<PAGE> 1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 333-39595-01
FELCOR LODGING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE 72-2544994
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062
(Address of principal executive offices) (Zip Code)
(972) 444-4900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
- --------------------------------------------------------------------------------
<PAGE> 2
FELCOR LODGING LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. -- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.................................................................... 3
CONSOLIDATED BALANCE SHEETS -SEPTEMBER 30, 1998 (UNAUDITED)
AND DECEMBER 31, 1997........................................................... 3
CONSOLIDATED STATEMENTS OF OPERATIONS -- FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)................................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -- FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)................................... 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................................... 6
PART II. -- OTHER INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 14
GENERAL/THIRD QUARTER HIGHLIGHTS........................................................ 14
RESULTS OF OPERATIONS................................................................... 15
LIQUIDITY AND CAPITAL RESOURCES......................................................... 20
ITEM 5. OTHER INFORMATION....................................................................... 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................................ 25
SIGNATURE............................................................................................ 27
</TABLE>
2
<PAGE> 3
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investment in hotels, net of accumulated depreciation of $148,339
and $87,400 at September 30, 1998 and December 31, 1997, respectively ......... $3,831,313 $1,489,764
Investment in unconsolidated entities ............................................ 136,556 132,991
Cash and cash equivalents ........................................................ 49,368 17,543
Due from Lessees ................................................................. 28,861 18,908
Deferred expenses, net of accumulated amortization of $1,473 and
$1,987 at September 30, 1998 and December 31, 1997, respectively .............. 10,617 10,593
Other assets ..................................................................... 9,316 3,565
---------- ----------
Total assets .......................................................... $4,066,031 $1,673,364
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Debt and capital lease obligations, net of discount of $1,704 and $1,855 at
September 30, 1998 and December 31, 1997, respectively ........................ $1,504,852 $ 476,819
Distributions payable ............................................................ 42,432 24,671
Accrued expenses and other liabilities ........................................... 63,890 11,331
Minority interest in other partnerships .......................................... 16,388 8,594
---------- ----------
Total liabilities ..................................................... 1,627,562 521,415
---------- ----------
Commitments and contingencies (Note 3)
Redeemable units at redemption value ............................................. 71,552 102,933
Preferred units:
Series A preferred units .................................................... 151,250 151,250
Series B preferred units .................................................... 143,750
Partners' capital ................................................................ 2,071,917 897,766
---------- ----------
Total liabilities and partners' capital ............................... $4,066,031 $1,673,364
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE> 4
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Percentage lease revenue ................................. $ 105,123 $ 48,603 $ 223,990 $ 122,651
Equity in income from unconsolidated entities ............ 2,446 2,338 6,429 5,765
Other revenue ............................................ 1,030 112 3,111 283
--------- --------- --------- ---------
Total revenue ................................... 108,599 51,053 233,530 128,699
--------- --------- --------- ---------
Expenses:
General and administrative ............................... 1,452 897 4,026 2,743
Depreciation ............................................. 27,720 14,238 61,036 35,969
Taxes, insurance and other ............................... 14,651 6,155 29,490 16,912
Interest expense ......................................... 22,960 7,183 46,486 20,097
Minority interest in other partnerships .................. 323 195 805 337
--------- --------- --------- ---------
Total expenses .................................. 67,106 28,668 141,843 76,058
--------- --------- --------- ---------
Net income before extraordinary charge ..................... 41,493 22,385 91,687 52,641
Extraordinary charge from write off of deferred
financing fees ........................................ 2,519 3,075
--------- --------- --------- ---------
Net income ................................................. 38,974 22,385 88,612 52,641
Preferred distributions .................................... 6,184 2,949 13,987 8,848
--------- --------- --------- ---------
Net income applicable to unitholders ....................... $ 32,790 $ 19,436 $ 74,625 $ 43,793
========= ========= ========= =========
Per unit data:
Basic:
Income applicable to unitholders before extraordinary
charge ................................................ $ 0.57 $ 0.50 $ 1.65 $ 1.35
Extraordinary charge ..................................... (0.04) (0.06)
--------- --------- --------- ---------
Net income applicable to unitholders ..................... $ 0.53 $ 0.50 $ 1.59 $ 1.35
========= ========= ========= =========
Weighted average units outstanding ....................... 61,541 39,260 46,958 32,337
Diluted:
Income applicable to unitholders before extraordinary
charge ................................................ $ 0.57 $ 0.49 $ 1.64 $ 1.34
Extraordinary charge ..................................... (0.04) (0.06)
--------- --------- --------- ---------
Net income applicable to unitholders ..................... $ 0.53 $ 0.49 $ 1.58 $ 1.34
========= ========= ========= =========
Weighted average units and equivalents outstanding ....... 61,913 39,717 47,327 32,749
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE> 5
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................................... $ 88,612 $ 52,641
Adjustments to reconcile net income to net cash provided by
operating activities, net of effects of acquisitions:
Depreciation ........................................................ 61,036 35,969
Amortization of deferred financing fees and organization costs ...... 1,927 1,011
Amortization of unearned officers' and directors' compensation ...... 605 737
Equity in income from unconsolidated entities ....................... (6,429) (5,765)
Extraordinary charge for write off of deferred financing fees ....... 3,075
Minority interest in other partnerships ............................. 805 337
Changes in assets and liabilities:
Due from Lessee ..................................................... (19,031) (7,893)
Deferred financing fees ............................................. (4,300)
Deferred costs and other assets ..................................... (4,102) (4,362)
Accrued expenses and other liabilities .............................. 28,933 (966)
--------- ---------
Net cash flow provided by operating activities ............ 151,131 71,709
--------- ---------
Cash flows from investing activities, net of effects of acquisitions:
Acquisition of hotels ......................................................... (354,435) (537,100)
Net cash paid in the acquisition of unconsolidated entities ................... (984) (59,571)
Net cash received in the acquisition of Bristol hotels ........................ 16,790
Bristol Interim Credit Facility ............................................... (120,000)
Improvements and additions to hotels .......................................... (44,310) (38,413)
Cash distributions from unconsolidated entities ............................... 18,406 2,849
--------- ---------
Net cash flow used in investing activities ................ (484,533) (632,235)
--------- ---------
Cash flows from financing activities, net of effects of acquisitions:
Proceeds from borrowings ...................................................... 942,003 332,000
Repayment of borrowings ....................................................... (640,300) (151,900)
Contributions ................................................................. 140,721 448,586
Distributions paid to preferred unitholders ................................... (13,987) (8,848)
Distributions paid to unitholders ............................................. (63,210) (48,163)
--------- ---------
Net cash flow provided by financing activities ............ 365,227 571,675
--------- ---------
Net change in cash and cash equivalents ................................................. 31,825 11,149
Cash and cash equivalents at beginning of periods ....................................... 17,543 7,793
--------- ---------
Cash and cash equivalents at end of periods ............................................. $ 49,368 $ 18,942
========= =========
Supplemental cash flow information --
Interest paid ................................................................. $ 33,322 $ 19,907
========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE> 6
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Third Quarter Highlights
FelCor Lodging Limited Partnership (the "Operating Partnership") and
its subsidiaries at September 30, 1998, owned interests in 194 hotels with
nearly 50,000 rooms and suites (collectively the "Hotels"). The sole general
partner of the Operating Partnership is FelCor Lodging Trust Incorporated
("FelCor") a self administered real estate investment trust ("REIT") that at
September 30, 1998, owned a 95.8% general partner interest in the Operating
Partnership. Felcor, the Operating Partnership and its subsidiaries, are herein
referred to, collectively, as the "Company". The Company owns 100% equity
interests in 172 of the Hotels, a 90% or greater interest in entities owning
seven hotels, and 50% interests in separate entities that own 15 hotels. The
Operating Partnership is the owner of the largest number of Embassy Suites(R),
Doubletree Guest Suites(R), Crowne Plaza(R) and Holiday Inn(R) branded hotels.
