debt is non-recourse to us and contains provisions allowing for
the substitution of collateral upon satisfaction of certain conditions. Most
of our mortgage debt is prepayable, subject to various prepayment penalties,
yield maintenance or defeasance obligations.

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Our publicly-traded senior unsecured notes require that we satisfy a total
leverage, a secured leverage and an interest coverage test in order to: incur
additional indebtedness, except under our line of credit or to refinance
maturing debt with replacement debt, as defined under our indentures; pay
distributions in excess of the minimum distributions required to meet FelCors
REIT qualification test; repurchase units; or merge. As of the date of this
filing, we have satisfied all such incurrence tests. We currently expect that
we will have the flexibility to meet these tests unless RevPAR declines
continue or become more severe. We anticipate meeting our debt service
obligations through a combination of cash on hand, cash flow from operations,
additional secured debt and the sale of non-strategic hotel assets.

Our failure to timely satisfy any judgment or recourse indebtedness, if in
the amount of $10 million or more, could result in the acceleration of most of
our other unsecured recourse indebtedness. We may not be able to refinance or
repay our debt in full under those circumstances.

Current Forecast

For the fourth quarter of 2003, we currently anticipate our portfolio
RevPAR will be 2.5% to flat, compared to the comparable period of the prior
year, and that our operating margins will decrease 50 to 200 basis points from
2002 levels. Our net loss for the fourth quarter of 2003, before asset sales,
is expected to be within the range of $43 million to $38 million. FFO for the
fourth quarter is expected to be within the range of a loss of $5 million to
zero, or $(0.07) to $0.01 per unit, and EBITDA is expected to be within the
range of $47 million to $52 million for the same period. This forecast takes
into consideration sales of non-strategic hotels that previously had not been
anticipated to occur in 2003. This acceleration in expected hotel sales
reduced our fourth quarter FFO estimate by approximately $0.04 per unit.

We estimate our full year 2003 hotel portfolio RevPAR will be 4.0% to 4.6%
below 2002, and that our operating margins for 2003 will decrease by 290 to 330
basis points from 2002 levels. Our net loss for the full year 2003, before
asset sales, is expected to be within the range of $240 million to $235
million. Our FFO for the full year 2003 is currently anticipated to be within
the range of $(84) million to $(79) million, or $(1.36) to $(1.28) per unit,
and EBITDA is expected to be within the range of $120 million to $125 million
for the same period. Full year net loss, FFO and EBITDA include
non-cash charges for impairment, of $121 million; charge-off of
deferred loan costs, of $3 million; and gain on early extinguishment
of debt, of $2 million.

In the event that RevPAR declines, compared to the prior year, are greater
than anticipated in the preparation of this forecast, or operating margins are
lower than anticipated, we may not meet our forecast for the fourth quarter or
the full year 2003. We expect to be able to meet our preferred distributions
obligations even if RevPAR declines for the year are 6% to 8% below prior year.
Our RevPAR results for October 2003 were approximately 2.5% below the same
period in 2002, and our RevPAR for the first 11 days of November was
approximately 2.8% below the same period in 2002.

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Our estimates of FFO and EBITDA for the fourth quarter and full year of
2003 were derived from our estimate of net loss applicable to unitholders for
these periods. The following table provides a reconciliation of our estimates
of FFO and EBITDA to our estimates of net loss applicable to unitholders for
both the fourth quarter and full year 2003.

Reconciliation of Estimated Net Loss to Estimated FFO and EBITDA
(in millions, except per unit data)

