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, 2008  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

                        

                        75-2544994(State or other jurisdiction of

                        

                        (I.R.S. Employerincorporation or organization)

                        

                        Identification No.)
  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. xYes o No  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
            one):  Large accelerated filero

                        

                        Accelerated filer oNon-accelerated filerx (Do not check if a smaller reporting company)

                        

                        Smaller reporting company o
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYesxNo   
 FELCOR LODGING LIMITED PARTNERSHIP  INDEX   PagePART I. -- FINANCIAL INFORMATIONItem 1.

                        Financial Statements

                        3Consolidated Balance Sheets September 30, 2008 and December 31, 2007 (unaudited)

                        3Consolidated Statements of Operations – For the Three and Nine Months EndedSeptember 30, 2008 and 2007 (unaudited)

                        4Consolidated Statements of Comprehensive Income – For the Three and Nine MonthsEnded September 30, 2008 and 2007 (unaudited)

                        5Consolidated Statements of Cash Flows – For the Nine Months Ended September 30, 2008and 2007 (unaudited)

                        6Notes to Consolidated Financial Statements

                        7Item 2.

                        Management’s Discussion and Analysis of Financial Condition and Results of Operations

                        24General

                        24Financial Comparison

                        25Results of Operations

                        26Non-GAAP Financial Measures

                        29Pro Rata Share of Rooms Owned

                        35Hotel Portfolio Composition

                        36Hotel Operating Statistics

                        37Hotel Portfolio Listing

                        39Liquidity and Capital Resources

                        41Inflation

                        43Seasonality

                        43Disclosure Regarding Forward-Looking Statements

                        43Item 3.

                        Quantitative and Qualitative Disclosures about Market Risk

                        43Item 4.

                        Controls and Procedures

                        44PART II. – OTHER INFORMATIONItem 6.

                        Exhibits

                        45SIGNATURE

                        46
   2
  
 PART I. -- FINANCIAL INFORMATION  Item 1. Financial Statements  FELCOR LODGING LIMITED PARTNERSHIP  CONSOLIDATED BALANCE SHEETS (unaudited, in thousands)  September 30,

                            2008

                        

                        December 31,

                            2007ASSETSInvestment in hotels, net of accumulated depreciation of $786,171 at

                            September 30, 2008 and $694,464 at December 31, 2007

                        $

                        2,341,471

                        

                        

                        $

                        2,400,057Investment in unconsolidated entities

                        

                        108,052

                        

                        

                        

                        127,273Cash and cash equivalents

                        

                        59,053

                        

                        

                        

                        57,609Restricted cash

                        

                        15,112

                        

                        

                        

                        14,846Accounts receivable, net of allowance for doubtful accounts of $665

                            at September 30, 2008 and $307 at December 31, 2007

                        

                        42,215

                        

                        

                        

                        37,871Deferred expenses, net of accumulated amortization of $12,488 at

                            September 30, 2008 and $10,820 at December 31, 2007

                        

                        6,154

                        

                        

                        

                        8,149Other assets

                        

                        37,623

                        

                        

                        

                        38,030Total assets

                        $

                        2,609,680

                        

                        

                        $

                        2,683,835LIABILITIES AND PARTNERS’ CAPITALDebt, net of discount of $1,678 at September 30, 2008 and $2,082 at

                            December 31, 2007

                        $

                        1,520,068

                        

                        

                        $

                        1,475,607Distributions payable

                        

                        18,040

                        

                        

                        

                        30,493Accrued expenses and other liabilities

                        

                        145,776

                        

                        

                        

                        134,159Total liabilities

                        

                        1,683,884

                        

                        

                        

                        1,640,259Commitments and contingenciesRedeemable units at redemption value, 1,224 and 1,354 units issued

                            and outstanding at September 30, 2008 and December 31, 2007,

                            respectively

                        

                        8,764

                        

                        

                        

                        21,109Minority interest in other partnerships

                        

                        24,096

                        

                        

                        

                        25,264Partners’ capital:Preferred units, $0.01 par value, 20,000 units authorized:Series A Cumulative Convertible Preferred Units, 12,880 units, issued

                            and outstanding at September 30, 2008 and December 31, 2007

                        

                        309,362

                        

                        

                        

                        309,362Series C Cumulative Redeemable Preferred Units, 68 units, issued

                            and outstanding at September 30, 2008 and December 31, 2007

                        

                        169,412

                        

                        

                        

                        169,412Common units, 69,413 units issued and outstanding at September 30,

                            2008 and December 31, 2007

                        

                        390,881

                        

                        

                        

                        490,979Accumulated other comprehensive income

                        

                        23,281

                        

                        

                        

                        27,450Total partners’ capital

                        

                        892,936

                        

                        

                        

                        997,203Total liabilities, redeemable units and partners’ capital

                        $

                        2,609,680

                        

                        

                        $

                        2,683,835
    The accompanying notes are an integral part of these consolidated financial statements.  3
  
   FELCOR LODGING LIMITED PARTNERSHIP  CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2008 and 2007 (unaudited, in thousands, except for per unit data)  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Revenues:Hotel operating revenue

                        $

                        276,333

                        

                        

                        $

                        256,696

                        

                        

                        $

                        873,117

                        

                        

                        $

                        770,766Other revenue

                        

                        1,396

                        

                        

                        

                        1,766

                        

                        

                        

                        2,655

                        

                        

                        

                        2,612Total revenues

                        

                        277,729

                        

                        

                        

                        258,462

                        

                        

                        

                        875,772

                        

                        

                        

                        773,378Expenses:Hotel departmental expense

                        

                        93,502

                        

                        

                        

                        82,321

                        

                        

                        

                        290,765

                        

                        

                        

                        246,134Other property related costs

                        

                        76,947

                        

                        

                        

                        70,119

                        

                        

                        

                        230,646

                        

                        

                        

                        207,260Management and franchise fees

                        

                        13,573

                        

                        

                        

                        13,652

                        

                        

                        

                        45,448

                        

                        

                        

                        40,718Taxes, insurance and lease expense

                        

                        29,718

                        

                        

                        

                        31,736

                        

                        

                        

                        87,884

                        

                        

                        

                        92,387Corporate expenses

                        

                        5,388

                        

                        

                        

                        3,690

                        

                        

                        

                        17,079

                        

                        

                        

                        15,732Depreciation and amortization

                        

                        36,069

                        

                        

                        

                        28,523

                        

                        

                        

                        104,909

                        

                        

                        

                        80,729Impairment loss

                        

                        36,692

                        

                        

                        

                        -

                        

                        

                        

                        53,823

                        

                        

                        

                        -Hurricane loss

                        

                        1,669

                        

                        

                        

                        -

                        

                        

                        

                        1,669

                        

                        

                        

                        -Other expenses

                        

                        1,046

                        

                        

                        

                        1,298

                        

                        

                        

                        2,879

                        

                        

                        

                        1,713Total operating expenses

                        

                        294,604

                        

                        

                        

                        231,339

                        

                        

                        

                        835,102

                        

                        

                        

                        684,673Operating income (loss)

                        

                        (16,875

                        )

                        

                        

                        27,123

                        

                        

                        

                        40,670

                        

                        

                        

                        88,705Interest expense, net

                        

                        (24,114

                        )

                        

                        

                        (22,655

                        )

                        

                        

                        (74,886

                        )

                        

                        

                        (68,734

                        )Income (loss) before equity in income from

                            unconsolidated entities, minority interests

                            and gain on sale of assets

                        

                        (40,989

                        )

                        

                        

                        4,468

                        

                        

                        

                        (34,216

                        )

                        

                        

                        19,971Equity in income (loss) from unconsolidated entities

                        

                        (2,773

                        )

                        

                        

                        3,030

                        

                        

                        

                        (1,064

                        )

                        

                        

                        19,511Minority interests

                        

                        (165

                        )

                        

                        

                        314

                        

                        

                        

                        (1,126

                        )

                        

                        

                        1,102Gain on involuntary conversion

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        3,095

                        

                        

                        

                        -Gain on sale of condominiums

                        

                        -

                        

                        

                        

                        354

                        

                        

                        

                        -

                        

                        

                        

                        18,493Income (loss) from continuing operations

                        

                        (43,927

                        )

                        

                        

                        8,166

                        

                        

                        

                        (33,311

                        )

                        

                        

                        59,077Discontinued operations

                        

                        1,193

                        

                        

                        

                        (209

                        )

                        

                        

                        1,180

                        

                        

                        

                        34,629Net income (loss)

                        

                        (42,734

                        )

                        

                        

                        7,957

                        

                        

                        

                        (32,131

                        )

                        

                        

                        93,706Preferred distribution

                        

                        (9,678

                        )

                        

                        

                        (9,678

                        )

                        

                        

                        (29,034

                        )

                        

                        

                        (29,034

                        )Net income (loss) applicable to common unitholders

                        $

                        (52,412

                        )

                        

                        $

                        (1,721

                        )

                        

                        $

                        (61,165

                        )

                        

                        $

                        64,672Basic per common unit data:Net income (loss) from continuing operations

                        $

                        (0.85

                        )

                        

                        $

                        (0.02

                        )

                        

                        $

                        (0.99

                        )

                        

                        $

                        0.48Net income (loss)

                        $

                        (0.83

                        )

                        

                        $

                        (0.03

                        )

                        

                        $

                        (0.97

                        )

                        

                        $

                        1.03Basic weighted average common units outstanding

                        

                        63,174

                        

                        

                        

                        63,006

                        

                        

                        

                        63,178

                        

                        

                        

                        62,937Diluted per common unit data:Net income (loss) from continuing operations

                        $

                        (0.85

                        )

                        

                        $

                        (0.02

                        )

                        

                        $

                        (0.99

                        )

                        

                        $

                        0.47Net income (loss)

                        $

                        (0.83

                        )

                        

                        $

                        (0.03

                        )

                        

                        $

                        (0.97

                        )

                        

                        $

                        1.02Diluted weighted average common units outstanding

                        

                        63,174

                        

                        

                        

                        63,006

                        

                        

                        

                        63,178

                        

                        

                        

                        63,262Cash distributions declared on common units

                        $

                        0.15

                        

                        

                        $

                        0.30

                        

                        

                        $

                        0.85

                        

                        

                        $

                        0.85
    The accompanying notes are an integral part of these consolidated financial statements.  4
  
   FELCOR LODGING LIMITED PARTNERSHIP  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Three and Nine Months Ended September 30, 2008 and 2007 (unaudited, in thousands)   Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Net income (loss)

                        $

                        (42,734

                        )

                        

                        $

                        7,957

                        

                        

                        $

                        (32,131

                        )

                        

                        $

                        93,706Foreign currency translation adjustment

                        

                        (2,681

                        )

                        

                        

                        4,879

                        

                        

                        

                        (4,169

                        )

                        

                        

                        12,058Comprehensive income (loss)

                        $

                        (45,415

                        )

                        

                        $

                        12,836

                        

                        

                        $

                        (36,300

                        )

                        

                        $

                        105,764
                     The accompanying notes are an integral part of these consolidated financial statements. 5
  
 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2008 and 2007 (unaudited, in thousands)  Nine Months Ended September 30,2008

                        

                        2007Cash flows from operating activities:Net income (loss)

                        $

                        (32,131

                        )

                        

                        $

                        93,706Adjustments to reconcile net income (loss) to net cash provided by

                            (used in) operating activities:Depreciation and amortization

                        

                        104,909

                        

                        

                        

                        80,743Gain on involuntary conversion

                        

                        (3,095

                        )

                        

                        

                        -Gain on sale of assets

                        

                        (1,193

                        )

                        

                        

                        (46,981

                        )Amortization of deferred financing fees and debt discount

                        

                        2,221

                        

                        

                        

                        1,974Amortization of unearned officers’ and directors’ compensation

                        

                        3,795

                        

                        

                        

                        3,129Equity in loss (income) from unconsolidated entities

                        

                        1,064

                        

                        

                        

                        (19,511

                        )Distributions of income from unconsolidated entities

                        

                        2,044

                        

                        

                        

                        947Charges related to early debt extinguishment

                        

                        -

                        

                        

                        

                        901Impairment loss on hotels

                        

                        53,823

                        

                        

                        

                        -Minority interests

                        

                        1,126

                        

                        

                        

                        (7

                        )Changes in assets and liabilities:Accounts receivable

                        

                        (2,859

                        )

                        

                        

                        (8,816

                        )Restricted cash – operations

                        

                        (1,786

                        )

                        

                        

                        868Other assets

                        

                        (3,726

                        )

                        

                        

                        (2,008

                        )Accrued expenses and other liabilities

                        

                        17,928

                        

                        

                        

                        7,484Net cash flow provided by operating activities

                        

                        142,120

                        

                        

                        

                        112,429Cash flows from investing activities:Improvements and additions to hotels

                        

                        (108,899

                        )

                        

                        

                        (187,794

                        )Acquisition of hotels

                        

                        -

                        

                        

                        

                        -Additions to condominium project

                        

                        (666

                        )

                        

                        

                        (8,381

                        )Proceeds from sale of assets

                        

                        -

                        

                        

                        

                        165,107Proceeds from sale of condominiums

                        

                        -

                        

                        

                        

                        20,202Proceeds received from property damage insurance

                        

                        2,005

                        

                        

                        

                        1,853Decrease in restricted cash – investing

                        

                        1,519

                        

                        

                        

                        7,656Redemption of investment securities

                        

                        4,738

                        

                        

                        

                        -Cash distributions from unconsolidated entities

                        

                        22,108

                        

                        

                        

                        8,812Capital contribution to unconsolidated entities

                        

                        (5,995

                        )

                        

                        

                        (2,150

                        )Net cash flow provided by (used in) investing activities

                        

                        (85,190

                        )

                        

                        

                        5,305Cash flows from financing activities:Proceeds from borrowings

                        

                        141,267

                        

                        

                        

                        7,142Repayment of borrowings

                        

                        (97,210

                        )

                        

                        

                        (16,978

                        )Payment of deferred financing fees

                        

                        (16

                        )

                        

                        

                        (1,115

                        )Exercise of FelCor stock options

                        

                        -

                        

                        

                        

                        5,960Distributions paid to other partnerships’ minority holders

                        

                        (2,858

                        )

                        

                        

                        (5,030

                        )Contributions from minority interest holders

                        

                        565

                        

                        

                        

                        1,989Distributions paid to preferred unitholders

                        

                        (29,034

                        )

                        

                        

                        (29,034

                        )Distributions paid to common unitholders

                        

                        (67,571

                        )

                        

                        

                        (50,944

                        )Net cash flow used in financing activities

                        

                        (54,857

                        )

                        

                        

                        (88,010

                        )Effect of exchange rate changes on cash

                        

                        (629

                        )

                        

                        

                        1,680Net change in cash and cash equivalents

                        

                        1,444

                        

                        

                        

                        31,404Cash and cash equivalents at beginning of periods

                        

                        57,609

                        

                        

                        

                        124,179Cash and cash equivalents at end of periods

                        $

                        59,053

                        

                        

                        

                        155,583Supplemental cash flow information — interest paid

                        $

                        67,441

                        

                        

                        

                        66,889
  The accompanying notes are an integral part of these consolidated financial statements.  6
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.

                        Organization
  At September 30, 2008, we held ownership interests in 89 hotels and were the largest owner of upper-upscale, all-suite hotels. Our sole general partner is FelCor Lodging Trust Incorporated, a real estate investment trust, or REIT. At September 30, 2008, FelCor owned a greater than 98% interest in our operations.  Of the 89 hotels in which we had an ownership interest at September 30, 2008, we owned a 100% interest in 66 hotels, a 90% or greater interest in entities owning four hotels, a 75% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and a 50% interest in unconsolidated entities owning 17 hotels. We lease 88 of our hotels to operating lessees and
            one 50%-owned hotel is operated without a lease.  We consolidate the operating lessees of 85 of our hotels (which we refer to as our Consolidated Hotels) because we have a controlling interest in those operating lessees. These hotels include 13 of the 17 hotels in which we have a 50% ownership interest.  The hotel operating revenues and expenses of our other four hotels (in which we have a 50% ownership interest) are not
            consolidated.  At September 30, 2008, we had an aggregate of 64,520,190 redeemable and common units outstanding.  The following table reflects the distribution, by brand, of our Consolidated Hotels at September 30, 2008:
  Brand

                        Hotels

                        

                        RoomsEmbassy Suites Hotels®

                        47

                        

                        12,129Holiday Inn®

                        17

                        

                        6,306Sheraton® and Westin®

                        9

                        

                        3,217Doubletree®

                        7

                        

                        1,472Renaissance® and Hotel 480 Union Square

                        3

                        

                        1,324Hilton®

                        2

                        

                        559Total hotels

                        85
  Our Consolidated Hotels are located in the United States (23 states) and Canada (two hotels in Ontario), with concentrations in California (15 hotels), Florida (14 hotels) and Texas (11 hotels). Approximately 51% of our hotel room revenues from continuing operations during the first nine months of 2008 were
            generated from hotels in these three states.  At September 30, 2008, of our Consolidated Hotels, (i) subsidiaries of Hilton Hotels Corporation managed 54, (ii) subsidiaries of InterContinental Hotels Group PLC, or IHG, managed 17, (iii) subsidiaries of Starwood Hotels & Resorts Worldwide, Inc. managed nine, (iv) subsidiaries of Marriott International Inc.
            managed three, and (v) independent management companies managed two.  We entered into management agreements for our three Marriott-managed hotels in December 2007 (two Renaissance Resorts and an independent hotel, operated as Hotel 480 Union Square until it is reflagged as a Marriott in 2009). Hotels managed by Marriott are accounted for on a fiscal year comprised of 52 or 53 weeks ending on
            the Friday closest to December 31. Our results of operations for the quarter ended September 30, 2008, includes our Marriott-managed hotels’ operations for only the twelve-week period ended September 5, 2008.  7
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   1.

                        Organization – (continued)
  The information in our consolidated financial statements for the three and nine months ended September 30, 2008 and 2007 is unaudited. Preparing financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, 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, 2008 and 2007, include adjustments based on management’s estimates (consisting of normal and 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, 2007, included in our Annual Report on Form 10-K. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of actual operating results for the entire year.  2.