The following table provides a schedule of the Hotels by brand:
<TABLE>
<CAPTION>
BRAND HOTELS
----- ------
<S> <C>
Embassy Suites 57
Holiday Inn 52
Doubletree(R)and Doubletree Guest Suites 18
Crowne Plaza and Crowne Plaza Suites(R) 11
Holiday Inn Select(R) 12
Sheraton(R)and Sheraton Suites(R) 10
Harvey Hotel(R) 5
Other Upscale 7
Hampton Inn(R) 9
Fairfield Inn(R) 5
Holiday Inn Express(R) 6
Other Full Service 2
------
Total Hotels 194
======
</TABLE>
The Hotels are located in 34 states and Canada, with 78 hotels in
California, Florida and Texas. The following table provides information
regarding the net acquisition of Hotels through September 30, 1998:
<TABLE>
<CAPTION>
NET HOTELS
ACQUIRED
----------
<S> <C>
1994 7
1995 13
1996 23
1997 30
1ST QUARTER 1998 2
2ND QUARTER 1998 12
3RD QUARTER 1998 107
---
194
===
</TABLE>
At September 30, 1998, 87 of the Hotels were leased to DJONT
Operations, L.L.C., a Delaware limited liability company, or a consolidated
subsidiary thereof (collectively "DJONT"), 106 of the Hotels were leased to
Bristol Hotels & Resorts or a consolidated subsidiary thereof, (collectively
with DJONT, the "Lessees") and one hotel was not leased.
Thomas J. Corcoran, Jr., the President, Chief Executive Officer and a
Director of FelCor, and Hervey A. Feldman, Chairman Emeritus of FelCor,
beneficially own a 50% voting equity interest in DJONT. The remaining
6
<PAGE> 7
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND THIRD QUARTER HIGHLIGHTS -- (CONTINUED)
50% non-voting equity interest is beneficially owned by the children of Charles
N. Mathewson, a director of FelCor and major initial investor in the Operating
Partnership. DJONT has entered into management agreements pursuant to which 73
of the Hotels leased by it are managed by subsidiaries of Promus Hotel
Corporation ("Promus"), nine are managed by subsidiaries of Starwood Hotels &
Resorts Worldwide, Inc. ("Starwood"), two are managed by Bristol Hotels &
Resorts and three are managed by two independent management companies. Promus is
the operator of the largest number of all-suite, full service hotels in the
United States.
Bristol Hotels & Resorts leases and/or manages the remaining 107 Hotels
and is the largest independent hotel operating company in North America. They
operate the largest number of Bass Hotels & Resorts - branded hotels in the
world.
A brief discussion of the third quarter 1998 highlights follows:
o Completed the merger of Bristol Hotel Company's hotel assets into
FelCor ( the "Bristol Merger") on July 28, 1998. The merger resulted in
the acquisition of 109 primarily full-service hotels in return for
approximately 31.0 million shares of newly issued FelCor Common Stock.
FelCor subsequently contributed the Hotels to the Operating Partnership
in exchange for a like number of partnership units. Based on the July
27, 1998 closing prices of FelCor Common Stock, the transaction was
valued at approximately $1.7 billion, including the assumption of
approximately $700 million in debt. The hotels acquired added more than
28,000 rooms to the Company's portfolio at approximately $59,000 per
room. The merger established significant brand/owner manager
relationships for the Company with Bass plc and its subsidiary Bass
Hotels & Resorts, which acquired approximately 14% of FelCor's
currently outstanding Common Stock in the merger. Bristol Hotels &
Resorts ("Bristol"), the new hotel operating company spun off from
Bristol Hotel Company prior to its merger into FelCor, continues to
lease and operate the hotels acquired by FelCor in the merger.
o Sold two of the hotels acquired in the Bristol Merger, the 199-room
Holiday Inn Express - Northeast in Atlanta, Ga., and the 200-room
Holiday Inn-Orlando Winter Park in Orlando, Fla., for an aggregate sale
price of $7.7 million. Presently, the Operating Partnership has pending
sales contracts on three additional limited-service hotels, which are
expected to close before year end, for an aggregate sales price of $8.6
million. Five additional hotel properties, acquired from Bristol Hotel
Company, are being actively offered for sale.
o Twenty-three hotels were undergoing redevelopment and renovation during
the quarter, resulting in approximately 120,000 room nights
out-of-service, or approximately 3% of available room nights. During
the quarter, two hotels were re-branded as Sheraton Suites and four
hotels were re-branded as Crowne Plaza hotels. In total, renovations at
11 hotels were completed during the quarter.
o Increased unsecured credit facilities to $1.1 billion from $550
million. The new unsecured credit facilities consist of a $850 million
revolving line of credit that matures on July 1, 2001, and a $250
million term loan that matures on January 1, 2000. In connection with
the retirement of the old unsecured credit facilities, an extraordinary
charge of $2.5 million was recognized in the quarter.
o Declared third quarter distributions of $0.55 per unit, $0.4875 per
unit on its $1.95 Series A Cumulative Convertible Preferred Units and
$0.5625 per depository share evidencing the 9% Series B Cumulative
Redeemable Preferred Units.
7
<PAGE> 8
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND THIRD QUARTER HIGHLIGHTS -- (CONTINUED)
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") and
should be read in conjunction with the financial statements and notes thereto of
the Operating Partnership included in the Operating Partnership's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 (the "10-K"). The notes
to the financial statements included herein highlight significant changes to the
notes included in the 10-K and present interim disclosures required by the SEC.
The financial statements for the three and nine months ended September 30, 1998
and 1997 are unaudited; however, in the opinion of management, all adjustments
(which include only normal recurring accruals) have been made which are
considered necessary to present fairly the operating results and financial
position of the Operating Partnership for the unaudited periods.
2. SUPPLEMENTAL CASH FLOW INFORMATION
On July 28, 1998, the Company acquired by merger, certain assets and
assumed certain liabilities relating to hotels owned by Bristol Hotel Company.
This was recorded under the purchase method of accounting. The fair value of the
acquired assets and liabilities recorded at the date of acquisition are as
follows (in thousands):
<TABLE>
<S> <C>
Assets acquired $ 1,975,887
Debt assumed (846,116)
Common Stock issued (1,146,561)
-----------
Net cash received by the Company $ (16,790)
===========
</TABLE>
Under the Bristol Merger Agreement, the Operating Partnership provided
Bristol a $120 million interim credit facility (the "Interim Credit Facility").
At July 28, 1998, the Interim Credit Facility was assumed and canceled by the
Operating Partnership upon completion of the merger with Bristol.
During the first nine months of 1998, the Operating Partnership
purchased certain other assets and assumed certain liabilities relating to
hotels. These purchases were recorded under the purchase method of accounting.
The fair value of the acquired assets and liabilities recorded at the date of
acquisition are as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired ......................................... $ 367,878
Debt assumed ............................................ (1,479)
Operating Partnership units issued ...................... (4,976)
Minority interest contribution in other partnerships .... (6,988)
---------
Net cash paid by the Company ................... $ 354,435
=========
</TABLE>
3. COMMITMENTS AND RELATED PARTY TRANSACTIONS
At September 30, 1998, the Operating Partnership owned interests in 194
Hotels operating under various brand names. The Hotels generally operate
pursuant to franchise license agreements which require the payment of fees based
on a percentage of suite/room revenue. These fees are paid by the Lessees. There
are no separate franchise license agreements with respect to the Doubletree
Guest Suites hotels, Doubletree hotels, Sheraton hotels or Sheraton Suites
hotels, which rights are included in management agreements with DJONT.
DJONT generally pays the Hotel managers a base management fee based on
a percentage of suite/room revenue and an incentive management fee based on
income before overhead expenses for each hotel. In certain
8
<PAGE> 9
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. COMMITMENTS AND RELATED PARTY TRANSACTIONS -- (CONTINUED)
instances, the hotel managers have subordinated fees and committed to make
subordinated loans to DJONT, if needed, to meet its rental and other obligations
under the Percentage Leases.
Bristol was both the lessee and/or manager of 107 hotels at September
30, 1998, and, as such, is compensated for both roles through the profitability
of the hotels, after meeting their operating expenses and rental obligations
under the Percentage Leases. Bristol is a public company whose common stock is
listed on the New York Stock Exchange under the symbol BH and that files
financial statements in accordance with the Securities and Exchange Act of
1934.
