UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
|
WASHINGTON,
D.C. 20549
(Mark
One)
[X] ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2009
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
1-14236
FelCor
Lodging Trust Incorporated
(Exact
name of registrant as specified in its charter)
|
Maryland
|
|
75-2541756
|
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
|
Identification
No.)
|
545
E. John Carpenter Frwy., Suite 1300, Irving, Texas
|
|
75062
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
(972) 444-4900
Securities
registered pursuant to Section 12(b) of the Act:
|
|
Name
of each exchange
|
Title
of each class
|
|
on
which registered
|
Common
Stock
|
|
New
York Stock Exchange
|
$1.95
Series A Cumulative Convertible Preferred Stock
|
|
New
York Stock Exchange
|
Depositary
Shares representing 8% Series C Cumulative Redeemable Preferred
Stock
|
|
New
York Stock Exchange
|
Securities
registered pursuant to Section 12(g) of the Act:
None
(Title of
class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
£
Yes
x
No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
£
Yes
x
No
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x
Yes
£
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
£
Yes
£
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
£
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. Check one:
Large
accelerated filer
|
£
|
|
Accelerated
filer
|
x
|
Non-accelerated
filer
|
£
(Do not
check if a smaller reporting company).
|
|
Smaller
reporting company
|
£
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act.).
£
Yes
x
No
The aggregate market value of shares
of common stock held by non-affiliates of the registrant as of June 30,
2009, computed by reference to the price at which registrant’s common stock was
last sold at June 30, 2009, was approximately
$154 million.
As of February 19, 2010, the
registrant had issued and outstanding 65,501,377 shares of common
stock.
DOCUMENTS
INCORPORATED BY REFERENCE
The
Registrant’s definitive Proxy Statement pertaining to the 2010 Annual Meeting of
Stockholders (the “Proxy Statement”), filed or to be filed not later than 120
days after the end of the fiscal year pursuant to Regulation 14A, is
incorporated herein by reference into Part III.
FELCOR
LODGING TRUST INCORPORATED
INDEX
|
|
Form
10-K
|
|
|
Report
|
Item
No.
|
|
Page
|
|
|
|
|
PART
I
|
|
Item
1.
|
Business
|
3
|
Item
1A.
|
Risk
Factors
|
11
|
Item
1B.
|
Unresolved
Staff Comments
|
21
|
Item
2.
|
Properties
|
22
|
Item
3.
|
Legal
Proceedings
|
29
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
29
|
|
|
|
|
PART
II
|
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
30
|
Item
6.
|
Selected
Financial Data
|
32
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
33
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
50
|
Item
8.
|
Financial
Statements and Supplementary Data
|
51
|
Item
9.
|
Changes
in and Disagreements With Accounts on Accounting and Financial
Disclosure
|
88
|
Item
9A.
|
Controls
and Procedures
|
88
|
Item
9B.
|
Other
Information
|
88
|
|
|
|
|
PART
III
|
|
Item
10.
|
Directors,
Executive Officers of the Registrant and Corporate
Governance
|
89
|
Item
11.
|
Executive
Compensation
|
89
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
89
|
Item
13.
|
Certain
Relationships, Related Transactions and Director
Independence
|
89
|
Item
14.
|
Principal
Accountant Fees and Services
|
89
|
|
|
|
|
PART
IV
|
|
Item
15.
|
Exhibits
and Financial Statement Schedules
|
90
|
This
Annual Report contains registered trademarks and service marks owned or licensed
by companies other than us, including but not limited to aloft, Candlewood
Suites, Conrad, Courtyard, Crowne Plaza, Doubletree, Doubletree Guest Suites,
Element, Embassy Suites Hotels, Fairfield Inn, Four Points by Sheraton, Hampton
Inn, Hilton, Hilton HHonors, Hilton Garden Inn, Hilton Grand Vacations, Hilton
Suites, Holiday Inn, Holiday Inn Express, Homewood Suites by Hilton, Hotel
Indigo, Home2 Suites by Hilton, InterContinental, JW Marriott, Le Méridien,
The Luxury Collection, Marriott, Marriott Rewards, Priority Club, Ramada,
Renaissance, Residence Inn, Ritz Carlton, Sheraton, Sheraton Suites, St. Regis,
Starwood Preferred Guest, Staybridge Suites, W, Waldorf Astoria, Walt Disney
World and Westin.
Disclosure
Regarding Forward Looking Statements
This Annual Report and the documents
incorporated by reference in this Annual Report include forward-looking
statements that involve numerous risks and
uncertainties. Forward-looking statements can be identified by the
use of forward-looking terminology, such as “believes,” “expects,”
“anticipates,” “may,” “will,” “should,” “seeks,” “project,” or other variations
of these terms (including their use in the negative), or by discussions of
strategies, plans or intentions. A number of factors could cause
actual results to differ materially from those anticipated by these
forward-looking statements, including:
•
|
general
economic conditions, including, among others, the pronounced recession,
rising unemployment, major bank failures and unsettled capital markets,
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, reduction in domestic
airline capacity, rising fuel costs and increased transportation security
precautions;
|
|
|
•
|
our
overall debt levels and our ability to refinance or obtain new financing
and service debt, especially in light of currently constrained capital
markets;
|
|
|
•
|
our
inability to retain earnings;
|
|
|
•
|
our
liquidity and capital expenditures;
|
|
|
•
|
our
ability to complete hotel dispositions at acceptable prices, growth
strategy and acquisition activities; and
|
|
|
•
|
competitive
conditions in the lodging industry.
|
Certain
of these risks and uncertainties are described in greater detail under “Risk
Factors” in Item 1A, or in our other filings with the Securities and Exchange
Commission.
In
addition, these forward-looking statements are necessarily dependent upon
assumptions and estimates that may prove to be incorrect. Accordingly, while we
believe that the plans, intentions and expectations reflected in these
forward-looking statements are reasonable, we cannot assure that these plans,
intentions or expectations will be achieved. The forward-looking
statements included in this report, and all subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf,
are expressly qualified in their entirety by the risk factors and cautionary
statements discussed in our filings under the Securities Act of 1933 and the
Securities Exchange Act of 1934. We undertake no obligation to update
any forward-looking statements to reflect future events or
circumstances.
The
prospective financial information related to anticipated operating performance
included in this Annual Report has been prepared by, and is the responsibility
of, our management. PricewaterhouseCoopers LLP has neither examined
nor compiled the accompanying prospective financial information and,
accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other
form of assurance with respect thereto. The PricewaterhouseCoopers
LLP report included in this Annual Report relates to our historical financial
information. It does not extend to the prospective financial
information and should not be read to do so.
Item
1. Business
FelCor Lodging Trust Incorporated
(NYSE:FCH), or FelCor, is a Maryland corporation operating as a real estate
investment trust, or REIT. We are the sole general partner of, and
the owner of a greater than 99% partnership interest in, FelCor Lodging Limited
Partnership, or FelCor LP, through which we held ownership interests in
85 hotels with approximately 24,000 rooms at December 31,
2009. When used in this report, “we,” “us” and “our” refer to FelCor
and its consolidated subsidiaries, unless otherwise indicated.
Of the 85
hotels in which we had an ownership interest at December 31, 2009, we owned
a 100% interest in 64 hotels, a 90% or greater interest in entities owning four
hotels, an 81% interest in an entity owning one hotel, a 60% interest in an
entity owning one hotel and a 50% interest in entities owning 15
hotels. We consolidate our real estate interests in the 70 hotels in
which we held greater than 50% ownership interests and we record the real estate
interests of the 15 hotels in which we held 50% ownership interests using the
equity method.
At
December 31, 2009, 84 of the 85 hotels in which we had ownership interest, were
leased to operating lessees, and one 50%-owned hotel was operated without a
lease. We held greater than 50% ownership interests and had direct or
indirect controlling interests in the lessees of 83 of the 84 hotels that were
leased to operating lessees. Because we owned controlling interests
in these lessees (including 13 of the 15 hotels in which we owned 50% of the
real estate interests), we consolidated our lessee interests in these hotels (we
refer to these 83 hotels as our Consolidated Hotels). Of our
Consolidated Hotels, we owned 50% of the real estate interests in each of 13
hotels (we accounted for the ownership in our real estate interests of these
hotels by the equity method) and more than 50% of the real estate interests in
each of the remaining 70 hotels (we consolidate our real estate interest in
these hotels). We also owned 50% of the real estate interests in each
of our two hotels that were either leased to a lessee in which we owned a 50%
interest (our lessee interest in this hotel is not consolidated because we do
not have controlling interest) or operated without a lease.
At
December 31, 2009, our Consolidated Hotels were located in the United
States (81 hotels in 23 states) and Canada (two hotels in Ontario), with
concentrations in major metropolitan and resort areas. Our hotel
portfolio consists primarily of upper-upscale hotels and resorts, which are
flagged under global brands such as Embassy Suites Hotels, Doubletree, Hilton,
Marriott, Renaissance, Sheraton, Westin and Holiday Inn.
Our
business is conducted in one reportable segment: hospitality. During
2009, we derived 97% of our revenues from hotels located within the United
States, with the balance derived from our Canadian hotels.
We seek to
own a
diversified portfolio of high quality, upscale hotels located in major urban and
resort markets. We focus on maximizing stockholder value and return on invested
capital by optimizing the use of our real estate and enhancing property cash
flow. We employ a portfolio management philosophy whereby we continually examine
our portfolio to address issues of market supply and demand, the capital needs
of each hotel and concentration risk, after which analysis we sell hotels that
no longer meet our investment criteria and selectively acquire hotels based on
strict underwriting standards.
At December 31, 2009, we had an
aggregate of 65,862,801 shares and units outstanding, consisting of 65,567,841
shares of FelCor common stock and 294,960 units of limited partnership interest
of FelCor LP not owned by FelCor.
Additional information relating to our
hotels and our business, including the charters of our Executive Committee,
Corporate Governance and Nominating Committee, Compensation Committee and Audit
Committee; our corporate governance guidelines; and our code of business conduct
and ethics can be found on our Web site at
www.felcor.com
. Information
relating to our hotels and our business can also be found in the Notes to
Consolidated Financial Statements located elsewhere in this
report. Our annual, quarterly and current reports, and amendments to
these reports, filed with the Securities and Exchange Commission, or SEC, under
the Securities Exchange Act of 1934, or Exchange Act, are made available on our
Web site, free of charge, under the “SEC Filings” tab on our “Investor
Relations” page, as soon as practicable following their filing. The
public may read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The
public may also obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
www.sec.gov
.
Developments
During 2009
Debt Transactions.
In spite
of the global recession and dysfunctional capital markets, we were able to take
the following steps to build flexibility into our capital
structure:
|
·
|
In
October 2009, we issued $636 million (aggregate principal amount) of
10% senior secured notes due 2014. We received approximately
$558 million in net proceeds after original issue discount, fees and
expenses related to the offering. These proceeds were used to
repurchase approximately $428 million (in aggregate principal amount)
of our senior notes due in 2011 and for general corporate
purposes.
|
|
·
|
In
June 2009, we obtained a $201 million non-recourse term loan secured
by nine hotels that matures in 2011. This loan can be extended
for up to two years, subject to satisfying certain conditions that we
expect to satisfy.
|
|
·
|
In
June 2009, we repaid and terminated our line of credit. By
terminating our line of credit, we eliminated certain restrictive
corporate covenants.
|
|
·
|
In
March 2009, we refinanced a $116 million secured loan maturing in
2009 with a $120 million non-recourse term loan that matures in 2014,
secured by the same seven
hotels.
|
|
·
|
We
held discussions with current and potential lenders to modify and/or
refinance all of our 2010 debt maturities (many of these discussions are
ongoing).
|
|
·
|
We
increased cash held on our balance sheet by more than
$200 million.
|
Redeveloped San Francisco Hotel.
In 2009, we completed the final phase of the comprehensive redevelopment
of the San Francisco Marriott-Union Square, which is situated in one of the
premier hotel markets in the United States. The hotel was rebranded
as a Marriott in April 2009, following redevelopment, which included renovations
to all areas of the hotel, including guest rooms, guest baths, guest corridors,
meeting space, food and beverage outlets, public areas and building
exterior.
Suspended Dividends.
We
suspended payment of our common dividend in December 2008 and our preferred
dividend in March 2009 in light of the deepening recession and dysfunctional
capital markets, and the attendant impact on our industry and us. Our
Board of Directors will determine the amount of future common and preferred
dividends for each quarter, if any, based upon various factors including
operating results, economic conditions, other operating trends, our financial
condition and capital requirements, as well as the minimum REIT distribution
requirements. Unpaid preferred dividends continue to accrue, and
accrued and current preferred dividends must be paid in full prior to payment of
any common dividends.
New Director.
In May 2009,
Glenn A. Carlin was elected as a director, filling the vacancy created by the
retirement of Richard S. Ellwood, in accordance with the age limits in our
Corporate Governance Guidelines. Mr. Carlin brings extensive finance
and real estate investment knowledge and expertise to our Board.
The
United States Lodging Industry
The Industry.