                        Investment in Unconsolidated Entities
  We owned 50% interests in joint venture entities that owned 17 hotels at September 30, 2008 and at December 31, 2007. We also owned a 50% interest in joint venture entities that own real estate in Myrtle Beach, South Carolina, provide condominium management services and lease three 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. We make adjustments to our equity in income from unconsolidated entities related to the depreciation of our excess basis in investment in unconsolidated entities when compared to the historical basis of the assets recorded by the joint ventures.  The following table summarizes combined financial information for our unconsolidated entities (in thousands):  September 30,

                            2008

                        

                        December31, 2007Balance sheet information:Investment in hotels, net of accumulated depreciation

                        $

                        292,587

                        

                        $

                        288,066Total assets

                        $

                        328,280

                        

                        $

                        319,295Debt

                        $

                        225,607

                        

                        $

                        188,356Total liabilities

                        $

                        236,009

                        

                        $

                        196,382Equity

                        $

                        92,271

                        

                        $

                        122,913
  Our unconsolidated entities’ debt at September 30, 2008 and December 31, 2007 consisted entirely of non-recourse mortgage debt.  8
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2.

                        Investment in Unconsolidated Entities – (continued)
  The following table sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):   Three Months Ended

                    Nine Months EndedSeptember 30,

                    

                    September 30,2008

                    

                    2007

                    

                    2008

                    

                    2007Total revenues

                    $

                    27,041

                    

                    

                    $

                    21,690

                    

                    

                    $

                    72,994

                    

                    

                    $

                    62,538Net income (loss)

                    $

                    (428

                    )(a)

                    

                    $

                    7,606

                    

                    

                    $

                    4,858

                    (a)

                    

                    $

                    35,712

                    (b)Net income (loss) attributable to FelCor LP

                    $

                    (214

                    )

                    

                    $

                    

                    3,803

                    

                    

                    $

                    2,429

                    

                    

                    $

                    

                    17,856Impairment loss

                    

                    (2,092

                    )(c)

                    

                    

                    -

                    

                    

                    

                    (2,092

                    )(c)

                    

                    

                    -Additional gain on sale related to basis difference

                    

                    -

                    

                    

                    

                    -

                    

                    

                    

                    -

                    

                    

                    

                    3,336

                    (b)Tax related to sale of asset by venture

                    

                    -

                    

                    

                    

                    (306

                    )(d)

                    

                    

                    -

                    

                    

                    

                    (306

                    )(d)Depreciation of cost in excess of book value

                    

                    (467

                    )

                    

                    

                    (467

                    )

                    

                    

                    (1,401

                    )

                    

                    

                    (1,375

                    )Equity in income (loss) from unconsolidated entities

                    $

                    (2,773

                    )

                    

                    $

                    

                    3,030

                    

                    

                    $

                    (1,064

                    )

                    

                    $

                    

                    19,511    (a)

                        Includes a $3.3 million impairment charge recorded by one of our joint ventures under the provisions of SFAS 144.
 (b)

                        In the first quarter of 2007, a 50%-owned joint venture entity sold a hotel, which resulted in a gain of $15.6 million for this venture. Our basis in this unconsolidated hotel was lower than the venture’s basis, resulting in an additional gain on sale.
 (c)

                        Represents a $2.1 million impairment charge related to an unrecoverable investment in an unconsolidated entity pursuant to APB 18.
 (d)

                        In the third quarter of 2007, a 50%-owned joint venture entity sold a hotel for an insignificant book gain. FelCor incurred a $0.3 million tax obligation as a result of this sale.
  The following table summarizes the components of our investment in unconsolidated entities (in thousands):
  September 30,

                            2008

                        

                        December 31, 2007Hotel related-investments

                        $

                        34,622

                        

                        

                        $

                        52,491Cost in excess of book value of hotel investments

                        

                        61,345

                        

                        

                        

                        62,746Land and condominium investments

                        

                        12,085

                        

                        

                        

                        12,036$

                        108,052

                        

                        

                        $

                        127,273
  The following table summarizes the components of our equity in income (loss) from unconsolidated entities (in thousands):  Three Months Ended

                            September 30,

                        

                        Nine Months Ended

                            September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Hotel investments

                        $

                        (954

                        )

                        

                        $

                        2,543

                        

                        

                        $

                        1,401

                        

                        

                        $

                        19,440Other investments

                        

                        (1,819

                        )

                        

                        

                        487

                        

                        

                        

                        (2,465

                        )

                        

                        

                        71$

                        (2,773

                        )

                        

                        $

                        3,030

                        

                        

                        $

                        (1,064

                        )

                        

                        $

                        19,511
  In January 2008, a 50%-owned joint venture refinanced a non-recourse loan secured by eight unconsolidated hotels. Of the $140 million in gross proceeds, $87 million were used to repay maturing debt, and the balance was either retained in the venture or distributed to the joint venture partners. We received
            $19.0 million from this distribution.  In January 2008, a 50%-owned joint venture repaid (with contributions from the joint venturers) a maturing $12.0 million non-recourse loan secured by one hotel. Our contribution was $6.0 million.  9
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   3.

                        Debt
  Debt at September 30, 2008 and December 31, 2007 consisted of the following (in thousands):  Interest Rate at

                        

                        

                        

                        

                        Balance OutstandingEncumbered Hotels

                        

                        September 30, 2008

                        

                        Maturity Date

                        

                        

                        September 30, 2008

                        

                        

                        December 31, 2007Senior term notes

                        none

                        

                        8.50%(a)

                        

                        June 2011

                        

                        $

                        299,351

                        

                        $

                        299,163Senior term notes

                        none

                        

                        L + 1.875

                        

                        December 2011

                        

                        

                        215,000

                        

                        

                        215,000Line of credit(b)

                        none

                        

                        L + 0.80

                        

                        August 2011

                        

                        

                        78,000

                        

                        

                        -Other

                        none

                        

                        L + 0.40

                        

                        July 2008(c)

                        

                        

                        -

                        

                        

                        8,350Total line of credit

                            and senior debt(d)

                        

                        

                        7.05

                        

                        

                        

                        

                        592,351

                        

                        

                        522,513Mortgage debt

                        12 hotels

                        

                        L + 0.93(e)

                        

                        November 2011(f)

                        

                        

                        250,000

                        

                        

                        250,000Mortgage debt

                        2 hotels

                        

                        L + 1.55(g)

                        

                        May 2012(h)

                        

                        

                        176,196

                        

                        

                        175,980Mortgage debt

                        8 hotels

                        

                        8.70

                        

                        May 2010

                        

                        

                        163,233

                        

                        

                        165,981Mortgage debt

                        7 hotels

                        

                        7.32

                        

                        April 2009

                        

                        

                        118,080

                        

                        

                        120,827Mortgage debt

                        6 hotels

                        

                        8.73

                        

                        May 2010

                        

                        

                        117,133

                        

                        

                        119,568Mortgage debt

                        5 hotels

                        

                        6.66

                        

                        June 2014

                        

                        

                        72,904

                        

                        

                        73,988Mortgage debt

                        2 hotels

                        

                        6.15

                        

                        June 2009

                        

                        

                        14,759

                        

                        

                        15,099Mortgage debt

                        1 hotel

                        

                        5.81

                        

                        July 2016

                        

                        

                        12,233

                        

                        

                        12,509Mortgage debt

                        -

                        

                        L + 2.85

                        

                        August 2008(c)

                        

                        

                        -

                        

                        

                        15,500Other

                        1 hotel

                        

                        various

                        

                        various

                        

                        

                        3,179

                        

                        

                        3,642Total mortgage debt(d)

                        44 hotels

                        

                        6.65

                        

                        

                        

                        

                        927,717

                        

                        

                        953,094Total

                        

                        

                        

                        6.80%

                        

                        

                        

                        $

                        1,520,068

                        

                        $

                        1,475,607
  (a)

                        If the credit rating on our senior debt is downgraded by Moody’s from Ba3 to B1 and Standard & Poor’s from BB- to B+, the interest rate on these notes will increase to 9.0%.
 (b)

                        We have a $250 million line of credit, of which $78 million is drawn. The interest rate can range from 80 to 150 basis points over LIBOR, based on our leverage ratio as defined in our line of credit agreement.
 (c)

                        This loan was repaid in full in July 2008.
 (d)

                        Interest rates are calculated based on the weighted average debt outstanding at September 30, 2008.
 (e)

                        We have purchased an interest rate cap that expires in November 2009 at 7.8% for this notional amount.
 (f)

                        The maturity date assumes that we will exercise three successive one-year extension options that permit, at our sole discretion, the original November 2008 maturity to be extended to 2011. In July 2008, we exercised our first one-year option to extend the maturity to November 2009, and we expect to exercise the remaining options when timely.
 (g)

                        We have purchased interest rate caps that expire in May 2009 at 6.25% for $177 million aggregate notional amounts.
 (h)

                        The maturity date assumes that we will exercise three successive one-year extension options that permit, at our sole discretion, the original May 2009 maturity to be extended to 2012, and we expect to exercise the options when timely.
  We reported interest expense of $24.1 million and $22.7 million for the three months ended September 30, 2008 and 2007, respectively, which is net of: (i) interest income of $0.3 million and $2.2 million, and (ii) capitalized interest of $0.3 million and $1.1 million, respectively. We
            reported interest expense of $74.9 million and $68.7 million for the nine months ended September 30, 2008 and 2007, respectively, which is net of: (i) interest income of $1.2 million and $4.9 million, and (ii) capitalized interest of $1.1 million and $3.9 million, respectively.  10
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   4.

                        Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs
  Our 2008 financial statements include results of operations from the two hotels acquired in December 2007. As such, we experienced increases in most of our revenue and expenses within continuing operations compared to the same period in 2007.  The following table summarizes the components of hotel operating revenue from continuing operations (in thousands):  Three Months Ended

                            September 30,

                        

                        Nine Months Ended

                            September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Room revenue

                        $

                        223,968

                        

                        

                        $

                        212,347

                        

                        

                        $

                        693,789

                        

                        

                        $

                        633,483Food and beverage revenue

                        

                        36,357

                        

                        

                        

                        32,161

                        

                        

                        

                        131,875

                        

                        

                        

                        99,146Other operating departments

                        

                        16,008

                        

                        

                        

                        12,188

                        

                        

                        

                        47,453

                        

                        

                        

                        38,137Total hotel operating revenue

                        $

                        276,333

                        

                        

                        $

                        256,696

                        

                        

                        $

                        873,117

                        

                        

                        $

                        770,766
  For the first nine months of both 2008 and 2007, more than 99% of our revenue was comprised of hotel operating revenue, which included 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, which are recorded as a bad debt expense. The remainder of our revenue was derived from other sources.  The following table summarizes the components of hotel departmental expenses from continuing operations (in thousands):  Three Months Ended September 30,2008

                        

                        2007Amount

                        

                        % of Total Hotel

                            Operating Revenue

                        

                        Amount

                        

                        % of Total Hotel

                            Operating RevenueRoom

                        $

                        55,563

                        

                        

                        20.1

                        %

                        

                        $

                        52,553

                        

                        

                        20.5

                        %Food and beverage

                        

                        30,747

                        

                        

                        11.1

                        

                        

                        

                        25,023

                        

                        

                        9.8Other operating departments

                        

                        7,192

                        

                        

                        2.6

                        

                        

                        

                        4,745

                        

                        

                        1.8Total hotel departmental expenses

                        $

                        93,502

                        

                        

                        33.8

                        %

                        

                        $

                        82,321

                        

                        

                        32.1

                        %
  Nine Months Ended September 30,2008

                        

                        2007Amount

                        

                        % of Total Hotel

                            Operating Revenue

                        

                        Amount

                        

                        % of Total Hotel

                            Operating RevenueRoom

                        $

                        167,085

                        

                        

                        19.1

                        %

                        

                        $

                        154,394

                        

                        

                        20.0

                        %Food and beverage

                        

                        102,289

                        

                        

                        11.7

                        

                        

                        

                        76,213

                        

                        

                        9.9Other operating departments

                        

                        21,391

                        

                        

                        2.5

                        

                        

                        

                        15,527

                        

                        

                        2.0Total hotel departmental expenses

                        $

                        290,765

                        

                        

                        33.3

                        %

                        

                        $

                        246,134

                        

                        

                        31.9

                        %
   11
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   4.

                        Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs – (continued)
  The following table summarizes the components of other property operating costs from continuing operations (in thousands):  Three Months Ended September 30,2008

                        

                        2007Amount

                        

                        % of Total Hotel

                            Operating Revenue

                        

                        Amount

                        

                        % of Total Hotel

                            Operating RevenueHotel general and administrative expense

                        $

                        24,378

                        

                        

                        8.8

                        %

                        

                        $

                        21,694

                        

                        

                        8.5

                        %Marketing

                        

                        22,340

                        

                        

                        8.1

                        

                        

                        

                        21,085

                        

                        

                        8.2Repair and maintenance

                        

                        14,173

                        

                        

                        5.1

                        

                        

                        

                        13,886

                        

                        

                        5.4Utilities

                        

                        16,056

                        

                        

                        5.8

                        

                        

                        

                        13,454

                        

                        

                        5.2Total other property operating costs

                        $

                        76,947

                        

                        

                        27.8

                        %

                        

                        $

                        70,119

                        

                        

                        27.3

                        %
  Nine Months Ended September 30,2008

                        

                        2007Amount

                        

                        % of Total Hotel

                            Operating Revenue

                        

                        Amount

                        

                        % of Total Hotel

                            Operating RevenueHotel general and administrative expense

                        $

                        74,526

                        

                        

                        8.5

                        %

                        

                        $

                        65,585

                        

                        

                        8.5

                        %Marketing

                        

                        70,330

                        

                        

                        8.0

                        

                        

                        

                        63,281

                        

                        

                        8.2Repair and maintenance

                        

                        43,324

                        

                        

                        5.0

                        

                        

                        

                        41,347

                        

                        

                        5.4Utilities

                        

                        42,466

                        

                        

                        4.9

                        

                        

                        

                        37,047

                        

                        

                        4.8Total other property operating costs

                        $

                        230,646

                        

                        

                        26.4

                        %

                        

                        $

                        207,260

                        

                        

                        26.9

                        %
  Hotel departmental expenses and other property operating costs include hotel employee compensation and benefit expenses of $81.8 million and $72.7 million for the three months ended September 30, 2008 and 2007, respectively, and $252.5 million and $218.1 million for the nine months ended
            September 30, 2008 and 2007, respectively.  12
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   5.

                        Taxes, Insurance and Lease Expense
  Taxes, insurance and lease expense from continuing operations were comprised of the following (in thousands):  Three Months Ended September 30,

                        

                        Nine Months Ended September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Operating lease expense(a)

                        $

                        17,913

                        

                        

                        $

                        18,783

                        

                        

                        $

                        51,466

                        

                        

                        $

                        54,471Real estate and other taxes

                        

                        8,426

                        

                        

                        

                        8,707

                        

                        

                        

                        25,434

                        

                        

                        

                        25,926Property insurance, general liability insurance and other

                        

                        3,379

                        

                        

                        

                        4,246

                        

                        

                        

                        10,984

                        

                        

                        

                        11,990Total taxes, insurance and lease expense

                        $

                        29,718

                        

                        

                        $

                        31,736

                        

                        

                        $

                        87,884

                        

                        

                        $

                        92,387
  (a)

                        Includes lease expense related to our 51%-owned operating lessees of $14.5 million and $16.2 million (paid to 13 of our unconsolidated, 50%-owned ventures) and $3.4 million and $2.6 million of ground lease expense for the three months ended September 30, 2008 and 2007, respectively; and lease expense related to our 51%-owned
                            operating lessees of $42.4 million and $47.7 million (paid to 13 of our unconsolidated, 50%-owned ventures) and $9.0 million and $6.7 million of ground lease expense for the nine months ended September 30, 2008 and 2007, respectively. Operating lease expense includes percentage rent (based on operating results) of $9.9 million and $10.4 million for the three months ended September 30, 2008 and 2007, respectively, and
                            $27.5 million and $29.4 million for the nine months ended September 30, 2008 and 2007, respectively.
  6.

                        Impairment Charge
  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 No. 144 for purposes of determining impairment charges and reporting discontinued operations.  In the third quarter of 2008, we identified two hotels as candidates to be sold, thereby reducing our estimated remaining hold period for these hotels. We tested these hotels for impairment under the provisions of SFAS No. 144 using undiscounted estimated cash flows over the revised estimated remaining hold period. Both of these hotels failed the test which resulted in a
            $36.7 million impairment charge during the third quarter ended September 30, 2008 to write down these hotel assets to our then current estimate of their fair market value before selling expenses.  In the first quarter of 2008, we identified six hotels as candidates to be sold and tested them for impairment. Of the hotels tested, two failed the test under SFAS No. 144, which resulted in a $17.1 million impairment charge during the first quarter ended March 31, 2008 to write down these hotel assets to our then
            current estimate of their fair market value before selling expenses.  The eight hotels identified as candidates for sale are included in continuing operations because we do not believe it is probable that the hotels will be sold within the next 12 months. These hotels continue to be depreciated over their remaining useful lives.  In the third quarter of 2008, an unconsolidated investment recorded a $3.3 million impairment charge (of which our share is $1.7 million) under SFAS No. 144. We also recorded an impairment charge of $2.1 million related to an other-than-temporary decline in value of certain equity method investments. In
            accordance with APB 18, other-than-temporary declines in fair value of our investment in unconsolidated entities result in reductions in the carrying value of these investments. We consider a decline in value in our equity method investments that is not estimated to recover within 12 months to be other-than-temporary.  13
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   6.

                        Impairment Charge – (continued)
  We may incur additional impairment charges if operating results of individual hotels are materially different from our forecasts, the economy or lodging industry materially weakens, or if we shorten our contemplated holding period for one or more hotels.  7.

                        Hurricane Related Items
  During the second quarter of 2008, we settled insurance claims related to 2005 hurricane losses and realized a $3.1 million gain from involuntary conversion as the final proceeds received exceeded our estimated basis in the assets requiring replacement.  In the third quarter of 2008, we recorded $1.7 million in hurricane-related clean up expenses. This related to 14 of our hotels affected by four hurricanes in 2008.  8.

                        Condominium Project
  We completed development of our 184-unit Royale Palms condominium project in Myrtle Beach, South Carolina in 2007. In the third quarter of 2007, we recognized a $0.4 million gain on sale of condominiums under the completed contract method, and for full year 2007, we recognized $18.6 million of gains, net of $1.0 million of tax. At September 30, 2008, we had five
            remaining condominium units included in other assets that we expect to sell on a selective basis to maximize the selling price.  9.