The Operating Partnership receives rental income from the Lessees under
the Percentage Leases which expire in 2002 (six hotels), 2003 (12 hotels), 2004
(12 hotels), 2005 (19 hotels), 2006 (25 hotels), 2007 (38 hotels), 2008 (52
hotels), and thereafter (15 hotels). Minimum future rental income (i.e., base
rents) payable to the Operating Partnership under these noncancellable operating
leases at September 30, 1998 is set forth below (in thousands). The Percentage
Leases for 14 of the unconsolidated entities expire in 2005 - 2007. The rental
income under the Percentage Leases between these 14 unconsolidated entities, of
which the Operating Partnership owns 50%, and DJONT are payable to the
respective entities and as such is not included in the following schedule of
lease commitments to the Operating Partnership.
<TABLE>
<CAPTION>
BRISTOL HOTELS
DJONT & RESORTS TOTAL
---------- -------------- ----------
<S> <C> <C> <C>
Remainder of 1998 ...... $ 34,329 $ 32,865 $ 67,194
1999 ................... 138,575 150,801 289,376
2000 ................... 139,903 176,797 316,700
2001 ................... 143,096 176,797 319,893
2002 ................... 143,090 176,797 319,887
2003 and thereafter .... 603,953 965,798 1,569,751
---------- ---------- ----------
$1,202,946 $1,679,855 $2,882,801
========== ========== ==========
</TABLE>
Directly or through affiliates, Messrs. Feldman and Corcoran, the
owners of joint venture interests in and the managers of certain of the Hotels
leased by DJONT have agreed to make loans to DJONT of up to an aggregate of
approximately $17.3 million, to the extent necessary to enable DJONT to pay rent
and other obligations due under the respective Percentage Leases relating to a
total of 38 of the Hotels. No loans were outstanding under such agreements at
September 30, 1998.
Minimum Liquid Net Worth Requirements
Pursuant to the Amended and Restated Master Hotel Agreement dated as of
July 27, 1998 (the "Master Hotel Agreement"), the lessees under the Percentage
Leases that are affiliated with Bristol (the "Bristol Lessees") are required to
maintain, collectively, a certain amount of Minimum Liquid Net Worth (defined to
mean Liquid Net Worth equal to 15% of the projected annual rent to be paid by
the Bristol Lessees under the Percentage Leases). In addition, each Bristol
Lessee is required to maintain an individual Liquid Net Worth equal to the
portion of the Minimum Liquid Net Worth for all Bristol Lessees allocable to it.
For purposes of these covenants, Liquid Net Worth is defined generally to mean
the lesser of (i) the net worth of the Bristol Lessee (for this purpose,
excluding intangibles) plus any Credit Enhancement Amount, and (ii) the Bristol
Lessees' Liquid Assets Amount plus any Credit Enhancement Amount. Liquid Assets
Amount is defined generally to mean working capital plus the lesser of book or
fair market value of lease or management contracts for non-affiliated hotel
properties (those not owned by an affiliate of FelCor or Bristol), hotels or
other real property owned and any other income producing
9
<PAGE> 10
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. COMMITMENTS AND RELATED PARTY TRANSACTIONS -- (CONTINUED)
or readily marketable tangible property, subject to the reasonable approval of
FelCor. Credit Enhancement Amount means, generally, the aggregate amount
available under letters of credit, guaranties provided by Bristol or its
affiliates, or other forms of credit enhancement acceptable to FelCor.
The Master Hotel Agreement also requires each Bristol Lessee to certify
the amount of its Liquid Net Worth and its then applicable Minimum Liquid Net
Worth, as well as the aggregate Liquid Net Worth and the Minimum Liquid Net
Worth then applicable to the Bristol Lessees, collectively. If the Liquid Net
Worth of any Bristol Lessee or the Bristol Lessees collectively is less than the
Minimum Liquid Net Worth, Bristol has the obligation, pursuant to the Master
Hotel Agreement, to contribute additional cash, marketable securities or other
assets that qualify for the Liquid Assets Amount, or to provide additional
credit enhancement equal to the deficiency in the Liquid Net Worth.
At the closing of the Merger, the Liquid Net Worth of the Bristol
Lessees, collectively, was set at $30 million. As credit enhancement, the
Bristol Lessees obtained a letter of credit (the "Letter of Credit") issued by
Bankers Trust Company for the benefit of all of the Bristol Lessees in a total
amount of $20 million. This Letter of Credit is required to be maintained until
July 27, 1999. In addition, Bristol and certain of its affiliates have provided
guaranties of the Percentage Leases pursuant to which Bristol and such
affiliates have guaranteed the payment of rent under the Percentage Leases;
provided, however, that the obligation under each such Guaranty is limited to
the amount of any deficiency in the Liquid Net Worth of the Bristol Lessees
below the Minimum Liquid Net Worth.
4. DEBT AND CAPITAL LEASE OBLIGATIONS
Debt and capital lease obligations at September 30, 1998 and December
31, 1997 consist of the following (in thousands):
<TABLE>
<CAPTION>
BALANCE
INTEREST RATE MATURITY DATE SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
FLOATING RATE DEBT:
Line of credit - unsecured LIBOR + 150bp July 2001 $ 349,000 $ 61,000
Term loan - unsecured LIBOR + 150bp January 2000 250,000
Other - unsecured Various June 2000 25,650 25,650
---------- ----------
Total floating rate debt 624,650 86,650
---------- ----------
FIXED RATE DEBT:
Line of credit - unsecured 7.27% July 2001 325,000 75,000
Publicly-traded term notes - 7.38% October 2004 174,218 174,116
unsecured
Publicly-traded term notes - 7.63% October 2007 124,098 124,029
unsecured
Mortgage debt - secured 7.46% November 2007 143,289
Mortgage debt - secured 8.0 % December 2002 45,101
Other - secured Various Various 68,496 17,024
---------- ----------
Total fixed rate debt 880,202 390,169
---------- ----------
Total debt and capital lease obligations $1,504,852 $ 476,819
========== ==========
</TABLE>
A portion of the Operating Partnership's Line of Credit is matched with
interest rate swap agreements which effectively convert the variable rate on the
Line of Credit to a fixed rate.
10
<PAGE> 11
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DEBT AND CAPITAL LEASE OBLIGATIONS -- (CONTINUED)
Under its loan agreements, the Operating Partnership is required to
satisfy various affirmative and negative covenants. The Operating Partnership
was in compliance with these covenants at September 30, 1998.
5. INVESTMENT IN UNCONSOLIDATED ENTITIES
At September 30, 1998, the Operating Partnership owned 50% interests in
separate entities owning 15 hotels, a parcel of undeveloped land and a
condominium management company. The Operating Partnership also owned a 97%
non-voting interest in an entity developing condominiums for sale. The Operating
Partnership is accounting for its investments in these unconsolidated entities
under the equity method.
Summarized combined financial information for 100% of these
unconsolidated entities is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Balance sheet information:
Investment in hotels, net of accumulated depreciation .... $ 252,112 $ 256,032
Non-recourse mortgage debt ............................... $ 169,939 $ 138,956
Equity ................................................... $ 94,775 $ 126,324
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 , SEPTEMBER 30 ,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Statements of operations information:
Percentage lease revenue ........................... $ 13,575 $ 13,297 $ 40,144 $ 35,551
Other income ....................................... 2,087 3,140 3,201 4,316
-------- -------- -------- --------
Total revenue ............................. 15,662 16,437 43,345 39,867
-------- -------- -------- --------
Expenses:
Depreciation .................................. 4,261 4,216 12,804 11,431
Taxes, insurance and other .................... 2,303 3,436 5,462 6,314
Interest expense .............................. 3,373 3,215 9,727 8,216
-------- -------- -------- --------
Total expenses ............................ 9,937 10,867 27,993 25,961
-------- -------- -------- --------
Net income ......................................... $ 5,725 $ 5,570 $ 15,352 $ 13,906
======== ======== ======== ========
50% of net income attributable to the Operating
Partnership .................................. $ 2,862 $ 2,785 $ 7,676 $ 6,953
Amortization of cost in excess of book value ....... (416) (447) (1,247) (1,188)
-------- -------- -------- --------
Equity in income from unconsolidated entities ...... $ 2,446 $ 2,338 $ 6,429 $ 5,765
======== ======== ======== ========
</TABLE>
11
<PAGE> 12
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. TAXES, INSURANCE AND OTHER
Taxes, insurance and other is comprised of the following for the three
and nine months ended September 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Real estate and personal property taxes ...... $10,246 $ 5,015 $23,269 $13,848
Property insurance ........................... 801 483 1,346 1,347
Land lease expense ........................... 2,729 459 3,535 1,119
State franchise taxes ........................ 561 198 1,026 498
Other ........................................ 314 314 100
------- ------- ------- -------
Total taxes, insurance and other .... $14,651 $ 6,155 $29,490 $16,912
======= ======= ======= =======
</TABLE>
7. SUBSEQUENT EVENTS
The Operating Partnership completed a $15.5 million non-recourse
financing of the Holiday Inn Select in Pittsburgh, Pa., for a term of five years
at a fixed interest rate of 7.15%. This financing was obtained to satisfy
commitments to the seller made in connection with the acquisition of this hotel.