The
United States lodging industry consists of private and public entities that
operate in a very diversified market with extremely fragmented ownership under a
variety of brand names. The lodging industry has several key
participants:
•
|
|
Owners—own
hotels and typically enter into an agreement for an independent third
party to manage the hotel. The property may be branded and operated under
the manager’s brand or branded under a franchise agreement and operated by
the franchisee or by an independent hotel manager. The property may also
be operated as an independent hotel (unaffiliated with any brand) by an
independent hotel manager.
|
•
|
|
Owner/Managers—own
hotels and operate the property with their own management team. They may
brand their hotels under a franchise agreement, operate as an independent
hotel (unaffiliated with any brand) or operate under the owner’s brand.
REITs are restricted from operating and managing hotels under applicable
laws and regulations governing
REITs.
|
•
|
|
Franchisors—own
a brand or brands and strive to grow their revenues by expanding the
number of hotels and brands in their franchise system. Franchisors provide
hotels with brand recognition, marketing support and centralized
reservation systems.
|
•
|
|
Brand/Managers—own
a brand or brands and also operate hotels or hotels on behalf of hotel
owners or franchisees.
|
The hotel
manager is responsible for day-to-day hotel operations, including employment of
hotel staff, determining room rates, developing sales and marketing plans,
preparing operating and capital expenditure budgets and preparing hotel-level
financial reports for the owner. They typically receive fees based on the
revenues and profitability of the hotel.
The
industry is highly competitive. Certain markets have low barriers to
entry, making it easy to build new hotels. The industry caters to a
diverse customer base, including transient customers (both leisure and
corporate) and groups. There are a diverse number of brands and
products from which customers may choose. Average rates charged by
the hotels are highly dependent on the customer mix and level of
demand. Our industry is influenced by the cyclical relationship
between the supply of and demand for hotel rooms. Lodging demand growth is
typically related to the vitality of the overall economy in addition to local
market factors that stimulate travel to specific
destinations. Economic indicators such as Gross Domestic Product
(GDP), business investment and employment levels are some of the primary drivers
of lodging demand.
We are an
owner of branded hotels, mainly in the upper-upscale segment, that are managed
by the brand/managers. We do not operate or manage our
hotels. Our hotels are located in desirable locations and are
diversified by market and customer mix. We believe that our
competitive advantages (diverse locations, alignment with the strongest brands,
owning a significant number of hotels of a particular brand to influence brand
strategy, superior management team and our unique asset management philosophy)
provide us with the strengths to provide above average growth.
The Recession and Its
Aftermath.
The U.S. lodging industry suffered the full effects of the
global recession in 2009. Visibility of future demand trends remains
limited by continued economic uncertainty and the absence of fundamental
dynamics that would indicate a sustainable recovery has taken hold. Actual and
projected performance, including revenue per available room, or RevPAR,
occupancy and average daily rate, or ADR, varies – often substantially – by
geographic markets and sub-markets, and projections typically assume that no
major external events, such as an act of terrorism or natural disaster, will
occur or affect the U.S. economy and the travel and lodging
industries. However, leading industry analysts and experts are
projecting improved overall U.S. lodging industry performance, if not
well-established in 2010, more certainly in 2011 and afterward due to higher
demand levels and supply growth that is projected to be below historical
averages.
Smith
Travel Research (STR), a leading provider of hospitality industry data, reported
that 2009 RevPAR declined 16.7%. This follows a 1.9% RevPAR decline
in 2008 – the first full-year decline since 2002. Weak industry
fundamentals directly reflect the global recession, which drove a 5.8% decline
in lodging demand. While demand declined in 2009, supply grew by
3.2%, and the combined effect (contracting demand and expanding supply) produced
an 8.6% decline in occupancy. Declining occupancy drove pricing down,
with an 8.8% decline in the ADR for the year. 2009 RevPAR represents
the worst year-over-year results since STR began tracking industry data in
1989. According to PKF Hospitality Research, another leading supplier
of industry data, in 2009 the industry experienced the greatest annual decline
in RevPAR observed since the 1930s.
STR
projects that lodging fundamentals will stabilize in 2010, with demand
increasing 1.8% (roughly tracking projected supply growth). As a
result, hotel occupancy in 2010 should remain flat compared to 2009 occupancy
(55.1%). By the end of 2010, it is expected that demand growth will
once again outpace supply growth. Continued weak occupancy will
provide little opportunity to improve ADR, until corporate demand
improves. STR projects ADR will decline by 3.2% in 2010, resulting in
a corresponding 3.2% RevPAR decline. If, as some operators and
industry experts have projected, an economic recovery takes hold during the
second
half of
2010 and if supply growth remains diminished, STR projects a 4.2% RevPAR
increase for 2011. By contrast, PKF Hospitality Research has
projected a more moderate 1.1% RevPAR decline for 2010 and a stronger recovery
afterward, with industry RevPAR increasing 5.9% in 2011. The variance
in projections reflects lingering uncertainty about the near-term and continued
limited visibility.
Hotel Classifications.
STR
classifies hotel chains into six distinct product categories: Luxury,
Upper-Upscale, Upscale, Midscale with Food & Beverage, Midscale without Food
& Beverage, and Economy. We own Upper-Upscale hotels (branded Doubletree,
Embassy Suites Hotels, Hilton, Marriott, Sheraton, Westin and Renaissance), and
Midscale with Food & Beverage hotels (Holiday Inn), from which we derived
100% of our 2009 Hotel EBITDA. Approximately 82% of our 2009 Hotel EBITDA was
derived from Upper-Upscale hotels (Hotel EBITDA is a non-GAAP financial measure
that is reconciled and further discussed in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Non-GAAP Financial
Measures”).
STR also
categorizes hotels based upon their relative market positions, as measured by
ADR, as Luxury, Upscale, Midprice, Economy and Budget. The following
table contains information with respect to average occupancy (determined by
dividing occupied rooms by available rooms), ADR and RevPAR for our Consolidated
Hotels, as well as all Upscale U.S. hotels, all Midprice U.S. hotels and all
U.S. hotels, as reported by STR, for the periods indicated:
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
Number
of FelCor Hotels
|
|
83
|
|
|
|
85
|
|
|
|
83
|
|
|
|
83
|
|
|
|
125
|
|
Occupancy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor
hotels
(a)
|
|
66.2
|
%
|
|
|
70.9
|
%
|
|
|
70.4
|
%
|
|
|
72.6
|
%
|
|
|
69.3
|
%
|
All
Upscale U.S. hotels
(b)
|
|
56.4
|
|
|
|
62.0
|
|
|
|
64.8
|
|
|
|
65.5
|
|
|
|
65.2
|
|
All
Midprice U.S. hotels
(c)
|
|
51.9
|
|
|
|
57.6
|
|
|
|
60.4
|
|
|
|
61.0
|
|
|
|
61.0
|
|
All
U.S. hotels
|
|
55.1
|
|
|
|
60.4
|
|
|
|
63.2
|
|
|
|
63.4
|
|
|
|
63.1
|
|
ADR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor
hotels
(a)
|
$
|
123.23
|
|
|
$
|
136.32
|
|
|
$
|
134.21
|
|
|
$
|
125.98
|
|
|
$
|
107.18
|
|
All
Upscale U.S. hotels
(b)
|
|
106.66
|
|
|
|
115.96
|
|
|
|
113.56
|
|
|
|
107.37
|
|
|
|
101.60
|
|
All
Midprice U.S. hotels
(c)
|
|
78.12
|
|
|
|
84.21
|
|
|
|
82.18
|
|
|
|
78.12
|
|
|
|
73.96
|
|
All
U.S. hotels
|
|
97.51
|
|
|
|
106.55
|
|
|
|
103.64
|
|
|
|
97.31
|
|
|
|
90.95
|
|
RevPAR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor
hotels
(a)
|
$
|
81.62
|
|
|
$
|
96.67
|
|
|
$
|
94.48
|
|
|
$
|
91.45
|
|
|
$
|
74.29
|
|
All
Upscale U.S. hotels
(b)
|
|
60.12
|
|
|
|
71.83
|
|
|
|
73.61
|
|
|
|
70.31
|
|
|
|
66.21
|
|
All
Midprice U.S. hotels
(c)
|
|
40.58
|
|
|
|
48.48
|
|
|
|
49.68
|
|
|
|
47.66
|
|
|
|
45.12
|
|
All
U.S. hotels
|
|
53.71
|
|
|
|
64.37
|
|
|
|
65.50
|
|
|
|
61.69
|
|
|
|
57.39
|
|
__________
(a)
|
Information
is based on historical
presentations.
|
(b)
|
This
category includes hotels in the “upscale price level,” defined as hotels
with ADRs in the 70th to 85th percentiles in their respective
markets.
|
(c)
|
This
category includes hotels in the “midprice level,” defined as hotels with
ADRs in the 40th to 70th percentiles in their respective
markets.
|
Business
Strategy
Our
long-term strategic plan is to own a diversified portfolio of high quality,
upscale hotels located in major urban and resort markets. We focus on maximizing
stockholder value and return on invested capital by optimizing the use of our
real estate and enhancing property cash flow. We employ a portfolio management
philosophy whereby we continually examine our portfolio to address issues of
market supply and demand, the capital needs of each hotel and concentration
risk, after which analysis we sell hotels that no longer meet our investment
criteria and selectively acquire hotels based on strict underwriting standards.
In order to achieve our objectives, we are focused on the following
areas:
Asset Management
. We seek to
improve the competitive position of our hotels through aggressive asset
management. We benefit from our brand/manager alliances with Hilton Hotels
Corporation, Starwood Hotels & Resorts Worldwide, Inc., Marriott
International, Inc., and InterContinental Hotels Group PLC, or
IHG. These relationships enable us to work effectively with our
managers to maximize Hotel EBITDA margins and operating cash flow from our
hotels. While REIT requirements prohibit us from directly managing our hotels,
we employ an intensive approach to asset management. We press our brand/managers
to implement best practices in expense and revenue management at our hotels, and
we strive to influence brand strategy on marketing and revenue enhancement
programs. We work closely with our brand/managers to monitor and review hotel
operations. As part of our focus on controlling hotel operating margins, we
continue to work with our operators to align the cost structure of our hotels
with current business levels. During the current downturn, this includes
lowering hotel expenses by reducing headcount and improving productivity and
energy efficiency, while maintaining guest satisfaction. At the same time, we
are very focused on revenue management and enhancement. Our asset managers have
exceptionally thorough knowledge of the markets where our hotels operate, as
well as overall demand dynamics, which enables us to work closely with our
brand/managers to optimize revenue generation. Our asset management approach
also entails looking for value-added enhancements at our hotels, such as
maximizing use of public areas, new restaurant concepts, changing management of
food and beverage operations and uncovering new revenue sources.
Renovations
. In 2009, we
completed the last phase of a multi-year, portfolio-wide renovation program
designed to enhance the competitive positioning and value of our hotels. We
invested more than $450 million and successfully generated expected returns
through growth in market share. Our overall portfolio grew market share by an
average of 3.0% during 2008, while the 70 hotels that completed renovations in
2007 and 2008 grew their aggregate market share by more than 5%, from 114% to
120%. In 2009, our hotel portfolio increased market share by 1.4% compared to
prior year. Our ongoing capital expenditures will generally be consistent with
ordinary course improvements and maintenance of our hotels. Given the
substantial renovations and the current industry conditions, we are able to
limit near-term capital expenditures without harming the value or quality of our
hotels.
Redevelopment
. In June 2009,
we completed the final phase of the comprehensive redevelopment of the San
Francisco Marriott-Union Square, which is situated in one of the premier hotel
markets in the United States. The Hotel was rebranded as a Marriott
hotel in April 2009. RevPAR during the second half of 2009 (under the
Marriott flag) increased 64% at this hotel, compared to 2008, and its market
share increased by 105%. Its market share index during the second
half of 2009 was 106% compared to 80% for 2007 (before renovation).
During
2008, we completed a new 35,000 square foot convention center adjacent to our
Hilton Myrtle Beach Resort, added meeting space at the Doubletree Guest Suites
in Dana Point, California and added a spa and food and beverage areas at the
Embassy Suites Hotel Deerfield Beach Resort & Spa. These new assets enhanced
the hotels’ competitiveness in a difficult environment, and contributed to their
5% increase in market share in 2009.
We are
progressing with the approval and entitlement process for additional
redevelopment projects, in the interest of building long-term value. However, we
are committed to a disciplined approach toward capital allocation and will
commit capital to new projects only when prudent, especially in the light of
lingering effects of the global recession.
Balance Sheet Strategy
. We
are committed to strengthening our balance sheet to provide the necessary
capacity to withstand lodging cycles and also provide us with capacity to take
advantage of opportunities that may arise in the future. We strive to maintain a
flexible balance sheet, utilizing a mix of common and preferred equity, public
notes, and utilizing floating rates on a portion of our debt as a hedge against
economic cycles. Although the economic downturn has resulted in an increase in
our leverage, we expect to reduce our leverage when operating performance
improves and with future asset sales. To preserve our liquidity, we have limited
capital expenditures, postponed further redevelopment projects, suspended
dividend payments and reduced expenses at our corporate office. Further, we have
increased our cash balance by over $200 million in the past year to ensure we
have sufficient liquidity to cover any cash flow needs during the current period
of declining RevPAR. We continue to look for additional opportunities
to reduce financing costs, increase our flexibility and ensure adequate
liquidity on an economically sound basis.
