##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 333-3959-01
 FelCor Lodging Limited Partnership
  Delaware
    
    75-2544994(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas
    
    75062(Address of principal executive offices)
    
    (Zip Code)
 (972) 444-4900
 þ o
  o o þ
 o þ




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##### 



FELCOR LODGING LIMITED PARTNERSHIP
 INDEX
 PagePART I.  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Consolidated Balance Sheets September 30, 2006 and December 31, 2005 (unaudited)
    
    
    3Consolidated Statements of Operations  For the Three and Nine Months Ended
September 30, 2006 and 2005 (unaudited)
    
    
    4Consolidated Statements of Comprehensive Income  For the Three and Nine Months
Ended September 30, 2006 and 2005 (unaudited)
    
    
    5Consolidated Statements of Cash Flows  For the Nine Months Ended September 30,
2006 and 2005 (unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25General
    
    
    25Financial Comparison
    
    
    26Results of Operations
    
    
    27Non-GAAP Financial Measures
    
    
    30Hotel Portfolio Composition
    
    
    35Hotel Operating Statistics
    
    
    36Liquidity and Capital Resources
    
    
    38Inflation
    
    
    41Seasonality
    
    
    41Disclosure Regarding Forward-Looking Statements
    
    
    41Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4.
    
    Controls and Procedures
    
    
    43PART II.  OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    44SIGNATURE
    
    
    45Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSInvestment in hotels, net of accumulated depreciation of $707,027 at
September 30, 2006 and $754,502 at December 31, 2005
    
    $
    2,271,256
    
    
    $
    2,587,379Investment in unconsolidated entities
    
    
    111,431
    
    
    
    109,262Hotels held for sale
    
    
    12,398
    
    
    
    Cash and cash equivalents
    
    
    133,054
    
    
    
    94,564Restricted cash
    
    
    25,237
    
    
    
    18,298Accounts receivable, net of allowance for doubtful accounts of $660 at
September 30,
2006 and $2,203 at December 31, 2005
    
    
    46,310
    
    
    
    54,815Deferred expenses, net of accumulated amortization of $14,074 at September 30,
2006
and $12,150 at December 31, 2005
    
    
    10,167
    
    
    
    12,423Condominium development project
    
    
    56,295
    
    
    
    13,051Other assets
    
    
    25,381
    
    
    
    29,301Total assets
    
    $
    2,691,529
    
    
    $
    2,919,093LIABILITIES
AND PARTNERS CAPITALDebt, net of discount of $2,095 at September 30, 2006 and $2,982 at
December 31, 2005
    
    $
    1,448,075
    
    
    $
    1,675,280Distributions payable
    
    
    20,967
    
    
    
    8,596Accrued expenses and other liabilities
    
    
    153,811
    
    
    
    138,017Total liabilities
    
    
    1,622,853
    
    
    
    1,821,893Commitments and contingenciesRedeemable units at redemption value,1,355 and 2,763 units issued and
outstanding
at September 30, 2006 and December 31, 2005, respectively
    
    
    27,168
    
    
    
    47,543Minority interest in other partnerships
    
    
    27,618
    
    
    
    40,014Partners capital:Preferred units, $.01 par value, 20,000 units authorized:Series A Cumulative Convertible Preferred Units, 12,880 units, issued and
outstanding at September 30, 2006 and December 31, 2005
    
    
    309,362
    
    
    
    309,362Series C Cumulative Redeemable Preferred Units, 68 units, issued and
outstanding at September 30, 2006 and December 31, 2005
    
    
    169,412
    
    
    
    169,412Common units, $.01 par value, 62,036 and 60,210 units issued and outstanding at
September 30, 2006 and December 31, 2005, respectively
    
    
    514,442
    
    
    
    511,267Accumulated other comprehensive income
    
    
    20,674
    
    
    
    19,602Total partners capital
    
    
    1,013,890
    
    
    
    1,009,643Total liabilities, redeemable units and partners capital
    
    $
    2,691,529
    
    
    $
    2,919,093
  3




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FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2006 and 2005
(unaudited, in thousands, except for per unit data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Hotel operating revenue
    
    $
    284,531
    
    
    $
    267,861
    
    
    $
    866,092
    
    
    $
    789,829Retail space rental and other revenue
    
    
    211
    
    
    
    1,632
    
    
    
    501
    
    
    
    1,908Total revenues
    
    
    284,742
    
    
    
    269,493
    
    
    
    866,593
    
    
    
    791,737Expenses:Hotel departmental expenses
    
    
    92,945
    
    
    
    90,246
    
    
    
    281,608
    
    
    
    264,302Other property operating costs
    
    
    79,862
    
    
    
    76,691
    
    
    
    237,408
    
    
    
    223,875Management and franchise fees
    
    
    14,302
    
    
    
    13,702
    
    
    
    45,642
    
    
    
    40,088Taxes, insurance and lease expense
    
    
    31,228
    
    
    
    29,388
    
    
    
    91,592
    
    
    
    86,867Corporate expenses
    
    
    7,164
    
    
    
    4,839
    
    
    
    18,530
    
    
    
    14,108Depreciation
    
    
    27,154
    
    
    
    25,487
    
    
    
    79,729
    
    
    
    75,108Impairment loss
    
    
    5,874
    
    
    
    
    
    
    
    15,142
    
    
    
    Total operating expenses
    
    
    258,529
    
    
    
    240,353
    
    
    
    769,651
    
    
    
    704,348Operating income
    
    
    26,213
    
    
    
    29,140
    
    
    
    96,942
    
    
    
    87,389Interest expense, net
    
    
    (28,273
    )
    
    
    (32,053
    )
    
    
    (87,585
    )
    
    
    (95,528
    )Hurricane loss
    
    
    
    
    
    
    (2,309
    )
    
    
    
    
    
    
    (2,309
    )Charge-off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (962
    )
    
    
    Early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (438
    )
    
    
    Income (loss) before equity in income of
unconsolidated entities, minority interests and
gain on sales of assets
    
    
    (2,060
    )
    
    
    (5,222
    )
    
    
    7,957
    
    
    
    (10,448
    )Equity in income from unconsolidated entities
    
    
    3,948
    
    
    
    3,260
    
    
    
    9,708
    
    
    
    8,229Minority interests
    
    
    (60
    )
    
    
    463
    
    
    
    1,843
    
    
    
    607Gain (loss) on sale of assets
    
    
    (92
    )
    
    
    80
    
    
    
    (92
    )
    
    
    469Income (loss) from continuing operations
    
    
    1,736
    
    
    
    (1,419
    )
    
    
    19,416
    
    
    
    (1,143
    )Discontinued operations
    
    
    18,553
    
    
    
    12,682
    
    
    
    20,894
    
    
    
    13,683Net income
    
    
    20,289
    
    
    
    11,263
    
    
    
    40,310
    
    
    
    12,540Preferred distributions
    
    
    (9,665
    )
    
    
    (9,829
    )
    
    
    (29,022
    )
    
    
    (29,729
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    (1,324
    )
    
    
    
    
    
    
    (6,522
    )Net income (loss) applicable to common unitholders
    
    $
    10,624
    
    
    $
    110
    
    
    $
    11,288
    
    
    $
    (23,711
    )Basic and diluted earnings (loss) per common unit data:Net income (loss) from continuing operations
    
    $
    (0.13
    )
    
    $
    (0.20
    )
    
    $
    (0.15
    )
    
    $
    (0.60
    )Net income (loss)
    
    $
    0.17
    
    
    $
    
    
    
    $
    0.18
    
    
    $
    (0.38
    )Basic and diluted weighted average common units
outstanding
    
    
    62,503
    
    
    
    62,216
    
    
    
    62,477
    
    
    
    62,181Cash distributions declared on common units
    
    $
    0.20
    
    
    $
    
    
    
    $
    0.55
    
    
    $
    
  4




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FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2006 and 2005
(unaudited, in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    20,289
    
    
    $
    11,263
    
    
    $
    40,310
    
    
    $
    12,540Unrealized holding gain (loss) from interest rate swaps
    
    
    (812
    )
    
    
    1,020
    
    
    
    (377
    )
    
    
    1,767Foreign currency translation adjustment
    
    
    16
    
    
    
    2,891
    
    
    
    1,449
    
    
    
    1,897Comprehensive income
    
    $
    19,493
    
    
    $
    15,174
    
    
    $
    41,382
    
    
    $
    16,204
  5




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FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2006 and 2005
(unaudited, in thousands)
 Nine Months Ended September 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    40,310
    
    
    $
    12,540Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    83,198
    
    
    
    91,795Loss (gain) on sale of assets
    
    
    (16,963
    )
    
    
    (10,022
    )Amortization of deferred financing fees
    
    
    2,479
    
    
    
    2,522Accretion of debt, net of discount
    
    
    887
    
    
    
    871Amortization of unearned compensation
    
    
    4,339
    
    
    
    2,171Equity in income from unconsolidated entities
    
    
    (9,708
    )
    
    
    (8,229
    )Distributions of income from unconsolidated entities
    
    
    2,996
    
    
    
    670Impairment loss
    
    
    15,142
    
    
    
    1,860Bad debt reserve
    
    
    
    
    
    
    1,389Charge-off of deferred financing costs
    
    
    1,044
    
    
    
    Loss (gain) on early extinguishment of debt
    
    
    596
    
    
    
    (2,538
    )Minority interests
    
    
    (1,050
    )
    
    
    (415
    )Changes in assets and liabilities:Accounts receivable
    
    
    2,147
    
    
    
    (9,518
    )Restricted cash  operations
    
    
    (4,230
    )
    
    
    (7,784
    )Other assets
    
    
    1,127
    
    
    
    569Accrued expenses and other liabilities
    
    
    18,296
    
    
    
    41,295Net cash flow provided by operating activities
    
    
    140,610
    
    
    
    117,176Cash flows (used in) provided by investing activities:Acquisition of interest in venture
    
    
    
    
    
    
    (1,197
    )Cash from consolidation of venture
    
    
    
    
    
    
    3,204Improvements and additions to hotels
    
    
    (108,623
    )
    
    
    (76,632
    )Additions to condominium project
    
    
    (43,060
    )
    