A one-time distribution of earnings and profits arising from the
Bristol Merger is expected to be made in conjunction with the regular fourth
quarter distribution which is expected to be paid to unitholders of record on
December 30, 1998. The amount of this additional distribution, which is expected
to be finalized before the end of November, 1998, is currently expected to be
within the ranges of $0.30 to $0.50 per unit, and $0.17 to $0.33 per share on
the $1.95 Series A Cumulative Convertible Preferred Units. The 9% Series B
Cumulative Redeemable Preferred Units do not participate in this additional
distribution.
FelCor and Starwood announced the re-branding of the Operating
Partnership's 545- room Sheraton Park Central hotel in Dallas, Texas, to the
Westin(R) brand. In addition, the two companies have entered into a joint
venture agreement combining the ownership of this hotel and an adjacent 438-room
Sheraton hotel owned by Starwood, which has recently been re-branded from a
Radisson(R) hotel. The Operating Partnership owns 60%, and Starwood owns 40%, of
the new joint venture.
8. PRO FORMA INFORMATION (UNAUDITED)
The following unaudited Pro Forma Consolidated Statements of Operations
for the nine months ended September 30, 1998 and 1997 are presented as if the
acquisitions of all hotels owned by the Operating Partnership at September 30,
1998, the equity offerings consummated during 1997 and 1998 and the Bristol
Merger had occurred as of the beginning of the periods presented and the Hotels
had been leased pursuant to Percentage Leases.
The following unaudited Pro Forma Consolidated Statements of Operations
for the periods presented are not necessarily indicative of what actual results
of operations of the Operating Partnership would have been assuming such
transactions had been completed at the beginning of the periods presented nor
does it purport to represent the results of operations for future periods.
12
<PAGE> 13
FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. PRO FORMA INFORMATION (UNAUDITED) -- (CONTINUED)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Percentage lease revenue ......................... $364,762 $302,606
Equity in income from unconsolidated entities .... 8,045 7,318
Other income ..................................... 159
-------- --------
Total revenue ................................. 372,966 309,924
-------- --------
Expenses:
General and administrative ....................... 5,193 3,493
Depreciation ..................................... 97,486 92,731
Taxes, insurance and other ....................... 56,823 54,917
Interest expense ................................. 79,602 76,686
Minority interest in other partnerships .......... 1,000 1,047
-------- --------
Total expenses ................................ 240,104 228,874
-------- --------
Net income ......................................... 132,862 81,050
Preferred distributions ............................ 18,552 18,552
-------- --------
Net income applicable to unitholders ............... $114,310 $ 62,498
======== ========
Per common share data:
Basic:
Net income applicable to unitholders ............. $ 1.62 $ 0.90
======== ========
Weighted average units outstanding ............... 70,560 69,302
======== ========
Diluted:
Net income applicable to unitholders ............. $ 1.60 $ 0.89
======== ========
Weighted average units outstanding ............... 71,487 70,308
======== ========
</TABLE>
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
For background information relating to the Operating Partnership and
the definitions of certain capitalized terms used herein, reference is made to
Note 1 of Notes to Consolidated Financial Statements of FelCor Lodging Limited
Partnership appearing elsewhere herein.
THIRD QUARTER HIGHLIGHTS:
o Revenues increased 113% for the quarter from $51.1 million to $108.6
million.
o Net income applicable to unitholders increased 69% for the quarter from
$19.4 million to $32.8 million.
o Income before extraordinary charges per unit increased 16% for the quarter
from $0.49 to $0.57.
o Funds From Operations ("FFO") of $68.5 million or $1.03 per unit sets a new
quarterly record.
o Completed the merger of Bristol Hotel Company's hotel assets, including 109
hotels, into FelCor on July 28, 1998. FelCor's 1998 third quarter earnings
include the results from these hotels for 65 of the 92 days in the quarter.
o The hotel portfolio's revenue per available room ("RevPAR"), including the
comparable hotels acquired in the Bristol Merger, increased 4.1% for the
quarter and 6.4% year-to-date over the comparable periods. The overall
RevPAR percentage increased for the quarter, but at a slower pace than
during the first half of 1998. The third quarter RevPAR increase was
negatively affected by some overbuilding in select markets and by room
additions at three of the hotels. Nevertheless, 70% of the comparable
hotels (85 of 123 hotels) produced RevPAR increases in the third quarter as
compared to the prior year. Furthermore, the Holiday Inn and Holiday Inn
Select hotels, not undergoing renovation in either reporting period,
produced RevPAR increases of 5.8% and 6.8% for the quarter and
year-to-date, respectively.
o Twenty-three hotels were undergoing redevelopment and renovation during the
quarter, resulting in approximately 120,000 room nights out-of-service or
approximately 3% of available room nights. During the quarter, two hotels
were re-branded as Sheraton Suites and four hotels were re-branded as
Crowne Plaza hotels. In total, renovations at 11 hotels were completed
during the quarter.
o Sold two of the hotels acquired in the Bristol Merger: the 199-room Holiday
Inn Express(R) - Northeast in Atlanta, Ga., and the 200-room Holiday
Inn-Orlando Winter Park in Orlando, Fla., for an aggregate sale price of
$7.7 million. Presently, the Operating Partnership has pending sales
contracts on three additional limited- service hotels, which are expected
to close before year end, for an aggregate sales price of $8.6 million.
Five additional hotel properties, acquired in the Bristol Merger, are being
actively offered for sale.
o Increased the Operating Partnership's unsecured credit facilities to $1.1
billion from $550 million. The new unsecured credit facilities consist of a
$850 million revolving line of credit that matures on July 1, 2001, and a
$250 million term loan that matures on January 1, 2000. In connection with
the retirement of the old unsecured credit facilities, an extraordinary
charge of $2.5 million was recognized in the quarter.
o Following the end of the quarter, completed $15.5 million non-recourse
financing of the Holiday Inn Select in Pittsburgh, Pa., for a term of five
years at a fixed interest rate of 7.15%. This financing was obtained to
satisfy commitments to the seller made in connection with the acquisition
of this hotel.
14
<PAGE> 15
o Declared third quarter distributions of $0.55 per unit, $0.4875 per unit on
its $1.95 Series A Cumulative Convertible Preferred Units and $0.5625 per
depositary share relating to the 9% Series B Cumulative Redeemable Units.
The current annual distribution on Operating Partnership Units of $2.20
results in a current FFO payout ratio of approximately 60% and a dividend
yield of approximately 9.2%, based on the November 2, 1998, closing price
for FelCor Common Stock on the NYSE.
RESULTS OF OPERATIONS
The Company
Nine Months Ended September 30, 1998 and 1997
For the nine months ended September 30, 1998 and 1997, the Operating
Partnership had revenues of $233.5 million and $128.7 million, respectively,
consisting primarily of Percentage Lease revenues of $224.0 million and $122.7
million, respectively. The increase in total revenue is primarily attributed to
the Operating Partnership's acquisition and subsequent leasing, pursuant to
Percentage Leases, of interests in 123 additional hotels since September 30,
1997 including 107 hotels acquired on July 28, 1998 through the Bristol Merger.
Management believes that the hotels it acquires will generally
experience increases in suite/room revenue and RevPAR (and accordingly, provide
the Operating Partnership with increases in Percentage Lease revenue) after
completion of renovation, upgrade and possible rebranding; however, as
individual hotels undergo such renovation and/or rebranding, their performance
has been, and may continue to be adversely affected by such temporary factors as
suites/rooms out of service and disruptions of hotel operations. (A more
detailed discussion of hotel suite/room revenue is contained in "The Hotels"
section of this Management's Discussion and Analysis of Financial Condition and
Results of Operations.)