|                                   |                         |   |                              |    |               |   |          |   |           |   |     |    |          |   |       |   | 
|---------------------------------- | ----------------------- | - | ---------------------------- | -- | ------------- | - | -------- | - | --------- | - | --- | -- | -------- | - | ----- | - | 
|                                   |                         |   | Fourth Quarter 2003 Guidance
|                                   |                         |   |                             
|                                   |                         |   | Low Guidance                 |    | High Guidance
|                                   |                         |   |                              |    |              
|                                   |                         |   |                              |    |               |   | Per Unit |   |           |   |     |    | Per Unit
|                                   |                         |   | Dollars                      |    | Amount(a)     |   | Dollars  |   | Amount(a)
|                                   |                         |   |                              |    |               |   |          |   |          
|Net loss applicable to unitholders |                         | $ | (43                          | )  |               | $ | (0.70    | ) |           | $ | (38 | )  |          | $ | (0.62 | )
|                                   | Depreciation            |   |                              | 38 |               |   |          |   |           |   |     | 38 |          |   |       |   | 
|                                   |                         |   |                              |    |               |   |          |   |           |   |     |    |          |   |       |  
|FFO                                |                         | $ | (5                           | )  |               | $ | (0.07    | ) |           | $ | 0   |    |          | $ | 0.01  |  
|                                   |                         |   |                              |    |               |   |          |   |           |   |     |    |          |   |       |  
|Net loss applicable to unitholders |                         | $ | (43                          | )  |               |   |          |   |           | $ | (38 | )  |          |   |       |  
|                                   | Depreciation            |   |                              | 38 |               |   |          |   |           |   |     | 38 |          |   |       |   | 
|                                   | Interest expense        |   |                              | 44 |               |   |          |   |           |   |     | 44 |          |   |       |   | 
|                                   | Amortization expense    |   |                              | 1  |               |   |          |   |           |   |     | 1  |          |   |       |   | 
|                                   | Preferred distributions |   |                              | 7  |               |   |          |   |           |   |     | 7  |          |   |       |   | 
|                                   |                         |   |                              |    |               |   |          |   |           |   |     |    |          |   |       |  
|EBITDA                             |                         | $ | 47                           |    |               |   |          |   |           | $ | 52  |    |          |   |       |  
|                                   |                         |   |                              |    |               |   |          |   |           |   |     |    |          |   |       |  

|                                   |                            |   |      |                            |  |               |       |          |  |           |      |     |  |          |       |   |  | 
|---------------------------------- | -------------------------- | - | ---- | -------------------------- |  | ------------- | ----- | -------- |  | --------- | ---- | --- |  | -------- | ----- | - |  | 
|                                   |                            |   |      | Full Year 2003 Guidance(b)
|                                   |                            |   |      |                           
|                                   |                            |   |      | Low Guidance               |  | High Guidance
|                                   |                            |   |      |                            |  |              
|                                   |                            |   |      |                            |  |               |       | Per Unit |  |           |      |     |  | Per Unit
|                                   |                            |   |      | Dollars                    |  | Amount(a)     |       | Dollars  |  | Amount(a)
|                                   |                            |   |      |                            |  |               |       |          |  |          
|Net loss applicable to unitholders |                            | $ | (240 | )                          |  | $             | (3.89 | )        |  | $         | (235 | )   |  | $        | (3.82 | )
|                                   | Depreciation               |   |      | 155                        |  |               |       |          |  |           |      | 155 |  |          |       |   | 
|                                   | Gain from sales of assets  |   |      | 1                          |  |               |       |          |  |           |      | 1   |  |          |       |   | 
|                                   |                            |   |      |                            |  |               |       |          |  |           |      |     |  |          |       |  
|FFO                                |                            | $ | (84  | )                          |  | $             | (1.36 | )        |  | $         | (79  | )   |  | $        | (1.28 | )
|                                   |                            |   |      |                            |  |               |       |          |  |           |      |     |  |          |       |  
|Net loss applicable to unitholders |                            | $ | (240 | )                          |  |               |       |          |  | $         | (235 | )   |  |          |       |  
|                                   | Depreciation               |   |      | 155                        |  |               |       |          |  |           |      | 155 |  |          |       |   | 
|                                   | Gains from sales of assets |   |      | 1                          |  |               |       |          |  |           |      | 1   |  |          |       |   | 
|                                   | Interest expense           |   |      | 175                        |  |               |       |          |  |           |      | 175 |  |          |       |   | 
|                                   | Amortization expense       |   |      | 2                          |  |               |       |          |  |           |      | 2   |  |          |       |   | 
|                                   | Preferred distributions    |   |      | 27                         |  |               |       |          |  |           |      | 27  |  |          |       |   | 
|                                   |                            |   |      |                            |  |               |       |          |  |           |      |     |  |          |       |  
|EBITDA                             |                            | $ | 120  |                            |  |               |       |          |  | $         | 125  |     |  |          |       |  
|                                   |                            |   |      |                            |  |               |       |          |  |           |      |     |  |          |       |  



| | (a) |  | Weighted average units are 61.8 million.                                                                                                                                                  
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Consistent with recently clarified SEC guidance, full year FFO and
EBITDA guidance has not been adjusted for the following non-cash charges
included in estimated net loss (in thousands):