    
    (7,778
    )Proceeds from sale of assets
    
    
    177,105
    
    
    
    52,354Proceeds received from property damage insurance
    
    
    7,351
    
    
    
    Decrease in restricted cash  investing
    
    
    462
    
    
    
    8,454Distributions of capital from unconsolidated entities
    
    
    4,793
    
    
    
    6,021Capital contributions to unconsolidated entities
    
    
    (250
    )
    
    
    (700
    )Net cash flow (used in) provided by investing activities
    
    
    37,778
    
    
    
    (16,274
    )Cash flows (used in) provided by financing activities:Proceeds from borrowings
    
    
    124,897
    
    
    
    6,002Repayment of borrowings
    
    
    (205,593
    )
    
    
    (25,951
    )Payment of deferred financing fees
    
    
    (1,201
    )
    
    
    Decrease in restricted cash  financing
    
    
    2,825
    
    
    
    4,429Net proceeds from sale of preferred units
    
    
    
    
    
    
    164,221Redemption of preferred units
    
    
    
    
    
    
    (169,395
    )Exercise of stock options
    
    
    1,407
    
    
    
    Contributions from minority interest holders
    
    
    1,948
    
    
    
    1,591Distributions paid to other partnerships minority interests
    
    
    (13,167
    )
    
    
    Distributions paid to preferred unitholders
    
    
    (29,035
    )
    
    
    (30,231
    )Distributions paid to common unitholders
    
    
    (22,173
    )
    
    
    Net cash flow used in financing activities
    
    
    (140,092
    )
    
    
    (49,334
    )Effect of exchange rate changes on cash
    
    
    194
    
    
    
    45Net change in cash and cash equivalents
    
    
    38,490
    
    
    
    51,613Cash and cash equivalents at beginning of periods
    
    
    94,564
    
    
    
    119,310Cash and cash equivalents at end of periods
    
    $
    133,054
    
    
    $
    170,923Supplemental cash flow information Interest paid
    
    $
    77,259
    
    
    $
    85,626
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FELCOR LODGING LIMITED PARTNERSHIP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization
 ® ®
    Brand
    
    Hotels
    
    RoomsEmbassy Suites Hotels
    
    
    54
    
    
    
    13,652Doubletree® and Doubletree Guest Suites
    
    
    7
    
    
    
    1,471Holiday Inn®  branded
    
    
    26
    
    
    
    8,858Sheraton® and Sheraton Suites®
    
    
    10
    
    
    
    3,274Other brands
    
    
    7
    
    
    
    2,473Total hotels
    
    
    104
    
    
    
    29,728
    7




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FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Foreign Currency Translation
  3. Investment in Unconsolidated Entities
   September 30,
    
    December 31,2006
    
    2005Balance sheet information:Investment in hotels, net of accumulated depreciation
    
    $
    261,563
    
    
    $
    259,645Total assets
    
    $
    303,456
    
    
    $
    295,065Debt
    
    $
    203,402
    
    
    $
    203,880Total liabilities
    
    $
    211,863
    
    
    $
    211,174Equity
    
    $
    91,593
    
    
    $
    83,891
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total revenues
    
    $
    23,062
    
    
    $
    20,384
    
    
    $
    64,572
    
    
    $
    57,652Net income
    
    
    8,734
    
    
    
    7,098
    
    
    
    21,928
    
    
    
    18,238Net income attributable to FelCor LP
    
    $
    4,367
    
    
    $
    3,549
    
    
    $
    10,964
    
    
    $
    9,119Preferred return
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    386Depreciation of cost in excess of book value
    
    
    (419
    )
    
    
    (419
    )
    
    
    (1,256
    )
    
    
    (1,276
    )Equity in income from unconsolidated entities
    
    $
    3,948
    
    
    $
    3,260
    
    
    $
    9,708
    
    
    $
    8,229
  September 30,
    
    
    December 31,2006
    
    
    2005Hotel investments
    
    $
    47,693
    
    
    $
    43,117Cost in excess of book value of hotel investments
    
    
    61,842
    
    
    
    63,098Land and condominium investments
    
    
    3,557
    
    
    
    4,270Hotel lessee investments
    
    
    (1,661
    )
    
    
    (1,223
    )$
    111,431
    
    
    $
    109,262
 8




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FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3. Investment in Unconsolidated Entities 3⁄4 (continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Hotel investments
    
    $
    4,149
    
    
    $
    3,372
    
    
    $
    10,232
    
    
    $
    8,419Land and condominium investments
    
    
    (32
    )
    
    
    107
    
    
    
    (86
    )
    
    
    179Hotel lessee operations
    
    
    (169
    )
    
    
    (219
    )
    
    
    (438
    )
    
    
    (369
    )$
    3,948
    
    
    $
    3,260
    
    
    $
    9,708
    
    
    $
    8,229
 4. Debt
  Balance OutstandingEncumbered
    
    Interest Rate at
    
    Maturity
    
    September 30,
    
    
    December 31,Hotels
    
    September 30, 2006(a)
    
    Date
    
    2006
    
    
    2005Promissory note
    
    none
    
    LIBOR (L) + 2.00(f)
    
    June 2016
    
    $
    650
    
    
    $
    650Line of credit(b)
    
    none
    
    L + 1.75(f)
    
    January 2009
    
    
    
    
    
    
    Senior unsecured term notes
    
    none
    
    7.63
    
    October 2007
    
    
    124,056
    *
    
    
    123,358Senior unsecured term notes
    
    none
    
    8.50
    
    June 2011
    
    
    298,849
    
    
    
    298,660Term loan
    
    
    
    
    
    
    
    
    
    
    
    
    225,000Senior unsecured term notes
    
    none
    
    L + 4.25(f)
    
    June 2011
    
    
    190,000
    *
    
    
    190,000Senior unsecured term notes(c)
    
    none
    
    7.80
    
    June 2011
    
    
    100,000
    *
    
    
    100,000Total unsecured debt
    
    
    
    
    
    
    
    
    713,555
    
    
    
    937,668Mortgage debt
    
    8 hotels
    
    6.56
    
    July 2009 - 2014
    
    
    98,027
    
    
    
    104,282Mortgage debt(d)
    
    8 hotels
    
    L + 1.25(f)
    
    May 2007
    
    
    88,265
    *
    
    
    117,913Mortgage debt
    
    7 hotels
    
    7.32
    
    March 2009
    
    
    125,083
    
    
    
    127,455Mortgage debt
    
    4 hotels
    
    7.55
    
    June 2009
    
    
    40,673
    *
    
    
    41,912Mortgage debt
    
    8 hotels
    
    8.70
    
    May 2010
    
    
    170,266
    
    
    
    172,604Mortgage debt
    
    7 hotels
    
    8.73
    
    May 2010
    
    
    131,337
    
    
    
    133,374Mortgage debt
    
    1 hotel
    
    L + 2.85(f)
    
    August 2008
    
    
    15,500
    
    
    
    15,500Mortgage debt
    
    1 hotel
    
    5.81
    
    July 2016
    
    
    12,917
    
    
    
    10,457Other
    
    1 hotel
    
    9.17
    
    August 2011
    
    
    4,644
    
    
    
    5,204Construction loan(e)
    
    
    
    L + 2.00(f)
    
    August 2007
    
    
    47,808
    
    
    
    8,911Total secured debt
    
    45 hotels
    
    
    
    
    
    
    734,520
    
    
    
    737,612$
    1,448,075
    
    
    $
    1,675,280* Debt to be redeemed or paid off in fourth quarter 2006
    
    
    
    $
    542,994Debt to be issued in fourth quarter 2006
    
    
    
    $
    465,000
 (a)
    
    Our weighted average interest rate as of September 30, 2006 was 8.13%.(b)
    
    We have a borrowing capacity of $125 million on our line of credit. The interest on this
line can range from L + 175 to L + 225 basis points, based on our leverage ratio (as defined
in our line of credit agreement).(c)
    
    We have swapped $100 million of floating rate debt, at L + 4.25 percent, for a fixed rate
of 7.80 percent. These interest rate swaps expire in December 2007.(d)
    
    This debt has a one-year extension option, subject to certain contingencies.(e)
    
    We have a $69.8 million recourse construction loan facility for the development of a
184-unit condominium project in Myrtle Beach, South Carolina. The interest on this facility
is being capitalized as part of the cost of the project.(f)
    
    Variable interest rate based on LIBOR. The six month LIBOR was 5.37% at September 30, 2006
and 4.58% at December 31, 2005. 9




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. Debt 3⁄4 (continued)
      5. Derivatives
  10




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5. Derivatives 3⁄4 (continued)
      6. Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Room revenue
    
    $
    235,909
    
    
    $
    221,524
    
    
    $
    713,536
    
    
    $
    646,630Food and beverage revenue
    
    
    34,036
    
    
    
    32,169
    
    
    
    108,947
    
    
    
    102,553Other operating departments
    
    
    14,586
    
    
    
    14,168
    
    
    
    43,609
    
    
    
    40,646Total hotel operating revenue
    
    $
    284,531
    
    
    $
    267,861
    
    
    $
    866,092
    
    
    $
    789,829
  11




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6. Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs 
(continued)
  Three Months Ended September 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueRoom
    
    $
    59,285
    
    
    
    20.8
    %
    
    $
    57,227
    
    
    
    21.4
    %Food and beverage
    
    
    26,876
    
    
    
    9.4
    
    
    
    26,147
    
    
    
    9.8Other operating departments
    
    
    6,784
    
    
    
    2.4
    
    
    
    6,872
    
    
    
    2.6Total hotel departmental expenses
    
    $
    92,945
    
    
    
    32.6
    %
    
    $
    90,246
    
    
    
    33.8
    %
 Nine Months Ended September 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueRoom
    
    $
    176,602
    
    
    
    20.4
    %
    
    $
    164,306
    
    
    
    20.8
    %Food and beverage
    
    
    84,584
    
    
    
    9.8
    
    
    
    80,416
    
    
    
    10.2Other operating departments
    
    
    20,422
    
    
    
    2.4
    
    
    
    19,580
    
    
    
    2.5Total hotel departmental expenses
    
    $
    281,608
    
    
    