We
successfully refinanced all of our debt that matured in 2009, extended the
maturity of one loan scheduled to mature in 2010, as well as refinanced nearly
all of our corporate debt that was scheduled to mature in 2011. We
continue to make progress with the various lenders to modify and/or refinance
our remaining secured debt scheduled to mature in May 2010. That debt
consists of eight non-recourse mortgage loans with a combined current balance of
$243 million, secured by 13 hotels (six of which are cross-collateralized
to secure one loan). With regard to these loans, we believe that
extending the maturity dates is in the best interest of the lenders and
FelCor. As a consequence, we intend to seek such
extensions. In addition, we intend to discuss other loan modification
options, as well as explore other refinancing opportunities and potential asset
sales as a means of satisfying our obligations under our other mortgage debt as
they mature. With regard to two of these loans, the mortgaged hotels’
cash flows do not cover debt service, and we stopped funding the short-falls in
December 2009.
Portfolio Review
. In 2006, we
implemented an initial phase of asset sales, which totaled 45 hotels, and we
received total gross proceeds of $720 million. We regularly
review and evaluate our hotel portfolio and will identify additional hotels to
sell based upon strategic considerations, such as future supply growth, changes
in demand dynamics, concentration risk, strategic fit, return on future capital
needs and return on invested capital. We expect to execute a second phase of
asset sales when hotel cash flows recover and the hotel transaction market
improves, in order to maximize proceeds. Proceeds from asset sales
will be used to improve stockholder value, including reducing
debt. None of our other hotels are currently being marketed for
sale.
External Growth
. While
preserving liquidity and reducing leverage are our focus in the current
environment, we will consider acquisitions that will improve the overall quality
of our portfolio, further diversify our portfolio by market, customer type and
brand, and improve future Hotel EBITDA growth. We may look for properties where
we can utilize our competitive strengths, such as ones that have redevelopment
opportunity to further enhance our return on investment. We take a highly
disciplined approach to analyzing any potential acquisition, which must meet
strict criteria, including minimum targeted rates of return. We expect potential
future acquisitions will be restricted to high quality hotels in major urban and
resort markets with high barriers to entry and high growth
potential.
Strategic
Relationships
We
benefit from our brand/manager alliances with Hilton Hotels Corporation,
(Embassy Suites Hotels, Doubletree and Hilton), Starwood Hotels & Resorts
Worldwide, Inc., (Sheraton and Westin), Marriott International, Inc.,
(Renaissance and Marriott) and InterContinental Hotels Group PLC (Holiday
Inn). These relationships enable us to work effectively with our
managers to maximize Hotel EBITDA margins and operating cash flow from our
hotels.
·
|
Hilton
Hotels Corporation (
www.hiltonworldwide.com
)
is recognized internationally as a preeminent hospitality company.
Hilton owns, manages or franchises more than 3,500 hotels in 81
countries. Its portfolio includes many of the world’s best-known and
most highly regarded hotel brands, including Waldorf Astoria, Conrad,
Hilton, Doubletree, Embassy Suites Hotels, Hilton Garden Inn, Hampton Inn,
Homewood Suites by Hilton, Home2 Suites by Hilton, and Hilton Grand
Vacations. Subsidiaries of Hilton managed 54 of our
Consolidated Hotels at December 31, 2009. Hilton is a 50%
partner in joint ventures with us that own 11 hotels and manage
residential condominiums. Hilton also holds 10% equity
interests in certain of our consolidated subsidiaries that own three
hotels.
|
·
|
Starwood
Hotels & Resorts Worldwide, Inc. (
www.starwoodhotels.com
)
is one of the leading hotel and leisure companies in the world with 960
properties in 100 countries. With internationally renowned brands,
Starwood is a fully integrated owner, operator and franchisor of hotels
and resorts including: St. Regis, The Luxury Collection, W, Westin, Le
Méridien, Sheraton, Four Points by Sheraton, Element and
aloft. Subsidiaries of Starwood managed nine of our
Consolidated Hotels at December 31, 2009. Starwood is a
40% joint venture partner with us in the ownership of one hotel and a 50%
joint venture partner with us in the ownership of one
hotel.
|
·
|
Marriott
International, Inc. (
www.marriott.com
)
is a leading lodging company with more than 3,000 lodging properties
located in the United States and 67 other countries and
territories. Its portfolio includes 17 lodging and vacation
resort ownership brands including Ritz Carlton, Marriott Hotels &
Resorts, Renaissance Hotels & Resorts, JW Marriott Hotels &
Resorts, Courtyard by Marriott, Fairfield Inn by Marriott and Residence
Inn by Marriott. Subsidiaries of Marriott managed three of our
Consolidated Hotels at December 31,
2009.
|
·
|
InterContinental
Hotels Group PLC (
www.ichotelsgroup.com
)
of the United Kingdom is one of the world’s largest hotel companies by
number of rooms. IHG owns, manages, leases or franchises,
through various subsidiaries, more than 4,400 hotels and over 640,000
guest rooms in nearly 100 countries. IHG owns a portfolio of well
recognized and respected hotel brands including InterContinental Hotels
& Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn, Holiday Inn
Express, Hotel Indigo, Staybridge Suites and Candlewood Suites, and also
manages the world’s largest hotel loyalty program, Priority Club
Rewards. At December 31, 2009, subsidiaries of IHG managed
15 of our Consolidated Hotels.
|
Competition
The
lodging industry is highly competitive. Each of our hotels is located in a
developed area that includes other hotel properties and competes for guests
primarily with other full service and limited service hotels in its immediate
vicinity and secondarily with other hotel properties in its geographic market.
We believe that location, brand recognition, the quality of the hotel, the
services provided, and price are the principal competitive factors affecting our
hotels.
Environmental
Matters
Under
various federal, state and local environmental laws, ordinances and regulations,
a current or previous owner of real property may be liable for the removal or
remediation of hazardous or toxic substances on, under or in a
property. These laws may impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, certain environmental laws and common
law principles could be used to impose liability for release of
asbestos-containing materials, and third parties may seek recovery from owners
or operators of real property for personal injury associated with exposure to
related asbestos-containing materials. Environmental laws also may
impose restrictions on the manner in which property may be used or businesses
may be operated, and these restrictions may require corrective or other
expenditures. In connection with our current or prior ownership of
hotels or other real estate, we may be potentially liable for various
environmental costs or liabilities.
We
customarily obtain a Phase I environmental survey from an independent
environmental consultant before acquiring a hotel. The principal purpose of a
Phase I survey is to identify indications of potential environmental
contamination and, secondarily, to assess, to a limited extent, the potential
for environmental regulatory compliance liabilities. The Phase I surveys of our
hotels were designed to meet the requirements of the then current industry
standards governing Phase I surveys, and consistent with those requirements,
none of the surveys involved testing of groundwater, soil or air. Accordingly,
they do not represent evaluations of conditions at the studied sites that would
be revealed only through such testing. In addition, Phase I
assessments of environmental regulatory compliance issues is general in scope
and not a detailed determination of a hotel’s environmental compliance.
Similarly, Phase I reports do not involve comprehensive analysis of potential
offsite liability. Our Phase I reports have not revealed any environmental
liability that we believe would have a material adverse effect on our business,
assets or results of operations, nor are we aware of any such liability.
Nevertheless, it is possible that these reports do not reveal or accurately
assess all material environmental conditions and that there are material
environmental conditions of which we are unaware.
We
believe that our hotels are in compliance, in all material respects, with all
federal, state, local and foreign laws and regulations regarding hazardous
substances and other environmental matters, the violation of which could have a
material adverse effect on us. We have not been notified by any governmental
authority or private party of any noncompliance, liability or claim relating to
hazardous or toxic substances or other environmental matters in connection with
any of our current or former properties that we believe would have a material
adverse effect on our business, assets or results of
operations. However, obligations for compliance with environmental
laws that arise or are discovered in the future may adversely affect our
financial condition.
Tax
Status
We
elected to be treated as a REIT under the federal income tax laws. As a REIT, we
generally are not subject to federal income taxation at the corporate level on
taxable income that is distributed to our stockholders. We may, however, be
subject to certain state and local taxes on our income and property and to
federal income and excise taxes on our undistributed taxable
income. Our taxable REIT subsidiaries, or TRSs, formed to lease our
hotels are subject to federal, state and local income taxes. A REIT
is subject to a number of organizational and operational requirements, including
a requirement that it currently distribute at least 90% of its annual taxable
income to its stockholders. If we fail to qualify as a REIT in any
taxable year, we will be subject to federal income taxes at regular corporate
rates (including any applicable alternative minimum tax) and may not qualify as
a REIT for four subsequent years. In connection with our election to
be treated as a REIT, our charter imposes restrictions on the ownership and
transfer of shares of our common stock. FelCor LP expects to make distributions
on its units sufficient to enable us to meet our distribution obligations as a
REIT. At December 31, 2009, we had a federal income tax loss
carryforward of $106.6 million, which we expect to use to offset future
distribution requirements and our TRSs had a federal income tax loss
carryforward of $337.6 million.
Employees
At
December 31, 2009, we had 68 full-time employees. Everyone
employed in the day-to-day operation of our hotels are employees of the
management companies engaged by us and are not our employees.
Item
1A. Risk Factors
Certain statements and analyses
contained in this report, in our 2009 Annual Report to Stockholders, or that may
in the future be made by, or be attributable to, us, may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. All of such forward-looking statements are
based upon present expectations and assumptions that may or may not actually
occur. The following factors constitute cautionary statements
identifying important factors, including material risks and uncertainties that
could cause actual results to differ materially from those reflected in such
forward-looking statements or in our historical results. Each of the following
factors, among others, could adversely affect our ability to meet the current
expectations of management.
We
depend on external sources of capital and recent disruptions in the financial
markets may affect our ability to obtain financing or obtain financing on
reasonable and acceptable terms.
As a REIT our ability to reduce our
debt and finance our growth must largely be funded by external sources of
capital because we are required to distribute to our stockholders at least 90%
of our taxable income (other than net capital gains) including, in some cases,
taxable income we recognize for federal income tax purposes but with regard to
which we do not receive corresponding cash. Our ability to obtain the
external capital we require could be limited by a number of factors, many of
which are outside our control, including general market conditions, unfavorable
market perception of our future prospects, lower current and/or estimated future
earnings, excessive cash distributions or a lower market price for our common
stock. The financial markets, and specifically the credit markets,
have experienced significant contraction and dysfunction in the face of the
continuing recession. When the financial markets are constrained – in
particular, when the availability of credit is severely diminished – our ability
to obtain financing on satisfactory terms or to extend maturing loans has been
substantially limited. Under such conditions, when financing is
available, it has been more expensive and likely includes other terms, such as
lower loan-to-value ratios, limitations or prohibitions of subordinated secured
debt, minimum debt service coverage, etc., that are more
restrictive. In addition, as loan default rates increase (as they
have recently), lenders impose more restrictive underwriting criteria and
tighten appraisal standards, further limiting credit
availability. Although we have successfully refinanced some of our
maturing loans under these more expensive and restrictive terms, we have various
other loans that will mature in 2010, and in order to refinance those loans,
adequate credit on reasonable terms must be available. With regard
to
refinancing
our maturing debt, our alternatives are severely limited compared to refinancing
in prior years. If credit is only available at unacceptable cost or
otherwise requires the application of resources that unacceptably constrains our
liquidity, we may be unable to refinance maturing loans on acceptable or
reasonable terms. Under current circumstances, there can be no
assurance that the financial markets and credit availability will improve or
stabilize and, thereby, enable us to refinance or extend maturing debt on
acceptable terms. If we are unable to refinance existing debt on
acceptable terms or obtain appropriate extensions of maturing debt, the relevant
loans could default, in which case the lenders may foreclose on the hotels
mortgaged as security for the repayment of those loans. Although our
secured debt is generally non-recourse to us, loan defaults under certain
circumstances could adversely affect our credit ratings and our ability to
borrow funds in the future. If our ability to borrow funds in the
future is impaired, our corresponding ability to reinvest in our hotels and
pursue growth through acquisitions, while maintaining targeted overall leverage
(which we believe helps us achieve desired overall returns for our
stockholders), could be constrained.
The current global recession has had
an adverse effect on our revenue per available room, or RevPAR, performance and
results of operations. The effects of a continued or deepening
recession on our financial condition could be material.
The
overall weakness in the U.S. economy, particularly the turmoil in the credit
markets, weakness in the housing market, and volatile energy and commodity
costs, has resulted in considerable negative pressure on both consumer and
business spending (this includes increased emphasis in cost containment with
focus on travel and entertainment limitations). We anticipate that
lodging demand will not improve materially until current economic trends reverse
course, particularly the weakened overall economy and illiquid credit
markets. For 2010, we believe that the continued weakness in the
credit markets, when combined with stagnant employment and business investing,
will continue to affect both leisure and business travel negatively and,
accordingly, inhibit lodging demand. Further, as hotels adjust to new demand
levels by shifting their occupancy mix to lower-rated business, we expect to see
average room rates and ancillary spending decline in most markets. Decreased
occupancy and declining room rates have an adverse effect on RevPAR, Hotel
EBITDA margins and results of operations.