|                                     |  |        |          |          |  |   |       |  
|------------------------------------ |  | ------ | -------- | -------- |  | - | ----- | -
|                                     |  | Amount |          | Per Unit
|                                     |  |        |          |         
|Impairment Loss                      |  | $      | (120,526 | )        |  | $ | (1.94 | )
|Charge-off of deferred debt costs    |  |        | (2,834   | )        |  |   | (0.05 | )
|Gain on early extinguishment of debt |  |        | 1,611    |          |  |   | 0.03  |  
|                                     |  |        |          |          |  |   |       |  
|                                     |  | $      | (121,749 | )        |  | $ | (1.96 | )
|                                     |  |        |          |          |  |   |       |  

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Quantitative and Qualitative Disclosures About Market Risk

At September 30, 2003, approximately 77% of our consolidated debt had
fixed interest rates. Currently, market rates of interest are below the rates
we are obligated to pay on our fixed-rate debt.

The following table provides information about our financial instruments
that are sensitive to changes in interest rates, including interest rate swaps
and debt obligations. For debt obligations at September 30, 2003, the
following table presents scheduled maturities and weighted average interest
rates, by maturity dates. For interest rate swaps, the table presents the
notional amount and weighted average interest rate, by contractual maturity
dates. Weighted average variable rates are based on implied forward rates in
the yield curve as of September 30, 2003. The fair value of our fixed rate
debt indicates the estimated principal amount of debt having the same debt
service requirements that could have been borrowed at September 30, 2003, at
then current market interest rates.

Expected Debt Maturity Dates
(dollars in thousands)

|               |                         |                       |       |       |      |      |         |          |      |      |        |        |      |            |         |         |      |            |         |          |      |   |           |           |      |   |           |           |      |   |   |           |   | 
|-------------- | ----------------------- | --------------------- | ----- | ----- | ---- | ---- | ------- | -------- | ---- | ---- | ------ | ------ | ---- | ---------- | ------- | ------- | ---- | ---------- | ------- | -------- | ---- | - | --------- | --------- | ---- | - | --------- | --------- | ---- | - | - | --------- | - | 
|               |                         |                       |       | 2003  |      | 2004 |         | 2005     |      | 2006 |        | 2007   |      | Thereafter |         | Total   |      | Fair Value
|               |                         |                       |       |       |      |      |         |          |      |      |        |        |      |            |         |         |      |           
|Fixed rate:    |                         |                       |       |       |      |      |         |          |      |      |        |        |      |            |         |         |      |            |         |          |      |   |           |           |      |   |           |           |      |   |   |          
|               | Debt                    |                       | $     | 4,169 |      |      | $       | 188,842  |      |      | $      | 23,754 |      |            | $       | 14,993  |      |            | $       | 259,123  |      |   | $         | 1,389,782 |      |   | $         | 1,880,663 |      |   | $ | 1,933,625 |  
|               | Interest rate swaps (a) |                       |       |      |      |      |         | (175,000 | )    |      |        |       |      |            |         |        |      |            |         | (125,000 | )    |   |           |          |      |   |           | (300,000  | )    |   |   |          |  
|               |                         | Average interest rate |       |       | 7.63 | %    |         |          | 7.94 | %    |        |        | 7.69 | %          |         |         | 8.02 | %          |         |          | 7.33 | % |           |           | 9.17 | % |           |           | 8.96 | % |   |           |  | 
|Floating rate: |                         |                       |       |       |      |      |         |          |      |      |        |        |      |            |         |         |      |            |         |          |      |   |           |           |      |   |           |           |      |   |   |          
|               | Debt                    |                       |       | 834   |      |      |         | 3,411    |      |      |        | 3,568  |      |            |         | 141,101 |      |            |         |         |      |   |           | 16,150    |      |   |           | 165,064   |      |   |   | 165,064   |  
|               | Interest rate swaps (a) |                       |       |      |      |      |         | 175,000  |      |      |        |       |      |            |         |        |      |            |         | 125,000  |      |   |           |          |      |   |           | 300,000   |      |   |   | (10,140   | )
|               |                         | Average interest rate |       |       | 3.62 | %    |         |          | 4.31 | %    |        |        | 3.62 | %          |         |         | 3.62 | %          |         |          | 5.16 | % |           |           | 4.18 | % |           |           | 4.31 | % |   |           |  | 
|Total debt     |                         | $                     | 5,003 |       |      | $    | 192,253 |          |      | $    | 27,322 |        |      | $          | 156,094 |         |      | $          | 259,123 |          |      | $ | 1,405,932 |           |      | $ | 2,045,727 |           |      |   |  |          
|               |                         | Average interest rate |       |       | 6.78 | %    |         |          | 4.57 | %    |        |        | 7.15 | %          |         |         | 4.04 | %          |         |          | 6.28 | % |           |           | 9.06 | % |           |           | 7.93 | % |   |           |  | 
|Net discount   |                         |                       |      |       |      |      |        |          |      |      |       |        |      |            |        |         |      |            |        |          |      |   |          |           |      |   | (4,443    | )         |      |   |  |          
|Total debt     |                         |                       |      |       |      |      |        |          |      |      |       |        |      |            |        |         |      |            |        |          |      |   |          |           |      | $ | 2,041,284 |           |      |   |  |          