    32.6
    %
    
    $
    264,302
    
    
    
    33.5
    %
  Three Months Ended September 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueHotel general and administrative expense
    
    $
    25,882
    
    
    
    9.1
    %
    
    $
    25,470
    
    
    
    9.5
    %Marketing
    
    
    23,047
    
    
    
    8.1
    
    
    
    22,209
    
    
    
    8.3Repair and maintenance
    
    
    15,168
    
    
    
    5.3
    
    
    
    14,455
    
    
    
    5.4Energy
    
    
    15,765
    
    
    
    5.5
    
    
    
    14,557
    
    
    
    5.4Total other property operating costs
    
    $
    79,862
    
    
    
    28.0
    %
    
    $
    76,691
    
    
    
    28.6
    %
 Nine Months Ended September 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueHotel general and administrative expense
    
    $
    76,589
    
    
    
    8.8
    %
    
    $
    73,589
    
    
    
    9.3
    %Marketing
    
    
    70,752
    
    
    
    8.2
    
    
    
    66,931
    
    
    
    8.5Repair and maintenance
    
    
    45,924
    
    
    
    5.3
    
    
    
    43,331
    
    
    
    5.5Energy
    
    
    44,143
    
    
    
    5.1
    
    
    
    40,024
    
    
    
    5.1Total other property operating costs
    
    $
    237,408
    
    
    
    27.4
    %
    
    $
    223,875
    
    
    
    28.4
    %
 
 12




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7. Taxes, Insurance and Lease Expense
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Operating lease expense(a)
    
    $
    18,975
    
    
    $
    16,924
    
    
    $
    54,436
    
    
    $
    48,771Real estate and other taxes
    
    
    9,311
    
    
    
    9,724
    
    
    
    29,282
    
    
    
    29,482Property insurance, general liability insurance and
other
    
    
    2,942
    
    
    
    2,740
    
    
    
    7,874
    
    
    
    8,614Total taxes, insurance and lease expense
    
    $
    31,228
    
    
    $
    29,388
    
    
    $
    91,592
    
    
    $
    86,867
 
 (a)
    
    Operating lease expense includes hotel lease expense of $16.5 million and $14.7 million
associated with 14 hotels leased by us from unconsolidated subsidiaries for the three
months ended September 30, 2006 and 2005, respectively, and $47.9 million and $42.8 million
for the nine months ended September 30, 2006 and 2005, respectively. We included in
operating lease expense $10.3 million and $8.3 million of percentage rent based on
operating results for the three months ended September 30, 2006 and 2005, respectively and
$28.7 million and $22.7 million of percentage rent based on operating results for the nine
months ended September 30, 2006 and 2005, respectively. 8. Impairment Charge
     13




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. Discontinued Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Operating revenue
    
    $
    12,858
    
    
    $
    49,984
    
    
    $
    63,769
    
    
    $
    162,736Operating expenses(a)
    
    
    (11,584
    )
    
    
    (48,423
    )
    
    
    (56,956
    )
    
    
    (156,556
    )Operating income
    
    
    1,274
    
    
    
    1,561
    
    
    
    6,813
    
    
    
    6,180Direct interest costs, net
    
    
    (59
    )
    
    
    (1,120
    )
    
    
    (207
    )
    
    
    (4,395
    )Gain on sale of depreciable assets
    
    
    19,345
    
    
    
    9,450
    
    
    
    16,483
    
    
    
    9,235Gain on sale of land
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    317Income tax arising from disposals
    
    
    (1,735
    )
    
    
    
    
    
    
    (1,735
    )
    
    
    Debt extinguishment gain (loss)
    
    
    (216
    )
    
    
    2,538
    
    
    
    (216
    )
    
    
    2,538Minority interests
    
    
    (56
    )
    
    
    (64
    )
    
    
    (244
    )
    
    
    (192
    )Income from discontinued operations
    
    $
    18,553
    
    
    $
    12,682
    
    
    $
    20,894
    
    
    $
    13,683
 
 (a)
    
    Impairment losses of $0.6 million and $1.9 million for the three and nine months ended
September 30, 2005, respectively, are included in operating expenses.     14




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. Earnings (Loss) Per Unit
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Income (loss) from continuing operations
    
    $
    1,736
    
    
    $
    (1,419
    )
    
    $
    19,416
    
    
    $
    (1,143
    )Less: Preferred distributions
    
    
    (9,665
    )
    
    
    (9,829
    )
    
    
    (29,022
    )
    
    
    (29,729
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    (1,324
    )
    
    
    
    
    
    
    (6,522
    )Income (loss) from continuing operations applicable
to common unitholders
    
    
    (7,929
    )
    
    
    (12,572
    )
    
    
    (9,606
    )
    
    
    (37,394
    )Discontinued operations
    
    
    18,553
    
    
    
    12,682
    
    
    
    20,894
    
    
    
    13,683Net income (loss) applicable to common unitholders
    
    $
    10,624
    
    
    $
    110
    
    
    $
    11,288
    
    
    $
    (23,711
    )Denominator:Denominator for basic and diluted earnings per unit
    
    
    62,503
    
    
    
    62,216
    
    
    
    62,477
    
    
    
    62,181Earnings (loss) per unit data:Basic:Income (loss) from continuing operations
    
    $
    (0.13
    )
    
    $
    (0.20
    )
    
    $
    (0.15
    )
    
    $
    (0.60
    )Discontinued operations
    
    $
    0.30
    
    
    $
    0.20
    
    
    $
    0.33
    
    
    $
    0.22Net income (loss)
    
    $
    0.17
    
    
    $
    
    
    
    $
    0.18
    
    
    $
    (0.38
    )Diluted:Income (loss) from continuing operations
    
    $
    (0.13
    )
    
    $
    (0.20
    )
    
    $
    (0.15
    )
    
    $
    (0.60
    )Discontinued operations
    
    $
    0.30
    
    
    $
    0.20
    
    
    $
    0.33
    
    
    $
    0.22Net income (loss)
    
    $
    0.17
    
    
    $
    
    
    
    $
    0.18
    
    
    $
    (0.38
    )
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005FelCors options and unvested restricted stock
    
    
    414
    
    
    
    620
    
    
    
    356
    
    
    
    543Series A convertible preferred units
    
    
    9,985
    
    
    
    9,985
    
    
    
    9,985
    
    
    
    9,985
  15




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. FelCors Stock Based Compensation Plans
   Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005Loss from continuing operations, as reported
    
    $
    (1,419
    )
    
    $
    (1,143
    )Add stock based compensation included in the net
income or loss, as reported
    
    
    954
    
    
    
    2,171Less stock based compensation expense that would
have been included in the determination of net
income or loss if the fair value method had been
applied to all awards
    
    
    (957
    )
    
    
    (2,180
    )Loss from continuing operations, pro forma
    
    $
    (1,422
    )
    
    $
    (1,152
    )Basic and diluted net loss per common unit:As reported
    
    $
    (0.20
    )
    
    $
    (0.60
    )Pro forma
    
    $
    (0.20
    )
    
    $
    (0.60
    )
 12. FelCor LP Units
  13. Application of New Accounting Standards
 Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement No. 109 Accounting for Income Taxes Accounting for
 16




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13. Application of New Accounting Standards  (continued)
 Contingencies
 Fair Value Measurements
 14. Subsequent Events
  5 8
   17




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information
  CONSOLIDATING BALANCE SHEET
September 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    109,984
    
    
    $
    1,120,666
    
    
    $
    1,040,606
    
    
    $
    
    
    
    $
    2,271,256Equity investment in consolidated entities
    
    
    1,549,237
    
    
    
    
    
    
    
    
    
    
    
    (1,549,237
    )
    
    
    Investment in unconsolidated entities
    
    
    79,682
    
    
    
    30,005
    
    
    
    1,744
    
    
    
    
    
    
    
    111,431Hotels held for sale
    
    
    
    
    
    
    12,398
    
    
    
    
    
    
    
    
    
    
    
    12,398Cash and cash equivalents
    
    
    78,033
    
    
    
    48,110
    
    
    
    6,911
    
    
    
    
    
    
    
    133,054Restricted cash
    
    
    388
    
    
    
    3,332
    
    
    
    21,517
    
    
    
    
    
    
    
    25,237Accounts receivable
    
    
    1,389
    
    
    
    45,049
    
    
    
    (128
    )
    
    
    
    
    
    
    46,310Deferred assets
    
    
    5,997
    
    
    
    713
    
    
    
    3,457
    
    
    
    
    
    
    
    10,167Condominium development project
    
    
    
    
    
    
    
    
    
    
    56,295
    
    
    
    
    
    
    
    56,295Other assets
    
    
    6,801
    
    
    
    18,461
    
    
    
    119
    
    
    
    
    
    
    
    25,381Total assets
    
    $
    1,831,511
    
    
    $
    1,278,734
    
    
    $
    1,130,521
    
    
    $
    (1,549,237
    )
    
    $
    2,691,529LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    729,055
    
    
    $
    129,726
    
    
    $
    589,294
    
    
    $
    
    
    
    $
    1,448,075Distributions payable
    
    
    20,967
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,967Accrued expenses and other liabilities
    
    
    40,431
    
    
    
    101,487
    
    
    
    11,893
    
    
    
    
    
    
    
    153,811Total liabilities
    
    
    790,453
    
    
    
    231,213
    
    
    
    601,187
    
    
    
    
    
    
    
    1,622,853Minority interest  other partnerships
    
    
    
    
    
    
    (43
    )
    
    
    27,661
    
    
    
    
    
    
    
    27,618Redeemable units, at redemption value
    
    
    27,168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,168Preferred units
    
    
    478,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,774Common units
    
    
    533,271
    
    
    
    1,028,735
    
    
    
    501,673
    
    
    
    (1,549,237
    )
    
    
    514,442Accumulated other comprehensive income
    
    
    1,845
    
    
    
    18,829
    
    
    
    
    
    
    
    
    
    
    
    20,674Total partners capital
    
    
    1,013,890
    
    
    
    1,047,564
    
    
    
    501,673
    
    
    
    (1,549,237
    )
    