Our
RevPAR declined in 2009, reflecting decreases in both average daily rate, or
ADR, and occupancy. We expect continued downward pressure in ADR
until corporate demand increases, particularly within certain business segments
(notably, transient business and group business). In the meantime,
leisure travelers benefit from the shift in pricing power and are occupying some
of the rooms previously taken by higher-rate paying business
travelers. As a consequence, our occupancy is declining slower than
ADR, which has the potential to shrink Hotel EBITDA margins and negatively
affect our results of operations unless we are able to reduce costs to mitigate
that effect. Because we are a REIT and do not manage our hotels
directly, we rely on third-party managers to drive both revenue and contain
costs, and while we make every effort to work with our managers to maximize cost
containment and improve revenue, there can be no assurance that these efforts
will be successful or otherwise mitigate declining RevPAR, Hotel EBITDA margins
or results of operations.
In
response to the economic decline, we suspended payment of all
dividends. Significant decreases in RevPAR or Hotel EBITDA margins,
or continued material deterioration in the capital markets in the future, could
reduce our ability to begin paying dividends again or to service our
debt.
Compliance
with, or failure to comply with, our financial covenants may adversely affect
our financial position and results of operations.
The
agreements governing our 10% senior notes require that we satisfy total
leverage, secured leverage and interest coverage tests in order to: (i) incur
additional indebtedness except to refinance maturing debt with replacement debt,
as defined under our indentures; (ii) pay dividends in excess of the minimum
distributions required to meet the REIT qualification test; (iii) repurchase
capital stock; or (iv) merge. We are currently restricted from paying dividends
(except to the extent necessary to satisfy the REIT qualification requirement
that we distribute currently at least 90% of our taxable income) and
repurchasing capital stock in connection with these tests.
These restrictions may adversely affect
our ability to finance our operations or engage in other business activities
that may be in our best interest.
Various risks, uncertainties and events
beyond our control could affect our ability to comply with these covenants and
financial tests. Failure to comply with any of the covenants in our
existing or future financing agreements could result in a default under those
agreements and under other agreements containing cross-default
provisions. A default would permit lenders to accelerate the maturity
of the obligations under these agreements and to foreclose upon any collateral
securing those obligations. Under these circumstances, we might not
have sufficient funds or other resources to satisfy all of our
obligations. In addition, the limitations imposed by financing
agreements on our ability to incur additional debt and to take other actions
might significantly impair our ability to obtain other financing. We
cannot assure you that we will be granted waivers or amendments to these
agreements if for any reason we are unable to comply with these agreements or
that we will be able to refinance our debt on terms acceptable to us, or at
all.
Certain of our subsidiaries have been
formed as special purpose entities, or SPEs. These SPEs have incurred
mortgage debt secured by the assets of those SPEs, which is non-recourse to
us. However, a violation of any of the recourse carve-out provisions,
including fraud, misapplication of funds and other customary recourse carve-out
provisions, could cause this debt to become fully recourse to us.
We
have substantial financial leverage.
At
December 31, 2009, our consolidated debt of $1.8 billion represented
approximately 76% of our total enterprise value. Declines in revenues
and cash flow may adversely affect our public debt ratings, and may limit our
access to additional debt. Our senior notes, as currently rated by
Moody’s Investors Service and Standard & Poor’s, are considered below
investment grade. Historically, we have incurred debt for
acquisitions and to fund our renovation, redevelopment and rebranding
programs. Limitations upon our access to additional debt could
adversely affect our ability to fund these programs or acquire hotels in the
future.
Our
financial leverage could have important consequences. For example, it
could:
•
|
limit
our ability to obtain additional financing for working capital,
renovation, redevelopment and rebranding plans, acquisitions, debt service
requirements and other purposes;
|
•
|
limit
our ability to refinance existing debt;
|
•
|
require
us to agree to additional restrictions and limitations on our business
operations and capital structure to obtain financing;
|
•
|
increase
our vulnerability to adverse economic and industry conditions, and to
interest rate fluctuations;
|
•
|
require
us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, thereby reducing funds available for capital
expenditures, future business opportunities, paying dividends or other
purposes;
|
•
|
limit
our flexibility to make, or react to, changes in our business and our
industry; and
|
•
|
place
us at a competitive disadvantage, compared to our competitors that have
less debt.
|
Most of our hotel mortgage debt is
recourse solely to the specific assets securing the debt. However, a
violation of any of the recourse carve-out provisions, including fraud,
misapplication of funds and other customary recourse carve-out provisions, could
cause this debt to become fully recourse to us.
Our
debt agreements will allow us to incur additional debt that, if incurred, could
exacerbate the other risks described herein.
We may be able to incur substantial
debt in the future. Although the instruments governing our
indebtedness contain restrictions on the incurrence of additional debt, these
restrictions are subject to a number of qualifications and exceptions and, under
certain circumstances, debt incurred in compliance with these restrictions could
be substantial. If new debt is added to our current debt levels, the
risks described above would intensify.
We
have substantial variable rate debt.
At December 31, 2009, approximately 35%
of our consolidated outstanding debt had variable interest rates. If
variable interest rates were to increase significantly, they could have a
material adverse impact on our earnings and financial condition.
We
are subject to the risks of real estate ownership, which could increase our
costs of operations.
General Risks.
Our
investment in hotels is subject to the numerous risks generally associated with
owning real estate, including among others:
•
|
adverse
changes in general or local economic or real estate market
conditions;
|
•
|
the
ability to refinance debt on favorable terms at
maturity;
|
•
|
changes
in zoning laws;
|
•
|
increases
in lodging supply or competition;
|
•
|
decreases
in demand;
|
•
|
changes
in traffic patterns and neighborhood characteristics;
|
•
|
increases
in assessed property taxes from changes in valuation or real estate tax
rates;
|
•
|
increases
in the cost of our property insurance;
|
•
|
the
potential for uninsured or underinsured property
losses;
|
•
|
costly
governmental regulations and fiscal policies;
|
•
|
changes
in tax laws;
|
•
|
our
ability to acquire hotel properties at prices consistent with our
investment criteria;
|
•
|
our
ability to fund capital expenditures at our hotels to maintain or enhance
their competitive position; and
|
•
|
other
circumstances beyond our control.
|
Moreover,
real estate investments are relatively illiquid, and we may not be able to
adjust our portfolio in a timely manner to respond to changes in economic and
other conditions.
Compliance with environmental laws
may adversely affect our financial condition.
Owners of real
estate are subject to numerous federal, state, local and foreign environmental
laws and regulations. Under these laws and regulations, a current or
former owner of real estate may be liable for the costs of remediating hazardous
substances found on its property, whether or not they were responsible for its
presence. In addition, if an owner of real property arranges for the
disposal of hazardous substances at another site, it may also be liable for the
costs of remediating the disposal site, even if it did not own or operate the
disposal site. Such liability may be imposed without regard to fault
or the legality of a party’s conduct and may, in certain circumstances, be joint
and several. A property owner may also be liable to third parties for
personal injuries or property damage sustained as a result of its release of
hazardous or toxic substances, including asbestos-containing materials, into the
environment. Environmental laws and regulations may require us to
incur substantial expenses and limit the use of our properties. We
could have substantial liability for a failure to comply with applicable
environmental laws and regulations, which may be enforced by the government or,
in certain instances, by private parties. The existence of hazardous
substances on a property can also adversely affect the value of, and the owner’s
ability to use, sell or borrow against, the property.
We cannot
provide assurances that future or amended laws or regulations, or more stringent
interpretations or enforcement of existing environmental requirements, will not
impose any material environmental liability, or that the environmental condition
or liability relating to our hotels will not be affected by new information or
changed circumstances, by the condition of properties in the vicinity of such
hotels, such as the presence of leaking underground storage tanks, or by the
actions of unrelated third parties.
Compliance with the Americans with
Disabilities Act may adversely affect our financial
condition.
Under the Americans with Disabilities Act of 1990,
all public accommodations, including hotels, are required to meet certain
federal requirements for access and use by disabled persons. Various
state and local jurisdictions have also adopted requirements relating to the
accessibility of buildings to disabled persons. We believe that our
hotels substantially comply with the requirements of the Americans with
Disabilities Act and other applicable laws. However, a determination
that our hotels are not in compliance with these laws could result in liability
for both governmental fines and payments to private parties. If we
were required to make unanticipated major
modifications
to our hotels to comply with the requirements of the Americans with Disabilities
Act and other similar laws, it could adversely affect our ability to make
distributions to our stockholders and to satisfy our other
obligations.
Lodging
industry-related risks may adversely affect our business.
We are subject to the risks inherent
to hotel operations.
We have ownership interests in the
operating lessees of our hotels; consequently, we are subject to the risk of
fluctuating hotel operating expenses at our hotels, including, but not limited
to:
•
|
wage
and benefit costs, including hotels that employ unionized
labor;
|
•
|
repair
and maintenance expenses;
|
•
|
gas
and electricity costs;
|
•
|
insurance
costs, including health, general liability and workers compensation;
and
|
•
|
other
operating expenses.
|
In
addition, we are subject to the risks of a decline in Hotel EBITDA margins,
which occur when hotel operating expenses increase disproportionately to
revenues or fail to shrink at least as fast as revenues
decline. These operating expenses and Hotel EBITDA margins are within
the control of our independent managers over whom we have limited
control.
Investing in hotel assets involves
special risks.
We have invested in hotel-related assets, and
our hotels are subject to all of the risks common to the hotel
industry. These risks could adversely affect hotel occupancy and the
rates that can be charged for hotel rooms, and generally include:
•
|
adverse
effects of declines in general and local economic
activity;
|
•
|
competition
from other hotels;
|
•
|
construction
of more hotel rooms in a particular area than needed to meet
demand;
|
•
|
any
further increases in energy costs and other travel
expenses;
|
•
|
other
events, such as terrorist acts or war that reduce business and leisure
travel;
|
•
|
fluctuations
in our revenue caused by the seasonal nature of the hotel
industry;
|
•
|
an
outbreak of a pandemic disease affecting the travel
industry;
|
•
|
a
downturn in the hotel industry; and
|
•
|
risks
generally associated with the ownership of hotels and real estate, as
discussed herein.
|
We could face increased
competition.
Each of our hotels competes with other hotels in
its geographic area. A number of additional hotel rooms have been, or
may be, built in a number of the geographic areas in which our hotels are
located, which could adversely affect both occupancy and rates in those
markets. A significant increase in the supply of midprice, upscale
and upper upscale hotel rooms and suites, if demand fails to increase at least
proportionately, could have a material adverse effect on our business, financial
condition and results of operations.
We face reduced coverages and
increased costs of insurance.
Our property insurance has a
$100,000 all risk deductible, a deductible of 5% of insured value for named
windstorm coverage and a deductible ranging from 2% to 5% of insured value for
California earthquake coverage. Substantial uninsured or not
fully-insured losses would have a material adverse impact on our operating
results, cash flows and financial condition.
Catastrophic losses,
such as the losses caused by hurricanes in 2005, could make the cost of insuring
against these types of losses prohibitively expensive or difficult to
find. In an effort to limit the cost of insurance, we purchase
catastrophic insurance coverage based on probable maximum losses based on
250-year events and have only purchased terrorism insurance to the extent
required by our lenders. We have established a self-insured retention
of $250,000 per occurrence for general liability insurance with regard to 57 of
our hotels. The remainder of our hotels participate in general
liability programs sponsored by our managers, with no deductible.
We could have property losses not
covered by insurance.
Our property policies provide that all
of the claims from each of our properties resulting from a particular insurable
event must be combined together for purposes of evaluating whether the aggregate
limits and sub-limits contained in our policies have been
exceeded. Therefore, if an insurable event occurs that affects more
than one of our hotels, the claims from each affected hotel will be added
together to determine whether the aggregate limit or sub-limits, depending on
the type of claim, have been reached, and each affected hotel may only receive a
proportional share of the amount of insurance proceeds provided for under the
policy if the total value of the loss exceeds the aggregate limits
available. We may incur losses in excess of insured limits and, as a
result, we may be even less likely to receive sufficient coverage for risks that
affect multiple properties such as earthquakes or catastrophic terrorist
acts. There are risks such as war, catastrophic terrorist acts,
nuclear, biological, chemical, or radiological attacks, and some environmental
hazards that may be deemed to fall completely outside the general coverage
limits of our policies or may be uninsurable or may be too expensive to justify
insuring against.
We may also encounter disputes
concerning whether an insurance provider will pay a particular claim that we
believe is covered under our policy. Should a loss in excess of
insured limits or an uninsured loss occur or should we be unsuccessful in
obtaining coverage from an insurance carrier, we could lose all, or a portion
of, the capital we have invested in a property, as well as the anticipated
future revenue from the hotel. In that event, we might nevertheless
remain obligated for any mortgage debt or other financial obligations related to
the property.
We obtain terrorism insurance to the
extent required by lenders as a part of our all-risk property insurance program,
as well as our general liability and directors’ and officers’
coverages. However, our all-risk policies have limitations such as
per occurrence limits and sub-limits which might have to be shared
proportionally across participating hotels under certain loss
scenarios. Also, all-risk insurers only have to provide terrorism
coverage to the extent mandated by the Terrorism Risk Insurance Act, or TRIA,
for “certified” acts of terrorism - namely those which are committed on behalf
of non-United States persons or interests. Furthermore, we do not
have full replacement coverage at all of our properties for acts of terrorism
committed on behalf of United States persons or interests (“non-certified”
events) as our coverage for such incidents is subject to sub-limits and/or
annual aggregate limits. In addition, property damage related to war
and to nuclear, biological and chemical incidents is excluded under our
policies. While TRIA will reimburse insurers for losses resulting
from nuclear, biological and chemical perils, TRIA does not require insurers to
offer coverage for these perils and, to date, insurers are not willing to
provide this coverage, even with government
reinsurance. Additionally, there is a possibility that congress will
not renew TRIA in the future, which would eliminate the federal subsidy for
terrorism losses. As a result of the above, there remains uncertainty
regarding the extent and adequacy of terrorism coverage that will be available
to protect our interests in the event of future terrorist attacks that impact
our properties.