|(a) |  | At September 30, 2003, our $175 million and $125 million in
publicly-traded senior notes due October 2004 and October 2007,
respectively, were matched with interest rate swap agreements that
effectively converted the fixed interest rate on the notes to a variable
interest rate tied to LIBOR. The interest rate swap agreements have the
same maturity as the notes.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Swap agreements, such as described above, contain a credit risk, in that
the counterparties may be unable to fulfill the terms of the agreement. We
minimize that risk by evaluating the creditworthiness of our counterparties,
who are limited to major banks and financial institutions, and we do not
anticipate nonperformance by the counterparties. The Standard & Poors credit
ratings for the financial institutions that are counterparties to our interest
rate swap agreements range from A+ to AA-.




Inflation

Operators of hotels, in general, possess the ability to adjust room rates
daily to reflect the effects of inflation. Competitive pressures may, however,
require us to reduce room rates in the near term and may limit our ability to
raise room rates in the future.




Seasonality

The lodging business is seasonal in nature. Generally, hotel revenues are
greater in the second and third calendar quarters than in the first and fourth
calendar quarters, although this may not be true for hotels in major tourist
destinations. Revenues for hotels in tourist areas generally are substantially
greater during tourist season than other times of the year. Seasonal variations
in revenue at our hotels can be expected to cause quarterly fluctuations in our
revenues. Quarterly earnings also may be adversely affected by events beyond
our control, such as extreme weather conditions, economic factors and other
considerations affecting travel. Historically, to the extent that cash flow
from operations has been insufficient during any quarter, due to temporary or
seasonal fluctuations in revenues, we have utilized cash on hand or borrowings
under our line of credit to meet our cash requirements.

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Recent Accounting Announcements

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
150 Accounting for Certain Financial Instruments with Characteristics of both
Liability and Equity which became effective during the three
months ended September 30, 2003. Neither SFAS 150 or
subsequently issued FASB staff positions have a material impact on our consolidated financial statements.




Disclosure Regarding Forward Looking Statements

Portions of this Quarterly Report on Form 10-Q include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward looking statements include, without limitation, any statement
that may predict, forecast, indicate or imply future results, performance or
achievements. Forward-looking statements involve risks and uncertainties that
may cause actual results to differ materially from the results contained in the
forward-looking statements. The risks, uncertainties and assumptions that may
affect our actual results, some of which are discussed more fully in our
previous filings under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended (collectively, Cautionary
Disclosures) include: general economic conditions, including the timing and
magnitude of any recovery from the current soft economy; future acts of
terrorism; the impact on the travel industry of increased security precautions;
the availability of capital; the impact of U.S. military involvement in the
Middle East and elsewhere; the ability to effect sales of non-strategic hotels
at anticipated prices and numerous other factors that may affect results,
performance and achievements. The forward looking statements included herein,
and all subsequent written and oral forward looking statements attributable to
us or persons acting on our behalf, are expressly qualified in their entirety
by the Cautionary Disclosures. We undertake no obligation to update any
forward-looking statements to reflect future events or circumstances.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information and disclosures regarding market risks applicable to us is
incorporated herein by reference to the discussion under Item 2. Managements
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources  Quantitative and Qualitative
Disclosures About Market Risks contained elsewhere in this Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2003.




Item 4. Controls and Procedures

(a)  Evaluation of disclosure controls and procedures.