Total expenses increased $65.8 million in the nine months ended
September 30, 1998, from $76 million to $141.8 million, compared to the same
period in 1997. This increase resulted primarily from the additional hotels
acquired in 1998 and 1997. Total expenses as a percentage of total revenue
increased to 60.7% in the nine months ended September 30, 1998 from 59.1% in the
same period of 1997. The major components of total expenses are depreciation;
taxes, insurance and other; and interest expense.
Depreciation increased primarily as a result of the additional hotels
acquired in 1998 and 1997. However, as a percentage of revenue, depreciation
remained relatively constant.
Taxes, insurance and other increased $12.6 million primarily as a
result of the increased number of hotels owned. As a percentage of total
revenue, taxes, insurance and other decreased insignificantly from 13.1% to
12.6%.
Interest expense increased as a percentage of total revenue to 19.9% in
the nine months ended September 30, 1998 from 15.6% in the nine months ended
September 30, 1997. This increase in interest expense is attributed to the
increased use of debt to finance acquisitions and renovations and the debt
assumed in connection with the Bristol Merger.
Three Months Ended September 30, 1998 and 1997
For the three months ended September 30, 1998 and 1997, the Operating
Partnership had revenues of $108.6 million and $51.1 million, respectively,
consisting primarily of Percentage Lease revenues of $105.1 million and $48.6
million, respectively. The increase in total revenue is primarily attributed to
the Company's acquisition and subsequent leasing, pursuant to Percentage Leases,
of interests in 123 additional hotels since September 30, 1997, including 107
hotels acquired on July 28, 1998 through the Bristol Merger.
15
<PAGE> 16
Total expenses increased $38.4 million in the three months ended
September 30, 1998, to $67.1 million, compared to the same period in 1997. This
increase resulted primarily from the additional hotels acquired in 1998 and
1997. Total expenses increased as percentage of total revenue to 61.8% in the
third quarter of 1998 from 56.1% in the third quarter of 1997. The major
components of total expenses are depreciation; taxes, insurance and other; and
interest expense.
Depreciation increased primarily as a result of the additional
properties acquired in 1998 and 1997. However, as a percentage of revenue,
depreciation remained relatively constant.
Taxes, insurance and other increased $8.5 million primarily as a result
of the increased number of hotels owned. As a percentage of total revenue,
taxes, insurance and other increased from 12.1% to 13.4%.
Interest expense increased as a percentage of total revenue to 21.1% in
the third quarter of 1998 from 14.1% in the third quarter of 1997. This increase
in interest expense is attributed to the increased use of debt to finance
acquisitions and renovations, and the debt assumed in connection with the
Bristol Merger.
Funds From Operations
The Company considers Funds From Operations to be a key measure of a
REIT's performance and should be considered along with, but not as an
alternative to, net income and cash flow as a measure of the Company's operating
performance and liquidity.
The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") defines Funds From Operations as net income or loss (computed in
accordance with GAAP), excluding gains or losses from debt restructuring and
sales of properties, plus; real estate related depreciation and amortization and
after comparable adjustments for the Company's portion of these items related to
unconsolidated entities and joint ventures. The Company believes that Funds From
Operations is helpful to investors as a measure of the performance of an equity
REIT because, along with cash flow from operating activities, financing
activities and investing activities, it provides investors with an indication of
the ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes Funds From
Operations in accordance with standards established by NAREIT which may not be
comparable to Funds From Operations reported by other REITs that do not define
the term in accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently than the Company. Funds From Operations
does not represent cash generated from operating activities determined by GAAP
and should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
to cash flow from operating activities (determined in accordance with GAAP) as a
measure of the Company 's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including its ability to make cash distributions.
Funds From Operations may include funds that may not be available for
management's discretionary use due to functional requirements to conserve funds
for capital expenditures and property acquisitions, and other commitments and
uncertainties.
16
<PAGE> 17
The following table details the computation of Funds From Operations
(in thousands, except per share and unit data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Funds From Operations (FFO):
Net income ............................................ $ 38,974 $ 22,385 $ 88,612 $ 52,641
Less: Series B redeemable preferred distributions ..... (3,234) (5,139)
Add back:
Extraordinary charge from write off of deferred
financing fees from unconsolidated entities ...... 2,519 3,075
Depreciation ....................................... 27,720 14,238 61,036 35,969
Depreciation for unconsolidated entities ........... 2,501 2,555 7,604 6,904
-------- -------- -------- --------
FFO ................................................... $ 68,480 $ 39,178 $155,188 $ 95,514
======== ======== ======== ========
Weighted average units outstanding (a) ................ 66,603 44,407 52,017 37,439
======== ======== ======== ========
</TABLE>
(a) Weighted average units are computed including dilutive options,
unvested restricted stock grants and assuming conversion of
convertible preferred units to units
Included in the Funds From Operations described above is the Operating
Partnership's share of FFO from its interest in fifteen unconsolidated entities.
The FFO contribution from these unconsolidated entities was derived as follows
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Statements of operations information:
Percentage Lease revenue .......................................... $ 13,575 $ 13,297 $ 40,144 $ 35,551
Other income ...................................................... 2,087 3,140 3,201 4,316
-------- -------- -------- --------
Total revenue ...................................... 15,662 16,437 43,345 39,867
-------- -------- -------- --------
Expenses:
Depreciation .............................................. 4,170 4,216 12,714 11,431
Taxes, insurance and other ................................ 2,394 3,436 5,552 6,314
Interest expense .......................................... 3,373 3,215 9,727 8,216
-------- -------- -------- --------
Total expenses ..................................... 9,937 10,867 27,993 25,961
-------- -------- -------- --------
Net income ........................................................ $ 5,725 $ 5,570 $ 15,352 $ 13,906
======== ======== ======== ========
50% of net income attributable to the
Operating Partnership ....................................... $ 2,862 $ 2,785 $ 7,676 $ 6,953
Amortization of cost in excess of book value ...................... (416) (447) (1,247) (1,188)
-------- -------- -------- --------
Income from unconsolidated entities ............................... 2,446 2,338 6,429 5,765
Add back: 50% of depreciation ..................................... 2,085 2,108 6,357 5,715
Amortization of cost in excess of book value .... 416 447 1,247 1,188
-------- -------- -------- --------
FFO contribution of unconsolidated entities ....................... $ 4,947 $ 4,893 $ 14,033 $ 12,668
======== ======== ======== ========
</TABLE>
17
<PAGE> 18
The Hotels
The following table sets forth hotel operating statistics for all Hotels
in which the Operating Partnership owned an interest at September 30, 1998,
regardless of the date of acquisition.