We have geographic concentrations
that may create risks from regional or local economic, seismic or weather
conditions.
At December 31, 2009, approximately 48% of
our hotel rooms were located in, and 47% of our 2009 Hotel EBITDA was generated
from, three states: California, Florida and
Texas. Additionally, at December 31, 2009, we had concentrations
in six major metropolitan areas, the San Francisco Bay area, Atlanta, South
Florida, Orlando, Dallas and the Los Angeles area, which together
represented approximately 33% of our Hotel EBITDA for the year ended
December 31, 2009. Therefore, adverse economic, seismic or
weather conditions in these states or metropolitan areas may have a greater
adverse effect on us than on the industry as a whole.
Transferability of franchise license
and management agreements and termination of such agreements may be prohibited
or restricted.
Hotel managers and
franchise licensors may have the right to terminate their agreements or suspend
their services in the event of default under such agreements or other third
party agreements such as ground leases and mortgages, upon the loss of liquor
licenses, or in the event of the sale or transfer of the hotel. Franchise
license agreements may expire by their terms, and we may not be able to obtain
replacement franchise license agreements.
The sale
of a hotel, replacement of the brand, or material default under a management or
franchise license agreement may give rise to payment of liquidated damages or
termination fees that may be guaranteed by us or certain of our subsidiaries.
The loss of a manager or franchise license could have a material impact on
the
operations
and value of a hotel because of the loss of associated name recognition,
marketing support and centralized reservation systems provided by the franchise
licensor or operations management provided by the manager. Most of our
management agreements restrict our ability to encumber our interests in the
applicable hotels under certain circumstances without the managers’
consent.
Terminating management agreements in
connection with the sale of two hotels may result in liquidated damages.
In 2009, we sold two Holiday Inn hotels in Florida operating under
management agreements with IHG. These hotels were originally designated
for redevelopment with condominiums, but market conditions in Florida no longer
make these condominium projects feasible. We also determined that the
major capital expenditures necessary to retain the Holiday Inn flags at these
hotels were not in the best interests of our stockholders, given the shortened
hold period for these hotels. We will be required to pay replacement
management fees for up to one year and liquidated damages (net of any
replacement management fees previously paid) in December 2010; or reinvest in
another hotel to be managed by IHG and carrying an IHG brand. Given the
current state of the economy and the market for hotel acquisitions, substitution
of a replacement hotel appears unlikely prior to the relevant dates, and we will
likely have to pay IHG at least some portion of replacement management fees
and/or liquidated damages. Liquidated damages are computed based on operating
results of a hotel prior to termination. The aggregate liability
related to these hotels, if paid, will be approximately $11 million.
We accrued the full amount of liquidated damages in 2008.
We are subject to possible adverse
effects of management, franchise and license agreement
requirements.
All of our hotels are operated under existing
management, franchise or license agreements with nationally recognized hotel
companies. Each agreement requires that the licensed hotel be
maintained and operated in accordance with specific standards and restrictions
in order to maintain uniformity within the brand. Compliance with
these standards, and changes in these standards, could require us to incur
significant expenses or capital expenditures, which could adversely affect our
results of operations and ability to pay dividends to our stockholders and
service on our indebtedness.
We are subject to the risks of brand
concentration.
We are subject to the potential risks
associated with the concentration of our hotels under a limited number of
brands. A negative public image or other adverse event that becomes
associated with the brand could adversely affect hotels operated under that
brand.
The
following table reflects the percentage of Hotel EBITDA from our 83 Consolidated
Hotels at December 31, 2009 by brand:
|
Hotels
|
|
%
of 2009
Hotel
EBITDA
(a)
|
|
Embassy
Suites Hotels
|
47
|
|
|
60
|
%
|
|
Holiday
Inn
|
15
|
|
|
18
|
|
|
Sheraton
and Westin
|
9
|
|
|
9
|
|
|
Doubletree
|
7
|
|
|
7
|
|
|
Renaissance
and Marriott
|
3
|
|
|
3
|
|
|
Hilton
|
2
|
|
|
3
|
|
|
|
(a)
|
Hotel
EBITDA is a non-GAAP financial measure. A detailed
reconciliation and further discussion of Hotel EBITDA is contained in the
“Non-GAAP Financial Measures” section of Management’s Discussion and
Analysis of Financial Condition and Results of Operations in Item 7
of this Annual Report.
|
If any of these brands suffer a
significant decline in popularity with the traveling public, the revenues and
profitability of our branded hotels could be adversely affected.
The lodging business is seasonal in
nature.
Generally, hotel revenues for our hotel portfolio are
greater in the second and third calendar quarters than in the first and fourth
calendar quarters, although this may not be true for hotels in major tourist
destinations. Revenues for hotels in tourist areas are generally
substantially greater during tourist season than other times of the
year. We expect that seasonal variations in revenue at our hotels
will cause quarterly fluctuations in our revenues.
Future
terrorist activities may adversely affect, and create uncertainty in, our
business.
Terrorism
in the United States or elsewhere could have an adverse effect on our business,
although the degree of impact will depend on a number of factors, including the
U.S. and global economies and global financial markets. Previous
terrorist attacks in the United States and subsequent terrorism alerts have
adversely affected the travel and hospitality industries over the past several
years. Such attacks, or the threat of such attacks, could have a
material adverse effect on our business, our ability to finance our business,
our ability to insure our properties, and/or our results of operations and
financial condition, as a whole.
We
face risks related to pandemic diseases, which could materially and adversely
affect travel and result in reduced demand for our hotels.
Our
business could be materially and adversely affected by the effect of a pandemic
disease on the travel industry. For example, the recent outbreaks of SARS and
avian flu had a severe impact on the travel industry, and outbreaks of H1N1 flu
threatens to have a similar impact. A prolonged recurrence of SARS, avian flu,
H1N1 flu or another pandemic disease also may result in health or other
government authorities imposing restrictions on travel. Any of these events
could result in a significant drop in demand for our hotels and adversely affect
our financial conditions and results of operations.
If
we fail to comply with applicable privacy laws and regulations, we could be
subject to payment of fines, damages or face restrictions on our use of guest
data.
We
collect information relating to our guests for various business purposes,
including marketing and promotional purposes. The collection and use of personal
data are governed by privacy laws and regulations enacted in the United States
and other jurisdictions around the world. Privacy regulations continue to evolve
and on occasion may be inconsistent from one jurisdiction to another. Compliance
with applicable privacy regulations may increase our operating costs and/or
adversely impact our ability to market our products, properties and services to
our guests. In addition, non-compliance with applicable privacy regulations by
us (or in some circumstances non-compliance by third parties engaged by us) or a
breach of security on systems storing our data may result in fines, payment of
damages or restrictions on our use or transfer of data.
As
a REIT, we are subject to specific tax laws and regulations, the violation of
which could subject us to significant tax liabilities.
The federal income tax laws
governing REITs are complex.
We have operated, and intend to
continue to operate, in a manner that is intended to enable us to qualify as a
REIT under the federal income tax laws. The REIT qualification
requirements are extremely complicated, and interpretations of the federal
income tax laws governing qualification as a REIT are
limited. Accordingly, we cannot be certain that we have been, or will
continue to be, successful in operating so as to qualify as a REIT.
The federal income tax laws
governing REITs are subject to change.
At any time, the
federal income tax laws governing REITs or the administrative interpretations of
those laws may be amended. These new laws, interpretations, or court
decisions may change the federal income tax laws relating to, or the federal
income tax consequences of, qualification as a REIT. Any of these new laws or
interpretations may take effect retroactively and could adversely affect us, or
you as a stockholder.
Failure to make required
distributions would subject us to tax.
Each year, a REIT must
pay out to its stockholders at least 90% of its taxable income, other than any
net capital gain. To the extent that we satisfy the 90% distribution
requirement, but distribute less than 100% of our taxable income, we will be
subject to federal corporate income tax on our undistributed taxable
income. In addition, we will be subject to a 4% nondeductible tax if
the actual amount we pay out to our stockholders in a calendar year is less than
the minimum amount specified under federal tax laws. Our only source
of funds to make such distributions comes from distributions from FelCor
LP. Accordingly, we may be required to borrow money or sell assets to
enable us to pay out enough of our taxable income to satisfy the distribution
requirements and to avoid corporate income tax and the 4% tax in a particular
year.
Failure to qualify as a REIT would
subject us to federal income tax.
If we fail to qualify as a
REIT in any taxable year, we would be subject to federal income tax at regular
corporate rates on our taxable income for any such taxable year for which the
statute of limitations remains open. We might need to borrow money or
sell hotels in order to obtain the funds necessary to pay any such
tax. If we cease to be a REIT, we no longer would be required to
distribute most of our taxable income to our stockholders. Unless our
failure to qualify as a REIT was excused under federal income tax laws, we could
not re-elect REIT status until the fifth calendar year following the year in
which we failed to qualify.
We lack control over the management
and operations of our hotels.
Because federal income tax laws
restrict REITs and their subsidiaries from operating hotels, we do not manage
our hotels. Instead, we are dependent on the ability of independent
third-party managers to operate our hotels pursuant to management
agreements. As a result, we are unable to directly implement
strategic business decisions for the operation and marketing of our hotels, such
as decisions with respect to the setting of room rates, the salary and benefits
provided to hotel employees, the conduct of food and beverage operations and
similar matters. While our taxable REIT subsidiaries monitor the
third-party manager’s performance, we have limited specific recourse under our
management agreements if we believe the third-party managers are not performing
adequately. Failure by our third-party managers to fully perform the
duties agreed to in our management agreements could adversely affect our results
of operations. In addition, our third-party managers or their
affiliates manage hotels that compete with our hotels, which may result in
conflicts of interest. As a result, our third-party managers may have
in the past made, and may in the future make, decisions regarding competing
lodging facilities that are not or would not be in our best
interests.
Complying
with REIT requirements may cause us to forego attractive opportunities that
could otherwise generate strong risk-adjusted returns and instead pursue less
attractive opportunities, or none at all.
To
continue to qualify as a REIT for federal income tax purposes, we must
continually satisfy tests concerning, among other things, the sources of our
income, the nature and diversification of our assets, the amounts we distribute
to our stockholders and the ownership of our stock. Thus, compliance with the
REIT requirements may hinder our ability to operate solely on the basis of
generating strong risk-adjusted returns on invested capital for our
stockholders.
Complying
with REIT requirements may force us to liquidate otherwise attractive
investments, which could result in an overall loss on our
investments.
To
continue to qualify as a REIT, we must also ensure that at the end of each
calendar quarter at least 75% of the value of our assets consists of cash, cash
items, government securities and qualified REIT real estate assets. The
remainder of our investment in securities (other than government securities and
qualified real estate assets) generally cannot include more than 10% of the
outstanding voting securities of any one issuer or more than 10% of the total
value of the outstanding securities of any one issuer. In addition, in general,
no more than 5% of the value of our assets (other than government securities and
qualified real estate assets) can consist of the securities of any one issuer,
and no more than 25% of the value of our total securities can be represented by
securities of one or more TRSs. If we fail to comply with these
requirements at the end of any calendar quarter, we must correct such failure
within 30 days after the end of the calendar quarter to avoid losing our REIT
status and suffering adverse tax consequences. If we fail to comply with these
requirements at the end of any calendar quarter, we may be able to preserve our
REIT status by benefiting from certain statutory relief provisions. Except with
respect to a de minimis failure of the 5% asset test or the 10% vote or value
test, we can maintain our REIT status only if the failure was due to reasonable
cause and not to willful neglect. In that case, we will be required to dispose
of the assets causing the failure within six months after the last day of the
quarter in which we identified the failure, and we will be required to pay an
additional tax of the greater of $50,000 or the product of the highest
applicable tax rate (currently 35%) multiplied by the net income generated on
those assets. As a result, we may be required to liquidate otherwise attractive
investments.
We
own, and may acquire, interests in hotel joint ventures with third parties that
expose us to some risk of additional liabilities or capital
requirements.
We own,
through our subsidiaries, interests in several real estate joint ventures with
third parties. Joint ventures that are not consolidated into our
financial statements owned real estate interests in a total of 15 hotels, in
which we had an aggregate investment of $82 million, at December 31,
2009. The lessee operations of 13 of these 15 hotels are included in
our consolidated results of operations due to our majority ownership of those
lessees. Our joint venture partners are affiliates of Hilton with
respect to 11 hotels, affiliates of Starwood with respect to one hotel, and
private entities or individuals (all of whom are unaffiliated with us) with
respect to three hotels. The ventures and hotels were subject to
non-recourse mortgage loans aggregating $215 million at December 31,
2009.