    
    1,013,890Total liabilities, redeemable units
and partners capital
    
    $
    1,831,511
    
    
    $
    1,278,734
    
    
    $
    1,130,521
    
    
    $
    (1,549,237
    )
    
    $
    2,691,529
 18




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    115,615
    
    
    $
    666,137
    
    
    $
    1,805,627
    
    
    $
    
    
    
    $
    2,587,379Equity investment in consolidated entities
    
    
    1,556,838
    
    
    
    
    
    
    
    
    
    
    
    (1,556,838
    )
    
    
    Investment in unconsolidated entities
    
    
    76,991
    
    
    
    32,271
    
    
    
    
    
    
    
    
    
    
    
    109,262Cash and cash equivalents
    
    
    48,393
    
    
    
    36,189
    
    
    
    9,982
    
    
    
    
    
    
    
    94,564Restricted cash
    
    
    3,637
    
    
    
    2,189
    
    
    
    12,472
    
    
    
    
    
    
    
    18,298Accounts receivable
    
    
    4,361
    
    
    
    50,149
    
    
    
    305
    
    
    
    
    
    
    
    54,815Deferred assets
    
    
    6,262
    
    
    
    1,139
    
    
    
    5,022
    
    
    
    
    
    
    
    12,423Condominium development project
    
    
    
    
    
    
    13,051
    
    
    
    
    
    
    
    
    
    
    
    13,051Other assets
    
    
    11,294
    
    
    
    17,599
    
    
    
    408
    
    
    
    
    
    
    
    29,301Total assets
    
    $
    1,823,391
    
    
    $
    818,724
    
    
    $
    1,833,816
    
    
    $
    (1,556,838
    )
    
    $
    2,919,093LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    737,087
    
    
    $
    152,302
    
    
    $
    785,891
    
    
    $
    
    
    
    $
    1,675,280Distributions payable
    
    
    8,596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,596Accrued expenses and other liabilities
    
    
    20,522
    
    
    
    97,747
    
    
    
    19,748
    
    
    
    
    
    
    
    138,017Total liabilities
    
    
    766,205
    
    
    
    250,049
    
    
    
    805,639
    
    
    
    
    
    
    
    1,821,893Minority interest  other partnerships
    
    
    
    
    
    
    (345
    )
    
    
    40,359
    
    
    
    
    
    
    
    40,014Redeemable units, at redemption value
    
    
    47,543
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,543Preferred units
    
    
    478,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,774Common units
    
    
    528,647
    
    
    
    551,640
    
    
    
    987,818
    
    
    
    (1,556,838
    )
    
    
    511,267Accumulated other comprehensive income
    
    
    2,222
    
    
    
    17,380
    
    
    
    
    
    
    
    
    
    
    
    19,602Total partners capital
    
    
    1,009,643
    
    
    
    569,020
    
    
    
    987,818
    
    
    
    (1,556,838
    )
    
    
    1,009,643Total liabilities and
partners capital
    
    $
    1,823,391
    
    
    $
    818,724
    
    
    $
    1,833,816
    
    
    $
    (1,556,838
    )
    
    $
    2,919,093
 19




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-GuarantorFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    284,531
    
    
    $
    
    
    
    $
    
    
    
    $
    284,531Percentage lease revenue
    
    
    7,359
    
    
    
    
    
    
    
    35,992
    
    
    
    (43,351
    )
    
    
    Other revenue
    
    
    191
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    211Total revenue
    
    
    7,550
    
    
    
    284,531
    
    
    
    36,012
    
    
    
    (43,351
    )
    
    
    284,742Expenses:Hotel operating expense
    
    
    
    
    
    
    187,109
    
    
    
    
    
    
    
    
    
    
    
    187,109Taxes, insurance and lease expense
    
    
    981
    
    
    
    68,962
    
    
    
    4,636
    
    
    
    (43,351
    )
    
    
    31,228Corporate expenses
    
    
    423
    
    
    
    4,632
    
    
    
    2,109
    
    
    
    
    
    
    
    7,164Depreciation
    
    
    2,235
    
    
    
    14,385
    
    
    
    10,534
    
    
    
    
    
    
    
    27,154Impairment loss
    
    
    
    
    
    
    5,874
    
    
    
    
    
    
    
    
    
    
    
    5,874Total operating expenses
    
    
    3,639
    
    
    
    280,962
    
    
    
    17,279
    
    
    
    (43,351
    )
    
    
    258,529Operating income (loss)
    
    
    3,911
    
    
    
    3,569
    
    
    
    18,733
    
    
    
    
    
    
    
    26,213Interest expense, net
    
    
    (14,993
    )
    
    
    (2,620
    )
    
    
    (10,660
    )
    
    
    
    
    
    
    (28,273
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (11,082
    )
    
    
    949
    
    
    
    8,073
    
    
    
    
    
    
    
    (2,060
    )Equity in income from consolidated
entities
    
    
    27,960
    
    
    
    
    
    
    
    
    
    
    
    (27,960
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    3,411
    
    
    
    555
    
    
    
    (18
    )
    
    
    
    
    
    
    3,948Minority interests in other partnerships
    
    
    
    
    
    
    545
    
    
    
    (605
    )
    
    
    
    
    
    
    (60
    )Loss on sale of assets
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Income (loss) from continuing operations
    
    
    20,289
    
    
    
    1,957
    
    
    
    7,450
    
    
    
    (27,960
    )
    
    
    1,736Discontinued operations from
consolidated entities
    
    
    
    
    
    
    13,028
    
    
    
    5,525
    
    
    
    
    
    
    
    18,553Net income (loss)
    
    
    20,289
    
    
    
    14,985
    
    
    
    12,975
    
    
    
    (27,960
    )
    
    
    20,289Preferred distributions
    
    
    (9,665
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,665
    )Net income (loss) applicable to
unitholders
    
    $
    10,624
    
    
    $
    14,985
    
    
    $
    12,975
    
    
    $
    (27,960
    )
    
    $
    10,624
 20




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    267,861
    
    
    $
    
    
    
    $
    
    
    
    $
    267,861Percentage lease revenue
    
    
    7,414
    
    
    
    
    
    
    
    59,611
    
    
    
    (67,025
    )
    
    
    Other revenue
    
    
    1,632
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,632Total revenue
    
    
    9,046
    
    
    
    267,861
    
    
    
    59,611
    
    
    
    (67,025
    )
    
    
    269,493Expenses:Hotel operating expense
    
    
    
    
    
    
    180,639
    
    
    
    
    
    
    
    
    
    
    
    180,639Taxes, insurance and lease expense
    
    
    1,076
    
    
    
    86,632
    
    
    
    8,705
    
    
    
    (67,025
    )
    
    
    29,388Corporate expenses
    
    
    280
    
    
    
    2,636
    
    
    
    1,923
    
    
    
    
    
    
    
    4,839Depreciation
    
    
    1,782
    
    
    
    7,153
    
    
    
    16,552
    
    
    
    
    
    
    
    25,487Total operating expenses
    
    
    3,138
    
    
    
    277,060
    
    
    
    27,180
    
    
    
    (67,025
    )
    
    
    240,353Operating income (loss)
    
    
    5,908
    
    
    
    (9,199
    )
    
    
    32,431
    
    
    
    
    
    
    
    29,140Interest expense, net
    
    
    (14,477
    )
    
    
    (2,278
    )
    
    
    (15,298
    )
    
    
    
    
    
    
    (32,053
    )Hurricane loss
    
    
    (1,890
    )
    
    
    (419
    )
    
    
    
    
    
    
    
    
    
    
    (2,309
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (10,459
    )
    
    
    (11,896
    )
    
    
    17,133
    
    
    
    
    
    
    
    (5,222
    )Gain on sale of assets
    
    
    
    
    
    
    20
    
    
    
    60
    
    
    
    
    
    
    
    80Equity in income from consolidated
entities
    
    
    7,841
    
    
    
    
    
    
    
    
    
    
    
    (7,841
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    2,285
    
    
    
    975
    
    
    
    
    
    
    
    
    
    
    
    3,260Minority interests in other partnerships
    
    
    
    
    
    
    844
    
    
    
    (381
    )
    
    
    
    
    
    
    463Income (loss) from continuing operations
    
    
    (333
    )
    
    
    (10,057
    )
    
    
    16,812
    
    
    
    (7,841
    )
    
    
    (1,419
    )Discontinued operations from
consolidated entities
    
    
    11,596
    
    
    
    3,154
    
    
    
    (2,068
    )
    
    
    
    
    
    
    12,682Net income (loss)
    
    
    11,263
    
    
    
    (6,903
    )
    
    
    14,744
    
    
    
    (7,841
    )
    
    
    11,263Preferred distributions
    
    
    (9,829
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,829
    )Issuance costs of redeemed preferred
units
    
    
    (1,324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,324
    )Net income (loss) applicable to
unitholders
    
    $
    110
    
    
    $
    (6,903
    )
    
    $
    14,744
    
    
    $
    (7,841
    )
    
    $
    110
 21




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    866,092
    
    
    $
    
    
    
    $
    
    
    
    $
    866,092Percentage lease revenue
    
    
    19,893
    
    
    
    
    
    
    
    118,874
    
    
    
    (138,767
    )
    
    
    Other revenue
    
    
    455
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    501Total revenue
    
    
    20,348
    
    
    
    866,092
    
    
    
    118,920
    
    
    
    (138,767
    )
    
    
    866,593Expenses:Hotel operating expense
    
    
    
    
    
    
    564,658
    
    
    
    
    
    
    
    
    
    
    
    564,658Taxes, insurance and lease expense
    
    
    3,469
    
    
    
    212,507
    
    
    
    14,383
    
    
    
    (138,767
    )
    
    
    91,592Corporate expenses
    
    
    897
    
    
    
    12,111
    
    
    
    5,522
    
    
    
    
    
    
    
    18,530Depreciation
    
    
    6,263
    
    
    
    42,124
    
    
    
    31,342
    
    
    
    
    
    
    
    79,729Impairment loss
    
    
    
    
    
    
    5,874
    
    
    
    9,268
    
    
    
    
    
    
    
    15,142Total operating expenses
    
    
    10,629
    
    
    
    837,274
    
    
    