As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of FelCors
principal executive officer and principal financial officer, of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the Exchange Act)). Based on this
evaluation, FelCors principal executive officer and principal financial
officer concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commission rules and forms. There was no change in our internal control over
financial reporting during our most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

(b)  Changes in internal controls.

Not applicable.

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PART II.  OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits: The following exhibits are filed as part of this Quarterly
Report on Form 10-Q:

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.3.1         |  | Master Amendment to Management Agreements, dated September
17, 2003, by and among FelCor Lodging Trust Incorporated
(FelCor), FelCor Lodging Limited Partnership (FelCor
LP), FelCor TRS I, L.L.C., FelCor TRS Holdings, L.P., BHR
Operations, L.L.C., BHR Lodging Tenant Company, BHR Salt
Lake Tenant Company, L.L.C., BHR Hotels Finance, Inc., BHR
Dallas Tenant Company, L.P. and BHR Plano Tenant Company,
L.P (filed as Exhibit 10.4.1 to FelCor Lodging Trust
Incorporateds (FelCor) September 2003
Form 10-Q and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.18.4        |  | Fourth Amendment, dated June 25, 2003, among FelCor, FelCor
LP and FelCor Canada Co., as borrowers, the lenders from
time to time party thereto, Deutsche Bank Trust Company
Americas, as syndication agent, and JPMorgan Chase Bank and
J.P. Morgan Bank Canada, as administrative agent for the
lenders (filed as Exhibit 10.19.4 to FelCors September
2003 Form 10-Q and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.18.5        |  | Fifth Amendment, dated October 29, 2003, among FelCor,
FelCor LP and FelCor Canada Co., as borrowers, the lenders
from time to time party thereto, Deutsche Bank Trust
Company Americas, as syndication agent, and JPMorgan Chase
Bank, as administrative agent for the lenders (filed as
Exhibit 10.19.5 to FelCors September 2003 Form 10-Q and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.30.4        |  | Second Amendment to Note, Loan Agreement, Environmental
Indemnity Agreement and Other Loan Documents, dated October
23, 2003, by and among FelCor/JPM Atlanta CP Hotel, L.L.C.,
FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin
Holdings, L.P., FelCor/JPM Mandalay Hotel, L.L.C.,
FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Phoenix Hotel,
L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., DJONT/JPM
Atlanta CP Leasing, L.L.C., DJONT/JPM Atlanta ES Leasing,
L.L.C., DJONT/JPM Austin Leasing, L.P., DJONT/JPM Mandalay
Leasing, L.L.C., DJONT/JPM Orlando Leasing, L.L.C.,
DJONT/JPM Phoenix Leasing, L.L.C., DJONT/JPM Wilmington
Leasing, L.L.C., DJONT/JPM BWI Leasing, L.L.C., FelCor LP,
FelCor/JPM BWI Hotel, L.L.C., FelCor/JPM Austin HI
Holdings, L.P., FelCor/JPM Boca Raton Hotel, L.L.C.,
FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM LBV Hotel,
L.L.C., FelCor/JPM Orlando I-Drive Hotel, L.L.C.,
FelCor/JPM Troy Hotel, L.L.C., DJONT/JPM Austin HI Leasing,
L.P., DJONT/JPM Boca Raton Leasing, L.L.C., DJONT/JPM
Denver Leasing, L.L.C., DJONT/JPM LBV Leasing, L.L.C.,
DJONT/JPM Orlando I-Drive Leasing, L.L.C., DJONT/JPM Troy
Leasing, L.L.C., FCH/DT BWI Hotel, L.L.C., and FCH/DT BWI
Holdings, L.P., as loan parties, and JPMorgan Chase Bank,
as lender, and acknowledged by FelCor Hotel Asset Company,
L.L.C. (filed as Exhibit 10.31.4 to FelCors September 2003
Form 10-Q and incorporated herein by reference).
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|31.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, of the Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|31.2           |  | Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, of the Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|32.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, of the Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|32.2           |  | Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, of the Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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(b)  Reports on Form 8-K:

None were issued during the three months ended September 30 2003.