                        Discontinued Operations
  Results of operations of eleven hotels sold in 2007 are included in discontinued operations. The following table summarizes the condensed financial information for those hotels (in thousands):  Three Months Ended

                            September 30,

                        

                        Nine Months Ended

                            September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Operating revenue

                        $

                        -

                        

                        

                        $

                        74

                        

                        

                        $

                        -

                        

                        

                        $

                        26,522Operating expenses

                        

                        -

                        

                        

                        

                        (276

                        )

                        

                        

                        (13

                        )

                        

                        

                        (18,371

                        )Operating income (loss)

                        

                        -

                        

                        

                        

                        (202

                        )

                        

                        

                        (13

                        )

                        

                        

                        8,151Interest income (expense), net

                        

                        -

                        

                        

                        

                        4

                        

                        

                        

                        -

                        

                        

                        

                        (15

                        )Gain on sale of hotels, net of income tax

                        

                        1,193

                        

                        

                        

                        -

                        

                        

                        

                        1,193

                        

                        

                        

                        28,488Charge-off of deferred debt costs

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (119

                        )Loss on early extinguishment of debt

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (782

                        )Minority interests

                        

                        -

                        

                        

                        

                        (11

                        )

                        

                        

                        -

                        

                        

                        

                        (1,094

                        )Income (loss) from discontinued operations

                        $

                        1,193

                        

                        

                        $

                        (209

                        )

                        

                        $

                        1,180

                        

                        

                        $

                        34,629
  In the third quarter of 2008, we recorded a revision in income tax related to prior year gains on sales of hotels, which resulted in additional gains of $1.2 million related to these sales.  In the second quarter of 2007, we sold eight hotels for aggregate proceeds of $126.3 million. In the first six months of 2007, we sold ten consolidated hotels for aggregate gross proceeds of $169.0 million and one unconsolidated hotel for gross proceeds of $22.0 million. The operations of the unconsolidated
            hotel are consolidated because we owned more than 50% of the lessee.  We did not have any hotels designated as held for sale at September 30, 2008, and we have not sold any hotels in 2008. We include the operating results of hotels held for sale in discontinued operations. We consider a hotel as “held for sale” once we determine the criteria for this classification under the
            provisions of SAFS No. 144 has been met.  14
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   10.

                        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

                            September 30,

                        

                        Nine Months Ended

                            September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Numerator:Income (loss) from continuing operations

                        $

                        (43,927

                        )

                        

                        $

                        8,166

                        

                        

                        $

                        (33,311

                        )

                        

                        $

                        59,077Less: Preferred distributions

                        

                        (9,678

                        )

                        

                        

                        (9,678

                        )

                        

                        

                        (29,034

                        )

                        

                        

                        (29,034

                        )Income (loss) from continuing operations

                            applicable to common unitholders

                        

                        (53,605

                        )

                        

                        

                        (1,512

                        )

                        

                        

                        (62,345

                        )

                        

                        

                        30,043Discontinued operations

                        

                        1,193

                        

                        

                        

                        (209

                        )

                        

                        

                        1,180

                        

                        

                        

                        34,629Net income (loss) applicable to common

                            unitholders

                        $

                        (52,412

                        )

                        

                        $

                        (1,721

                        )

                        

                        $

                        (61,165

                        )

                        

                        $

                        64,672Denominator:Denominator for basic earnings per unit

                        

                        63,174

                        

                        

                        

                        63,006

                        

                        

                        

                        63,178

                        

                        

                        

                        62,937Denominator for diluted earnings per unit

                        

                        63,174

                        

                        

                        

                        63,006

                        

                        

                        

                        63,178

                        

                        

                        

                        63,262Earnings (loss) per unit data:Basic:Income (loss) from continuing operations

                        $

                        (0.85

                        )

                        

                        $

                        (0.02

                        )

                        

                        $

                        (0.99

                        )

                        

                        $

                        0.48Discontinued operations

                        $

                        0.02

                        

                        

                        $

                        (0.01

                        )

                        

                        $

                        0.02

                        

                        

                        $

                        0.55Net income (loss)

                        $

                        (0.83

                        )

                        

                        $

                        (0.03

                        )

                        

                        $

                        (0.97

                        )

                        

                        $

                        1.03Diluted:Income (loss) from continuing operations

                        $

                        (0.85

                        )

                        

                        $

                        (0.02

                        )

                        

                        $

                        (0.99

                        )

                        

                        $

                        0.47Discontinued operations

                        $

                        0.02

                        

                        

                        $

                        (0.01

                        )

                        

                        $

                        0.02

                        

                        

                        $

                        0.55Net income (loss)

                        $

                        (0.83

                        )

                        

                        $

                        (0.03

                        )

                        

                        $

                        (0.97

                        )

                        

                        $

                        1.02
  The following securities, which could potentially dilute basic earnings (loss) per unit in the future, were not included in the computation of diluted earnings (loss) per unit because they would have been antidilutive for the periods presented (in thousands):  Three Months Ended

                        

                        Nine Months EndedSeptember30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007FelCor’s restricted stock

                        

                        121

                        

                        

                        

                        346

                        

                        

                        

                        114

                        

                        

                        

                        -Series A convertible preferred units

                        

                        9,985

                        

                        

                        

                        9,985

                        

                        

                        

                        9,985

                        

                        

                        

                        9,985
  Series A preferred distributions that would be excluded from net income (loss) applicable to common unitholders, if these Series A preferred units were dilutive, were $6.3 million for the three months ended both September 30, 2008 and 2007, and $18.8 million for the nine months ended both September 30,
            2008 and 2007.  15
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   11.

                        Application of New Accounting Standards
  The FASB issued SFAS 157, “Fair Value Measurements” ("SFAS 157") which was effective for us on January 1, 2008. SFAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants
            would use when pricing the asset or liability. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. SFAS 157 also provides for certain disclosure requirements, including, but not limited to, the valuation techniques used to measure fair value and a discussion of changes in valuation
            techniques, if any, during the period except for nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value on a recurring basis, for which the effective date is January 1, 2009. We do not believe that the adoption of this standard has or will have a material effect on our financial position and results of operations.  The FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which was effective for us on January 1, 2008. SFAS 159 gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value on an instrument-by-instrument
            basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes (i.e., unrealized gains and losses) in fair value must be recorded in earnings. Additionally, SFAS 159 allows for a one-time election for existing positions upon adoption, with the transition
            adjustment recorded to beginning retained earnings. We did not make the one-time election upon adoption and therefore do not believe that the adoption of this standard has a material effect on our financial position and results of operations.  In December 2007, the FASB issued SFAS 141 (revised 2007), "Business Combinations" ("FAS 141R"). FAS 141R provides principles on the recognition and measurement of the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination. The
            standard particularly requires the assets acquired, liabilities assumed and noncontrolling interests to be measured at the acquisition date fair value, including contingent considerations. Furthermore, FAS 141R prohibits acquisition-related costs, such as due diligence, legal and accounting fees, from being applied in the determination of fair value. We will adopt the provisions of this statement beginning in the first quarter of 2009 prospectively. We do not believe the adoption of
            this statement will materially affect the recognition and measurement related to our future business combinations.  In December 2007, the FASB issued SFAS 160, “NoncontrollingInterests in Consolidated Financial Statements – an amendment of ARB No. 51” (“FAS 160”), which defines a noncontrolling interest in a consolidated subsidiary as “the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent” and requires
            noncontrolling interest to be presented as a separate component of equity in the consolidated balance sheet. FAS 160 also modifies the presentation of net income by requiring earnings and other comprehensive income to be attributed to controlling and noncontrolling interests. We will adopt this standard beginning in the first quarter of 2009 prospectively and any presentation and disclosure requirements retrospectively. Upon the adoption of this standard, we will reclassify
            interests of our minority partners from the mezzanine level of the balance sheet to partners' capital. As of December 31, 2007, this balance totaled $11.4 million. Additionally, the income attributable to minority partners will no longer be deducted in our determination of net income and net income would increase accordingly. However, the expense will be deducted in our determination of net income available to common unitholders. Therefore, we do not anticipate that the
            adoption of this standard will have a material effect on our income available to common unitholders or our diluted earnings per units.  16
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information
  Certain of our wholly-owned subsidiaries (FelCor/CSS Holdings, L.P.; FelCor Pennsylvania Company, L.L.C.; FelCor Lodging Holding Company, L.L.C.; Myrtle Beach Hotels, L.L.C.; FelCor TRS Borrower 1, L.P.; FelCor TRS Borrower 3, L.P.; FelCor TRS Borrower 4, L.L.C.; FelCor TRS Guarantor, L.P.; Center City Hotel Associates; FelCor Lodging Company, L.L.C.; FelCor TRS Holdings, L.P.; FHAC
            Texas Holdings, L.P.; FelCor Omaha Hotel Company, L.L.C.; FelCor Canada Co.; FelCor/St. Paul Holdings, L.P. and FelCor Hotel Asset Company, L.L.C., collectively, “Subsidiary Guarantors”), together with FelCor, guarantee, fully and unconditionally, and jointly and severally, our senior debt. The following tables present consolidating information for the Subsidiary Guarantors.  CONSOLIDATING BALANCE SHEET September 30, 2008 (in thousands)  ASSETSFelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Eliminations

                        

                        Total ConsolidatedNet investment in hotel properties

                        $

                        122,724

                        

                        

                        $

                        942,673

                        

                        $

                        1,276,074

                        

                        

                        $

                        -

                        

                        

                        $

                        2,341,471Equity investment in consolidated entities

                        

                        1,319,736

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (1,319,736

                        )

                        

                        

                        -Investment in unconsolidated entities

                        

                        80,877

                        

                        

                        

                        27,175

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        108,052Cash and cash equivalents

                        

                        2,852

                        

                        

                        

                        55,340

                        

                        

                        861

                        

                        

                        

                        -

                        

                        

                        

                        59,053Restricted cash

                        

                        -

                        

                        

                        

                        3,148

                        

                        

                        11,964

                        

                        

                        

                        -

                        

                        

                        

                        15,112Accounts receivable

                        

                        3,770

                        

                        

                        

                        38,450

                        

                        

                        (5

                        )

                        

                        

                        -

                        

                        

                        

                        42,215Deferred expenses

                        

                        2,908

                        

                        

                        

                        123

                        

                        

                        3,123

                        

                        

                        

                        -

                        

                        

                        

                        6,154Other assets

                        

                        11,117

                        

                        

                        

                        25,603

                        

                        

                        903

                        

                        

                        

                        -

                        

                        

                        

                        37,623Total assets

                        $

                        1,543,984

                        

                        

                        $

                        1,092,512

                        

                        $

                        1,292,920

                        

                        

                        $

                        (1,319,736

                        )

                        

                        $

                        2,609,680LIABILITES AND PARTNERS’ CAPITALDebt

                        $

                        592,351

                        

                        

                        $

                        121,260

                        

                        $

                        806,457

                        

                        

                        $

                        -

                        

                        

                        $

                        1,520,068Distributions payable

                        

                        18,040

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        18,040Accrued expenses and other liabilities

                        

                        32,393

                        

                        

                        

                        96,568

                        

                        

                        16,815

                        

                        

                        

                        -

                        

                        

                        

                        145,776Total liabilities

                        

                        642,784

                        

                        

                        

                        217,828

                        

                        

                        823,272

                        

                        

                        

                        -

                        

                        

                        

                        1,683,884Redeemable units, at redemption value

                        

                        8,764

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        8,764Minority interest – other partnerships

                        

                        -

                        

                        

                        

                        566

                        

                        

                        23,530

                        

                        

                        

                        -

                        

                        

                        

                        24,096Preferred units

                        

                        478,774

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        478,774Common units

                        

                        413,662

                        

                        

                        

                        850,837

                        

                        

                        446,118

                        

                        

                        

                        (1,319,736

                        )

                        

                        

                        390,881Accumulated other comprehensive income

                        

                        -

                        

                        

                        

                        23,281

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        23,281Total partners’ capital

                        

                        892,436

                        

                        

                        

                        874,118

                        

                        

                        446,118

                        

                        

                        

                        (1,319,736

                        )

                        

                        

                        892,936Total liabilities, redeemable units

                            and partners' capital

                        $

                        1,543,984

                        

                        

                        $

                        1,092,512

                        

                        $

                        1,292,920

                        

                        

                        $

                        (1,319,736

                        )

                        

                        $

                        2,609,680
   17
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information – (continued)
  CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2007 (in thousands)  ASSETSFelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Eliminations

                        

                        Total ConsolidatedNet investment in hotel properties

                        $

                        122,225

                        

                        

                        $

                        973,614

                        

                        $

                        1,304,218

                        

                        

                        $

                        -

                        

                        

                        $

                        2,400,057Equity investment in consolidated entities

                        

                        1,365,512

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (1,365,512

                        )

                        

                        

                        -Investment in unconsolidated entities

                        

                        97,810

                        

                        

                        

                        27,820

                        

                        

                        1,643

                        

                        

                        

                        -

                        

                        

                        

                        127,273Cash and cash equivalents

                        

                        7,889

                        

                        

                        

                        43,305

                        

                        

                        6,415

                        

                        

                        

                        -

                        

                        

                        

                        57,609Restricted cash

                        

                        364

                        

                        

                        

                        3,790

                        

                        

                        10,692

                        

                        

                        

                        -

                        

                        

                        

                        14,846Accounts receivable

                        

                        2,508

                        

                        

                        

                        35,198

                        

                        

                        165

                        

                        

                        

                        -

                        

                        

                        

                        37,871Deferred expenses

                        

                        3,839

                        

                        

                        

                        344

                        

                        

                        3,966

                        

                        

                        

                        -

                        

                        

                        

                        8,149Other assets

                        

                        14,593

                        

                        

                        

                        20,262

                        

                        

                        3,175

                        

                        

                        

                        -

                        

                        

                        

                        38,030Total assets

                        $

                        1,614,740

                        

                        

                        $

                        1,104,333

                        

                        $

                        1,330,274

                        

                        

                        $

                        (1,365,512

                        )

                        

                        $

                        2,683,835LIABILITES AND PARTNERS’ CAPITALDebt

                        $

                        538,012

                        

                        

                        $

                        124,469

                        

                        $

                        813,126

                        

                        

                        $

                        -

                        

                        

                        $

                        1,475,607Distributions payable

                        

                        30,493

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        30,493Accrued expenses and other liabilities

                        

                        27,923

                        

                        

                        

                        91,880

                        

                        

                        14,356

                        

                        

                        

                        -

                        

                        

                        

                        134,159Total liabilities

                        

                        596,428

                        

                        

                        

                        216,349

                        

                        

                        827,482

                        

                        

                        

                        -

                        

                        

                        

                        1,640,259Redeemable units, at redemption value

                        

                        21,109

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        21,109Minority interest – other partnerships

                        

                        -

                        

                        

                        

                        70

                        

                        

                        25,194

                        

                        

                        

                        -

                        

                        

                        

                        25,264Preferred units

                        

                        478,774

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        478,774Common units

                        

                        518,429

                        

                        

                        

                        860,464

                        

                        

                        477,598

                        

                        

                        

                        (1,365,512

                        )

                        

                        

                        490,979Accumulated other comprehensive income

                        

                        -

                        

                        

                        

                        27,450

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        27,450Total partners’ capital

                        

                        997,203

                        

                        

                        

                        887,914

                        

                        

                        477,598

                        

                        

                        

                        (1,365,512

                        )

                        

                        

                        997,203Total liabilities, redeemable units

                            and partners' capital

                        $

                        1,614,740

                        

                        

                        $

                        1,104,333

                        

                        $

                        1,330,274

                        

                        

                        $

                        (1,365,512

                        )

                        

                        $

                        2,683,835
   18
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information – (continued)
  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Three Months Ended September 30, 2008 (in thousands)  FelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Eliminations

                        

                        Total ConsolidatedRevenues:Hotel operating revenue

                        $

                        -

                        

                        

                        $

                        276,333

                        

                        

                        $

                        -

                        

                        

                        $

                        -

                        

                        

                        $

                        276,333Percentage lease revenue

                        

                        7,482

                        

                        

                        

                        -

                        

                        

                        

                        38,083

                        

                        

                        

                        (45,565

                        )

                        

                        

                        -Other revenue

                        

                        9

                        

                        

                        

                        1,371

                        

                        

                        

                        16

                        

                        

                        

                        -

                        

                        

                        

                        1,396Total revenue

                        

                        7,491

                        

                        

                        

                        277,704

                        

                        

                        

                        38,099

                        

                        

                        

                        (45,565

                        )

                        

                        

                        277,729Expenses:Hotel operating expenses

                        

                        -

                        

                        

                        

                        184,022

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        184,022Taxes, insurance and lease expense

                        

                        139

                        

                        

                        

                        69,126

                        

                        

                        

                        6,018

                        

                        

                        

                        (45,565

                        )

                        

                        

                        29,718Corporate expenses

                        

                        328

                        

                        

                        

                        3,372

                        

                        

                        

                        1,688

                        

                        

                        

                        -

                        

                        

                        

                        5,388Depreciation and amortization

                        

                        2,803

                        

                        

                        

                        15,587

                        

                        

                        

                        17,679

                        

                        

                        

                        -

                        

                        

                        

                        36,069Impairment loss

                        

                        -

                        

                        

                        

                        36,692

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        36,692Hurricane loss

                        

                        29

                        

                        

                        

                        1,575

                        

                        

                        

                        65

                        

                        

                        

                        -

                        

                        

                        

                        1,669Other expenses

                        

                        1

                        

                        

                        

                        1,027

                        

                        

                        

                        18

                        

                        

                        

                        -

                        

                        

                        

                        1,046Total operating expenses

                        

                        3,300

                        

                        

                        

                        311,401

                        

                        

                        

                        25,468

                        

                        

                        

                        (45,565

                        )

                        

                        

                        294,604Operating income

                        

                        4,191

                        

                        

                        

                        (33,697

                        )

                        

                        

                        12,631

                        

                        

                        

                        -

                        

                        

                        

                        (16,875

                        )Interest expense, net

                        

                        (9,431

                        )

                        

                        

                        (2,258

                        )

                        

                        

                        (12,425

                        )

                        

                        

                        -

                        

                        

                        

                        (24,114

                        )Income (loss) before equity in income

                            from unconsolidated entities and

                            minority interests

                        

                        (5,240

                        )

                        

                        

                        (35,955

                        )