COMPARABLE HOTELS (A)
<TABLE>
<CAPTION>
THIRD QUARTER 1998 YEAR-TO-DATE 1998
------------------ -----------------
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Original Hotels .................... 73.7% $ 108.90 $ 80.27 75.1% $ 113.68 $ 85.36
CSS Hotels ......................... 73.5 122.10 89.78 74.6 126.22 94.20
1996 Acquisitions .................. 77.2 126.26 97.51 75.6 127.34 96.23
Total DJONT Comparable Hotels ...... 74.6 119.48 89.10 75.6 122.92 92.21
Original Bristol ................... 69.4 74.37 51.63 73.6 73.91 54.40
Holiday Acquisition ................ 77.7 88.82 69.03 76.0 84.01 63.82
Omaha Acquisition .................. 57.0 62.56 35.65 52.2 62.43 32.60
Total Bristol Comparable Hotels .... 71.3 80.32 57.31 70.4 77.43 54.49
Total Comparable Hotels ......... 72.4% $ 93.79 $ 67.93 72.2% $ 95.71 $ 69.07
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER 1997 YEAR-TO-DATE 1997
------------------ -----------------
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Original Hotels......................... 76.9% $ 107.50 $ 82.70 77.4% $ 109.29 $ 84.61
CSS Hotels.............................. 74.5 113.40 84.49 74.5 115.67 86.16
1996 Acquisitions....................... 77.0 120.34 92.70 76.2 118.69 90.44
Total DJONT Comparable Hotels........... 75.9 113.65 86.23 75.8 114.71 86.91
Original Bristol........................ 73.4 68.19 50.08 76.0 68.37 51.93
Holiday Acquisition..................... 79.8 83.13 66.33 77.8 77.90 60.57
Omaha Acquisition....................... 52.9 60.12 31.78 48.1 58.48 28.14
Total Bristol Comparable Hotels......... 73.1 74.99 54.84 71.2 72.06 51.30
Total Comparable Hotels.............. 74.0% $ 88.10 $ 65.23 72.9% $ 89.01 $ 64.92
</TABLE>
<TABLE>
<CAPTION>
CHANGE FROM PRIOR PERIOD CHANGE FROM PRIOR YEAR
3RD QTR. 1998 VS. 3RD QTR. 1997 1998 VS. 1997 YEAR-TO-DATE
------------------------------- --------------------------------
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- --- ------ --------- --- ------
<S> <C> <C> <C> <C> <C> <C>
Original Hotels .................... (3.2) pts. 1.3% (2.9)% (2.3)pts. 4.0% 0.9%
CSS Hotels ......................... (1.0) 7.7 6.3 0.1 9.1 9.3
1996 Acquisitions .................. (0.2) 4.9 5.2 (0.6) 7.3 6.4
Total DJONT Comparable Hotels ...... (1.3) 5.1 3.3 (0.2) 7.2 6.1
Original Bristol ................... (4.0) 9.1 3.1 (2.4) 8.1 4.8
Holiday Acquisition ................ (2.1) 6.8 4.1 (1.8) 7.8 5.4
Omaha Acquisition .................. 4.1 4.1 12.2 4.1 6.8 15.9
Total Bristol Comparable Hotels .... (1.8) 7.1 4.5 (0.8) 7.5 6.2
Total Comparable Hotels ......... (1.6) pts. 6.5% 4.1% (0.7)pts. 7.5% 6.4%
</TABLE>
(A) The Original Hotels (13 hotels), CSS Hotels (18 hotels) and 1996
Acquisitions (12 hotels) are considered DJONT Comparable Hotels since these
hotels were owned by FelCor for both the nine months ended September 30, 1997
and 1998.
18
<PAGE> 19
Bristol Comparable Hotels exclude hotels undergoing redevelopment in
either the 1998 or 1997 period reported, five individual hotel acquisitions
and eight hotels targeted for sale. For the third quarter 1998 data, 17
hotels were undergoing redevelopment and were excluded. For year-to-date
September 30, 1998 data, 29 hotels were undergoing redevelopment and were
excluded.
NON-COMPARABLE HOTELS (B)
<TABLE>
<CAPTION>
THIRD QUARTER 1998 YEAR-TO-DATE 1998
------------------------------ -----------------------------
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1997 Acquisitions 71.7% $108.87 $78.08 72.2% $112.16 $80.93
1998 Acquisitions 71.0 91.44 64.89 73.5 99.56 73.17
Bristol Non-Comparable Hotels (C) 61.5 85.37 52.52 66.3 88.16 58.41
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER 1997 YEAR-TO-DATE 1997
------------------------------ -----------------------------
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1997 Acquisitions 72.8% $107.34 $78.17 73.2% $109.01 $79.79
1998 Acquisitions 72.4 89.03 64.50 74.8 96.27 71.96
Bristol Non-Comparable Hotels (C) 69.4 78.07 54.20 73.0 80.68 58.88
</TABLE>
<TABLE>
<CAPTION>
CHANGE FROM PRIOR PERIOD CHANGE FROM PRIOR YEAR
3RD QTR. 1998 VS. 3RD QTR. 1997 1998 VS. 1997 YEAR-TO-DATE
------------------------------ ------------------------------
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1997 Acquisitions (1.1) pts. 1.4% (0.1)% (1.0)pts. 2.9% 1.4%
1998 Acquisitions (1.4) 2.7 0.6 (1.3) 3.4 1.7
Bristol Non-Comparable Hotels (C) (7.9) 9.3 (3.1) (6.7) 9.3 (0.8)
</TABLE>
(B) The 1997 Acquisitions (30 hotels) and 1998 Acquisitions (13 hotels) are
not considered comparable since these hotels were not owned by FelCor for
both the nine months ended September 30, 1998 and 1997 and the hotels were
undergoing renovation in either the 1998 or 1997 period reported.
(C) Excludes two closed hotels under renovation and eight hotels targeted for
sale. In aggregate, the eight hotels targeted for sale had a 8.7% and 9.5%
decline in RevPAR for the third quarter 1998 and year-to-date, respectively.
All hotel performance statistics reflect the hotels' performance for the
entire periods noted, whether or not the hotel was owned by FelCor for the
entire periods.
Comparison of The Hotels' Operating Statistics for the Nine Months Ended
September 30, 1998 and 1997
Revenue per available room ("RevPAR") for the DJONT Comparable Hotels
increased 6.1% for the nine months ended September 30, 1998 compared to the
same period in 1997. Of these hotels the strongest performance came from the
CSS Hotels, which the Operating Partnership purchased in late 1995 and early
1996. The Operating Partnership invested more than $50 million to renovate and
reposition these hotels and believes that this contributed to the strong
increase in RevPAR. The Original Hotels which represent 13 hotels acquired
between 1994 and 1995 had increases in RevPAR of 0.9%. There were room
additions at two of these hotels which negatively effected RevPAR, but resulted
in increases in revenue and percentage rent income. Additionally, three of the
Original Hotels are in Florida and were impacted by adverse weather conditions
and three hotels are located in markets experiencing overall decreases in
occupancy.
RevPAR for the Bristol Comparable Hotels increased 4.5% over the same
period in 1997. These were led by the Omaha Acquisition, which has benefitted
from Bristol management.
The Operating Partnership noted that most of the markets in which the
Company's hotels are located experienced strong performance. The hotels in
Southern California saw double digit RevPAR growth. Florida and east coast
hotels were adversely affected by Hurricane Bonnie during the peak summer season
but generally performed well.
19
<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership's principal source of cash to meet its cash
requirements, including distributions to unitholders, is cash flow from the
Percentage Leases. For the nine months ended September 30, 1998, cash flow
provided by operating activities, consisting primarily of Percentage Lease
revenue, was $151.1 million and Funds From Operations (as previously defined)
was $155.2 million. The Lessees' obligations under the Percentage Leases are
unsecured. The Lessees' ability to make lease payments under the Percentage
Leases and the Operating Partnership's liquidity, including its ability to make
distributions to unitholders, are substantially dependent on the ability of the
Lessees to generate sufficient cash flow from the operation of the Hotels.
At September 30, 1998, DJONT had paid all amounts then due the
Operating Partnership under the Percentage Leases. During the nine months ended
September 30, 1998, DJONT had net loss of $1 million. DJONT had a shareholders'
deficit of $10 million at September 30, 1998 resulting primarily from losses
during 1997 and 1996, as a consequence of the one-time costs of converting the
CSS Hotels to the Embassy Suites and Doubletree Guest Suites brands and the
substantial number of suite/room nights lost during those years due to
renovation. It is anticipated that a substantial portion of any future profits
of DJONT will be retained until a positive shareholders' equity is restored. It
is anticipated that DJONT's future earnings will be sufficient to enable it to
continue to make its lease payments under the Percentage Leases when due.
Directly or through affiliates, Messrs. Feldman and Corcoran, the
owners of joint venture interests in and the managers of certain of the Hotels
have agreed to make loans to DJONT of up to an aggregate of approximately $17.3
million, to the extent necessary to enable DJONT to pay rent and other
obligations due under the respective Percentage Leases relating to a total of 38
of the Hotels. Amounts so borrowed by DJONT, if any, will be subordinate in
right of repayment to the prior payment in full of rent and other obligations
due under the Percentage Leases relating to such Hotels. No loans were
outstanding under such agreements at September 30, 1998.