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##### Table of Contents






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: November 13, 2003

| |                                    |  |                                  
| | ---------------------------------- |  | ---------------------------------
| | FELCOR LODGING LIMITED PARTNERSHIP
| | a Delaware Limited Partnership    
| |                                    |  |                                  
| | BY                                 |  | FelCor Lodging Trust Incorporated
| |                                    |  | Its General Partner              



| |     |  |                                                                         
| | --- |  | ------------------------------------------------------------------------
| | By: |  | /s/ Richard J. OBrien                                                  
| |     | 
| |     |  | Richard J. OBrien
Executive Vice President and
Chief Financial Officer 
|
| | By: |  | /s/ Lester C. Johnson                                                   
| |     | 
| |     |  | Lester C. Johnson
Senior Vice President and
Principal Accounting Officer

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##### Table of Contents









Index to Exhibits

Exhibit Number
    
    Description of Exhibit10.3.1
    
    
    Master Amendment to Management Agreements, dated September
17, 2003, by and among FelCor Lodging Trust Incorporated
(FelCor), FelCor Lodging Limited Partnership (FelCor
LP), FelCor TRS I, L.L.C., FelCor TRS Holdings, L.P., BHR
Operations, L.L.C., BHR Lodging Tenant Company, BHR Salt
Lake Tenant Company, L.L.C., BHR Hotels Finance, Inc., BHR
Dallas Tenant Company, L.P. and BHR Plano Tenant Company,
L.P (filed as Exhibit 10.4.1 to FelCor Lodging Trust
Incorporateds (FelCor) September 2003
Form 10-Q and incorporated herein by reference).10.18.4
    
    
    Fourth Amendment, dated June 25, 2003, among FelCor, FelCor
LP and FelCor Canada Co., as borrowers, the lenders from
time to time party thereto, Deutsche Bank Trust Company
Americas, as syndication agent, and JPMorgan Chase Bank and
J.P. Morgan Bank Canada, as administrative agent for the
lenders (filed as Exhibit 10.19.4 to FelCors September
2003 Form 10-Q and incorporated herein by reference).10.18.5
    
    
    Fifth Amendment, dated October 29, 2003, among FelCor,
FelCor LP and FelCor Canada Co., as borrowers, the lenders
from time to time party thereto, Deutsche Bank Trust
Company Americas, as syndication agent, and JPMorgan Chase
Bank, as administrative agent for the lenders (filed as
Exhibit 10.19.5 to FelCors September 2003 Form 10-Q and
incorporated herein by reference).10.30.4
    
    
    Second Amendment to Note, Loan Agreement, Environmental
Indemnity Agreement and Other Loan Documents, dated October
23, 2003, by and among FelCor/JPM Atlanta CP Hotel, L.L.C.,
FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin
Holdings, L.P., FelCor/JPM Mandalay Hotel, L.L.C.,
FelCor/JPM Orlando Hotel, L.L.C., FelCor/JPM Phoenix Hotel,
L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., DJONT/JPM
Atlanta CP Leasing, L.L.C., DJONT/JPM Atlanta ES Leasing,
L.L.C., DJONT/JPM Austin Leasing, L.P., DJONT/JPM Mandalay
Leasing, L.L.C., DJONT/JPM Orlando Leasing, L.L.C.,
DJONT/JPM Phoenix Leasing, L.L.C., DJONT/JPM Wilmington
Leasing, L.L.C., DJONT/JPM BWI Leasing, L.L.C., FelCor LP,
FelCor/JPM BWI Hotel, L.L.C., FelCor/JPM Austin HI
Holdings, L.P., FelCor/JPM Boca Raton Hotel, L.L.C.,
FelCor/JPM Denver Hotel, L.L.C., FelCor/JPM LBV Hotel,
L.L.C., FelCor/JPM Orlando I-Drive Hotel, L.L.C.,
FelCor/JPM Troy Hotel, L.L.C., DJONT/JPM Austin HI Leasing,
L.P., DJONT/JPM Boca Raton Leasing, L.L.C., DJONT/JPM
Denver Leasing, L.L.C., DJONT/JPM LBV Leasing, L.L.C.,
DJONT/JPM Orlando I-Drive Leasing, L.L.C., DJONT/JPM Troy
Leasing, L.L.C., FCH/DT BWI Hotel, L.L.C., and FCH/DT BWI
Holdings, L.P., as loan parties, and JPMorgan Chase Bank,
as lender, and acknowledged by FelCor Hotel Asset Company,
L.L.C. (filed as Exhibit 10.31.4 to FelCors September 2003
Form 10-Q and incorporated herein by reference).31.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, of the Chief Executive Officer.31.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, of the Chief Financial Officer.32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, of the Chief Executive Officer.32.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, of the Chief Financial Officer.