    60,515
    
    
    
    (138,767
    )
    
    
    769,651Operating income (loss)
    
    
    9,719
    
    
    
    28,818
    
    
    
    58,405
    
    
    
    
    
    
    
    96,942Interest expense, net
    
    
    (45,706
    )
    
    
    (9,059
    )
    
    
    (32,820
    )
    
    
    
    
    
    
    (87,585
    )Charge-off of deferred financing cost
    
    
    
    
    
    
    (879
    )
    
    
    (83
    )
    
    
    
    
    
    
    (962
    )Early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (438
    )
    
    
    
    
    
    
    (438
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (35,987
    )
    
    
    18,880
    
    
    
    25,064
    
    
    
    
    
    
    
    7,957Equity in income from consolidated
entities
    
    
    67,211
    
    
    
    
    
    
    
    
    
    
    
    (67,211
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    9,086
    
    
    
    666
    
    
    
    (44
    )
    
    
    
    
    
    
    9,708Minority interests in other partnerships
    
    
    
    
    
    
    1,695
    
    
    
    148
    
    
    
    
    
    
    
    1,843Gain (loss on sale of assets
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Income (loss) from continuing operations
    
    
    40,310
    
    
    
    21,149
    
    
    
    25,168
    
    
    
    (67,211
    )
    
    
    19,416Discontinued operations from
consolidated entities
    
    
    
    
    
    
    13,675
    
    
    
    7,219
    
    
    
    
    
    
    
    20,894Net income (loss)
    
    
    40,310
    
    
    
    34,824
    
    
    
    32,387
    
    
    
    (67,211
    )
    
    
    40,310Preferred distributions
    
    
    (29,022
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,022
    )Net income (loss) applicable to
unitholders
    
    $
    11,288
    
    
    $
    34,824
    
    
    $
    32,387
    
    
    $
    (67,211
    )
    
    $
    11,288
 22




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    789,829
    
    
    $
    
    
    
    $
    
    
    
    $
    789,829Percentage lease revenue
    
    
    18,688
    
    
    
    
    
    
    
    285,544
    
    
    
    (304,232
    )
    
    
    Other revenue
    
    
    2,245
    
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    1,908Total revenue
    
    
    20,933
    
    
    
    789,492
    
    
    
    285,544
    
    
    
    (304,232
    )
    
    
    791,737Expenses:Hotel operating expense
    
    
    
    
    
    
    528,265
    
    
    
    
    
    
    
    
    
    
    
    528,265Taxes, insurance and lease expense
    
    
    4,629
    
    
    
    241,753
    
    
    
    144,717
    
    
    
    (304,232
    )
    
    
    86,867Corporate expenses
    
    
    819
    
    
    
    7,475
    
    
    
    5,814
    
    
    
    
    
    
    
    14,108Depreciation
    
    
    4,986
    
    
    
    24,597
    
    
    
    45,525
    
    
    
    
    
    
    
    75,108Total operating expenses
    
    
    10,434
    
    
    
    802,090
    
    
    
    196,056
    
    
    
    (304,232
    )
    
    
    704,348Operating income (loss)
    
    
    10,499
    
    
    
    (12,598
    )
    
    
    89,488
    
    
    
    
    
    
    
    87,389Interest expense, net
    
    
    (42,649
    )
    
    
    (8,508
    )
    
    
    (44,371
    )
    
    
    
    
    
    
    (95,528
    )Hurricane loss
    
    
    (1,890
    )
    
    
    (419
    )
    
    
    
    
    
    
    
    
    
    
    (2,309
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (34,040
    )
    
    
    (21,525
    )
    
    
    45,117
    
    
    
    
    
    
    
    (10,448
    )Gain on sale of assets
    
    
    388
    
    
    
    20
    
    
    
    61
    
    
    
    
    
    
    
    469Equity in income from consolidated
entities
    
    
    27,381
    
    
    
    
    
    
    
    
    
    
    
    (27,381
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    7,086
    
    
    
    1,143
    
    
    
    
    
    
    
    
    
    
    
    8,229Minority interests in other partnerships
    
    
    
    
    
    
    1,562
    
    
    
    (955
    )
    
    
    
    
    
    
    607Income (loss) from continuing operations
    
    
    815
    
    
    
    (18,800
    )
    
    
    44,223
    
    
    
    (27,381
    )
    
    
    (1,143
    )Discontinued operations from
consolidated entities
    
    
    11,725
    
    
    
    (477
    )
    
    
    2,435
    
    
    
    
    
    
    
    13,683Net income (loss)
    
    
    12,540
    
    
    
    (19,277
    )
    
    
    46,658
    
    
    
    (27,381
    )
    
    
    12,540Preferred distributions
    
    
    (29,729
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,729
    )Issuance costs of redeemed preferred
units
    
    
    (6,522
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,522
    )Net income (loss) applicable to
unitholders
    
    $
    (23,711
    )
    
    $
    (19,277
    )
    
    $
    46,658
    
    
    $
    (27,381
    )
    
    $
    (23,711
    )
 23




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    (25,140
    )
    
    $
    85,930
    
    
    $
    79,820
    
    
    $
    140,610Cash flows from (used in) investing activities
    
    
    (4,120
    )
    
    
    104,257
    
    
    
    (62,359
    )
    
    
    37,778Cash flows from (used in) financing activities
    
    
    58,900
    
    
    
    (178,460
    )
    
    
    (20,532
    )
    
    
    (140,092
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    194
    
    
    
    
    
    
    
    194Change in cash and cash equivalents
    
    
    29,640
    
    
    
    11,921
    
    
    
    (3,071
    )
    
    
    38,490Cash and cash equivalents at beginning of period
    
    
    48,393
    
    
    
    36,189
    
    
    
    9,982
    
    
    
    94,564Cash and equivalents at end of period
    
    $
    78,033
    
    
    $
    48,110
    
    
    $
    6,911
    
    
    $
    133,054
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    3,434
    
    
    $
    12,883
    
    
    $
    100,859
    
    
    $
    117,176Cash flows from (used in) investing activities
    
    
    18,095
    
    
    
    487
    
    
    
    (34,856
    )
    
    
    (16,274
    )Cash flows from (used in) financing activities
    
    
    14,432
    
    
    
    (2,112
    )
    
    
    (61,654
    )
    
    
    (49,334
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    45Change in cash and cash equivalents
    
    
    35,961
    
    
    
    11,303
    
    
    
    4,349
    
    
    
    51,613Cash and cash equivalents at beginning of period
    
    
    84,829
    
    
    
    29,387
    
    
    
    5,094
    
    
    
    119,310Cash and equivalents at end of period
    
    $
    120,790
    
    
    $
    40,690
    
    
    $
    9,443
    
    
    $
    170,923
 24




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 General
      25




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##### Table of Contents



Financial Comparison (in thousands of dollars, except RevPAR and Hotel EBITDA margin)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,% Change
    
    
    
    
    
    
    
    
    
    % Change2006
    
    2005
    
    2005-2006
    
    2006
    
    2005
    
    2005-2006RevPAR
    
    $
    86.52
    
    
    $
    81.60
    
    
    
    6.0
    %
    
    $
    87.34
    
    
    $
    79.88
    
    
    
    9.3
    %Total revenues from continuing
operations
    
    
    284,742
    
    
    
    269,493
    
    
    
    5.7
    %
    
    
    866,593
    
    
    
    791,737
    
    
    
    9.5
    %Hotel EBITDA(1)
    
    
    81,050
    
    
    
    70,948
    
    
    
    14.2
    %
    
    
    253,061
    
    
    
    212,809
    
    
    
    18.9
    %Hotel EBITDA margin(1)
    
    
    28.5
    %
    
    
    26.5
    %
    
    
    7.5
    %
    
    
    29.2
    %
    
    
    26.9
    %
    
    
    8.6
    %Income
(loss) from continuing operations
    
    
    1,906
    
    
    
    (867
    )
    
    
    319.8
    %
    
    
    19,499
    
    
    
    513
    
    
    
    3,701.0
    %Funds From Operations
(FFO)(1) (2)
    
    
    23,707
    
    
    
    23,705
    
    
    
    
    
    
    
    88,014
    
    
    
    65,561
    
    
    
    34.2
    %Earnings Before Interest, Taxes,
Depreciation and Amortization
(EBITDA)(1)(3)
    
    $
    84,039
    
    
    $
    81,166
    
    
    
    3.5
    %
    
    $
    231,047
    
    
    $
    221,268
    
    
    
    4.4
    %
 
 (1)
    
    Included in the Financial Comparison are non-GAAP financial measures, including FFO,
EBITDA, Hotel EBITDA and Hotel EBITDA margin. Further discussions of the use, limitations
and importance, and detailed reconciliations to the most comparable GAAP measure, of these
non-GAAP financial measures are found elsewhere in this Managements Discussion and
Analysis of Financial Condition and Results of Operations.(2)
    
    In accordance with the guidance provided by the United States Securities and Exchange
Commission, or SEC, with respect to non-GAAP financial measures, FFO has not been adjusted
to add back the following items included in net income (loss) applicable to common
unitholders (in thousands): Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Impairment loss, continuing operations
    
    $
    5,874
    
    
    $
    
    
    
    $
    15,142
    
    
    $
    Impairment loss, discontinued operations
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    1,860Minority interest share of impairment loss
    
    
    
    
    
    
    
    
    
    
    (927
    )
    
    
    Debt extinguishment loss (gain)
    
    
    216
    
    
    
    (2,538
    )
    
    
    1,686
    
    
    
    (2,538
    )Issuance
costs of redeemed preferred units
    
    
    
    
    
    
    1,324
    
    
    
    
    
    
    
    6,522Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
 (3)
    
    Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been
adjusted for the following amounts included in net income (in thousands):
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Gain on sale of depreciable assets
    
    $
    (19,345
    )
    
    $
    (9,449
    )
    
    $
    (16,483
    )
    
    $
    (9,624
    )Income tax arising from disposals
    
    
    1,735
    
    
    
    
    
    
    
    1,735
    
    
    
    Impairment loss, continuing operations
    
    
    5,874
    
    
    
    
    
    
    
    15,142
    
    
    