                        

                        

                        206

                        

                        

                        

                        -

                        

                        

                        

                        (40,989

                        )Equity in income from consolidated entities

                        

                        (37,203

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        37,203

                        

                        

                        

                        -Equity in income (loss) from unconsolidated

                            entities

                        

                        (1,139

                        )

                        

                        

                        (1,634

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (2,773

                        )Minority interests

                        

                        -

                        

                        

                        

                        (192

                        )

                        

                        

                        27

                        

                        

                        

                        -

                        

                        

                        

                        (165

                        )Income from continuing operations

                        

                        (43,582

                        )

                        

                        

                        (37,781

                        )

                        

                        

                        233

                        

                        

                        

                        37,203

                        

                        

                        

                        (43,927

                        )Discontinued operations from consolidated entities

                        

                        848

                        

                        

                        

                        345

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        1,193Net income

                        

                        (42,734

                        )

                        

                        

                        (37,436

                        )

                        

                        

                        233

                        

                        

                        

                        37,203

                        

                        

                        

                        (42,734

                        )Preferred distributions

                        

                        (9,678

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (9,678

                        )Net income applicable to unitholders

                        $

                        (52,412

                        )

                        

                        $

                        (37,436

                        )

                        

                        $

                        233

                        

                        

                        $

                        37,203

                        

                        

                        $

                        (52,412

                        )
    19
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information – (continued)
  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Three Months Ended September 30, 2007 (in thousands)  FelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Eliminations

                        

                        Total ConsolidatedRevenues:Hotel operating revenue

                        $

                        -

                        

                        

                        $

                        256,696

                        

                        

                        $

                        -

                        

                        

                        $

                        -

                        

                        

                        $

                        256,696Percentage lease revenue

                        

                        7,859

                        

                        

                        

                        -

                        

                        

                        

                        33,864

                        

                        

                        

                        (41,723

                        )

                        

                        

                        -Other revenue

                        

                        2

                        

                        

                        

                        -

                        

                        

                        

                        466

                        

                        

                        

                        -

                        

                        

                        

                        468Total revenue

                        

                        7,861

                        

                        

                        

                        256,696

                        

                        

                        

                        34,330

                        

                        

                        

                        (41,723

                        )

                        

                        

                        257,164Expenses:Hotel operating expense

                        

                        -

                        

                        

                        

                        166,092

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        166,092Taxes, insurance and lease expense

                        

                        853

                        

                        

                        

                        67,006

                        

                        

                        

                        5,600

                        

                        

                        

                        (41,723

                        )

                        

                        

                        31,736Corporate expenses

                        

                        220

                        

                        

                        

                        2,524

                        

                        

                        

                        946

                        

                        

                        

                        -

                        

                        

                        

                        3,690Depreciation

                        

                        2,383

                        

                        

                        

                        13,562

                        

                        

                        

                        12,578

                        

                        

                        

                        -

                        

                        

                        

                        28,523Total operating expenses

                        

                        3,456

                        

                        

                        

                        249,184

                        

                        

                        

                        19,124

                        

                        

                        

                        (41,723

                        )

                        

                        

                        230,041Operating income

                        

                        4,405

                        

                        

                        

                        7,512

                        

                        

                        

                        15,206

                        

                        

                        

                        -

                        

                        

                        

                        27,123Interest expense, net

                        

                        (5,760

                        )

                        

                        

                        (1,696

                        )

                        

                        

                        (15,199

                        )

                        

                        

                        -

                        

                        

                        

                        (22,655

                        )Income (loss) before equity in income from

                            unconsolidated entities, minority interests and

                            sale of assets

                        

                        (1,355

                        )

                        

                        

                        5,816

                        

                        

                        

                        7

                        

                        

                        

                        -

                        

                        

                        

                        4,468Equity in income from consolidated entities

                        

                        6,341

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (6,341

                        )

                        

                        

                        -Equity in income from unconsolidated entities

                        

                        2,916

                        

                        

                        

                        132

                        

                        

                        

                        (18

                        )

                        

                        

                        -

                        

                        

                        

                        3,030Minority interests in other partnerships

                        

                        -

                        

                        

                        

                        675

                        

                        

                        

                        (361

                        )

                        

                        

                        -

                        

                        

                        

                        314Gain on condominiums

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        354

                        

                        

                        

                        -

                        

                        

                        

                        354Income (loss) from continuing operations

                        

                        7,902

                        

                        

                        

                        6,623

                        

                        

                        

                        (18

                        )

                        

                        

                        (6,341

                        )

                        

                        

                        8,166Discontinued operations from consolidated

                            entities

                        

                        55

                        

                        

                        

                        (295

                        )

                        

                        

                        31

                        

                        

                        

                        -

                        

                        

                        

                        (209

                        )Net income

                        

                        7,957

                        

                        

                        

                        6,328

                        

                        

                        

                        13

                        

                        

                        

                        (6,341

                        )

                        

                        

                        7,957Preferred distributions

                        

                        (9,678

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (9,678

                        )Net income applicable to unitholders

                        $

                        (1,721

                        )

                        

                        $

                        6,328

                        

                        

                        $

                        13

                        

                        

                        $

                        (6,341

                        )

                        

                        $

                        (1,721

                        )
   20
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information – (continued)
  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Nine Months Ended September 30, 2008 (in thousands)  FelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Eliminations

                        

                        Total ConsolidatedRevenues:Hotel operating revenue

                        $

                        -

                        

                        

                        $

                        873,117

                        

                        

                        $

                        -

                        

                        

                        $

                        -

                        

                        

                        $

                        873,117Percentage lease revenue

                        

                        20,794

                        

                        

                        

                        -

                        

                        

                        

                        138,371

                        

                        

                        

                        (159,165

                        )

                        

                        

                        -Other revenue

                        

                        9

                        

                        

                        

                        1,375

                        

                        

                        

                        1,271

                        

                        

                        

                        -

                        

                        

                        

                        2,655Total revenue

                        

                        20,803

                        

                        

                        

                        874,492

                        

                        

                        

                        139,642

                        

                        

                        

                        (159,165

                        )

                        

                        

                        875,772Expenses:Hotel operating expenses

                        

                        -

                        

                        

                        

                        566,859

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        566,859Taxes, insurance and lease expense

                        

                        2,627

                        

                        

                        

                        224,645

                        

                        

                        

                        19,777

                        

                        

                        

                        (159,165

                        )

                        

                        

                        87,884Corporate expenses

                        

                        895

                        

                        

                        

                        10,225

                        

                        

                        

                        5,959

                        

                        

                        

                        -

                        

                        

                        

                        17,079Depreciation and amortization

                        

                        8,022

                        

                        

                        

                        45,172

                        

                        

                        

                        51,715

                        

                        

                        

                        -

                        

                        

                        

                        104,909Impairment loss

                        

                        -

                        

                        

                        

                        36,692

                        

                        

                        

                        17,131

                        

                        

                        

                        -

                        

                        

                        

                        53,823Hurricane loss

                        

                        29

                        

                        

                        

                        1,575

                        

                        

                        

                        65

                        

                        

                        

                        -

                        

                        

                        

                        1,669Other expenses

                        

                        2

                        

                        

                        

                        1,395

                        

                        

                        

                        1,482

                        

                        

                        

                        -

                        

                        

                        

                        2,879Total operating expenses

                        

                        11,575

                        

                        

                        

                        886,563

                        

                        

                        

                        96,129

                        

                        

                        

                        (159,165

                        )

                        

                        

                        835,102Operating income

                        

                        9,228

                        

                        

                        

                        (12,071

                        )

                        

                        

                        43,513

                        

                        

                        

                        -

                        

                        

                        

                        40,670Interest expense, net

                        

                        (29,061

                        )

                        

                        

                        (7,832)

                        

                        

                        

                        (37,993

                        )

                        

                        

                        -

                        

                        

                        

                        (74,886)Income (loss) before equity in income

                            from unconsolidated entities and

                            minority interests

                        

                        (19,833

                        )

                        

                        

                        (19,903

                        )

                        

                        

                        5,520

                        

                        

                        

                        -

                        

                        

                        

                        (34,216

                        )Equity in income from consolidated entities

                        

                        (16,174

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        16,174

                        

                        

                        

                        -Equity in income (loss) from unconsolidated

                            entities

                        

                        1,023

                        

                        

                        

                        (2,051

                        )

                        

                        

                        (36

                        )

                        

                        

                        -

                        

                        

                        

                        (1,064

                        )Minority interests

                        

                        -

                        

                        

                        

                        (675

                        )

                        

                        

                        (451

                        )

                        

                        

                        -

                        

                        

                        

                        (1,126

                        )Gain on involuntary conversion

                        

                        2,005

                        

                        

                        

                        145

                        

                        

                        

                        945

                        

                        

                        

                        -

                        

                        

                        

                        3,095Income from continuing operations

                        

                        (32,979

                        )

                        

                        

                        (22,484

                        )

                        

                        

                        5,978

                        

                        

                        

                        16,174

                        

                        

                        

                        (33,311

                        )Discontinued operations from consolidated

                            entities

                        

                        848

                        

                        

                        

                        332

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        1,180Net income

                        

                        (32,131

                        )

                        

                        

                        (22,152

                        )

                        

                        

                        5,978

                        

                        

                        

                        16,174

                        

                        

                        

                        (32,131

                        )Preferred distributions

                        

                        (29,034

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (29,034

                        )Net income (loss) applicable to unitholders

                        $

                        (61,165

                        )

                        

                        $

                        (22,152

                        )

                        

                        $

                        5,978

                        

                        

                        $

                        16,174

                        

                        

                        $

                        (61,165

                        )
    21
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information – (continued)
  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Nine Months Ended September 30, 2007 (in thousands)  FelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Eliminations

                        

                        Total ConsolidatedRevenues:Hotel operating revenue

                        $

                        -

                        

                        

                        $

                        770,766

                        

                        

                        $

                        -

                        

                        

                        $

                        -

                        

                        

                        $

                        770,766Percentage lease revenue

                        

                        20,609

                        

                        

                        

                        -

                        

                        

                        

                        114,650

                        

                        

                        

                        (135,259

                        )

                        

                        

                        -Other revenue

                        

                        119

                        

                        

                        

                        -

                        

                        

                        

                        802

                        

                        

                        

                        -

                        

                        

                        

                        921Total revenue

                        

                        20,728

                        

                        

                        

                        770,766

                        

                        

                        

                        115,452

                        

                        

                        

                        (135,259

                        )

                        

                        

                        771,687Expenses:Hotel operating expense

                        

                        -

                        

                        

                        

                        494,112

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        494,112Taxes, insurance and lease expense

                        

                        3,111

                        

                        

                        

                        207,829

                        

                        

                        

                        16,706

                        

                        

                        

                        (135,259

                        )

                        

                        

                        92,387Abandoned projects

                        

                        -

                        

                        

                        

                        22

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        22Corporate expenses

                        

                        870

                        

                        

                        

                        9,841

                        

                        

                        

                        5,021

                        

                        

                        

                        -

                        

                        

                        

                        15,732Depreciation

                        

                        6,555

                        

                        

                        

                        38,862

                        

                        

                        

                        35,312

                        

                        

                        

                        -

                        

                        

                        

                        80,729Total operating expenses

                        

                        10,536

                        

                        

                        

                        750,666

                        

                        

                        

                        57,039

                        

                        

                        

                        (135,259

                        )

                        

                        

                        682,982Operating income

                        

                        10,192

                        

                        

                        

                        20,100

                        

                        

                        

                        58,413

                        

                        

                        

                        -

                        

                        

                        

                        88,705Interest expense, net

                        

                        (18,229

                        )

                        

                        

                        (5,363

                        )

                        

                        

                        (45,142

                        )

                        

                        

                        -

                        

                        

                        

                        (68,734

                        )Income (loss) before equity in income from

                            unconsolidated entities, minority interests

                            and sale of assets

                        

                        (8,037

                        )

                        

                        

                        14,737

                        

                        

                        

                        13,271

                        

                        

                        

                        -

                        

                        

                        

                        19,971Equity in income from consolidated entities

                        

                        81,408

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (81,408

                        )

                        

                        

                        -Equity in income from unconsolidated entities

                        

                        19,975

                        

                        

                        

                        (410

                        )

                        

                        

                        (54

                        )

                        

                        

                        -

                        

                        

                        

                        19,511Minority interests in other partnerships

                        

                        -

                        

                        

                        

                        1,800

                        

                        

                        

                        (698

                        )

                        

                        

                        -

                        

                        

                        

                        1,102Gain on condominiums

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        18,493

                        

                        

                        

                        -

                        

                        

                        

                        18,493Income from continuing operations

                        

                        93,346

                        

                        

                        

                        16,127

                        

                        

                        

                        31,012

                        

                        

                        

                        (81,408

                        )

                        

                        

                        59,077Discontinued operations from consolidated

                            entities

                        

                        360

                        

                        

                        

                        32,030

                        

                        

                        

                        2,239

                        

                        

                        

                        -

                        

                        

                        

                        34,629Net income

                        

                        93,706

                        

                        

                        

                        48,157

                        

                        

                        

                        33,251

                        

                        

                        

                        (81,408

                        )

                        

                        

                        93,706Preferred distributions

                        

                        (29,034

                        )

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (29,034

                        )Net income applicable to unitholders

                        $

                        64,672

                        

                        

                        $

                        48,157

                        

                        

                        $

                        33,251

                        

                        

                        $

                        (81,408

                        )

                        

                        $

                        64,672
    22
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12.

                        Consolidating Financial Information – (continued)
  CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the Nine Months Ended September30, 2008 (in thousands)   FelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Total ConsolidatedCash flows from (used in) operating activities

                        $

                        (9,328

                        )

                        

                        $

                        68,150

                        

                        

                        $

                        83,298

                        

                        

                        $

                        142,120Cash flows from (used in) investing activities

                        

                        17,989

                        

                        

                        

                        (55,861

                        )

                        

                        

                        (47,318

                        )

                        

                        

                        (85,190

                        )Cash flows from (used in) financing activities

                        

                        (13,698

                        )

                        

                        

                        375

                        

                        

                        

                        (41,534

                        )

                        

                        

                        (54,857

                        )Effect of exchange rates changes on cash

                        

                        -

                        

                        

                        

                        (629

                        )

                        

                        

                        -

                        

                        

                        

                        (629

                        )Change in cash and cash equivalents

                        

                        (5,037

                        )

                        

                        

                        12,035

                        

                        

                        

                        (5,554

                        )

                        

                        

                        1,444Cash and cash equivalents at beginning of period

                        

                        7,889

                        

                        

                        

                        43,305

                        

                        

                        

                        6,415

                        

                        

                        

                        57,609Cash and equivalents at end of period

                        $

                        2,852

                        

                        

                        $

                        55,340

                        

                        

                        $

                        861

                        

                        

                        $

                        59,053
   CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the Nine Months Ended September 30, 2007 (in thousands)  FelCor L.P.

                        

                        Subsidiary Guarantors

                        

                        Non-Guarantor Subsidiaries

                        

                        Total ConsolidatedCash flows from (used in) operating activities

                        $

                        3,916

                        

                        

                        $

                        56,690

                        

                        

                        $

                        51,823

                        

                        

                        $

                        112,429Cash flows from (used in) investing activities

                        

                        (17,587

                        )

                        

                        

                        55,801

                        

                        

                        

                        (32,909

                        )

                        

                        

                        5,305Cash flows from (used in) financing activities

                        

                        35,270

                        

                        

                        

                        (105,871

                        )

                        

                        

                        (17,409

                        )

                        

                        

                        (88,010

                        )Effect of exchange rates changes on cash

                        

                        -

                        

                        

                        

                        1,680

                        

                        

                        

                        -

                        

                        

                        

                        1,680Change in cash and cash equivalents

                        

                        21,599

                        

                        

                        

                        8,300

                        

                        

                        

                        1,505

                        

                        

                        

                        31,404Cash and cash equivalents at beginning of period

                        

                        69,728

                        

                        

                        

                        46,966

                        

                        

                        

                        7,485

                        

                        

                        

                        124,179Cash and equivalents at end of period

                        $

                        91,327

                        

                        

                        $

                        55,266

                        

                        

                        $

                        8,990

                        

                        

                        $

                        155,583
    23
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Item 2.