Pursuant to the Amended and Restated Master Hotel Agreement dated as of
July 27, 1998 (the "Master Hotel Agreement"), the lessees under the Percentage
Leases that are affiliated with Bristol (the "Bristol Lessees") are required to
maintain, collectively, a certain amount of Minimum Liquid Net Worth (defined to
mean Liquid Net Worth equal to 15% of the projected annual rent to be paid by
the Bristol Lessees under the Percentage Leases). In addition, each Bristol
Lessee is required to maintain an individual Liquid Net Worth equal to the
portion of the Minimum Liquid Net Worth for all Bristol Lessees allocable to it.
For purposes of these covenants, Liquid Net Worth is defined generally to mean
the lesser of (i) the net worth of the Bristol Lessee (for this purpose,
excluding intangibles) plus any Credit Enhancement Amount, and (ii) the Bristol
Lessees' Liquid Assets Amount plus any Credit Enhancement Amount. Liquid Assets
Amount is defined generally to mean working capital plus the lesser of book or
fair market value of lease or management contracts for non-affiliated hotel
properties (those not owned by an affiliate of FelCor or Bristol), hotels or
other real property owned and any other income producing or readily marketable
tangible property, subject to the reasonable approval of FelCor. Credit
Enhancement Amount means, generally, the aggregate amount available under
letters of credit, guaranties provided by Bristol or its affiliates, or other
forms of credit enhancement acceptable to FelCor.
The Master Hotel Agreement also requires each Bristol Lessee to certify
the amount of its Liquid Net Worth and its then applicable Minimum Liquid Net
Worth, as well as the aggregate Liquid Net Worth and the Minimum Liquid Net
Worth then applicable to the Bristol Lessees, collectively. If the Liquid Net
Worth of any Bristol Lessee or the Bristol Lessees collectively is less than the
Minimum Liquid Net Worth, Bristol has the obligation, pursuant to the Master
Hotel Agreement, to contribute additional cash, marketable securities or other
assets that qualify for the Liquid Assets Amount, or to provide additional
credit enhancement equal to the deficiency in the Liquid Net Worth.
At the closing of the Merger, the Liquid Net Worth of the Bristol
Lessees, collectively, was set at $30 million. As credit enhancement, the
Bristol Lessees obtained a letter of credit (the "Letter of Credit") issued by
20
<PAGE> 21
Bankers Trust Company for the benefit of all of the Bristol Lessees in a total
amount of $20 million. This Letter of Credit is required to be maintained until
July 27, 1999. In addition, Bristol and certain of its affiliates have provided
guaranties of the Percentage Leases pursuant to which Bristol and such
affiliates have guaranteed the payment of rent under the Percentage Leases;
provided, however, that the obligation under each such Guaranty is limited to
the amount of any deficiency in the Liquid Net Worth of the Bristol Lessees
below the Minimum Liquid Net Worth.
The Operating Partnership may acquire additional hotels and may incur
indebtedness to make such acquisitions, or to meet distribution requirements
imposed on a REIT under the Internal Revenue Code, to the extent that working
capital and cash flow from the Operating Partnership's investments are
insufficient to make such distributions.
At September 30, 1998, the Operating Partnership had $49.4 million of
cash and cash equivalents and had utilized $674 million of the amount available
under the Line of Credit. Significant debt statistics at September 30, 1998 are
as follows:
o Interest coverage ratio of 3.5x
o Total debt to EBITDA of 3.9x
o Borrowing capacity under existing credit facilities of $150 million o
o Consolidated debt-to-investment in hotels, at cost, of 38%
o Fixed interest rate debt comprising 58% of total debt
o Total assets encumbered by secured debt of 7%
o Debt maturing in 1999 of $16 million
In addition, the Operating Partnership has no interest rate hedging
instrument exposure or forward equity commitments.
To manage the relative mix of its debt between fixed and variable rate
instruments, the Operating Partnership has entered into eight separate interest
rate swap agreements. These interest rate swap agreements modify a portion of
the interest characteristics of the Operating Partnership's outstanding debt
without an exchange of the underlying principal amount and effectively convert
variable rate debt to a fixed rate. The fixed rates to be paid, the effective
fixed rate, and the initial variable rate to be received by the Operating
Partnership at September 30, 1998 are summarized in the following table:
<TABLE>
<CAPTION>
SWAP RATE
RECEIVED
SWAP RATE EFFECTIVE (VARIABLE) AT SWAP
NOTIONAL AMOUNT PAID (FIXED) FIXED RATE 6/30/98 MATURITY
- --------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
$50 million 6.11% 7.61% 5.69% October 1999
$25 million 5.95% 7.45% 5.69% November 1999
$75 million 5.55% 7.05% 5.67% July 2001
$25 million 5.56% 7.06% 5.67% July 2001
$25 million 5.55% 7.05% 5.67% July 2001
$50 million 5.80% 7.29% 5.67% July 2003
$50 million 5.80% 7.29% 5.67% July 2003
$25 million 5.83% 7.33% 5.67% July 2003
</TABLE>
The differences to be paid or received by the Operating Partnership
under the terms of the interest rate swap agreements are accrued as interest
rates change and recognized as an adjustment to interest expense by the
Operating Partnership pursuant to the terms of its interest rate agreement and
will have a corresponding effect on its future cash flows. Agreements such as
these contain a credit risk that the counterparties may be unable to meet the
terms of the agreement. The Operating Partnership minimizes that risk by
evaluating the creditworthiness of
21
<PAGE> 22
its counterparties, which are limited to major banks and financial institutions,
and it does not anticipate nonperformance by the counterparties.
The Operating Partnership spent approximately $43 million on upgrading,
renovating and/or rebranding 50 hotels during the nine months ended September
30, 1998. In addition, the Operating Partnership plans to continue Bristol's
$400 million repositioning and redevelopment program of Crowne Plaza and Holiday
Inn hotels which were acquired in the Bristol Merger. At July 28, 1998, the
redevelopment of 39 hotels was completed with a remaining 43 hotels currently in
various stages of redevelopment. The Operating Partnership plans to spend
approximately $125 million to complete this repositioning and redevelopment
program, commenced by Bristol in 1997, with an expected completion by the end of
1999.
Hotels undergoing renovations, redevelopment and re-branding during the
third quarter of 1998 included three Doubletree Guest Suites, one Sheraton, four
Embassy Suites, two Sheraton Suites and 13 Holiday Inn or Holiday Inn Select
hotels. Included in these are two hotels, the Allerton Hotel - Chicago (to be
re-branded as a Crowne Plaza) and the Holiday Inn - Tampa Busch Gardens, which
are closed. Both hotels are expected to reopen in the summer of 1999.
Renovations at 11 hotels, containing approximately 3,200 rooms, were
completed during the third quarter and the hotels were returned to service as
follows:
<TABLE>
<S> <C>
296 - room Crowne Plaza Atlanta, Ga.
224 - room Crowne Plaza Greenville, S.C.
445 - room Crowne Plaza - City Center Philadelphia, Pa.
400 - room Crowne Plaza - Union Square San Francisco, Calif.
219 - room Doubletree Guest Suites Bloomington, Minn.
198 - room Doubletree Guest Suites Dana Point, Calif.
261 - room Embassy Suites Austin, Texas
217 - room Embassy Suites San Antonio, Texas
242 - room Holiday Inn Knoxville, Tenn.
385 - room Holiday Inn Select Stamford, Conn.
316 - room Holiday Inn - Downtown San Antonio, Texas
</TABLE>
The recently renovated and re-branded Crowne Plaza hotels produced
RevPAR increases in each post renovation month of the third quarter 1998 as
compared to the prior year period. During the remainder of 1998 and in calendar
year 1999, nine additional hotels are expected to be re-branded as Crowne Plaza
hotels.
INFLATION
Operators of hotels, in general, possess the ability to adjust
suite/room rates periodically to reflect the effects of inflation. Competitive
pressures may, however, limit the Lessees' ability to raise suite/room rates.
SEASONALITY
The Hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in the
Operating Partnership's quarterly lease revenue, particularly during the fourth
quarter, to the extent that it receives Percentage Rent. To the extent the cash
flow from operations is insufficient during any quarter, due to temporary or
seasonal fluctuations in lease revenue, the Operating Partnership expects to
utilize other cash on hand or borrowings under the Line of Credit to make
distributions to its unitholders.