    Impairment loss, discontinued operations
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    1,860Minority interest share of impairment loss
    
    
    
    
    
    
    
    
    
    
    (927
    )
    
    
    Debt extinguishment loss (gain)
    
    
    216
    
    
    
    (2,538
    )
    
    
    1,686
    
    
    
    (2,538
    )Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
 26




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##### Table of Contents



Results of Operations
 Comparison of the Three Months Ended September 30, 2006 and 2005
          27




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##### Table of Contents



Comparison of the Nine Months Ended September 30, 2006 and 2005
     28




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##### Table of Contents



29




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##### Table of Contents



Non-GAAP Financial Measures
   Reconciliation of Net Income to FFO
 Three Months Ended September 30,2006
    
    
    2005Per Unit
    
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    
    Units
    
    
    Amount
    
    
    Dollars
    
    
    Units
    
    
    AmountNet income
    
    $
    20,289
    
    
    
    
    
    
    
    
    
    
    $
    11,263Preferred distributions
    
    
    (9,665
    )
    
    
    
    
    
    
    
    
    
    
    (9,829
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,324
    )Net income applicable to common
unitholders
    
    
    10,624
    
    
    
    62,503
    
    
    $
    0.17
    
    
    
    110
    
    
    
    62,216
    
    
    $
    Depreciation, continuing operations
    
    
    27,154
    
    
    
    
    
    
    
    0.43
    
    
    
    25,487
    
    
    
    
    
    
    
    0.41Depreciation, unconsolidated
entities and discontinued operations
    
    
    3,539
    
    
    
    
    
    
    
    0.06
    
    
    
    7,557
    
    
    
    
    
    
    
    0.12Gain on sale of depreciable assets,
before income tax
    
    
    (19,345
    )
    
    
    
    
    
    
    (0.31
    )
    
    
    (9,449
    )
    
    
    
    
    
    
    (0.15
    )Income tax arising from dispositions
    
    
    1,735
    
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    
    
    
    
    Conversion of options and unvested
restricted units
    
    
    
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    619
    
    
    
    FFO
    
    $
    23,707
    
    
    
    62,917
    
    
    $
    0.38
    
    
    $
    23,705
    
    
    
    62,835
    
    
    $
    0.38
 Reconciliation of Net Income to FFO
 Nine Months Ended September 30,2006
    
    
    2005Per Unit
    
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    
    Units
    
    
    Amount
    
    
    Dollars
    
    
    Units
    
    
    AmountNet income
    
    $
    40,310
    
    
    
    
    
    
    
    
    
    
    $
    12,540Preferred distributions
    
    
    (29,022
    )
    
    
    
    
    
    
    
    
    
    
    (29,729
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,522
    )Net income (loss) applicable to common
unitholders
    
    
    11,288
    
    
    
    62,477
    
    
    $
    0.18
    
    
    
    (23,711
    )
    
    
    62,181
    
    
    $
    (0.38
    )Depreciation, continuing operations
    
    
    79,729
    
    
    
    
    
    
    
    1.27
    
    
    
    75,108
    
    
    
    
    
    
    
    1.21Depreciation, unconsolidated
entities and discontinued operations
    
    
    11,745
    
    
    
    
    
    
    
    0.19
    
    
    
    23,788
    
    
    
    
    
    
    
    0.38Gain on sale of depreciable assets,
before income tax
    
    
    (16,483
    )
    
    
    
    
    
    
    (0.26
    )
    
    
    (9,624
    )
    
    
    
    
    
    
    (0.16
    )Income tax arising from dispositions
    
    
    1,735
    
    
    
    
    
    
    
    0.02
    
    
    
    
    
    
    
    
    
    
    
    Conversion of options and unvested
restricted units
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    543
    
    
    
    FFO
    
    $
    88,014
    
    
    
    62,832
    
    
    $
    1.40
    
    
    $
    65,561
    
    
    
    62,724
    
    
    $
    1.05
 30




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Impairment loss, continuing operations
    
    $
    5,874
    
    
    $
    
    
    
    $
    15,142
    
    
    $
    Impairment loss, discontinued operations
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    1,860Minority interest share of impairment loss
    
    
    
    
    
    
    
    
    
    
    (927
    )
    
    
    Debt extinguishment loss (gain)
    
    
    216
    
    
    
    (2,538
    )
    
    
    1,686
    
    
    
    (2,538
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    1,324
    
    
    
    
    
    
    
    6,522Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
 Reconciliation of Net Income to EBITDA
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    20,289
    
    
    $
    11,263
    
    
    $
    40,310
    
    
    $
    12,540Depreciation, continuing operations
    
    
    27,154
    
    
    
    25,487
    
    
    
    79,729
    
    
    
    75,108Depreciation, unconsolidated entities
and discontinued operations
    
    
    3,539
    
    
    
    7,557
    
    
    
    11,745
    
    
    
    23,788Interest expense
    
    
    29,171
    
    
    
    33,240
    
    
    
    90,131
    
    
    
    98,149Interest expense from unconsolidated entities
and discontinued operations
    
    
    1,444
    
    
    
    2,799
    
    
    
    4,793
    
    
    
    9,512Amortization expense
    
    
    2,442
    
    
    
    820
    
    
    
    4,339
    
    
    
    2,171EBITDA
    
    $
    84,039
    
    
    $
    81,166
    
    
    $
    231,047
    
    
    $
    221,268
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Gain on sale of depreciable assets,
before income tax
    
    $
    (19,345
    )
    
    $
    (9,449
    )
    
    $
    (16,483
    )
    
    $
    (9,624
    )Income tax arising from dispositions
    
    
    1,735
    
    
    
    
    
    
    
    1,735
    
    
    
    Impairment loss, continuing operations
    
    
    5,874
    
    
    
    
    
    
    
    15,142
    
    
    
    Impairment loss, discontinued operations
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    Minority interest share of impairment loss
    
    
    
    
    
    
    
    
    
    
    (927
    )
    
    
    1,860Debt extinguishment loss (gain)
    
    
    216
    
    
    
    (2,538
    )
    
    
    1,686
    
    
    
    (2,538
    )Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
 31




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##### Table of Contents



Hotel EBITDA and Hotel EBITDA Margin
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total revenue
    
    $
    284,742
    
    
    $
    269,493
    
    
    $
    866,593
    
    
    $
    791,737Retail space rental and other revenue
    
    
    (211
    )
    
    
    (1,632
    )
    
    
    (501
    )
    
    
    (1,908
    )Hotel operating revenue
    
    
    284,531
    
    
    
    267,861
    
    
    
    866,092
    
    
    
    789,829Hotel operating expenses
    
    
    (203,481
    )
    
    
    (196,913
    )
    
    
    (613,031
    )
    
    
    (577,020
    )Hotel EBITDA
    
    $
    81,050
    
    
    $
    70,948
    
    
    $
    253,061
    
    
    $
    212,809Hotel EBITDA margin(1)
    
    
    28.5
    %
    
    
    26.5
    %
    
    
    29.2
    %
    
    
    26.9
    %
 
 (1)
    
    Hotel EBITDA as a percentage of hotel revenue. Hotel Operating Expense Composition
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Continuing Operations
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Hotel departmental expenses:Room
    
    $
    59,285
    
    
    $
    57,227
    
    
    $
    176,602
    
    
    $
    164,306Food and beverage
    
    
    26,876
    
    
    
    26,147
    
    
    
    84,584
    
    
    
    80,416Other operating departments
    
    
    6,784
    
    
    
    6,872
    
    
    
    20,422
    
    
    
    19,580Other property related costs:Administrative and general
    
    
    25,882
    
    
    
    25,470
    
    
    
    76,589
    
    
    
    73,589Marketing and advertising
    
    
    23,047
    
    
    
    22,209
    
    
    
    70,752
    
    
    
    66,931Repairs and maintenance
    
    
    15,168
    
    
    
    14,455
    
    
    
    45,924
    
    
    
    43,331Energy
    
    
    15,765
    
    
    
    14,557
    
    
    
    44,143
    
    
    
    40,024Total other property related costs
    
    
    79,862
    
    
    
    76,691
    
    
    
    237,408
    
    
    
    223,875Management and franchise fees
    
    
    14,302
    
    
    
    13,702
    
    
    
    45,642
    
    
    
    40,088Taxes, insurance and lease expense
    
    
    16,372
    
    
    
    16,274
    
    
    
    48,373
    
    
    
    48,755Hotel operating expenses
    
    $
    203,481
    
    
    $
    196,913
    
    
    $
    613,031
    
    
    $
    577,020Reconciliation of total operating expense
to hotel operating expense:Total operating expenses
    
    $
    258,529
    
    
    $
    240,353
    
    
    $
    769,651
    
    
    $
    704,348Unconsolidated taxes, insurance and lease expense
    
    
    1,663
    
    
    
    1,596
    
    
    
    4,688
    
    
    
    4,649Consolidated hotel lease expense
    
    
    (16,519
    )
    
    
    (14,710
    )
    
    
    (47,907
    )
    
    
    (42,761
    )Corporate expenses
    
    
    (7,164
    )
    
    
    (4,839
    )
    
    
    (18,530
    )
    
    
    (14,108
    )Impairment loss
    
    
    (5,874
    )
    
    
    
    
    
    
    (15,142
    )
    
    
    Depreciation
    
    
    (27,154
    )
    
    
    (25,487
    )
    
    
    (79,729
    )
    
    
    (75,108
    )Hotel operating expenses
    
    $
    203,481
    
    
    $
    196,913
    
    
    $
    613,031
    
    
    $
    577,020Supplemental information:Compensation and benefits expense
(included in hotel operating expenses)
    
    $
    80,951
    
    
    $
    81,525
    
    
    $
    249,798
    
    
    $
    241,461
 32




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##### Table of Contents



Reconciliation of Net Income to Hotel EBITDA
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    20,289
    
    
    $
    11,263
    
    
    $
    40,310
    
    
    $
    12,540Discontinued operations
    
    
    (18,553
    )
    
    
    (12,682
    )
    
    
    (20,894
    )
    
    
    (13,683
    )Equity in income from unconsolidated entities
    
    
    (3,948
    )
    