                        Management’s Discussion and Analysis of Financial Condition and Results of Operations
  General
  Despite the slowing economy, revenue per available room, or RevPAR, at our Consolidated Hotels increased 2.6% for the third quarter and 4.0% for the nine months ended September 30, 2008, compared to the same periods last year. RevPAR, at our Consolidated Hotels, was substantially higher than the average for U.S. hotels, generally for the same periods (-1.1% and 0.6%, respectively).
            Our RevPAR increases were driven by increases in both occupancy (2.3% and 2.7%, for the three and nine months ended September 30, 2008, respectively), and average daily rate, or ADR (0.3% and 1.3%, respectively). Our hotels were also able to increase their market share approximately 4% for the quarter and more than 3% for the nine months ended September 30, 2008.  We attribute our above-market increase in RevPAR and improvement in market share to our comprehensive hotel renovation program, which is substantially complete. We completed renovations at 70 hotels representing nearly 85% of our hotel portfolio during 2007 and 2008. RevPAR for those 70 hotels increased 5.4% in the third quarter of 2008 compared to the same period last year and they
            increased their market share more than 6%. We expect that our renovated hotels will continue to outperform industry averages and expand market share at least through the end of 2008.  In the first quarter of 2008, we identified six hotels as candidates to be sold and in the third quarter of 2008, we identified an additional two hotels to be sold. Because of our shortened remaining estimated hold periods on these hotels, in accordance with SFAS No. 144, we recorded impairment charges of $17.1 million in the first quarter and $36.7 million in the third
            quarter of 2008. We also reported $3.8 million aggregate impairment charges in the third quarter of 2008 related to our investments in unconsolidated subsidiaries.  We declared and paid a $0.35 per unit common distribution for the first and second quarters of 2008, and a $0.15 per unit common distribution for the third quarter. FelCor’s board of directors will determine the amount of future common and preferred distributions for each quarter based upon actual operating results, economic conditions, operating trends, its financial condition
            and capital requirements, as well as FelCor’s minimum REIT distribution requirements.  In December 2007, we acquired two hotels which make the comparison of hotel operating results between the quarters and the nine months ended September 30, 2008 and September 30, 2007 difficult. As a result, we have utilized a same-store comparison when comparing earnings before interest, taxes, depreciation and
            amortization, or EBITDA, Hotel EBITDA, Hotel EBITDA margin, and funds from operations, or FFO. These are all non-GAAP financial measures, and detailed reconciliations to the most comparable GAAP measure are found elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For purposes of these same-store comparisons, we have adjusted some of our September 30, 2007 information to remove discontinued operations and gains on sale
            of condominium units and to add the historical results of operations of the two acquired hotels. We believe that this is helpful for the investor’s understanding of our current-year operating results  24
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Financial Comparison (in thousands of dollars, except RevPAR and Hotel EBITDA margin)  Three Months Ended September 30,

                        

                        Nine Months Ended September 30,2008

                        

                        2007

                        

                        % Change

                            2008-2007

                        

                        2008

                        

                        2007

                        

                        % Change

                            2008-2007RevPAR

                        $

                        97.80

                        

                        

                        $

                        95.29

                        

                        

                        2.6

                        

                        %

                        

                        $

                        101.69

                        

                        

                        $

                        97.77

                        

                        

                        4.0

                        

                        %Hotel EBITDA(1)

                        $

                        74,972

                        

                        

                        $

                        72,399

                        

                        

                        3.6

                        

                        %

                        

                        $

                        254,490

                        

                        

                        $

                        237,595

                        

                        

                        7.1

                        

                        %Hotel EBITDA margin(1)

                        

                        27.1%

                        

                        

                        

                        26.7%

                        

                        

                        1.5

                        

                        %

                        

                        

                        29.1%

                        

                        

                        

                        28.3%

                        

                        

                        2.8

                        

                        %Income (loss) from continuing operations(2)

                        $

                        (43,927

                        )

                        

                        $

                        8,166

                        

                        

                        (637.9

                        )

                        %

                        

                        $

                        (33,311

                        )

                        

                        $

                        59,077

                        

                        

                        (156.4

                        )

                        %Same-Store FFO(1) (3)

                        $

                        (13,538

                        )

                        

                        $

                        25,938

                        

                        

                        (152.2

                        )

                        %

                        

                        $

                        50,597

                        

                        

                        $

                        90,892

                        

                        

                        (44.3

                        )

                        %Same-Store EBITDA(1)(4)

                        $

                        24,055

                        

                        

                        $

                        65,437

                        

                        

                        (63.2

                        )

                        %

                        

                        $

                        168,031

                        

                        

                        $

                        249,393

                        

                        

                        (32.6

                        )

                        %
  ____________ (1)

                        A discussion of the use, limitations and importance of these non-GAAP financial measures and detailed reconciliations to the most comparable GAAP measure are found elsewhere in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
  (2)

                        Included in income (loss) from continuing operations are the following amounts (in thousands):
  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Impairment loss

                        $

                        (36,692

                        )

                        

                        $

                        -

                        

                        

                        $

                        (53,823

                        )

                        

                        $

                        -Impairment loss on unconsolidated hotels

                        

                        (3,750

                        )

                        

                        

                        -

                        

                        

                        

                        (3,750

                        )

                        

                        

                        -Hurricane loss

                        

                        (1,669

                        )

                        

                        

                        -

                        

                        

                        

                        (1,669

                        )

                        

                        

                        -Hurricane loss on unconsolidated hotels

                        

                        (50

                        )

                        

                        

                        -

                        

                        

                        

                        (50

                        )

                        

                        

                        -Conversion costs

                        

                        (118

                        )

                        

                        

                        -

                        

                        

                        

                        (481

                        )

                        

                        

                        -Gain (loss) on sale of unconsolidated hotels

                        

                        -

                        

                        

                        

                        (189

                        )

                        

                        

                        -

                        

                        

                        

                        10,993Gain on sale of condominiums

                        

                        -

                        

                        

                        

                        354

                        

                        

                        

                        -

                        

                        

                        

                        18,493Gain on involuntary conversion

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        3,095

                        

                        

                        

                        -Abandoned projects

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (22

                        )
  (3)

                        Same-Store FFO has not been adjusted for the following items included in net income (loss) (in thousands):
  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Impairment loss

                        $

                        (36,692

                        )

                        

                        $

                        -

                        

                        

                        $

                        (53,823

                        )

                        

                        $

                        -Impairment loss on unconsolidated hotels

                        

                        (3,750

                        )

                        

                        

                        -

                        

                        

                        

                        (3,750

                        )

                        

                        

                        -Hurricane loss

                        

                        (1,669

                        )

                        

                        

                        -

                        

                        

                        

                        (1,669

                        )

                        

                        

                        -Hurricane loss on unconsolidated hotels

                        

                        (50

                        )

                        

                        

                        -

                        

                        

                        

                        (50

                        )

                        

                        

                        -Conversion costs

                        

                        (118

                        )

                        

                        

                        -

                        

                        

                        

                        (481

                        )

                        

                        

                        -Abandoned projects

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (22

                        )Charges related to debt extinguishment,

                            net of minority interests

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (811

                        )
   25
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (4)

                        Same-Store EBITDA has not been adjusted for the following amounts included in net income (loss)
 (in thousands):  Three Months Ended September 30,

                        

                        Nine Months Ended September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Impairment loss

                        $

                        (36,692

                        )

                        

                        $

                        -

                        

                        

                        $

                        (53,823

                        )

                        

                        $

                        -Impairment loss on unconsolidated hotels

                        

                        (3,750

                        )

                        

                        

                        -

                        

                        

                        

                        (3,750

                        )

                        

                        

                        -Hurricane loss

                        

                        (1,669

                        )

                        

                        

                        -

                        

                        

                        

                        (1,669

                        )

                        

                        

                        -Hurricane loss on unconsolidated hotels

                        

                        (50

                        )

                        

                        

                        -

                        

                        

                        

                        (50

                        )

                        

                        

                        -Conversion costs

                        

                        (118

                        )

                        

                        

                        -

                        

                        

                        

                        (481

                        )

                        

                        

                        -Gain on sale of hotels, net of income tax

                            and minority interests

                        

                        1,193

                        

                        

                        

                        -

                        

                        

                        

                        1,193

                        

                        

                        

                        27,830Gain (loss) on sale of hotels in

                            unconsolidated entities

                        

                        -

                        

                        

                        

                        (189

                        )

                        

                        

                        -

                        

                        

                        

                        10,993Gain on involuntary conversion

                        

                        

                        

                        

                        

                        -

                        

                        

                        

                        3,095

                        

                        

                        

                        -Abandoned projects

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (22

                        )Charges related to debt extinguishment,

                            net of minority interests

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (811

                        )
  Results of Operations  Comparison of the Three Months Ended September 30, 2008 and 2007  Our net loss applicable to common unitholders was $52.4 million, or $0.83 per unit, compared to a net loss of $1.7 million, or $0.03 per unit, for the same period in 2007. The current year loss includes $42.2 million of (i) impairment charges ($36.7 million related to two consolidated hotels and $3.8 million related to equity method investments in hotels) and
            (ii) hurricane-related expenses ($1.7 million), which were partially offset by an increase in gains from sales of hotels of $1.2 million.  The third quarter of 2008 was our third complete quarter to include results of operations from two hotels acquired in December 2007. As such, our financial statements reflected increases in revenues and expenses associated with these hotels compared to the same period in 2007.  Our total revenues were $277.7 million, a 7.5% increase compared to the same period in 2007. The increase in revenue is principally attributed to our 2.6% RevPAR increase and $14.5 million of revenue from two recently-acquired hotels.  Hotel departmental expenses increased $11.2 million compared to the same period in 2007, of which $9.2 million is attributable to the two recently-acquired hotels and the remainder primarily reflects expenses associated with increased occupancy compared to the same period in 2007. As a percentage of total revenue, hotel departmental expenses increased from 31.9% to 33.7%
            compared to the same period in 2007. Rooms expense decreased as a percentage of total revenue from 20.3% to 20.0%, but food and beverage expense increased as a percent of total revenue from 9.7% to 11.1% and other operating department expenses increased as a percent of total revenue from 1.8% to 2.6% compared to the same period in 2007. The changes in departmental expenses as a percent of total revenue are primarily due to the mix and nature of the business of the two
            recently-acquired hotels, which are both resort properties. Food and beverage revenue generally has significantly higher expenses as a percent of revenue than room revenue, and the two recently-acquired hotels contributed approximately 16% of our food and beverage revenue during the third quarter of 2008.  26
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Other property-related costs increased $6.8 million compared to the same period in 2007, of which $5.5 million related to the two recently-acquired hotels and $1.4 million related to increased energy costs. As a percentage of total revenue, other property operating costs increased from 27.1% to 27.7% compared to the same period in 2007, due primarily to increased energy
            costs.  Management and franchise fees remained essentially the same compared to the same period in 2007. As a percentage of total revenue, management and franchise fees decreased from 5.3% to 4.9% compared to the same period in 2007, primarily from decreases in estimated 2008 incentive management fees.  Taxes, insurance and lease expense decreased $2.0 million compared to the same period in 2007. The two recently-acquired hotels had taxes, insurance and lease expense of $0.8 million. The decrease from the prior year primarily related to a $1.7 million decrease in percentage rent expense when several of our percentage leases were reset in late 2007 and a
            $1.2 million decrease in insurance expense.  Corporate expenses increased $1.7 million compared to the same period in 2007 and increased as a percentage of total revenue from 1.4% to 1.9%, due primarily to adjustments recorded in the prior year for stock compensation and corporate bonus estimates.  Depreciation and amortization expense increased $7.5 million, compared to the same period in 2007, of which $2.0 million related to the two recently-acquired hotels. The remainder is attributed to increased depreciation associated with hotel capital expenditures of $108.9 million in 2008 and $227.5 million in 2007.  We identified two hotels in the third quarter 2008 as candidates to be sold. We tested these hotels for impairment under the provisions of SFAS No. 144 using undiscounted estimated cash flows over a revised estimated remaining hold period. The two hotels failed the test under SFAS No. 144, which resulted in an impairment charge of $36.7 million to write down these hotel
            assets to our current estimate of their fair market value before selling expenses in the third quarter ended September 30, 2008.  In the third quarter of 2008, we recorded $1.7 million in hurricane-related clean up expenses. This related to 14 of our hotels affected by four hurricanes in 2008.  Net interest expense increased $1.5 million compared to the same period in 2007. This change is primarily attributable to (i) a $2.0 million decrease in interest income due to lower cash balances and lower interest rates earned on those balances; (ii) a $1.9 million increase in interest expense related to the mortgage debt on the two recently-acquired hotels; and
            (iii) a $0.8 million reduction in capitalized interest related to lower renovation-related construction in progress, all of which was partially offset by lower interest of $3.2 million on floating-rate debt.  Equity in income from unconsolidated entities decreased $5.8 million compared to the same period in 2007, which primarily reflects $3.8 million impairment charge related to our equity method investments and the effect of resetting several percentage leases in late 2007.  Discontinued operations consisted of a $1.2 million adjustment to gains on sale due to a revision in taxes associated with $71.2 million gains from hotel sales in 2006 and 2007.  27
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Comparison of the Nine Months Ended September 30, 2008 and 2007  Our net loss applicable to common unitholders was $61.2 million, or $0.97 per unit, compared to net income applicable to common unitholders of $64.7 million, or $1.02 per unit, for the same period in 2007. The current year loss includes $59.3 million of impairment charges ($53.8 million related to consolidated hotels and $3.8 million related to equity method
            investments) and hurricane related expenses ($1.7 million). These expenses were partially offset by a gain related to involuntary conversions from the final settlement of 2005 hurricane claims ($3.1 million) and an adjustment to gains from hotel sales ($1.2 million). The prior year net income includes $66.2 million from (i) gains from sale of hotels ($28.5 million in discontinued operations and $11.0 million in equity in income from unconsolidated entities),
            (ii) gain on sale of condominiums ($18.5 million), and (iii) operating income from hotels sold in 2007 and included in discontinued operations ($8.2 million).  The third quarter of 2008 was our third complete quarter to include results of operations from two hotels acquired in December 2007. As such, our financial statements reflected increases in revenues and expenses associated with these hotels compared to the same period in 2007.  Our total revenues were $875.8 million, a 13.2% increase compared to the same period in 2007. The increase in revenue is principally attributed to our 4.0% RevPAR increase and $69.6 million of revenue from two recently-acquired hotels.  Hotel departmental expenses increased $44.6 million compared to the same period in 2007, of which $34.6 million is attributable to the two recently-acquired hotels and the remainder primarily reflects expenses associated with increased occupancy compared to the same period in 2007. As a percentage of total revenue, hotel departmental expenses increased from 31.8% to 33.2%
            compared to the same period in 2007. Rooms expense decreased as a percentage of total revenue from 20.0% to 19.1%, but food and beverage expense increased as a percent of total revenue from 9.9% to 11.7% and other operating department expenses increased as a percent of total revenue from 2.0% to 2.4% compared to the same period in 2007. The change in departmental expenses as a percent of total revenue is primarily due to the mix and nature of the business of the two
            recently-acquired hotels, which are both resort properties. ADR at the two recently-acquired hotels was 41% higher than the remainder of the portfolio in the nine months ended September 30, 2008, which was the principal reason for the improvement in rooms expense as a percentage of total revenue. Food and beverage generally has significantly higher expenses as a percent of revenue than room revenue and, the two recently-acquired hotels contributed nearly 23% of our food and
            beverage revenue during the nine months ended September 30, 2008.  Other property-related costs increased $23.4 million compared to the same period in 2007, of which $17.8 million related to the two recently-acquired hotels. As a percentage of total revenue, other property operating costs decreased from 26.8% to 26.3% compared to the same period in 2007, due principally to decreased repairs and maintenance costs (as a consequence of our
            recent renovation program) as a percentage of revenue.  Management and franchise fees increased $4.7 million compared to the same period in 2007, of which $2.6 million resulted from increases in revenue and $2.1 million related to the two recently-acquired hotels. There was essentially no change in management and franchise fees as a percentage of revenue for the nine months ended September 30, 2008 compared to the same
            period in 2007.  Taxes, insurance and lease expense decreased $4.5 million compared to the same period in 2007. The two recently-acquired hotels had taxes, insurance and lease expense of $3.6 million. The decrease from the prior year primarily related to a $5.3 million decrease in percentage rent expense when several of our percentage leases were reset in late 2007, a $2.5 million
            decrease in property taxes largely from reduced assessed values and successful resolution of estimated property tax accruals related to prior years and a $1.8 million decrease in property insurance.  Corporate expenses increased $1.3 million in the nine months ended September 30, 2008 but remained unchanged as a percentage of revenue compared to the same period in 2007.  28
  
 FELCOR LODGING LIMITED PARTNERSHIP  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Depreciation and amortization expense increased $24.2 million, compared to the same period in 2007, of which increase $6.2 million related to the two recently-acquired hotels. The remainder of the increase is attributed to increased depreciation associated with hotel capital expenditures of $108.9 million in 2008 and $227.5 million in 2007.  We identified eight hotels in 2008 as candidates to be sold. We tested these hotels for impairment under the provisions of SFAS No. 144 using undiscounted estimated cash flows over a revised estimated remaining hold period. Of the hotels tested, four hotels failed the test under SFAS No. 144, which resulted in an impairment charge of $53.8 million to write down these
            hotel assets to our current estimate of their fair market value before selling expenses in the nine months ended September 30, 2008.  In 2008, we recorded $1.7 million in hurricane-related clean up expenses. This related to 14 of our hotels affected by four hurricanes in 2008.  Net interest expense increased $6.2 million compared to the same period in 2007. This change is primarily attributable to (i) a $3.7 million decrease in interest income due to lower cash balances and interest rates earned on those balances; (ii) a $6.0 million increase in interest expense related to the mortgage debt on the two recently-acquired hotels; and
            (iii) a $2.8 million reduction in capitalized interest related to lower renovation-related construction in progress, all of which was partially offset by lower interest of $6.8 million on floating rate debt.  Equity in income from unconsolidated entities decreased by $20.6 million compared to the same period in 2007, which primarily reflects $11.0 million of income received from the gain on the sale of an unconsolidated hotel during the first quarter of 2007, $3.8 million of impairment charges during the third quarter of 2008, and the effect of resetting several percentage
            leases in late 2007.  In 2008 we settled insurance claims relating to 2005 hurricane losses and realized a $3.1 million gain from involuntary conversion.  In 2007 we finalized the sale of 178 of the 184 units at our Royale Palms condominium project and recognized an $18.5 million gain on sale under the completed contract method.  Discontinued operations included a $1.2 million adjustment to gains on sale related to a revision in taxes associated with gains aggregating $71.2 million from hotel sales in 2006 and 2007. Discontinued operations for the nine months ended September 30, 2007, included operating income of $8.2 million, $0.9 million of charges related to early debt repayment,
            and $1.1 million of minority interest expense related to the hotels we sold in 2007. Discontinued operations also included $28.5 million of gains related to the sale of ten hotels during the first six months of 2007.  Non-GAAP Financial Measures  We refer in this report to certain “non-GAAP financial measures.” These measures, including FFO, Same-Store FFO, Same-Store EBITDA, Same-Store Hotel EBITDA and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with GAAP. The following tables reconcile each of these non-GAAP measures to the most comparable
            GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and the limitations of such measures.  29
  
 The following tables detail our computation of FFO, Same-Store FFO, EBITDA and Same-Store EBITDA (in thousands, except per unit data):  Reconciliation of Net Income (Loss) to FFO  Three Months Ended September 30,2008

                        

                        2007Dollars

                        

                        Units

                        

                        Per Unit Amount

                        

                        Dollars

                        

                        Units

                        

                        Per Unit AmountNet income (loss)

                        $

                        (42,734

                        )

                        

                        

                        

                        

                        

                        

                        

                        $

                        7,957Preferred distributions

                        

                        (9,678

                        )

                        

                        

                        

                        

                        

                        

                        

                        

                        (9,678

                        )Net income (loss) applicable to common

                            unitholders

                        

                        (52,412

                        )

                        

                        63,174

                        

                        $

                        (0.83

                        )

                        

                        

                        (1,721

                        )

                        

                        63,006

                        

                        $

                        (0.03

                        )Depreciation and amortization

                        

                        36,069

                        

                        

                        -

                        

                        

                        0.58

                        

                        

                        

                        28,523

                        

                        

                        -

                        

                        

                        0.45Depreciation, unconsolidated entities and discontinued operations

                        

                        3,998

                        