22
<PAGE> 23
YEAR 2000
The year 2000 issue relates to computer programs that were written
using two digits rather than four to define the applicable year. In those
programs, the year 2000 may be incorrectly identified as the year 1900, which
could result in a system failure or miscalculations causing a disruption of
operations, including a temporary inability to process transactions, prepare
financial statements or engage in other normal business activities.
The Operating Partnership believes that its efforts to remediate the
year 2000 issues will avoid a major business disruption. The Operating
Partnership has assessed its internal computer systems and believes that they
will properly utilize dates beyond December 31, 1999.
The Hotels owned by the Operating Partnership are in various stages of
identifying both computer issues and non-information technology systems issues
to determine if they are year 2000 compliant, including embedded systems that
operate elevators, phone systems, energy maintenance systems, security systems
and other systems. The assessments, which have not been completed at this date,
are scheduled to be completed by the end of the first quarter of 1999. Most of
the upgrades to make a hotel year 2000 compliant had been anticipated as part of
the renovation and re-branding program that the Operating Partnership undertakes
upon acquisition of a hotel.
The Operating Partnership currently anticipates that the total cost to
remediate all hotel year 2000 issues to be less than approximately $20 million,
which is included in the Operating Partnership's 1998 and 1999 capital plans.
Concurrent with the assessment of the year 2000 issue, the Operating
Partnership and its hotel managers and Lessees are developing contingency plans
intended to mitigate the possible disruption in business operations that may
result from year 2000 issues, and are developing cost estimates for such plans.
Once developed, contingency plans and related cost estimates will be continually
refined as additional information becomes available.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Portions of this Quarterly Report on Form 10-Q include forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended ("1933 Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended ("1934 Act"). Although the Operating Partnership believes that the
expectations reflected in such forward looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Important factors that could cause actual results to differ materially
from the Operating Partnership's current expectations are disclosed herein and
in the Operating Partnership's other filings under the 1933 Act and 1934 Act
(collectively, "Cautionary Disclosures"). The forward looking statements
included herein, and all subsequent written and oral forward looking statements
attributable to the Operating Partnership or persons acting on its behalf, are
expressly qualified in their entirety by the Cautionary Statements.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("FAS No. 132").
FAS No. 132 provides additional information to facilitate financial
analysis and eliminates certain disclosures which are no longer useful. To the
extent practicable, the Statement also standardizes disclosures for retiree
benefits. FAS No. 132 is effective for financial statements issued for periods
ending after December 15, 1997. The Operating Partnership believes that FAS No.
132 will not have a material impact on the financial statements of the Operating
Partnership.
23
<PAGE> 24
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS No. 133").
FAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. FAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Operating Partnership believes
that upon implementation, FAS 133 will not have a material impact on the
financial statements of the Operating Partnership.
24
<PAGE> 25
PART II. -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
For information relating to hotel acquisitions and certain other
transactions by the Operating Partnership through September 30, 1998, see Note 1
of Notes to Consolidated Financial Statements of FelCor Lodging Limited
Partnership contained in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Such information is incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1.10 Tenth Amendment to Amended and Restated Agreement of Limited Partnership of the
Operating Partnership effective as of June 22, 1998, by and among the Operating
Partnership, Schenley Hotel Associates, and all of the persons or entities who
are or shall in the future become limited partners of the Operating Partnership.
(filed as exhibit 10.1.10 to FelCor's Form 10-Q for the quarterly period ended
September 30, 1998, and incorporated herein by reference)
10.1.11 Eleventh Amendment to Amended and Restated Agreement of Limited Partnership of
the Operating Partnership dated as of July 28, 1998, by and between the Operating
Partnership and all of the persons or entities who are or shall in the future
become limited partners of the Operating Partnership, changing the name of
the Partnership to "FelCor Lodging Limited Partnership." (filed as exhibit
10.1.11 to FelCor's Form 10-Q for the quarterly period ended September 30,
1998, and incorporated herein by reference)
10.2.1 Schedule of executed Lease Agreements identifying material variations from the
form of Lease Agreement with respect to hotels acquired by the Operating
Partnership through September 30, 1998. (filed as exhibit 10.2.1 to FelCor's
Form 10-Q for the quarterly period ended September 30, 1998, and incorporated
herein by reference)
10.20 FelCor Suite Hotels, Inc. 1998 Restricted Stock and Stock Option Plan (filed
as Exhibit 4.2 to FelCor's Registration Statement on Form S-8 (File No. 333-
66041) and incorporated herein by reference).
10.21 Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to
FelCor's Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement
(File No. 333-50509) (the "Form S-3 Registration Statement") and incorporated
herein by reference).
10.22 Amended and Restated Stock Option Plan for Non-Employee Directors (filed as
Exhibit 99.2 to FelCor's Form S-3 Registration Statement and incorporated herein
by reference).
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C>
10.23 Form of Nonqualified Stock Option Agreement for 1995 Equity Incentive Plan
(filed as Exhibit 99.3 to FelCor's Form S-3 Registration Statement and
incorporated herein by reference).
10.24 Form of Nonqualified Stock Option Agreement
for Non-Employee Directors Stock Option Plan
(filed as Exhibit 99.4 to FelCor's Form S-3
Registration Statement and incorporated
herein by reference).
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K: None
26
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 16, 1998
FELCOR LODGING LIMITED PARTNERSHIP
By: FelCor Lodging Trust Incorporated
Its General Partner
By: /s/ Randall L. Churchey
----------------------------------------------
Randall L. Churchey
Senior Vice President and Chief Financial Officer
(Chief Financial Officer)
27
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.2.10 Tenth Amendment to Amended and Restated Agreement of Limited Partnership of the
Operating Partnership effective as of June 22, 1998, by and among the Operating
Partnership, Schenley Hotel Associates, and all of the persons or entities who
are or shall in the future become limited partners of the Operating Partnership.
(filed as exhibit 10.1.10 to FelCor's Form 10-Q for the quarterly period ended
September 30, 1998, and incorporated herein by reference)
3.2.11 Eleventh Amendment to Amended and Restated Agreement of Limited Partnership of
the Operating Partnership dated as of July 28, 1998, by and between the Operating
Partnership and all of the persons or entities who are or shall in the future
become limited partners of the Operating Partnership, changing the name of
the Partnership to "FelCor Lodging Limited Partnership." (filed as exhibit
10.1.11 to FelCor's Form 10-Q for the quarterly period ended September 30,
1998, and incorporated herein by reference)
10.2.1 Schedule of executed Lease Agreements identifying material variations from the
form of Lease Agreement with respect to hotels acquired by the Operating
Partnership through September 30, 1998. (filed as exhibit 10.2.1 to FelCor's
Form 10-Q for the quarterly period ended September 30, 1998, and incorporated
herein by reference)
10.20 FelCor Suite Hotels, Inc. 1998 Restricted Stock and Stock Option Plan (filed
as Exhibit 4.2 to FelCor's Registration Statement on Form S-8 (File No. 333-
66041) and incorporated herein by reference).
10.21 Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to
FelCor's Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement
(File No. 333-50509) (the "Form S-3 Registration Statement") and incorporated
herein by reference).
10.22 Amended and Restated Stock Option Plan for Non-Employee Directors (filed as
Exhibit 99.2 to FelCor's Form S-3 Registration Statement and incorporated herein
by reference).
10.23 Form of Nonqualified Stock Option Agreement for 1995 Equity Incentive Plan
(filed as Exhibit 99.3 to FelCor's Form S-3 Registration Statement and
incorporated herein by reference).
10.24 Form of Nonqualified Stock Option Agreement
for Non-Employee Directors Stock Option Plan
(filed as Exhibit 99.4 to FelCor's Form S-3
Registration Statement and incorporated
herein by reference).
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 49,368
<SECURITIES> 0
<RECEIVABLES> 28,861
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,831,313
<DEPRECIATION> 148,339
<TOTAL-ASSETS> 4,066,031
<CURRENT-LIABILITIES> 106,322
<BONDS> 1,504,852
0
295,000
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,066,031
<SALES> 0
<TOTAL-REVENUES> 233,530
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 147,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,486
<INCOME-PRETAX> 91,687
<INCOME-TAX> 0
<INCOME-CONTINUING> 91,687
<DISCONTINUED> 0
<EXTRAORDINARY> 3,075
<CHANGES> 0
<NET-INCOME> 88,612
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.58
</TABLE>