    
    (3,260
    )
    
    
    (9,708
    )
    
    
    (8,229
    )Minority interests
    
    
    60
    
    
    
    (463
    )
    
    
    (1,843
    )
    
    
    (607
    )Consolidated hotel lease expense
    
    
    16,519
    
    
    
    14,710
    
    
    
    47,907
    
    
    
    42,761Unconsolidated taxes, insurance and lease expense
    
    
    (1,663
    )
    
    
    (1,596
    )
    
    
    (4,688
    )
    
    
    (4,649
    )Interest expense, net
    
    
    28,273
    
    
    
    32,053
    
    
    
    87,585
    
    
    
    95,528Charge-off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    962
    
    
    
    Early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    438
    
    
    
    Impairment loss
    
    
    5,874
    
    
    
    
    
    
    
    15,142
    
    
    
    Corporate expenses
    
    
    7,164
    
    
    
    4,839
    
    
    
    18,530
    
    
    
    14,108Hurricane loss
    
    
    
    
    
    
    2,309
    
    
    
    
    
    
    
    2,309Depreciation
    
    
    27,154
    
    
    
    25,487
    
    
    
    79,729
    
    
    
    75,108Loss (gain) on sale of assets
    
    
    92
    
    
    
    (80
    )
    
    
    92
    
    
    
    (469
    )Retail space rental and other revenue
    
    
    (211
    )
    
    
    (1,632
    )
    
    
    (501
    )
    
    
    (1,908
    )Hotel EBITDA
    
    $
    81,050
    
    
    $
    70,948
    
    
    $
    253,061
    
    
    $
    212,809
 Reconciliation of Ratio of Operating Income to Total Revenue to Hotel EBITDA Margin
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Ratio of operating income to total revenue
    
    
    9.2
    %
    
    
    10.8
    %
    
    
    11.2
    %
    
    
    11.0
    %Retail space rental and other revenue
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.2
    )Unconsolidated taxes, insurance and lease expense
    
    
    (0.6
    )
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (0.6
    )Consolidated hotel lease expense
    
    
    5.8
    
    
    
    5.5
    
    
    
    5.5
    
    
    
    5.4Corporate expenses
    
    
    2.5
    
    
    
    1.8
    
    
    
    2.1
    
    
    
    1.8Impairment loss
    
    
    2.1
    
    
    
    
    
    
    
    1.7
    
    
    
    Depreciation
    
    
    9.5
    
    
    
    9.6
    
    
    
    9.2
    
    
    
    9.5Hotel EBITDA margin
    
    
    28.5
    %
    
    
    26.5
    %
    
    
    29.2
    %
    
    
    26.9
    %
  FFO and EBITDA
  33




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##### Table of Contents



Hotel EBITDA and Hotel EBITDA Margin
  Limitations of Non-GAAP Measures
   34




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##### Table of Contents



Hotel Portfolio Composition
  % of
    
    % of 2005Brand
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Hotel EBITDAEmbassy Suites Hotels
    
    
    54
    
    
    
    13,652
    
    
    
    46
    
    
    
    55Holiday Inn-branded
    
    
    26
    
    
    
    8,858
    
    
    
    30
    
    
    
    21Sheraton-branded
    
    
    10
    
    
    
    3,274
    
    
    
    11
    
    
    
    12Doubletree-branded
    
    
    7
    
    
    
    1,471
    
    
    
    5
    
    
    
    6Other
    
    
    7
    
    
    
    2,473
    
    
    
    8
    
    
    
    6Top MarketsAtlanta
    
    
    8
    
    
    
    2,385
    
    
    
    8
    
    
    
    8South Florida area
    
    
    5
    
    
    
    1,434
    
    
    
    5
    
    
    
    6Los Angeles area
    
    
    5
    
    
    
    1,100
    
    
    
    4
    
    
    
    5Orlando
    
    
    5
    
    
    
    1,690
    
    
    
    6
    
    
    
    5Dallas
    
    
    7
    
    
    
    2,359
    
    
    
    8
    
    
    
    4Minneapolis
    
    
    4
    
    
    
    955
    
    
    
    3
    
    
    
    4New Orleans
    
    
    2
    
    
    
    746
    
    
    
    3
    
    
    
    4Phoenix
    
    
    3
    
    
    
    798
    
    
    
    3
    
    
    
    4Chicago
    
    
    4
    
    
    
    1,238
    
    
    
    4
    
    
    
    4Washington, D.C.
    
    
    1
    
    
    
    443
    
    
    
    1
    
    
    
    4San Diego
    
    
    1
    
    
    
    600
    
    
    
    2
    
    
    
    3Northern New Jersey
    
    
    3
    
    
    
    756
    
    
    
    3
    
    
    
    3San Francisco Bay area
    
    
    6
    
    
    
    2,141
    
    
    
    7
    
    
    
    3Philadelphia
    
    
    2
    
    
    
    729
    
    
    
    2
    
    
    
    3San Antonio
    
    
    3
    
    
    
    874
    
    
    
    3
    
    
    
    3LocationSuburban
    
    
    45
    
    
    
    11,167
    
    
    
    37
    
    
    
    37Urban
    
    
    24
    
    
    
    7,711
    
    
    
    26
    
    
    
    26Airport
    
    
    23
    
    
    
    7,335
    
    
    
    25
    
    
    
    23Resort
    
    
    12
    
    
    
    3,515
    
    
    
    12
    
    
    
    14SegmentUpper-upscale all-suite
    
    
    65
    
    
    
    16,035
    
    
    
    54
    
    
    
    64Full service
    
    
    26
    
    
    
    8,858
    
    
    
    30
    
    
    
    21Upscale
    
    
    12
    
    
    
    4,526
    
    
    
    15
    
    
    
    14Limited service
    
    
    1
    
    
    
    309
    
    
    
    1
    
    
    
    1Core Hotels
    
    
    83
    
    
    
    24,083
    
    
    
    81
    
    
    
    91Non-Strategic Hotels
    
    
    21
    
    
    
    5,645
    
    
    
    19
    
    
    
    9
 35




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##### Table of Contents



Hotel Operating Statistics
  Operating Statistics by Brand (a)
 Occupancy (%)Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    %Variance
    
    2006
    
    2005
    
    % VarianceEmbassy Suites Hotels
    
    
    74.3
    
    
    
    75.0
    
    
    
    (0.9
    )
    
    
    75.4
    
    
    
    74.4
    
    
    
    1.4Holiday Inn-branded hotels
    
    
    69.7
    
    
    
    73.8
    
    
    
    (5.5
    )
    
    
    70.3
    
    
    
    70.2
    
    
    
    0.2Sheraton-branded hotels
    
    
    64.0
    
    
    
    67.1
    
    
    
    (4.6
    )
    
    
    63.0
    
    
    
    65.4
    
    
    
    (3.6
    )Doubletree-branded hotels
    
    
    76.3
    
    
    
    75.1
    
    
    
    1.7
    
    
    
    76.5
    
    
    
    73.4
    
    
    
    4.2Other hotels
    
    
    71.9
    
    
    
    70.6
    
    
    
    1.8
    
    
    
    67.7
    
    
    
    65.5
    
    
    
    3.3Total hotels
    
    
    71.7
    
    
    
    73.4
    
    
    
    (2.3
    )
    
    
    71.9
    
    
    
    71.4
    
    
    
    0.8
 ADR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceEmbassy Suites Hotels
    
    
    130.44
    
    
    
    121.00
    
    
    
    7.8
    
    
    
    132.54
    
    
    
    122.87
    
    
    
    7.9Holiday Inn-branded hotels
    
    
    101.78
    
    
    
    94.85
    
    
    
    7.3
    
    
    
    99.97
    
    
    
    93.66
    
    
    
    6.7Sheraton-branded hotels
    
    
    116.70
    
    
    
    106.06
    
    
    
    10.0
    
    
    
    122.09
    
    
    
    108.30
    
    
    
    12.7Doubletree-branded hotels
    
    
    126.73
    
    
    
    112.81
    
    
    
    12.3
    
    
    
    130.38
    
    
    
    117.84
    
    
    
    10.6Other hotels
    
    
    130.47
    
    
    
    119.81
    
    
    
    8.9
    
    
    
    125.54
    
    
    
    114.29
    
    
    
    9.8Total hotels
    
    
    120.63
    
    
    
    111.18
    
    
    
    8.5
    
    
    
    121.40
    
    
    
    111.94
    
    
    
    8.5
 RevPAR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceEmbassy Suites Hotels
    
    
    96.98
    
    
    
    90.76
    
    
    
    6.9
    
    
    
    99.97
    
    
    
    91.40
    
    
    
    9.4Holiday Inn-branded hotels
    
    
    70.97
    
    
    
    69.95
    
    
    
    1.5
    
    
    
    70.32
    
    
    
    65.75
    
    
    
    6.9Sheraton-branded hotels
    
    
    74.72
    
    
    
    71.21
    
    
    
    4.9
    
    
    
    76.96
    
    
    
    70.82
    
    
    
    8.7Doubletree-branded hotels
    
    
    96.74
    
    
    
    84.67
    
    
    
    14.3
    
    
    
    99.72
    
    
    
    86.45
    
    
    
    15.3Other hotels
    
    
    93.75
    
    
    
    84.54
    
    
    
    10.9
    
    
    
    84.94
    
    
    
    74.86
    
    
    
    13.5Total hotels
    
    
    86.52
    
    
    
    81.60
    
    
    
    6.0
    
    
    
    87.34
    
    
    
    79.88
    
    
    
    9.3
 
 (a)
    
    Hotels have been excluded in both the current and prior year for those months
directly impacted by hurricanes. 36




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##### Table of Contents



Operating Statistics for Our Top Markets (a)
 Occupancy (%)Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceAtlanta
    
    
    68.7
    
    
    
    74.6
    
    
    
    (7.9
    )
    
    
    70.7
    
    
    
    71.8
    
    
    
    (1.6
    )South Florida area
    
    
    72.6
    
    
    
    74.9
    
    
    
    (3.1
    )
    
    
    79.8
    
    
    
    82.3
    
    
    
    (3.0
    )Los Angeles area
    
    
    77.2
    
    
    
    81.8
    
    
    
    (5.5
    )
    
    
    76.4
    
    
    
    77.1
    
    
    
    (0.9
    )Orlando
    
    
    72.6
    
    
    
    74.5
    
    
    
    (2.5
    )
    
    
    78.9
    
    
    
    79.3
    
    
    
    (0.5
    )Dallas
    
    
    53.9
    
    
    
    53.1
    
    
    
    1.5
    
    
    
    56.4
    
    
    
    50.8
    
    
    
    10.9Minneapolis
    
    
    78.4
    
    
    
    79.7
    
    
    
    (1.6
    )
    
    
    71.5
    
    
    
    73.6
    
    
    
    (2.9
    )New Orleans
    
    
    44.3
    
    
    
    64.2
    
    
    
    (31.0
    )
    
    
    68.1
    
    
    
    71.3
    
    
    
    (4.5
    )Phoenix
    
    
    64.5
    
    
    
    64.5
    
    
    
    0.0
    
    
    
    73.9
    
    
    
    73.6
    
    
    
    0.4Chicago
    
    
    80.2
    
    
    
    79.3
    
    
    
    1.0
    
    
    
    74.6
    
    
    
    74.0
    
    
    
    0.9Washington, D.C.
    