                        

                        -

                        

                        

                        0.06

                        

                        

                        

                        2,895

                        

                        

                        -

                        

                        

                        0.05Gain on sale of hotels

                        

                        (1,193

                        )

                        

                        -

                        

                        

                        (0.02

                        )

                        

                        

                        -

                        

                        

                        -

                        

                        

                        -Loss on sale of hotels in unconsolidated entities

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        189

                        

                        

                        -

                        

                        

                        -Conversion of FelCor options and unvested restricted stock

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        346

                        

                        

                        -FFO

                        $

                        (13,538

                        )

                        

                        63,174

                        

                        $

                        (0.21

                        )

                        

                        $

                        29,886

                        

                        

                        63,352

                        

                        $

                        0.47FFO from discontinued operations

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        210

                        

                        

                        -

                        

                        

                        -FFO from acquired hotels(a)

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (3,804

                        )

                        

                        -

                        

                        

                        (0.06

                        )Gain on sale of condominiums

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (354

                        )

                        

                        -

                        

                        

                        -Same-Store FFO

                        $

                        (13,538

                        )

                        

                        63,174

                        

                        $

                        (0.21

                        )

                        

                        $

                        25,938

                        

                        

                        63,352

                        

                        $

                        0.41
  Nine Months Ended September 30,2008

                        

                        2007Dollars

                        

                        Units

                        

                        Per Unit Amount

                        

                        Dollars

                        

                        Units

                        

                        Per Unit AmountNet income (loss)

                        $

                        (32,131

                        )

                        

                        

                        

                        

                        

                        

                        

                        $

                        93,706Preferred distributions

                        

                        (29,034

                        )

                        

                        

                        

                        

                        

                        

                        

                        

                        (29,034

                        )Net income (loss) applicable to common unitholders

                        

                        (61,165

                        )

                        

                        63,178

                        

                        $

                        (0.97

                        )

                        

                        

                        64,672

                        

                        

                        63,262

                        

                        $

                        1.02Depreciation and amortization

                        

                        104,909

                        

                        

                        -

                        

                        

                        1.66

                        

                        

                        

                        80,729

                        

                        

                        -

                        

                        

                        1.28Depreciation, unconsolidated entities and discontinued operations

                        

                        11,128

                        

                        

                        -

                        

                        

                        0.18

                        

                        

                        

                        8,606

                        

                        

                        -

                        

                        

                        0.13Gain on involuntary conversion

                        

                        (3,095

                        )

                        

                        -

                        

                        

                        (0.05

                        )

                        

                        

                        -

                        

                        

                        -

                        

                        

                        -Gain on sale of hotels

                        

                        (1,193

                        )

                        

                        -

                        

                        

                        (0.02

                        )

                        

                        

                        (27,830

                        )

                        

                        -

                        

                        

                        (0.44

                        )Gain on sale of hotels in unconsolidated entities

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (10,993

                        )

                        

                        -

                        

                        

                        (0.17

                        )Conversion of FelCor options and unvested restricted stock

                        

                        -

                        

                        

                        114

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        -

                        

                        

                        -FFO

                        $

                        50,584

                        

                        

                        63,292

                        

                        $

                        0.80

                        

                        

                        $

                        115,184

                        

                        

                        63,262

                        

                        $

                        1.82FFO from discontinued operations

                        

                        13

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (7,625

                        )

                        

                        -

                        

                        

                        (0.12

                        )FFO from acquired hotels(a)

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        1,826

                        

                        

                        -

                        

                        

                        0.03Gain on sale of condominiums

                        

                        -

                        

                        

                        -

                        

                        

                        -

                        

                        

                        

                        (18,493

                        )

                        

                        -

                        

                        

                        (0.29

                        )Same-Store FFO

                        $

                        50,597

                        

                        

                        63,292

                        

                        $

                        0.80

                        

                        

                        $

                        90,892

                        

                        

                        63,262

                        

                        $

                        1.44
  (a)

                        We have included amounts for two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
  30
  
 FFO has not been adjusted for the following amounts included in net income (loss) applicable to common unitholders (in thousands):  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Impairment loss

                        $

                        (36,692

                        )

                        

                        $

                        -

                        

                        

                        $

                        (53,823

                        )

                        

                        $

                        -Impairment loss on unconsolidated hotels

                        

                        (3,750

                        )

                        

                        

                        -

                        

                        

                        

                        (3,750

                        )

                        

                        

                        -Hurricane loss

                        

                        (1,669

                        )

                        

                        

                        -

                        

                        

                        

                        (1,669

                        )

                        

                        

                        -Hurricane loss on unconsolidated hotels

                        

                        (50

                        )

                        

                        

                        -

                        

                        

                        

                        (50

                        )

                        

                        

                        -Conversion costs

                        

                        (118

                        )

                        

                        

                        -

                        

                        

                        

                        (481

                        )

                        

                        

                        -Abandoned projects

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (22

                        )Charges related to debt extinguishment, net of

                            minority interests

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (811

                        )
  Reconciliation of Net Income (Loss) to EBITDA (in thousands)  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Net income (loss)

                        $

                        (42,734

                        )

                        

                        $

                        7,957

                        

                        

                        $

                        (32,131

                        )

                        

                        $

                        93,706Depreciation and amortization

                        

                        36,069

                        

                        

                        

                        28,523

                        

                        

                        

                        104,909

                        

                        

                        

                        80,729Depreciation, unconsolidated entities and discontinued operations

                        

                        3,998

                        

                        

                        

                        2,895

                        

                        

                        

                        11,128

                        

                        

                        

                        8,606Interest expense

                        

                        24,368

                        

                        

                        

                        24,865

                        

                        

                        

                        76,112

                        

                        

                        

                        73,611Interest expense, unconsolidated entities and discontinued operations

                        

                        1,282

                        

                        

                        

                        1,508

                        

                        

                        

                        4,205

                        

                        

                        

                        4,570Amortization of FelCor stock compensation

                        

                        1,072

                        

                        

                        

                        516

                        

                        

                        

                        3,795

                        

                        

                        

                        3,130EBITDA

                        $

                        24,055

                        

                        

                        $

                        66,264

                        

                        

                        $

                        168,018

                        

                        

                        $

                        264,352EBITDA from discontinued operations

                        

                        -

                        

                        

                        

                        210

                        

                        

                        

                        13

                        

                        

                        

                        (7,653

                        )EBITDA from acquired hotels(a)

                        

                        -

                        

                        

                        

                        (683

                        )

                        

                        

                        -

                        

                        

                        

                        11,187Gain on sale of condominiums

                        

                        -

                        

                        

                        

                        (354

                        )

                        

                        

                        -

                        

                        

                        

                        (18,493

                        )Same-Store EBITDA

                        $

                        24,055

                        

                        

                        $

                        65,437

                        

                        

                        $

                        168,031

                        

                        

                        $

                        249,393
  (a)

                        We have included amounts for two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
  EBITDA has not been adjusted for the following amounts included in net income (loss) (in thousands):  Three Months Ended

                            September 30,

                        

                        Nine Months Ended

                            September 30,2008

                        

                        2007

                        

                        

                        

                        2008

                        

                        

                        

                        2007Impairment loss

                        $

                        (36,692

                        )

                        

                        $

                        -

                        

                        

                        $

                        (53,823

                        )

                        

                        $

                        -Impairment loss on unconsolidated hotels

                        

                        (3,750

                        )

                        

                        

                        -

                        

                        

                        

                        (3,750

                        )

                        

                        

                        -Hurricane loss

                        

                        (1,669

                        )

                        

                        

                        -

                        

                        

                        

                        (1,669

                        )

                        

                        

                        -Hurricane loss on unconsolidated hotels

                        

                        (50

                        )

                        

                        

                        -

                        

                        

                        

                        (50

                        )

                        

                        

                        -Conversion costs

                        

                        (118

                        )

                        

                        

                        -

                        

                        

                        

                        (481

                        )

                        

                        

                        -Gain on sale of hotels, net of income tax and minority interests

                        

                        1,193

                        

                        

                        

                        -

                        

                        

                        

                        1,193

                        

                        

                        

                        27,830Gain (loss) on sale of hotels in unconsolidated entities

                        

                        -

                        

                        

                        

                        (189

                        )

                        

                        

                        -

                        

                        

                        

                        10,993Gain on involuntary conversion

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        3,095

                        

                        

                        

                        -Abandoned projects

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (22

                        )Charges related to debt extinguishment, net of minority interests

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (811

                        )
   31
  
 The following tables detail our computation of Hotel EBITDA, Hotel EBITDA margin, hotel operating expenses and the reconciliation of hotel operating expenses to total operating expenses with respect to our hotels included in continuing operations at the dates presented.  Hotel EBITDA and Hotel EBITDA Margin (dollars in thousands)  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Total revenues

                        $

                        277,729

                        

                        

                        $

                        258,462

                        

                        

                        $

                        875,772

                        

                        

                        $

                        773,378Other revenue

                        

                        (1,396

                        )

                        

                        

                        (1,766

                        )

                        

                        

                        (2,655

                        )

                        

                        

                        (2,612

                        )Revenue from acquired hotels(a)

                        

                        -

                        

                        

                        

                        14,640

                        

                        

                        

                        -

                        

                        

                        

                        68,811Same-Store hotel operating revenue

                        

                        276,333

                        

                        

                        

                        271,336

                        

                        

                        

                        873,117

                        

                        

                        

                        839,577Same-Store hotel operating expenses(a)

                        

                        (201,361

                        )

                        

                        

                        (198,937

                        )

                        

                        

                        (618,627

                        )

                        

                        

                        (601,982

                        )Hotel EBITDA

                        $

                        74,972

                        

                        

                        $

                        72,399

                        

                        

                        $

                        254,490

                        

                        

                        $

                        237,595Hotel EBITDA margin(b)

                        

                        27.1%

                        

                        

                        

                        26.7%

                        

                        

                        

                        29.1%

                        

                        

                        

                        28.3%
  (a)

                        We have included amounts for two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
 (b)

                        Hotel EBITDA as a percentage of hotel operating revenue.
  Reconciliation of Total Operating Expenses to Same-Store Hotel Operating Expenses (dollars in thousands)  Three Months Ended

                        

                        Nine Months EndedSeptember 30,

                        

                        September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Total operating expenses

                        $

                        294,604

                        

                        

                        $

                        231,339

                        

                        

                        $

                        835,102

                        

                        

                        $

                        684,673Unconsolidated taxes, insurance and lease expense

                        

                        2,132

                        

                        

                        

                        1,990

                        

                        

                        

                        6,328

                        

                        

                        

                        5,588Consolidated hotel lease expense

                        

                        (14,511

                        )

                        

                        

                        (16,204

                        )

                        

                        

                        (42,444

                        )

                        

                        

                        (47,729

                        )Corporate expenses

                        

                        (5,388

                        )

                        

                        

                        (3,690

                        )

                        

                        

                        (17,079

                        )

                        

                        

                        (15,732

                        )Depreciation and amortization

                        

                        (36,069

                        )

                        

                        

                        (28,523

                        )

                        

                        

                        (104,909

                        )

                        

                        

                        (80,729

                        )Impairment loss

                        

                        (36,692

                        )

                        

                        

                        -

                        

                        

                        

                        (53,823

                        )

                        

                        

                        -Hurricane loss

                        

                        (1,669

                        )

                        

                        

                        -

                        

                        

                        

                        (1,669

                        )

                        

                        

                        -Other expenses

                        

                        (1,046

                        )

                        

                        

                        (1,298

                        )

                        

                        

                        (2,879

                        )

                        

                        

                        (1,713

                        )Expenses from acquired hotels(a)

                        

                        -

                        

                        

                        

                        15,323

                        

                        

                        

                        -

                        

                        

                        

                        57,624Same-Store Hotel operating expenses

                        $

                        201,361

                        

                        

                        $

                        198,937

                        

                        

                        $

                        618,627

                        

                        

                        $

                        601,982
  (a)

                        We have included amounts for two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
  32
  
  The following tables reconcile net income (loss) to Hotel EBITDA and the ratio of operating income (loss) to total revenue to Hotel EBITDA margin.  Reconciliation of Net Income (Loss) to Hotel EBITDA (in thousands)  Three Months EndedSeptember 30,

                        

                        Nine Months EndedSeptember 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Net income (loss)

                        $

                        (42,734

                        )

                        

                        $

                        7,957

                        

                        

                        $

                        (32,131

                        )

                        

                        $

                        93,706Discontinued operations

                        

                        (1,193

                        )

                        

                        

                        209

                        

                        

                        

                        (1,180

                        )

                        

                        

                        (34,629

                        )EBITDA from acquired hotels(a)

                        

                        -

                        

                        

                        

                        (683

                        )

                        

                        

                        -

                        

                        

                        

                        11,187Equity in loss (income) from unconsolidated entities

                        

                        2,773

                        

                        

                        

                        (3,030

                        )

                        

                        

                        1,064

                        

                        

                        

                        (19,511

                        )Minority interests

                        

                        165

                        

                        

                        

                        (314

                        )

                        

                        

                        1,126

                        

                        

                        

                        (1,102

                        )Consolidated hotel lease expense

                        

                        14,511

                        

                        

                        

                        16,204

                        

                        

                        

                        42,444

                        

                        

                        

                        47,729Unconsolidated taxes, insurance and lease expense

                        

                        (2,132

                        )

                        

                        

                        (1,990

                        )

                        

                        

                        (6,328

                        )

                        

                        

                        (5,588

                        )Interest expense, net

                        

                        24,114

                        

                        

                        

                        22,655

                        

                        

                        

                        74,886

                        

                        

                        

                        68,734Corporate expenses

                        

                        5,388

                        

                        

                        

                        3,690

                        

                        

                        

                        17,079

                        

                        

                        

                        15,732Depreciation and amortization

                        

                        36,069

                        

                        

                        

                        28,523

                        

                        

                        

                        104,909

                        

                        

                        

                        80,729Impairment loss

                        

                        36,692

                        

                        

                        

                        -

                        

                        

                        

                        53,823

                        

                        

                        

                        -Hurricane loss

                        

                        1,669

                        

                        

                        

                        -

                        

                        

                        

                        1,669

                        

                        

                        

                        -Other expenses

                        

                        1,046

                        

                        

                        

                        1,298

                        

                        

                        

                        2,879

                        

                        

                        

                        1,713Gain on sale of condominiums

                        

                        -

                        

                        

                        

                        (354

                        )

                        

                        

                        -

                        

                        

                        

                        (18,493

                        )Gain on involuntary conversion

                        

                        -

                        

                        

                        

                        -

                        

                        

                        

                        (3,095

                        )

                        

                        

                        -Other revenue

                        

                        (1,396

                        )

                        

                        

                        (1,766

                        )

                        

                        

                        (2,655

                        )

                        

                        

                        (2,612

                        )Hotel EBITDA

                        $

                        74,972

                        

                        

                        $

                        72,399

                        

                        

                        $

                        254,490

                        

                        

                        $

                        237,595
  (a)

                        We have included amounts for two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
  Reconciliation of Ratio of Operating Income (Loss) to Total Revenues to Hotel EBITDA Margin  Three Months Ended September 30,

                        

                        Nine Months Ended

                            September 30,2008

                        

                        2007

                        

                        2008

                        

                        2007Ratio of operating income (loss) to total revenues

                        (6.1

                        )%

                        

                        10.0

                        %

                        

                        4.6

                        %

                        

                        10.5

                        %Other revenue

                        (0.5

                        )

                        

                        (0.7

                        )

                        

                        (0.3

                        )

                        

                        (0.3

                        )Revenue from acquired hotels(a)

                        -

                        

                        

                        5.4

                        

                        

                        -

                        

                        

                        8.2Unconsolidated taxes, insurance and lease expense

                        (0.7

                        )

                        

                        (0.7

                        )

                        

                        (0.7

                        )

                        

                        (0.7

                        )Consolidated hotel lease expense

                        5.2

                        

                        

                        5.9

                        

                        

                        4.9

                        

                        

                        5.7Other expenses

                        0.4

                        

                        

                        0.5

                        

                        

                        0.3

                        

                        

                        0.2Corporate expenses

                        2.0

                        

                        

                        1.4

                        

                        

                        2.0

                        

                        

                        1.9Depreciation and amortization

                        13.0

                        

                        

                        10.5

                        

                        

                        12.0

                        

                        

                        9.6Impairment loss

                        13.2

                        

                        

                        -

                        

                        

                        6.1

                        

                        

                        -Hurricane loss

                        0.6

                        

                        

                        -

                        

                        

                        0.2

                        

                        

                        -Expenses from acquired hotels(a)

                        -

                        

                        

                        (5.6

                        )

                        

                        -

                        

                        

                        (6.8

                        )Hotel EBITDA margin

                        27.1

                        %

                        

                        26.7

                        %

                        

                        29.1

                        %

                        

                        28.3

                        %
  (a)

                        We have included amounts for two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
  33
  
 Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not
            measures of operating performance under GAAP, to be helpful in evaluating a real estate company’s operations. These supplemental measures, including FFO, EBITDA, Hotel EBITDA and Hotel EBITDA margin, are not measures of operating performance under GAAP. However, we consider these non-GAAP measures 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.  FFO and EBITDA  The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income or loss (computed in accordance with GAAP), 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 FFO on the same basis.  We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.  EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on
            the same basis.  To derive same-store comparisons, we have adjusted FFO and EBITDA to remove discontinued operations and gains on sales of condominium units; and have added the historical results of operations from the two Renaissance hotels acquired in December 2007.  Hotel EBITDA and Hotel EBITDA Margin  Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and operating managers have direct control. We believe that Hotel EBITDA and Hotel EBITDA margin are useful to investors by providing greater transparency with respect to two
            significant measures used by us in our financial and operational decision-making. Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel EBITDA margin by eliminating from continuing operations all revenues and expenses not directly associated with hotel operations including corporate-level expenses, depreciation and expenses related to our capital structure. We eliminate corporate-level costs and expenses
            because we believe property-level results provide investors with supplemental information into the ongoing operational performance of our hotels and the effectiveness of management on a property-level basis. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, we do not believe that these non-cash expenses, which are based on historical cost accounting for real estate assets and implicitly assume that the value of
            real estate assets diminishes predictably over time, accurately reflect an adjustment in the value of our assets. We also eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by minority interest expense and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our hotels. Hotel EBITDA and Hotel EBITDA margins
            are presented on a same-store basis including the historical results of operations from the two Renaissance hotels acquired in December 2007.  34
  