The
personal liability of our subsidiaries under existing non-recourse loans secured
by the hotels owned by our joint ventures is generally limited to the guaranty
of the borrowing ventures’ personal obligations to pay for the lender’s losses
caused by misconduct, fraud or misappropriation of funds by the ventures and
other typical exceptions from the non-recourse covenants in the mortgages, such
as those relating to environmental liability. We may invest in other
ventures in the future that own hotels and have recourse or non-recourse debt
financing. If a venture defaults under its mortgage loan, the lender
may accelerate the loan and demand payment in full before taking action to
foreclose on the hotel. As a partner or member in any of these
ventures, our subsidiary may be exposed to liability for claims asserted against
the venture, and the venture may not have sufficient assets or insurance to
discharge the liability.
Our
subsidiaries may be contractually or legally unable to unilaterally control
decisions regarding these ventures and their hotels. In addition, the
hotels in a joint venture may perform at levels below expectations, resulting in
potential insolvency unless the joint venturers provide additional
funds. In some ventures, the joint venturers may elect not to make
additional capital contributions. We may be faced with the choice of
losing our investment in a venture or investing additional capital in it with no
guaranty of receiving a return on that investment.
Our
directors may have interests that may conflict with our interests.
A
director who has a conflict of interest with respect to an issue presented to
our board will have no inherent legal obligation to abstain from voting upon
that issue. We do not have provisions in our bylaws or charter that
require an interested director to abstain from voting upon an issue, and we do
not expect to add provisions in our charter and bylaws to this effect.
Although each director has a duty of loyalty to us, there is a risk that, should
an interested director vote upon an issue in which a director or one of his or
her affiliates has an interest, his or her vote may reflect a bias that could be
contrary to our best interests. In addition, even if an interested
director abstains from voting, that director’s participation in the meeting and
discussion of an issue in which they have, or companies with which he or she is
associated have, an interest could influence the votes of other directors
regarding the issue.
Departure
of key personnel would deprive us of the institutional knowledge, expertise and
leadership they provide.
Our
executive management team includes our President and Chief Executive Officer and
four Executive Vice Presidents. In addition, we have several other
long-tenured senior officers. These executives and officers generally
possess institutional knowledge about our organization and the hospitality or
real estate industries, have significant expertise in their fields, and possess
leadership skills that are important to our operations. The loss of
any of our executives or other long-serving officers could adversely affect our
ability to execute our business strategy.
Our
charter contains limitations on ownership and transfer of shares of our stock
that could adversely affect attempted transfers of our capital
stock.
To
maintain our status as a REIT, no more than 50% in value of our outstanding
stock may be owned, actually or constructively, under the applicable tax rules,
by five or fewer persons during the last half of any taxable
year. Our charter prohibits, subject to some exceptions, any person
from owning more than 9.9%, as determined in accordance with the Internal
Revenue Code and the Securities Exchange Act of 1934, of the number of
outstanding shares of any class of our stock. Our charter also
prohibits any transfer of our stock that would result in a violation of the 9.9%
ownership limit, reduce the number of stockholders below 100 or otherwise result
in our failure to qualify as a REIT. Any attempted transfer of shares
in violation of the charter prohibitions will be void, and the intended
transferee will not acquire any right in those shares. We have the
right to take any lawful action that we believe is necessary or advisable to
ensure compliance with these ownership and transfer restrictions and to preserve
our status as a REIT, including refusing to recognize any transfer of stock in
violation of our charter.
Some
provisions in our charter and bylaws and Maryland law make a takeover more
difficult.
Ownership
Limit.
The ownership and transfer restrictions of our charter
may have the effect of discouraging or preventing a third party from attempting
to gain control of us without the approval of our board of
directors. Accordingly, it is less likely that a change in control,
even if beneficial to stockholders, could be effected without the approval of
our board.
Staggered
Board
. Our board of directors is divided into three
classes. Directors in each class are elected for terms of three
years. As a result, the ability of stockholders to effect a change in
control of us through the election of new directors is limited by the inability
of stockholders to elect a majority of our board at any particular
meeting.
Authority to Issue Additional
Shares.
Under our charter, our board of directors may issue up
to an aggregate of 20 million shares of preferred stock without stockholder
action. The preferred stock may be issued, in one or more series,
with the preferences and other terms designated by our board that may delay or
prevent a change in control of us, even if the change is in the best interests
of stockholders. At December 31, 2009, we had outstanding
12,880,475 shares of our Series A preferred stock and 67,980 shares, represented
by 6,798,000 depositary shares, of our Series C preferred stock.
Maryland Takeover Statutes.
As a Maryland corporation, we are subject to various provisions under the
Maryland General Corporation Law, including the Maryland Business Combination
Act, that may have the effect of delaying or preventing a transaction or a
change in control that might involve a premium price for the stock or otherwise
be in the best interests of stockholders. Under the Maryland business
combination statute, some “business combinations,” including some issuances of
equity securities, between a Maryland corporation and an “interested
stockholder,” which is any person who beneficially owns 10% or more of the
voting power of the corporation’s shares, or an affiliate of that stockholder,
are prohibited for five years after the most recent date on which the interested
stockholder becomes an interested stockholder. Any of these business
combinations must be approved by a stockholder vote meeting two separate super
majority requirements, unless, among other conditions, the corporation’s common
stockholders receive a minimum price, as defined in the statute, for their
shares and the consideration is received in cash or in the same form as
previously paid by the interested stockholder for its common
shares. Our charter currently provides that the Maryland Control
Share Acquisition Act will not apply to any of our existing or future
stock. That statute may deny voting rights to shares involved in an
acquisition of one-tenth or more of the voting stock of a Maryland
corporation. To the extent these or other laws are applicable to us,
they may have the effect of delaying or preventing a change in control of us
even though beneficial to our stockholders.
Item
1B. Unresolved
Staff Comments
None.
Item
2. Properties
We own a diversified portfolio of
globally branded hotels managed and branded by Hilton, Starwood, Marriott and
IHG. We consider our hotels, generally, to be high quality lodging
properties with respect to desirability of location, size, facilities, physical
condition, quality and variety of services offered in the markets in which they
are located. Our hotels are designed to appeal to a broad range of
hotel customers, including frequent business travelers, groups and conventions,
as well as leisure travelers. The hotels generally feature
comfortable, modern guest rooms, meeting and convention facilities and
full-service restaurant and catering facilities. At December 31,
2009, our Consolidated Hotels were located in the United States (81 hotels in 23
states) and Canada (two hotels in Ontario), and were situated primarily in major
markets in suburban, downtown, airport or resort areas. The following
table illustrates the distribution of our 83 Consolidated Hotels at
December 31, 2009.
Top
Markets
|
|
|
Hotels
|
|
Rooms
|
|
%
of
Total
Rooms
|
|
%
of 2009
Hotel EBITDA
(a)
|
|
South
Florida
|
|
5
|
|
|
1,439
|
|
|
6
|
|
|
8
|
|
|
Los
Angeles area
|
|
4
|
|
|
899
|
|
|
4
|
|
|
6
|
|
|
Atlanta
|
|
5
|
|
|
1,462
|
|
|
6
|
|
|
6
|
|
|
Orlando
|
|
4
|
|
|
1,038
|
|
|
4
|
|
|
5
|
|
|
Philadelphia
|
|
2
|
|
|
729
|
|
|
3
|
|
|
4
|
|
|
Minneapolis
|
|
3
|
|
|
736
|
|
|
3
|
|
|
4
|
|
|
San
Francisco area
|
|
6
|
|
|
2,138
|
|
|
9
|
|
|
4
|
|
|
Dallas
|
|
4
|
|
|
1,333
|
|
|
6
|
|
|
4
|
|
|
Central
California Coast
|
|
2
|
|
|
408
|
|
|
2
|
|
|
4
|
|
|
San
Antonio
|
|
3
|
|
|
874
|
|
|
4
|
|
|
3
|
|
|
Myrtle
Beach
|
|
2
|
|
|
640
|
|
|
3
|
|
|
3
|
|
|
Boston
|
|
2
|
|
|
532
|
|
|
2
|
|
|
3
|
|
|
San
Diego
|
|
1
|
|
|
600
|
|
|
2
|
|
|
3
|
|
|
Northern
New Jersey
|
|
3
|
|
|
756
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suburban
|
|
35
|
|
|
8,781
|
|
|
37
|
|
|
32
|
|
|
Urban
|
|
20
|
|
|
6,358
|
|
|
27
|
|
|
27
|
|
|
Airport
|
|
18
|
|
|
5,788
|
|
|
24
|
|
|
24
|
|
|
Resort
|
|
10
|
|
|
2,927
|
|
|
12
|
|
|
17
|
|
|
|
(a)
|
Hotel
EBITDA is a non-GAAP financial measure. A detailed
reconciliation and further discussion of Hotel EBITDA is contained in the
“Non-GAAP Financial Measures” section of Management’s Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 of
this Annual Report.
|
We are
committed to maintaining the high standards of our hotels. Our hotels
have an average of 287 rooms, with seven hotels having 400 or more
rooms. Although obsolescence arising from age and condition of
facilities can adversely affect our hotels, in 2009, we completed the last phase
of a multi-year, portfolio-wide renovation program costing more than
$450 million. The program was designed to upgrade, modernize and
renovate all of our hotels to enhance or maintain their competitive
position. For 2009, our pro rata share of capital expenditures spent
on consolidated and unconsolidated hotels, including renovations and
redevelopment projects, was $79.3 million. We also spent 7.0% of
our consolidated room revenue on maintenance and repair expense.
Hotel
Brands
Part of our business strategy is to
have our hotels managed by some of the nation’s most recognized and respected
hotel brand owners. The following table illustrates the distribution
of our Consolidated Hotels among our brands at December 31,
2009.
Brand
Distribution
Brand
|
|
Hotels
|
|
Rooms
|
|
%
of
Total
Rooms
|
|
%
of 2009
Hotel EBITDA
(a)
|
|
Embassy
Suites Hotels
|
47
|
|
|
12,132
|
|
51
|
|
|
60
|
|
|
Holiday
Inn
|
15
|
|
|
5,154
|
|
22
|
|
|
18
|
|
|
Sheraton
and Westin
|
9
|
|
|
3,217
|
|
13
|
|
|
9
|
|
|
Doubletree
|
7
|
|
|
1,471
|
|
6
|
|
|
7
|
|
|
Renaissance
and Marriott
|
3
|
|
|
1,321
|
|
6
|
|
|
3
|
|
|
Hilton
|
2
|
|
|
559
|
|
2
|
|
|
3
|
|
|
|
(a)
|
Hotel
EBITDA is a non-GAAP financial measure. A detailed
reconciliation and further discussion of Hotel EBITDA is contained in the
“Non-GAAP Financial Measures” section of Management’s Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 of
this Annual Report.
|
Embassy Suites Hotels
Embassy
Suites Hotels is the nation’s largest brand of upper upscale
hotels. Created in 1983, Embassy Suites Hotels was a pioneer in the
all-suite concept and today is a market share leader with more than 200 hotels
internationally. Embassy Suites Hotels maintains a significant
presence in its segment in terms of system size, geographic distribution,
brand-name recognition and operating performance. As part of the
Hilton family, the Embassy Suites Hotels participate in the Hilton HHonors
frequent guest program.
Doubletree Hotels
Doubletree
hotels are upscale accommodations for business and leisure travelers in more
than 200 gateway cities, metropolitan areas and vacation destinations
worldwide. As part of the Hilton family, Doubletree hotels
participate in the Hilton HHonors frequent guest program.
Holiday
Inn, one of the most widely-recognized lodging brands in the world, offers
business and leisure travelers’ value, dependability, friendly service and
modern attractive facilities. Holiday Inn participates in IHG’s
Priority Club frequent guest program.
Sheraton Hotels &
Resorts
With approximately 400 hotels and
resorts in 69 countries, Sheraton Hotels & Resorts is the largest brand in
the Starwood system. Located in major cities and resort destinations,
Sheraton hotels serve the needs of both business and leisure
travelers. Sheraton hotels participate in the Starwood Preferred
Guest frequent traveler program.
Renaissance Hotels &
Resorts
Renaissance Hotels & Resorts is a
distinctive upper-upscale full-service brand that targets individual business
and leisure travelers and group meetings by offering stylish and personalized
environments. There are 143 Renaissance Hotels & Resorts
worldwide, with 75 United States and 68 international
locations. Renaissance hotels participate in the Marriott Rewards
frequent traveler program.
Other Hotels
As of December 31, 2009, four of our
hotels were operated under other flags: Hilton (two hotels), Marriott and
Westin.
Hotel Operating
Statistics
The following tables set forth average
historical occupancy (occupied rooms), ADR and RevPAR for the years ended
December 31, 2009 and 2008, and the percentage changes therein for the
periods presented for our Consolidated Hotels.