    
    69.6
    
    
    
    76.1
    
    
    
    (8.5
    )
    
    
    67.5
    
    
    
    75.5
    
    
    
    (10.6
    )San Diego
    
    
    88.4
    
    
    
    88.2
    
    
    
    0.2
    
    
    
    83.7
    
    
    
    84.6
    
    
    
    (1.1
    )Northern New Jersey
    
    
    70.7
    
    
    
    69.8
    
    
    
    1.2
    
    
    
    70.4
    
    
    
    70.7
    
    
    
    (0.5
    )San Francisco Bay area
    
    
    84.0
    
    
    
    85.6
    
    
    
    (1.9
    )
    
    
    77.9
    
    
    
    75.7
    
    
    
    2.9Philadelphia
    
    
    82.1
    
    
    
    78.7
    
    
    
    4.3
    
    
    
    74.9
    
    
    
    75.5
    
    
    
    (0.8
    )San Antonio
    
    
    77.0
    
    
    
    81.8
    
    
    
    (5.9
    )
    
    
    79.3
    
    
    
    78.1
    
    
    
    1.5
 ADR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceAtlanta
    
    
    98.96
    
    
    
    92.42
    
    
    
    7.1
    
    
    
    103.15
    
    
    
    92.77
    
    
    
    11.2South Florida area
    
    
    105.94
    
    
    
    102.47
    
    
    
    3.4
    
    
    
    141.89
    
    
    
    125.85
    
    
    
    12.8Los Angeles area
    
    
    148.00
    
    
    
    129.91
    
    
    
    13.9
    
    
    
    139.02
    
    
    
    124.98
    
    
    
    11.2Orlando
    
    
    89.52
    
    
    
    84.21
    
    
    
    6.3
    
    
    
    100.38
    
    
    
    94.19
    
    
    
    6.6Dallas
    
    
    106.95
    
    
    
    98.11
    
    
    
    9.0
    
    
    
    110.23
    
    
    
    101.46
    
    
    
    8.6Minneapolis
    
    
    141.57
    
    
    
    134.88
    
    
    
    5.0
    
    
    
    136.02
    
    
    
    127.53
    
    
    
    6.7New Orleans
    
    
    93.84
    
    
    
    107.48
    
    
    
    (12.7
    )
    
    
    132.64
    
    
    
    133.74
    
    
    
    (0.8
    )Phoenix
    
    
    104.57
    
    
    
    98.04
    
    
    
    6.7
    
    
    
    131.46
    
    
    
    120.43
    
    
    
    9.2Chicago
    
    
    141.98
    
    
    
    120.22
    
    
    
    18.1
    
    
    
    132.62
    
    
    
    113.81
    
    
    
    16.5Washington, D.C.
    
    
    152.17
    
    
    
    141.80
    
    
    
    7.3
    
    
    
    161.03
    
    
    
    145.80
    
    
    
    10.4San Diego
    
    
    144.02
    
    
    
    128.40
    
    
    
    12.2
    
    
    
    139.69
    
    
    
    129.92
    
    
    
    7.5Northern New Jersey
    
    
    146.47
    
    
    
    137.98
    
    
    
    6.2
    
    
    
    147.14
    
    
    
    137.31
    
    
    
    7.2San Francisco Bay area
    
    
    137.42
    
    
    
    125.58
    
    
    
    9.4
    
    
    
    130.40
    
    
    
    119.41
    
    
    
    9.2Philadelphia
    
    
    128.58
    
    
    
    114.83
    
    
    
    12.0
    
    
    
    127.48
    
    
    
    115.08
    
    
    
    10.8San Antonio
    
    
    107.27
    
    
    
    94.19
    
    
    
    13.9
    
    
    
    104.40
    
    
    
    93.16
    
    
    
    12.1
 RevPAR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceAtlanta
    
    
    67.95
    
    
    
    68.91
    
    
    
    (1.4
    )
    
    
    72.95
    
    
    
    66.65
    
    
    
    9.5South Florida area
    
    
    76.88
    
    
    
    76.77
    
    
    
    0.1
    
    
    
    113.27
    
    
    
    103.56
    
    
    
    9.4Los Angeles area
    
    
    114.32
    
    
    
    106.24
    
    
    
    7.6
    
    
    
    106.26
    
    
    
    96.39
    
    
    
    10.2Orlando
    
    
    65.01
    
    
    
    62.75
    
    
    
    3.6
    
    
    
    79.19
    
    
    
    74.66
    
    
    
    6.1Dallas
    
    
    57.69
    
    
    
    52.14
    
    
    
    10.6
    
    
    
    62.15
    
    
    
    51.57
    
    
    
    20.5Minneapolis
    
    
    111.05
    
    
    
    107.51
    
    
    
    3.3
    
    
    
    97.18
    
    
    
    93.87
    
    
    
    3.5New Orleans
    
    
    41.59
    
    
    
    69.04
    
    
    
    (39.8
    )
    
    
    90.33
    
    
    
    95.35
    
    
    
    (5.3
    )Phoenix
    
    
    67.48
    
    
    
    63.27
    
    
    
    6.6
    
    
    
    97.13
    
    
    
    88.59
    
    
    
    9.6Chicago
    
    
    113.82
    
    
    
    95.39
    
    
    
    19.3
    
    
    
    98.97
    
    
    
    84.18
    
    
    
    17.6Washington, D.C.
    
    
    105.91
    
    
    
    107.89
    
    
    
    (1.8
    )
    
    
    108.65
    
    
    
    110.02
    
    
    
    (1.2
    )San Diego
    
    
    127.32
    
    
    
    113.30
    
    
    
    12.4
    
    
    
    116.87
    
    
    
    109.94
    
    
    
    6.3Northern New Jersey
    
    
    103.55
    
    
    
    96.37
    
    
    
    7.4
    
    
    
    103.53
    
    
    
    97.07
    
    
    
    6.7San Francisco Bay area
    
    
    115.42
    
    
    
    107.55
    
    
    
    7.3
    
    
    
    101.61
    
    
    
    90.45
    
    
    
    12.3Philadelphia
    
    
    105.55
    
    
    
    90.42
    
    
    
    16.7
    
    
    
    95.44
    
    
    
    86.84
    
    
    
    9.9San Antonio
    
    
    82.57
    
    
    
    77.08
    
    
    
    7.1
    
    
    
    82.76
    
    
    
    72.76
    
    
    
    13.7
 
 (a)
    
    Hotels have been excluded in both the current and prior year for those months directly
impacted by hurricanes. 37




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##### Table of Contents



Liquidity and Capital Resources
        38




---



##### Table of Contents



Debt
  5 8
    Line of Credit
    39




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##### Table of Contents



Construction Loan
  Mortgage Debt
   Senior Notes
  40




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##### Table of Contents



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




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and Qualitative Disclosures About Market Risk
   Expected Maturity Date
at September 30, 2006
(dollars in thousands)
 Fair2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    ValueLiabilitiesFixed rate:Debt
    
    $
    3,537
    
    
    $
    139,897
    
    
    $
    16,342
    
    
    $
    178,924
    
    
    $
    282,462
    
    
    $
    386,786
    
    
    $
    1,007,948
    
    
    $
    1,065,611Average interest
rate
    
    
    7.92
    %
    
    
    7.66
    %
    
    
    7.88
    %
    
    
    7.32
    %
    
    
    8.70
    %
    
    
    8.06
    %
    
    
    8.05
    %Floating rate:Debt
    
    
    727
    
    
    
    135,345
    
    
    
    15,500
    
    
    
    
    
    
    
    
    
    
    
    290,650
    
    
    
    442,222
    
    
    
    442,222Average interest
rate
    
    
    6.59
    %
    
    
    6.76
    %
    
    
    7.69
    %
    
    
    
    
    
    
    
    
    
    
    9.36
    %
    
    
    8.50
    %Total debt
    
    $
    4,264
    
    
    $
    275,242
    
    
    $
    31,842
    
    
    $
    178,924
    
    
    $
    282,462
    
    
    $
    677,436
    
    
    $
    1,450,170Average interest
rate
    
    
    7.69
    %
    
    
    7.22
    %
    
    
    7.79
    %
    
    
    7.32
    %
    
    
    8.70
    %
    
    
    8.62
    %
    
    
    8.19
    %Net discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,095
    )Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,448,075Interest
rate swaps
(floating
fixed)Notional amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100,000
    
    
    
    2,443Pay rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.80
    %
    
    
    7.80
    %
  42




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##### Table of Contents



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




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##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 6. Exhibits.
  Exhibit Number
    
    Description of Exhibit31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the 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.
 44




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##### Table of Contents



SIGNATURE
   FELCOR LODGING LIMITED PARTNERSHIP
a Delaware Limited PartnershipBy:
    
    FelCor Lodging Trust Incorporated
Its General PartnerBy:
    
    /s/ Lester C. JohnsonSenior Vice President and
Principal Accounting Officer
 45




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##### Table of Contents



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