 Limitations of Non-GAAP Measures  FelCor’s management and Board of Directors use FFO, EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in evaluating hotel-level performance and the operating efficiency
            of our hotel managers.  The use of these non-GAAP financial measures has certain limitations. FFO, EBITDA, Hotel EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable to FFO, EBITDA, Hotel EBITDA and Hotel EBITDA margin as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation, interest and capital
            expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our
            performance, as well as the usefulness of our non-GAAP financial measures. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. Neither should FFO, FFO per unit or EBITDA be considered as measures of our liquidity or indicative of funds available for our
            cash needs, including our ability to make cash distributions or service our debt. FFO per unit should not be used as a measure of amounts that accrue directly to the benefit of unitholders. FFO, EBITDA, Hotel EBITDA and Hotel EBITDA margin reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our
            business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on a single financial measure.  Pro Rata Share of Rooms Owned  The following table sets forth, as of September 30, 2008, the pro rata share of hotel rooms owned by us after giving consideration to the portion of rooms owned by our partners in our consolidated and unconsolidated joint ventures:  Hotels

                        

                        Room Countat

                            September 30, 2008Consolidated hotels in continuing operations

                        85

                        

                        

                        

                        25,007Unconsolidated hotel operations

                        4

                        

                        

                        

                        647Total hotels

                        89

                        

                        

                        

                        25,65450% joint ventures

                        17

                        

                        

                        

                        (2,032

                        )60% joint ventures

                        1

                        

                        

                        

                        (214

                        )75% joint ventures

                        1

                        

                        

                        

                        (55

                        )90% joint ventures

                        3

                        

                        

                        

                        (68

                        )97% joint venture

                        1

                        

                        

                        

                        (10

                        )Total rooms owned by joint venture partners

                        

                        

                        

                        

                        (2,379

                        )Pro rata share of rooms owned

                        

                        

                        

                        

                        23,275
   35
  
 Hotel Portfolio Composition  The following tables set forth, as of September 30, 2008, for 85 Consolidated Hotels distribution by brand, by our top markets and by type of location.  Brand

                        Hotels

                        

                        Rooms

                        

                        % of

                            Total Rooms

                        

                        % of 2007

                            HotelEBITDA(a)Embassy Suites Hotels

                        47

                        

                        12,129

                        

                        49

                        

                        58Holiday Inn

                        17

                        

                        6,306

                        

                        25

                        

                        19Sheraton and Westin

                        9

                        

                        3,217

                        

                        13

                        

                        14Doubletree

                        7

                        

                        1,472

                        

                        6

                        

                        7Renaissance and Hotel 480

                        3

                        

                        1,324

                        

                        5

                        

                        -

                        (b)Hilton

                        2

                        

                        559

                        

                        2

                        

                        2Top MarketsSouth Florida

                        5

                        

                        1,436

                        

                        6

                        

                        7Atlanta

                        5

                        

                        1,462

                        

                        6

                        

                        7Los Angeles area

                        4

                        

                        899

                        

                        4

                        

                        6San Francisco area

                        6

                        

                        2,141

                        

                        8

                        

                        6Orlando

                        5

                        

                        1,690

                        

                        7

                        

                        5Dallas

                        4

                        

                        1,333

                        

                        5

                        

                        4Minneapolis

                        3

                        

                        736

                        

                        3

                        

                        4Phoenix

                        3

                        

                        798

                        

                        3

                        

                        4Northern New Jersey

                        3

                        

                        756

                        

                        3

                        

                        4San Diego

                        1

                        

                        600

                        

                        2

                        

                        3Washington, D.C.

                        1

                        

                        443

                        

                        2

                        

                        3Chicago

                        3

                        

                        795

                        

                        3

                        

                        3San Antonio

                        3

                        

                        874

                        

                        4

                        

                        3Philadelphia

                        2

                        

                        729

                        

                        3

                        

                        3Boston

                        2

                        

                        532

                        

                        2

                        

                        2LocationSuburban

                        35

                        

                        8,781

                        

                        35

                        

                        38Urban

                        20

                        

                        6,362

                        

                        25

                        

                        25Airport

                        18

                        

                        5,785

                        

                        24

                        

                        24Resort

                        12

                        

                        4,079

                        

                        16

                        

                        13
  (a)

                        Hotel EBITDA is a non-GAAP financial measure. A detailed reconciliation and further discussion of Hotel EBITDA is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Quarterly Report on Form 10-Q.
 (b)

                        We acquired the Renaissance Esmeralda Resort & Spa and the Renaissance Vinoy Resort & Golf Club in December 2007. They did not make a significant contribution to our 2007 Hotel EBITDA.
  36
  
 Hotel Operating Statistics  The following tables set forth occupancy, ADR and RevPAR for the third quarter and the first nine months of 2008 and 2007, and the percentage changes thereof between the periods presented, for hotels included in our consolidated operations.  Operating Statistics by Brand    Occupancy (%)Three Months Ended September 30,

                        

                        Nine Months Ended September 30,2008

                        

                        2007

                        

                        %Variance

                        

                        2008

                        

                        2007

                        

                        %VarianceEmbassy Suites Hotels

                        74.5

                        

                        70.9

                        

                        5.1

                        

                        

                        75.2

                        

                        72.9

                        

                        3.2Holiday Inn

                        76.3

                        

                        73.9

                        

                        3.3

                        

                        

                        74.8

                        

                        70.3

                        

                        6.3Sheraton and Westin

                        68.1

                        

                        68.9

                        

                        (1.1

                        )

                        

                        68.1

                        

                        69.8

                        

                        (2.3

                        )Doubletree

                        73.5

                        

                        75.5

                        

                        (2.6

                        )

                        

                        76.3

                        

                        72.8

                        

                        4.8Renaissance and Hotel 480(a)

                        62.2

                        

                        70.2

                        

                        (11.4

                        )

                        

                        67.0

                        

                        73.9

                        

                        (9.3

                        )Hilton

                        71.5

                        

                        77.5

                        

                        (7.8

                        )

                        

                        64.8

                        

                        63.6

                        

                        1.8Total hotels

                        73.4

                        

                        71.8

                        

                        2.3

                        

                        

                        73.6

                        

                        71.7

                        

                        2.7ADR ($)Three Months Ended September 30,

                        

                        Nine Months Ended September 30,2008

                        

                        2007

                        

                        %Variance

                        

                        2008

                        

                        2007

                        

                        %VarianceEmbassy Suites Hotels

                        142.26

                        

                        141.35

                        

                        0.6

                        

                        

                        145.69

                        

                        143.55

                        

                        1.5Holiday Inn

                        122.98

                        

                        120.11

                        

                        2.4

                        

                        

                        121.64

                        

                        116.87

                        

                        4.1Sheraton and Westin

                        117.54

                        

                        120.30

                        

                        (2.3

                        )

                        

                        125.19

                        

                        126.51

                        

                        (1.0

                        )Doubletree

                        133.42

                        

                        137.62

                        

                        (3.1

                        )

                        

                        144.39

                        

                        144.29

                        

                        0.1Renaissance and Hotel 480(a)

                        131.20

                        

                        137.99

                        

                        (4.9

                        )

                        

                        178.25

                        

                        178.31

                        

                        -Hilton

                        141.20

                        

                        139.95

                        

                        0.9

                        

                        

                        131.33

                        

                        132.82

                        

                        (1.1

                        )Total hotels

                        133.21

                        

                        132.78

                        

                        0.3

                        

                        

                        138.14

                        

                        136.42

                        

                        1.3RevPAR ($)Three Months Ended September 30,

                        

                        Nine Months Ended September 30,2008

                        

                        2007

                        

                        %Variance

                        

                        2008

                        

                        2007

                        

                        %VarianceEmbassy Suites Hotels

                        105.98

                        

                        100.17

                        

                        5.8

                        

                        

                        109.58

                        

                        104.61

                        

                        4.8Holiday Inn

                        93.86

                        

                        88.75

                        

                        5.8

                        

                        

                        90.94

                        

                        82.20

                        

                        10.6Sheraton and Westin

                        80.08

                        

                        82.89

                        

                        (3.4

                        )

                        

                        85.28

                        

                        88.25

                        

                        (3.4

                        )Doubletree

                        98.12

                        

                        103.90

                        

                        (5.6

                        )

                        

                        110.21

                        

                        105.06

                        

                        4.9Renaissance and Hotel 480(a)

                        81.60

                        

                        96.87

                        

                        (15.8

                        )

                        

                        119.44

                        

                        131.80

                        

                        (9.4

                        )Hilton

                        100.95

                        

                        108.52

                        

                        (7.0

                        )

                        

                        85.04

                        

                        84.50

                        

                        0.6Total hotels

                        97.80

                        

                        95.29

                        

                        2.6

                        

                        

                        101.69

                        

                        97.77

                        

                        4.0
  (a)

                        Decreases in occupancy, ADR and RevPAR are principally related to renovation-related disruption at Hotel 480 Union Square. We have included historical room statistics for the two hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes.
  37
  
 Operating Statistics for Our Top Markets   Occupancy (%)Three Months Ended

                        September 30,

                    

                    Nine Months Ended September 30,2008

                    

                    2007

                    

                    %Variance

                    

                    2008

                    

                    2007

                    

                    %VarianceSouth Florida

                    70.9

                    

                    61.5

                    

                    15.3

                    

                    

                    78.7

                    

                    73.5

                    

                    7.2Atlanta

                    74.0

                    

                    74.3

                    

                    (0.4

                    )

                    

                    75.4

                    

                    75.6

                    

                    (0.3

                    )Los Angeles area

                    81.3

                    

                    79.7

                    

                    2.0

                    

                    

                    77.7

                    

                    78.8

                    

                    (1.4

                    )San Francisco area

                    83.5

                    

                    85.6

                    

                    (2.5

                    )

                    

                    78.1

                    

                    77.2

                    

                    1.2Orlando

                    72.6

                    

                    73.2

                    

                    (0.8

                    )

                    

                    78.4

                    

                    77.6

                    

                    1.1Dallas

                    67.5

                    

                    59.0

                    

                    14.3

                    

                    

                    68.6

                    

                    65.1

                    

                    5.5Minneapolis

                    78.6

                    

                    84.0

                    

                    (6.4

                    )

                    

                    73.9

                    

                    77.3

                    

                    (4.4

                    )Phoenix

                    55.3

                    

                    56.1

                    

                    (1.5

                    )

                    

                    66.0

                    

                    68.6

                    

                    (3.8

                    )Northern New Jersey

                    75.6

                    

                    77.8

                    

                    (2.8

                    )

                    

                    72.5

                    

                    71.5

                    

                    1.5San Diego

                    80.4

                    

                    76.3

                    

                    5.3

                    

                    

                    81.3

                    

                    76.2

                    

                    6.7Washington, D.C.

                    62.1

                    

                    66.6

                    

                    (6.8

                    )

                    

                    58.9

                    

                    67.7

                    

                    (13.0

                    )Chicago

                    76.4

                    

                    82.1

                    

                    (6.9

                    )

                    

                    74.4

                    

                    72.0

                    

                    3.3San Antonio

                    85.9

                    

                    78.7

                    

                    9.2

                    

                    

                    82.1

                    

                    78.0

                    

                    5.2Philadelphia

                    79.6

                    

                    77.6

                    

                    2.5

                    

                    

                    74.7

                    

                    68.7

                    

                    8.7Boston

                    85.0

                    

                    79.6

                    

                    6.8

                    

                    

                    79.8

                    

                    67.3

                    

                    18.5ADR ($)Three Months Ended

                        September 30,

                    

                    Nine Months Ended September 30,2008

                    

                    2007

                    

                    %Variance

                    

                    2008

                    

                    2007

                    

                    %VarianceSouth Florida

                    112.91

                    

                    111.43

                    

                    1.3

                    

                    

                    152.82

                    

                    153.29

                    

                    (0.3

                    )Atlanta

                    119.91

                    

                    119.91

                    

                    -

                    

                    

                    122.57

                    

                    122.05

                    

                    0.4Los Angeles area

                    167.55

                    

                    170.50

                    

                    (1.7

                    )

                    

                    161.27

                    

                    159.98

                    

                    0.8San Francisco area

                    153.86

                    

                    149.81

                    

                    2.7

                    

                    

                    144.74

                    

                    140.64

                    

                    2.9Orlando

                    91.33

                    

                    90.58

                    

                    0.8

                    

                    

                    107.41

                    

                    105.83

                    

                    1.5Dallas

                    119.72

                    

                    119.49

                    

                    0.2

                    

                    

                    124.75

                    

                    124.41

                    

                    0.3Minneapolis

                    154.63

                    

                    147.92

                    

                    4.5

                    

                    

                    147.34

                    

                    143.61

                    

                    2.6Phoenix

                    114.52

                    

                    109.45

                    

                    4.6

                    

                    

                    148.71

                    

                    146.23

                    

                    1.7Northern New Jersey

                    163.52

                    

                    157.09

                    

                    4.1

                    

                    

                    163.89

                    

                    155.90

                    

                    5.1San Diego

                    160.07

                    

                    157.76

                    

                    1.5

                    

                    

                    160.83

                    

                    155.45

                    

                    3.5Washington, D.C.

                    141.53

                    

                    156.22

                    

                    (9.4

                    )

                    

                    155.11

                    

                    166.00

                    

                    (6.6

                    )Chicago

                    129.37

                    

                    133.57

                    

                    (3.1

                    )

                    

                    127.88

                    

                    131.51

                    

                    (2.8

                    )San Antonio

                    112.59

                    

                    110.80

                    

                    1.6

                    

                    

                    114.04

                    

                    110.49

                    

                    3.2Philadelphia

                    148.20

                    

                    137.41

                    

                    7.9

                    

                    

                    148.84

                    

                    136.45

                    

                    9.1Boston

                    161.05

                    

                    164.62

                    

                    (2.2

                    )

                    

                    156.12

                    

                    156.12

                    

                    -RevPAR ($)Three Months Ended

                        September 30,

                    

                    Nine Months Ended September 30,2008

                    

                    2007

                    

                    %Variance

                    

                    2008

                    

                    2007

                    

                    %VarianceSouth Florida

                    80.07

                    

                    68.52

                    

                    16.9

                    

                    

                    120.33

                    

                    112.61

                    

                    6.9Atlanta

                    88.77

                    

                    89.14

                    

                    (0.4

                    )

                    

                    92.41

                    

                    92.31

                    

                    0.1Los Angeles area

                    136.15

                    

                    135.86

                    

                    0.2

                    

                    

                    125.24

                    

                    126.03

                    

                    (0.6

                    )San Francisco area

                    128.52

                    

                    128.30

                    

                    0.2

                    

                    

                    113.02

                    

                    108.53

                    

                    4.1Orlando

                    66.34

                    

                    66.29

                    

                    0.1

                    

                    

                    84.25

                    

                    82.15

                    

                    2.6Dallas

                    80.79

                    

                    70.55

                    

                    14.5

                    

                    

                    85.64

                    

                    80.95

                    

                    5.8Minneapolis

                    121.49

                    

                    124.22

                    

                    (2.2

                    )

                    

                    108.87

                    

                    110.95

                    

                    (1.9

                    )Phoenix

                    63.31

                    

                    61.45

                    

                    3.0

                    

                    

                    98.09

                    

                    100.30

                    

                    (2.2

                    )Northern New Jersey

                    123.62

                    

                    122.14

                    

                    1.2

                    

                    

                    118.88

                    

                    111.43

                    

                    6.7San Diego

                    128.66

                    

                    120.38

                    

                    6.9

                    

                    

                    130.75

                    

                    118.50

                    

                    10.3Washington, D.C.