Operating
Statistics by Brand
|
|
Occupancy
(%)
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
2009
|
|
2008
|
|
%Variance
|
|
|
Embassy
Suites Hotels
|
67.7
|
|
|
72.9
|
|
|
(7.1
|
)
|
|
|
Holiday
Inn
|
68.7
|
|
|
74.0
|
|
|
(7.2
|
)
|
|
|
Sheraton
and Westin
|
60.2
|
|
|
65.8
|
|
|
(8.5
|
)
|
|
|
Doubletree
|
65.5
|
|
|
73.5
|
|
|
(10.8
|
)
|
|
|
Renaissance
and Marriott
|
61.4
|
|
|
62.8
|
|
|
(2.1
|
)
|
|
|
Hilton
|
60.0
|
|
|
60.6
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
hotels
|
66.2
|
|
|
71.3
|
|
|
(7.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADR
($)
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
2009
|
|
2008
|
|
%Variance
|
|
|
Embassy
Suites Hotels
|
127.92
|
|
|
143.54
|
|
|
(10.9
|
)
|
|
|
Holiday
Inn
|
112.22
|
|
|
128.04
|
|
|
(12.4
|
)
|
|
|
Sheraton
and Westin
|
108.47
|
|
|
124.61
|
|
|
(13.0
|
)
|
|
|
Doubletree
|
122.59
|
|
|
141.62
|
|
|
(13.4
|
)
|
|
|
Renaissance
and Marriott
|
163.16
|
|
|
173.97
|
|
|
(6.2
|
)
|
|
|
Hilton
|
115.46
|
|
|
126.12
|
|
|
(8.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
hotels
|
123.23
|
|
|
138.75
|
|
|
(11.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR
($)
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
2009
|
|
2008
|
|
%Variance
|
|
|
Embassy
Suites Hotels
|
86.55
|
|
|
104.57
|
|
|
(17.2
|
)
|
|
|
Holiday
Inn
|
77.11
|
|
|
94.81
|
|
|
(18.7
|
)
|
|
|
Sheraton
and Westin
|
65.34
|
|
|
82.05
|
|
|
(20.4
|
)
|
|
|
Doubletree
|
80.35
|
|
|
104.03
|
|
|
(22.8
|
)
|
|
|
Renaissance
and Marriott
|
100.21
|
|
|
109.17
|
|
|
(8.2
|
)
|
|
|
Hilton
|
69.32
|
|
|
76.38
|
|
|
(9.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
hotels
|
81.62
|
|
|
99.00
|
|
|
(17.6
|
)
|
|
Operating
Statistics for our Top Markets
|
|
Occupancy
(%)
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
2009
|
|
2008
|
|
%Variance
|
|
|
South
Florida
|
73.0
|
|
|
76.9
|
|
|
(5.1
|
)
|
|
|
Los
Angeles area
|
71.6
|
|
|
74.5
|
|
|
(3.9
|
)
|
|
|
Atlanta
|
69.7
|
|
|
72.4
|
|
|
(3.7
|
)
|
|
|
Orlando
|
74.0
|
|
|
79.8
|
|
|
(7.3
|
)
|
|
|
Philadelphia
|
66.4
|
|
|
72.9
|
|
|
(8.9
|
)
|
|
|
Minneapolis
|
66.6
|
|
|
70.6
|
|
|
(5.7
|
)
|
|
|
San
Francisco area
|
69.1
|
|
|
74.6
|
|
|
(7.4
|
)
|
|
|
Dallas
|
58.6
|
|
|
65.9
|
|
|
(11.0
|
)
|
|
|
Central
California Coast
|
72.8
|
|
|
73.1
|
|
|
(0.4
|
)
|
|
|
San
Antonio
|
70.0
|
|
|
78.1
|
|
|
(10.4
|
)
|
|
|
Myrtle
Beach
|
59.6
|
|
|
58.5
|
|
|
1.8
|
|
|
|
Boston
|
77.8
|
|
|
79.2
|
|
|
(1.7
|
)
|
|
|
San
Diego
|
72.6
|
|
|
78.5
|
|
|
(7.5
|
)
|
|
|
Northern
New Jersey
|
62.2
|
|
|
71.1
|
|
|
(12.5
|
)
|
|
|
|
ADR
($)
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
2009
|
|
2008
|
|
%Variance
|
|
|
South
Florida
|
129.18
|
|
|
148.82
|
|
|
(13.2
|
)
|
|
|
Los
Angeles area
|
135.63
|
|
|
157.20
|
|
|
(13.7
|
)
|
|
|
Atlanta
|
104.71
|
|
|
120.93
|
|
|
(13.4
|
)
|
|
|
Orlando
|
110.75
|
|
|
125.68
|
|
|
(11.9
|
)
|
|
|
Philadelphia
|
135.22
|
|
|
151.60
|
|
|
(10.8
|
)
|
|
|
Minneapolis
|
127.53
|
|
|
144.82
|
|
|
(11.9
|
)
|
|
|
San
Francisco area
|
129.66
|
|
|
143.35
|
|
|
(9.5
|
)
|
|
|
Dallas
|
114.92
|
|
|
124.48
|
|
|
(7.7
|
)
|
|
|
Central
California Coast
|
156.45
|
|
|
172.03
|
|
|
(9.1
|
)
|
|
|
San
Antonio
|
102.74
|
|
|
112.90
|
|
|
(9.0
|
)
|
|
|
Myrtle
Beach
|
133.48
|
|
|
141.71
|
|
|
(5.8
|
)
|
|
|
Boston
|
133.97
|
|
|
154.30
|
|
|
(13.2
|
)
|
|
|
San
Diego
|
124.75
|
|
|
157.47
|
|
|
(20.8
|
)
|
|
|
Northern
New Jersey
|
140.38
|
|
|
162.37
|
|
|
(13.5
|
)
|
|
|
|
RevPAR
($)
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
2009
|
|
2008
|
|
%Variance
|
|
|
South
Florida
|
94.28
|
|
|
114.42
|
|
|
(17.6
|
)
|
|
|
Los
Angeles area
|
97.07
|
|
|
117.10
|
|
|
(17.1
|
)
|
|
|
Atlanta
|
73.01
|
|
|
87.60
|
|
|
(16.7
|
)
|
|
|
Orlando
|
81.93
|
|
|
100.34
|
|
|
(18.3
|
)
|
|
|
Philadelphia
|
89.81
|
|
|
110.55
|
|
|
(18.8
|
)
|
|
|
Minneapolis
|
84.88
|
|
|
102.21
|
|
|
(17.0
|
)
|
|
|
San
Francisco area
|
89.54
|
|
|
106.87
|
|
|
(16.2
|
)
|
|
|
Dallas
|
67.34
|
|
|
81.99
|
|
|
(17.9
|
)
|
|
|
Central
California Coast
|
113.95
|
|
|
125.80
|
|
|
(9.4
|
)
|
|
|
San
Antonio
|
71.89
|
|
|
88.21
|
|
|
(18.5
|
)
|
|
|
Myrtle
Beach
|
79.49
|
|
|
82.89
|
|
|
(4.1
|
)
|
|
|
Boston
|
104.22
|
|
|
122.15
|
|
|
(14.7
|
)
|
|
|
San
Diego
|
90.58
|
|
|
123.64
|
|
|
(26.7
|
)
|
|
|
Northern
New Jersey
|
87.35
|
|
|
115.49
|
|
|
(24.4
|
)
|
|
The
following table sets forth certain descriptive information regarding the 85
hotels in which we held ownership interests at December 31, 2009:
|
|
Brand
|
|
|
State
|
|
|
Rooms
|
|
%
Owned
(a)
|
|
Consolidated
Hotels
|
|
|
|
|
|
Birmingham
(b)
|
Embassy
Suites Hotel
|
AL
|
242
|
|
Phoenix
– Biltmore
(b)
|
Embassy
Suites Hotel
|
AZ
|
232
|
|
Phoenix
– Crescent
(b)
|
Sheraton
|
AZ
|
342
|
|
Phoenix
– Tempe
(b)
|
Embassy
Suites Hotel
|
AZ
|
224
|
|
Anaheim
– North
(b)
|
Embassy
Suites Hotel
|
CA
|
222
|
|
Dana
Point – Doheny Beach
|
Doubletree
Guest Suites
|
CA
|
196
|
|
Indian
Wells – Esmeralda Resort & Spa
(b)
|
Renaissance
Resort
|
CA
|
560
|
|
Los
Angeles – International Airport/South
|
Embassy
Suites Hotel
|
CA
|
349
|
97%
|
Milpitas
– Silicon Valley
(b)
|
Embassy
Suites Hotel
|
CA
|
266
|
|
Napa
Valley
(b)
|
Embassy
Suites Hotel
|
CA
|
205
|
|
Oxnard
– Mandalay Beach – Hotel & Resort
(b)
|
Embassy
Suites Hotel
|
CA
|
248
|
|
San
Diego – On the Bay
(b)
|
Holiday
Inn
|
CA
|
600
|
|
San
Francisco – Airport/Burlingame
(b)
|
Embassy
Suites Hotel
|
CA
|
340
|
|
San
Francisco – Airport/South San Francisco
(b)
|
Embassy
Suites Hotel
|
CA
|
312
|
|
San
Francisco – Fisherman’s Wharf
(b)
|
Holiday
Inn
|
CA
|
585
|
|
San
Francisco – Union Square
(b)
|
Marriott
|
CA
|
400
|
|
San
Rafael – Marin County
(b)
|
Embassy
Suites Hotel
|
CA
|
235
|
50%
|
Santa
Barbara – Goleta
(b)
|
Holiday
Inn
|
CA
|
160
|
|
Santa
Monica Beach – at the Pier
(b)
|
Holiday
Inn
|
CA
|
132
|
|
Wilmington
(b)
|
Doubletree
|
DE
|
244
|
90%
|
Boca
Raton
(b)
|
Embassy
Suites Hotel
|
FL
|
263
|
|
Deerfield
Beach – Resort & Spa
(b)
|
Embassy
Suites Hotel
|
FL
|
244
|
|
Ft.
Lauderdale – 17th Street
(b)
|
Embassy
Suites Hotel
|
FL
|
361
|
|
Ft.
Lauderdale – Cypress Creek
(b)
|
Sheraton
Suites
|
FL
|
253
|
|
Jacksonville
– Baymeadows
(b)
|
Embassy
Suites Hotel
|
FL
|
277
|
|
Miami
– International Airport
(b)
|
Embassy
Suites Hotel
|
FL
|
318
|
|
Orlando
– International Airport
(b)
|
Holiday
Inn
|
FL
|
288
|
|
Orlando
– International Drive South/Convention
(b)
|
Embassy
Suites Hotel
|
FL
|
244
|
|
Orlando–
North
(b)
|
Embassy
Suites Hotel
|
FL
|
277
|
|
Orlando
– Walt Disney World Resort
(b)
|
Doubletree
Guest Suites
|
FL
|
229
|
|
St.
Petersburg – Vinoy Resort & Golf Club
(b)
|
Renaissance
Resort
|
FL
|
361
|
|
Tampa
– Tampa Bay
(b)
|
Doubletree
Guest Suites
|
FL
|
203
|
|
Atlanta
– Airport
(b)
|
Embassy
Suites Hotel
|
GA
|
232
|
|
Atlanta
– Buckhead
(b)
|
Embassy
Suites Hotel
|
GA
|
316
|
|
Atlanta
– Galleria
(b)
|
Sheraton
Suites
|
GA
|
278
|
|
Atlanta
– Gateway – Atlanta Airport
(b)
|
Sheraton
|
GA
|
395
|
|
Atlanta
– Perimeter Center
(b)
|
Embassy
Suites Hotel
|
GA
|
241
|
50%
|
Chicago
– Lombard/Oak Brook
(b)
|
Embassy
Suites Hotel
|
IL
|
262
|
50%
|
Chicago
– North Shore/Deerfield
(b)
|
Embassy
Suites Hotel
|
IL
|
237
|
|
Chicago
– Gateway – O’Hare
(b)
|
Sheraton
Suites
|
IL
|
296
|
|
Indianapolis
– North
(b)
|
Embassy
Suites Hotel
|
IN
|
221
|
81%
|
Kansas
City – Overland Park
(b)
|
Embassy
Suites Hotel
|
KS
|
199
|
50%
|
Lexington
– Lexington Green
(b)
|
Hilton
Suites
|
KY
|
174
|
|
Baton
Rouge
(b)
|
Embassy
Suites Hotel
|
LA
|
223
|
|
Hotel
Portfolio Listing (continued)
|
|
Brand
|
|
|
State
|
|
Rooms
|
|
%
Owned
(a)
|
New
Orleans – Convention Center
(b)
|
Embassy
Suites Hotel
|
LA
|
370
|
|
New
Orleans – French Quarter
(b)
|
Holiday
Inn
|
LA
|
374
|
|
Boston
– at Beacon Hill
(b)
|
Holiday
Inn
|
MA
|
303
|
|
Boston
– Marlborough
(b)
|
Embassy
Suites Hotel
|
MA
|
229
|
|
Baltimore
– at BWI Airport
(b)
|
Embassy
Suites Hotel
|
MD
|
251
|
90%
|
Bloomington
(b)
|
Embassy
Suites Hotel
|
MN
|
218
|
|
Minneapolis
– Airport
(b)
|
Embassy
Suites Hotel
|
MN
|
310
|
|
St.