                    87.95

                    

                    104.12

                    

                    (15.5

                    )

                    

                    91.34

                    

                    112.39

                    

                    (18.7

                    )Chicago

                    98.81

                    

                    109.60

                    

                    (9.8

                    )

                    

                    95.10

                    

                    94.69

                    

                    0.4San Antonio

                    96.71

                    

                    87.16

                    

                    11.0

                    

                    

                    93.58

                    

                    86.16

                    

                    8.6Philadelphia

                    117.90

                    

                    106.62

                    

                    10.6

                    

                    

                    111.19

                    

                    93.74

                    

                    18.6Boston

                    136.92

                    

                    131.01

                    

                    4.5

                    

                    

                    124.59

                    

                    105.10

                    

                    18.5      38
  
 Hotel Portfolio Listing  The following table provides the name, location, number of rooms, our ownership percentage and brand names of each of our hotels.  State

                        

                        

                        Rooms

                        

                        

                        % Owned

                        (a)

                        

                        BrandConsolidated HotelsBirmingham(b)

                        AL

                        242

                        

                        Embassy Suites HotelPhoenix – Biltmore(b)

                        AZ

                        232

                        

                        Embassy Suites HotelPhoenix Crescent Hotel(b)

                        AZ

                        342

                        

                        SheratonPhoenix Tempe(b)

                        AZ

                        224

                        

                        Embassy Suites HotelDana Point – Doheny Beach

                        CA

                        196

                        

                        Doubletree Guest SuitesIndian Wells – Esmeralda Resort & Spa(b)

                        CA

                        560

                        

                        Renaissance ResortLos Angeles – Anaheim (Located near Disneyland Park)(b)

                        CA

                        222

                        

                        Embassy Suites HotelLos Angeles – El Segundo – International Airport –South

                        CA

                        349

                        97%

                        Embassy Suites HotelMilpitas – Silicon Valley(b)

                        CA

                        266

                        

                        Embassy Suites HotelNapa Valley(b)

                        CA

                        205

                        

                        Embassy Suites HotelOxnard – Mandalay Beach Resort & Conference Center

                        CA

                        248

                        

                        Embassy Suites HotelSan Diego – On the Bay

                        CA

                        600

                        

                        Holiday InnSan Francisco – Burlingame Airport

                        CA

                        340

                        

                        Embassy Suites HotelSan Francisco – South San Francisco Airport(b)

                        CA

                        312

                        

                        Embassy Suites HotelSan Francisco – Fisherman’s Wharf

                        CA

                        585

                        

                        Holiday InnSan Francisco – Hotel 480 Union Square

                        CA

                        403

                        

                        Independent(c)San Rafael – Marin County/Conference Center(b)

                        CA

                        235

                        50%

                        Embassy Suites HotelSanta Barbara – Goleta

                        CA

                        160

                        

                        Holiday InnSanta Monica – Beach at the Pier

                        CA

                        132

                        

                        Holiday InnWilmington(b)

                        DE

                        244

                        90%

                        DoubletreeBoca Raton(b)

                        FL

                        263

                        

                        Embassy Suites HotelCocoa Beach – Oceanfront

                        FL

                        500

                        

                        Holiday InnDeerfield Beach – Boca Raton/Deerfield Beach Resort(b)

                        FL

                        244

                        

                        Embassy Suites HotelFt. Lauderdale – 17th Street(b)

                        FL

                        358

                        

                        Embassy Suites HotelFt. Lauderdale – Cypress Creek(b)

                        FL

                        253

                        

                        Sheraton SuitesJacksonville – Baymeadows(b)

                        FL

                        277

                        

                        Embassy Suites HotelMiami – International Airport(b)

                        FL

                        318

                        

                        Embassy Suites HotelOrlando – International Airport(b)

                        FL

                        288

                        

                        Holiday InnOrlando – International Drive

                        FL

                        652

                        

                        Holiday InnOrlando – International Drive South/Convention Center(b)

                        FL

                        244

                        

                        Embassy Suites HotelOrlando– (North)

                        FL

                        277

                        

                        Embassy Suites HotelOrlando – Walt Disney World Resort

                        FL

                        229

                        

                        Doubletree Guest SuitesSt. Petersburg – Vinoy Resort & Golf Club(b)

                        FL

                        361

                        

                        Renaissance ResortTampa – On Tampa Bay(b)

                        FL

                        203

                        

                        Doubletree Guest SuitesAtlanta – Airport(b)

                        GA

                        232

                        

                        Embassy Suites HotelAtlanta – Buckhead(b)

                        GA

                        316

                        

                        Embassy Suites HotelAtlanta – Galleria(b)

                        GA

                        278

                        

                        Sheraton SuitesAtlanta – Gateway – Atlanta Airport

                        GA

                        395

                        

                        SheratonAtlanta – Perimeter Center(b)

                        GA

                        241

                        50%

                        Embassy Suites HotelChicago – Lombard/Oak Brook(b)

                        IL

                        262

                        50%

                        Embassy Suites HotelChicago – Northshore/Deerfield (Northbrook) (b)

                        IL

                        237

                        

                        Embassy Suites HotelChicago – O’Hare Airport(b)

                        IL

                        296

                        

                        Sheraton SuitesIndianapolis – North(b)

                        IN

                        221

                        75%

                        Embassy Suites HotelKansas City – Overland Park(b)

                        KS

                        199

                        50%

                        Embassy Suites HotelLexington – Lexington Green(b)

                        KY

                        174

                        

                        Hilton Suites
   39
  
 Hotel Portfolio Listing (continued)  State

                        

                        

                        Rooms

                        

                        

                        % Owned(a)

                        

                        

                        BrandBaton Rouge(b)

                        LA

                        223

                        

                        Embassy Suites HotelNew Orleans(b)

                        LA

                        370

                        

                        Embassy Suites HotelNew Orleans – French Quarter

                        LA

                        374

                        

                        Holiday InnBoston – Beacon Hill

                        MA

                        303

                        

                        Holiday InnBoston – Marlborough(b)

                        MA

                        229

                        

                        Embassy Suites HotelBaltimore – BWI Airport(b)

                        MD

                        251

                        90%

                        Embassy Suites HotelBloomington(b)

                        MN

                        218

                        

                        Embassy Suites HotelMinneapolis – Airport(b)

                        MN

                        310

                        

                        Embassy Suites HotelSt. Paul – Downtown(b)

                        MN

                        208

                        

                        Embassy Suites HotelKansas City – Plaza

                        MO

                        266

                        50%

                        Embassy Suites HotelCharlotte(b)

                        NC

                        274

                        50%

                        Embassy Suites HotelCharlotte SouthPark

                        NC

                        208

                        

                        Doubletree Guest SuitesRaleigh/Durham(b)

                        NC

                        203

                        

                        Doubletree Guest SuitesRaleigh – Crabtree(b)

                        NC

                        225

                        50%

                        Embassy Suites HotelParsippany(b)

                        NJ

                        274

                        50%

                        Embassy Suites HotelPiscataway – Somerset(b)

                        NJ

                        221

                        

                        Embassy Suites HotelSecaucus – Meadowlands(b)

                        NJ

                        261

                        50%

                        Embassy Suites HotelPhiladelphia – Historic District

                        PA

                        364

                        

                        Holiday InnPhiladelphia – Society Hill(b)

                        PA

                        365

                        

                        SheratonPittsburgh – At University Center (Oakland)

                        PA

                        251

                        

                        Holiday InnCharleston – Mills House (Historic Downtown)(b)

                        SC

                        214

                        

                        Holiday InnMyrtle Beach – At Kingston Plantation

                        SC

                        255

                        

                        Embassy Suites HotelMyrtle Beach Resort

                        SC

                        385

                        

                        HiltonNashville – Airport/Opryland Area

                        TN

                        296

                        

                        Embassy Suites HotelNashville – Opryland/Airport (Briley Parkway)

                        TN

                        383

                        

                        Holiday InnAustin(b)

                        TX

                        189

                        90%

                        Doubletree Guest SuitesAustin – Central(b)

                        TX

                        260

                        50%

                        Embassy Suites HotelCorpus Christi(b)

                        TX

                        150

                        

                        Embassy Suites HotelDallas – DFW International Airport South(b)

                        TX

                        305

                        

                        Embassy Suites HotelDallas – Love Field(b)

                        TX

                        248

                        

                        Embassy Suites HotelDallas – Market Center

                        TX

                        244

                        

                        Embassy Suites HotelDallas – Park Central

                        TX

                        536

                        60%

                        WestinHouston – Medical Center

                        TX

                        287

                        

                        Holiday Inn & SuitesSan Antonio – International Airport(b)

                        TX

                        261

                        50%

                        Embassy Suites HotelSan Antonio – International Airport(b)

                        TX

                        397

                        

                        Holiday InnSan Antonio – N.W. I-10(b)

                        TX

                        216

                        50%

                        Embassy Suites HotelBurlington Hotel & Conference Center(b)

                        VT

                        309

                        

                        SheratonVienna – At Tysons Corner(b)

                        VA

                        443

                        50%

                        SheratonCanadaToronto – Airport

                        Ontario

                        446

                        

                        Holiday InnToronto – Yorkdale

                        Ontario

                        370

                        

                        Holiday InnUnconsolidated OperationsHays(b)

                        KS

                        191

                        50%

                        Holiday InnSalina(b)

                        KS

                        192

                        50%

                        Holiday InnSalina – I-70(b)

                        KS

                        93

                        50%

                        Holiday Inn Express & SuitesNew Orleans – Chateau LeMoyne (In French

                            Quarter/Historic Area)(b)

                        LA

                        171

                        50%

                        Holiday Inn
  (a)

                        We own 100% of the real estate interests unless otherwise noted.
 (b)

                        This hotel was encumbered by mortgage debt or a capital lease obligation at September 30, 2008.
 (c)

                        Upon the completion of its renovation in early 2009, this hotel will be rebranded as a Marriott.
  40
  
 Liquidity and Capital Resources  Hotel operations provide most of the cash needed to meet our cash requirements, including distributions to unitholders and repayments of indebtedness. For the nine months ended September 30, 2008, net cash flow provided by operating activities, consisting primarily of hotel operations, was $142.1 million. At September 30, 2008, we had $59 million of cash on hand,
            including approximately $49 million held under management agreements to meet minimum working capital requirements.  We declared and paid a $0.35 per unit common distribution for the first and second quarters of 2008, and a $0.15 per unit common distribution for the third quarter. Under current economic circumstances, we have taken a conservative approach to a common distribution, which reflects both our targeted payout ratio and any distribution requirements that are mandated by REIT qualification
            standards. FelCor’s board of directors will determine the amount of future common and preferred distributions for each quarter based upon actual operating results, economic conditions, operating trends, its financial condition and capital requirements, as well as FelCor’s minimum REIT distribution requirements.  We currently expect to have approximately $168 million to $170 million of cash flow from operating activities for 2008. This forecast assumes that RevPAR increases between 1.8% and 2.2% and Hotel EBITDA margin increases of approximately 20 basis points. Our current operating plan for 2008 includes aggregate common distribution payments of $77 million, preferred
            distribution payments of $39 million and normal recurring principal payments of $22 million, leaving surplus cash flow (before capital expenditures or additional debt reduction) of approximately $30 to $32 million. In 2008, we expect to spend approximately $150 million for capital expenditures, which will be funded from cash and borrowings under our line of credit. In July 2008, we repaid our maturing $15.5 million mortgage note with borrowing under our line
            of credit, and we have no remaining scheduled debt maturities until April 2009.  Two of the hotels currently identified to be sold are operating under management agreements with affiliates of InterContinental Hotels Group PLC, or IHG. These agreements expire in 2025. We may be required to pay replacement management fees and/or liquidated damages, or to reinvest in another hotel to carry an IHG brand, if a hotel is sold or a management agreement is terminated prior
            to expiration. Replacement management fees and liquidated damages are computed based on operating results of a hotel prior to termination. We expect that the aggregate liability related to these hotels, if paid, will be less than $10 million.  During the quarter, the overall weakness in the U.S. economy, particularly the turmoil in the credit markets, weakness in the housing market, and volatile energy and commodity costs, has resulted in considerable negative pressure on both consumer and business spending. As a result, lodging demand continued to weaken during
            the third quarter and contributed to further weakening of our Consolidated Hotel RevPAR. We expect negative year over year RevPAR for the fourth quarter 2008 and into 2009. We anticipate that lodging demand will not improve, and will likely weaken further, until the current economic trends reverse course, particularly the expected weakness in the overall economy and the lack of liquidity in the credit markets.  For 2009, we believe that the economic forecasts for increasing unemployment and declines in business investment and profits, when combined with the turmoil in the credit markets, will continue to affect both leisure and business travel negatively and, accordingly, decrease lodging demand. Further, as
            properties adjust to reduced demand by shifting the occupancy mix to lower-rated business, we expect to see average room rates decline in most markets. We are in the very early stages of our budget process and the complexity and uncertainty of the current economic environment make it difficult to forecast our operating results accurately. However, we are working with our managers to develop strategies to manage our occupancy mix, maintain rate integrity and operate our hotels
            differently to lower operating costs. We also believe that our recently completed renovations will position our hotels favorably heading into a lodging downturn.  We are subject to increases in hotel operating expenses, including wage and benefit costs, repair and maintenance expenses, utilities and insurance expenses, that can fluctuate disproportionately to revenues. Operating expenses are difficult to predict and control, which lends volatility in our operating results. If our
            hotel RevPAR decreases and/or Hotel EBITDA margins shrink, our operations, earnings and/or cash flow could suffer a material adverse effect.  41
  
  Debt  Line of Credit
 At September 30, 2008, we had $78 million borrowed under our $250 million line of credit. The interest rate on our line of credit was LIBOR plus 0.80% at September 30, 2008.  Mortgage Debt At September 30, 2008, we had $928 million of debt secured by mortgages on our hotels. With respect to two of these loans, we are permitted to retain 115% of budgeted hotel operating expenses, but the remaining revenues would become subject to a lock-box arrangement if a specified debt service coverage ratio is not met. These hotels currently exceed the minimum debt service
            coverage ratio; however, under the terms of the loan agreements, the lock-box provisions remain in place until the loan is repaid. None of these hotels have ever fallen below the applicable debt service coverage ratio.  With respect to the mortgage debt assumed in connection with our acquiring two hotels in 2007, all cash from the hotels in excess of operating expenses, taxes, insurance and capital expenditure reserves is subject to lock-box arrangements. In each case, the lender holds lock-box funds that are first applied to meet current
            debt service obligations, and any excess funds are held in the lock-box account until the relevant hotel meets or exceeds a debt service coverage ratio of 1:1. At September 30, 2008, the debt service coverage ratio for both hotels exceeded 1:1.  Our hotel mortgage debt is non-recourse to us and most of that debt is governed by contain provisions allowing us to substitute collateral upon satisfaction of certain conditions. Most of our mortgage debt is prepayable, subject to various prepayment, yield maintenance or defeasance obligations.  Senior Notes. Our publicly-traded senior notes require that we satisfy total leverage, secured leverage and interest coverage tests in order to: incur additional indebtedness except to refinance maturing debt with replacement debt, as defined under our indentures; pay
            distributions in excess of the minimum dividend required to meet FelCor’s REIT qualification test; repurchase partnership units; or merge. As of the date of this filing, we have satisfied all such tests.  We expect to meet our financial covenant and incurrence tests based on current RevPAR expectations. For 2008, we currently anticipate that our full year 2008 portfolio RevPAR will be 1.8% to 2.2% higher than for 2007. If we were unable to continue to satisfy the incurrence test under the indentures governing our senior unsecured notes, we may be prohibited from, among other things,
            incurring any additional indebtedness (other than under our line of credit), except under certain specific exceptions,or making distributions on our preferred or common units, except to the extent necessary to satisfy FelCor’s REIT qualification requirement that it distribute currently at least 90% of its taxable income.  We are currently prohibited from repurchasing any of our capital stock, whether common or preferred, subject to certain exceptions, so long as our debt-to-EBITDA ratio, as defined in the indenture, exceeds 4.85 to 1, which it does at the date of this filing.  Other Debt. In late 2007, we were notified that a AAA-rated money market fund in which we had invested approximately $8.4 million had ceased honoring redemption requests and would liquidate its investments over approximately a six-month period. In order to ensure that our liquidity would not be impaired as a consequence, an affiliate of the fund
            sponsor provided us with a short-term loan at a rate approximately equal to our earnings rate on the fund. Through the date of this filing we have received redemptions aggregating $5.8 million and in July 2008 repaid the short-term loan.  Interest Rate Caps. To fulfill requirements under certain loans, we entered into interest rate cap agreements with aggregate notional amounts of $427.2 million at both September 30, 2008 and December 31, 2007. These interest rate caps were not designated as hedges and had insignificant fair values at both September 30, 2008 and
            December 31, 2007, resulting in no significant net earnings impact.  42
  
  Inflation  Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competition may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in
            hotel operating expenses disproportionately to revenues. If competition requires us to reduce room rates or limits our ability to raise room rates in the future, we may not be able to adjust our room rates to reflect the effects of inflation in full, in which case our operating results and liquidity could be adversely affected.  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. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, we may utilize cash on hand or
            borrowings to satisfy our obligations or make distributions to our equity holders.  Disclosure Regarding Forward-Looking Statements  This report and the documents incorporated by reference in this report include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “anticipates,”
            “may,” “will,” “should,” “seeks”, or other variations of these terms (including their use in the negative), or by discussions of strategies, plans or intentions. A number of factors could cause actual results to differ materially from those anticipated by these forward-looking statements. Certain of these risks and uncertainties are described in greater detail under “Risk Factors” in our Annual Report on Form 10-K or in our
            other filings with the Securities and Exchange Commission, or the SEC.  These forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect. Accordingly, while we believe that the plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot assure you that deviations from these plans, intentions or
            expectations will not be material. The forward-looking statements included in this report, 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 risk factors and cautionary statements discussed in our filings to the SEC. We undertake no obligation to publicly update any forward-looking statements to reflect future circumstances or changes in our expectations.  Item 3. Quantitative and Qualitative Disclosures about Market Risk  Quantitative and Qualitative Disclosures About Market Risk  At September 30, 2008, approximately 53% of our consolidated debt had fixed interest rates.
  The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents scheduled maturities and weighted average interest rates, by maturity dates. 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 the date presented, at then current market interest rates.  43
  
 Expected Maturity Date at September 30, 2008 (dollars in thousands)  2008

                        

                        

                        2009

                        

                        

                        2010

                        

                        

                        2011

                        

                        

                        2012

                        

                        Thereafter

                        

                        

                        Total

                        

                        

                        Fair ValueLiabilitiesFixed rate:Debt

                        $

                        3,609

                        

                        $

                        142,427

                        

                        $

                        274,014

                        

                        $

                        302,953

                        

                        $

                        2,415

                        

                        $

                        75,836

                        

                        $

                        801,254

                        

                        $

                        757,245Average interest rate

                        

                        8.00%

                        

                        

                        7.27%

                        

                        

                        8.70%

                        

                        

                        8.49%

                        

                        

                        6.49%

                        

                        

                        6.54%

                        

                        

                        8.15%Floating rate:Debt

                        

                        -

                        

                        

                        267

                        

                        

                        -

                        

                        

                        543,000

                        

                        

                        177,225

                        

                        

                        -

                        

                        

                        720,492

                        

                        

                        615,704Average interest rate

                        

                        -

                        

                        

                        6.00%

                        

                        

                        -

                        

                        

                        5.75%

                        

                        

                        6.34%

                        

                        

                        -

                        

                        

                        5.90%Total debt

                        $

                        3,609

                        

                        $

                        142,694

                        

                        $

                        274,014

                        

                        $

                        845,953

                        

                        $

                        179,640

                        

                        $

                        75,836

                        

                        $

                        1,521,746Average interest rate

                        

                        8.00%

                        

                        

                        7.27%

                        

                        

                        8.70%

                        

                        

                        6.73%

                        

                        

                        6.35%

                        

                        

                        6.54%

                        

                        

                        7.08%Net discount

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        (1,678

                        )Total debt

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        $

                        1,520,068
  Item 4. Controls and Procedures  (a)

                        Evaluation of disclosure controls and procedures.
 We have no employees. As a limited partnership, we are managed by our general partner. Under the supervision and with the participation of FelCor’s management, including its chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure
            controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, FelCor’s chief executive officer and chief financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were effective, such that the information relating to us required to be disclosed in our reports is recorded,
            processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to FelCor’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.  (b)

                        Changes in internal control over financial reporting.
  There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934) during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  44
  
 PART II. -- OTHER INFORMATION  Item 6.

                        Exhibits
  The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K:
  Exhibit Number

                        Description of Exhibit31.1

                        Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

                        Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

                        Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

                        Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   45
  
  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.   FELCOR LODGING LIMITED PARTNERSHIPa Delaware Limited PartnershipBy:

                        FelCor Lodging Trust IncorporatedIts General PartnerDate: November 5, 2008

                        By:

                        /s/ Lester C. JohnsonName: Lester C. Johnson

                            Title:    Senior Vice President and Chief Accounting Officer
   46