Paul – Downtown
(b)
|
Embassy
Suites Hotel
|
MN
|
208
|
|
Kansas
City – Plaza
|
Embassy
Suites Hotel
|
MO
|
266
|
50%
|
Charlotte
(b)
|
Embassy
Suites Hotel
|
NC
|
274
|
50%
|
Charlotte
– SouthPark
(b)
|
Doubletree
Guest Suites
|
NC
|
208
|
|
Raleigh/Durham
(b)
|
Doubletree
Guest Suites
|
NC
|
203
|
|
Raleigh
– Crabtree
(b)
|
Embassy
Suites Hotel
|
NC
|
225
|
50%
|
Parsippany
(b)
|
Embassy
Suites Hotel
|
NJ
|
274
|
50%
|
Piscataway
– Somerset
(b)
|
Embassy
Suites Hotel
|
NJ
|
221
|
|
Secaucus
– Meadowlands
(b)
|
Embassy
Suites Hotel
|
NJ
|
261
|
50%
|
Philadelphia
– Historic District
(b)
|
Holiday
Inn
|
PA
|
364
|
|
Philadelphia
– Society Hill
(b)
|
Sheraton
|
PA
|
365
|
|
Pittsburgh
– at University Center (Oakland)
(b)
|
Holiday
Inn
|
PA
|
251
|
|
Charleston
– Mills House
(b)
|
Holiday
Inn
|
SC
|
214
|
|
Myrtle
Beach – Oceanfront Resort
(b)
|
Embassy
Suites Hotel
|
SC
|
255
|
|
Myrtle
Beach Resort
(b)
|
Hilton
|
SC
|
385
|
|
Nashville
– Airport – Opryland Area
(b)
|
Embassy
Suites Hotel
|
TN
|
296
|
|
Nashville
– Opryland – Airport (Briley Parkway)
(b)
|
Holiday
Inn
|
TN
|
383
|
|
Austin
(b)
|
Doubletree
Guest Suites
|
TX
|
188
|
90%
|
Austin
– Central
(b)
|
Embassy
Suites Hotel
|
TX
|
260
|
50%
|
Corpus
Christi
(b)
|
Embassy
Suites Hotel
|
TX
|
150
|
|
Dallas
– DFW International Airport South
(b)
|
Embassy
Suites Hotel
|
TX
|
305
|
|
Dallas
– Love Field
(b)
|
Embassy
Suites Hotel
|
TX
|
248
|
|
Dallas
– Market Center
(b)
|
Embassy
Suites Hotel
|
TX
|
244
|
|
Dallas
– Park Central
|
Westin
|
TX
|
536
|
60%
|
Houston
– Medical Center
(b)
|
Holiday
Inn
|
TX
|
287
|
|
San
Antonio – International Airport
(b)
|
Embassy
Suites Hotel
|
TX
|
261
|
50%
|
San
Antonio – International Airport
(b)
|
Holiday
Inn
|
TX
|
397
|
|
San
Antonio – NW I-10
(b)
|
Embassy
Suites Hotel
|
TX
|
216
|
50%
|
Burlington
Hotel & Conference Center
(b)
|
Sheraton
|
VT
|
309
|
|
Vienna
– Premiere at Tysons Corner
(b)
|
Sheraton
|
VA
|
443
|
50%
|
|
|
|
|
|
Canada
|
|
|
|
|
Toronto
– Airport
(b)
|
Holiday
Inn
|
Ontario
|
446
|
|
Toronto
– Yorkdale
(b)
|
Holiday
Inn
|
Ontario
|
370
|
|
|
|
|
|
|
Unconsolidated
Hotels
|
|
|
Salina
– I-70
(b)
|
Holiday
Inn Express
|
KS
|
93
|
50%
|
New
Orleans – French Quarter – Chateau LeMoyne
(b)
|
Holiday
Inn
|
LA
|
171
|
50%
|
|
(a)
|
We
own 100% of the real estate interests unless otherwise
noted.
|
|
(b)
|
This
hotel was encumbered by secured debt or a capital lease obligation at
December 31, 2009.
|
Management
Agreements
At
December 31, 2009, of our 83 Consolidated Hotels, (i) Hilton subsidiaries
managed 54 hotels, (ii) IHG subsidiaries managed 15 hotels, (iii)
Starwood subsidiaries managed nine hotels, (iv) Marriott subsidiaries
managed three hotels, and (v) independent management companies managed two
hotels.
The
management agreements governing the operation of 35 of our Consolidated Hotels
contain the right and license to operate the hotels under the specified
brands. No separate franchise agreements or payment of separate
franchise fees are required for the operation of these 35 hotels. These hotels
are managed by (i) IHG under the Holiday Inn brand, (ii) Starwood under the
Sheraton and Westin brands, (iii) Hilton under the Doubletree and Hilton
brands (but not including the Hilton Suites brand, which has separate franchise
fees) and (iv) Marriott under the Renaissance and Marriott brands.
Management
Fees.
Minimum base management fees generally range from 1% to
3% of total revenue, with the exception of our IHG-managed hotels, whose base
management fees are 2% of total revenue plus 5% of room revenue. Most
of our management agreements also allow for incentive management fees that are
subordinated to a return on our investment basis (generally ranging from 8.5% to
12%). Incentive management fees are generally capped at 2% to 2.5% of total
revenue (except for incentive management fees payable to Marriott, which are not
subject to a cap).
The
management fees we paid with respect to our Consolidated Hotels during each of
the past three years are as follows (in thousands):
|
|
Year
Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Base
fees
|
$
|
26,748
|
|
|
$
|
32,132
|
|
|
$
|
28,021
|
|
|
Incentive
fees
|
|
769
|
|
|
|
4,720
|
|
|
|
5,532
|
|
|
Total
management fees
|
$
|
27,517
|
|
|
$
|
36,852
|
|
|
$
|
33,553
|
|
Term and
Termination.
The management agreements with IHG terminate in
2025 for 14 hotels and 2018 for one hotel. The management
agreements with Marriott terminate in 2025 for our Renaissance hotels and 2029
for our Marriott hotel, and these agreements may be extended to 2055 and 2039,
respectively, at Marriott’s option. The management agreements with
our other managers generally have initial terms of between 5 and 20 years, and
the agreements are generally renewable beyond the initial term only upon the
mutual written agreement of the parties. The management agreements
covering our hotels expire, subject to any renewal rights, as
follows:
|
|
Number
of Management Agreements Expiring in
|
|
Brand
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Thereafter
|
|
Embassy
Suites
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
39
|
|
|
Sheraton
– Westin
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
Doubletree
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
Holiday
Inn
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
Renaissance
– Marriott
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
Hilton
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
Total
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
75
|
|
The
management agreements are generally terminable upon the occurrence of standard
events of default or if the hotel subject to the agreement fails to meet certain
financial expectations. Upon termination by either party for any
reason, we generally will pay all amounts due and owing under the management
agreement through the effective date of termination. If an agreement
is terminated as a result of a default by us, we may also be liable for damages
suffered by the manager. Under the IHG management agreements, we may
be required to pay IHG a monthly replacement management fee equal to the
existing fee structure for up to one year and, thereafter, liquidated damages,
or reinvest the sale proceeds into another hotel to be branded under an IHG
brand. In addition, if we breach the agreement, resulting in a
default and its termination, or otherwise cause or suffer a termination for any
reason other than an event of default by IHG, we may be liable for liquidated
damages under the terms of the management agreement.
Assignment.
Generally,
neither party to a management agreement has the right to sell, assign or
transfer the agreement to an unaffiliated third party without the prior written
consent of the other party to the agreement, which consent shall not be
unreasonably withheld. A change in control of FelCor will generally require each
manager’s consent.
Franchise
Agreements
Forty-eight of our Consolidated Hotels
operate under franchise or license agreements that are separate from our
management agreements. Of these hotels, 47 are operated as Embassy
Suites Hotels and one is operated as a Hilton Suites.
The Embassy Suites Hotels franchise
license agreements to which we are a party grant us the right to the use of the
Embassy Suites Hotels name, system and marks with respect to specified hotels
and establish various management, operational, record-keeping, accounting,
reporting and marketing standards and procedures with which the licensed hotel
must comply. In addition, the franchisor establishes requirements for
the quality and condition of the hotel and its furnishings, furniture and
equipment, and we are obligated to expend such funds as may be required to
maintain the hotel in compliance with those requirements. Typically,
our Embassy Suites Hotels franchise license agreements provide for payment to
the franchisor of a license fee or royalty of 4% to 5% of suite
revenues. In addition, we pay approximately 3.5% to 4% of suite
revenues as marketing and reservation system contributions for the systemwide
benefit of Embassy Suites Hotels. We paid marketing and reservation
systems contributions of $13.0 million, $17.4 million and
$17.0 million for the years ended December 31, 2009, 2008, and 2007,
respectively. We paid license fees with respect to our Consolidated
Hotels, during each of the past three years are as follows (in
thousands):
|
|
Year
Ended December 31,
|
|
|
Brand
|
|
2009
|
|
2008
|
|
2007
|
|
|
Embassy
Suites Hotels
|
$
|
15,452
|
|
$
|
18,569
|
|
$
|
18,047
|
|
|
Hilton
Suites
|
|
252
|
|
|
299
|
|
|
263
|
|
|
Total
|
$
|
15,704
|
|
$
|
18,868
|
|
$
|
18,310
|
|
Our
typical Embassy Suites Hotels franchise license agreement provides for a term of
10 to 20 years, but for the 20 year agreements, we have a right to terminate the
license for any particular hotel on the 10th or 15th anniversary of the
agreement upon payment by us of an amount equal to the fees paid to the
franchisor with respect to that hotel during the two preceding
years. The agreements provide us with no renewal or extension
rights. The agreements are not assignable by us, and a change in
control of the franchisee will constitute a default on our part. In
the event we breach one of these agreements, in addition to losing the right to
use the Embassy Suites Hotels name for the operation of the applicable hotel, we
may be liable, under certain circumstances, for liquidated damages equal to the
fees paid to the franchisor with respect to that hotel during the three
preceding years. The franchise license agreements covering five of
our hotels expire in 2014 and the remaining expire thereafter.
Item
3. Legal Proceedings
At
December 31, 2009, there was no litigation pending or known to be threatened
against us or affecting any of our hotels, other than claims arising in the
ordinary course of business or that otherwise are not considered to be
material. Furthermore, most of these ordinary course of business
claims are substantially covered by insurance. We do not believe that
any claims known to us, individually or in the aggregate, will have a material
adverse effect on us.
Item
4. Submission of Matters to a Vote of Security
Holders
Not applicable.
PART
II
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
Our common stock is traded on the New
York Stock Exchange under the symbol “FCH.” The following table sets forth for
the indicated periods the high and low sale prices for our common stock, as
traded on that exchange and dividends declared per share.
|
|
High
|
|
Low
|
|
Dividends
Declared Per Share
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
$
|
2.19
|
|
$
|
0.72
|
|
$
|
-
|
|
|
|
Second
quarter
|
|
3.60
|
|
|
1.22
|
|
|
-
|
|
|
|
Third
quarter
|
|
5.31
|
|
|
1.86
|
|
|
-
|
|
|
|
Fourth
quarter
|
|
4.90
|
|
|
2.85
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
$
|
15.69
|
|
$
|
11.90
|
|
$
|
0.35
|
|
|
|
Second
quarter
|
|
15.87
|
|
|
10.39
|
|
|
0.35
|
|
|
|
Third
quarter
|
|
10.67
|
|
|
6.27
|
|
|
0.15
|
|
|
|
Fourth
quarter
|
|
7.12
|
|
|
0.66
|
|
|
-
|
|
|
Stockholder
Information
At February 19, 2010, we had
approximately 240 holders of record of our common stock and 36 holders of record
of our Series A preferred stock (which is convertible into common
stock). However, because many of the shares of our common stock and
Series A preferred stock are held by brokers and other institutions on behalf of
stockholders, we believe there are substantially more beneficial holders of our
common stock and Series A preferred stock than record holders. At
February 19, 2010, (other than FelCor) there were 35 holders of FelCor LP
units. FelCor LP units are redeemable for cash, or, at our election,
for shares of FelCor common stock.
IN ORDER TO COMPLY WITH CERTAIN
REQUIREMENTS RELATED TO OUR QUALIFICATION AS A REIT, OUR CHARTER LIMITS, SUBJECT
TO CERTAIN EXCEPTIONS, THE NUMBER OF SHARES OF ANY CLASS OR SERIES OF OUR
CAPITAL STOCK THAT MAY BE OWNED BY ANY SINGLE PERSON OR AFFILIATED GROUP TO 9.9%
OF THE OUTSTANDING SHARES OF THAT CLASS OR SERIES.
Distribution
Information
In order to maintain our qualification
as a REIT, we must make annual distributions to our stockholders of at least 90%
of our taxable income (other than net capital gains). We made no
common distributions for the year ended December 31, 2009. For
the year ended December 31, 2008, 100% of our common distribution
constituted dividend income. For the year ended December 31,
2007, approximately 28% of our common distribution constituted a return of
capital and the remainder ordinary dividend income. Under certain
circumstances, we may be required to make distributions in excess of cash
available for distribution in order to meet REIT distribution
requirements. In that event, we expect to borrow funds or sell assets
for cash to the extent necessary to obtain cash sufficient to make the
distributions required to retain our qualification as a REIT for federal income
tax purposes.
Under terms of our senior notes
indenture our ability to pay dividends and make other payments is limited based
on our ability to satisfy certain financial requirements. Further
discussion of these limitations is contained in the “Liquidity and Capital
Resources” section of Management’s Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 and the Risk Factors in Item
1A.
Issuances
of Unregistered Securities
During
the fourth quarter of 2009, we issued an aggregate of 883 shares of our common
stock, all of which were issued to holders of FelCor LP units, upon redemption
of a like number of FelCor LP units. We relied upon the exemption
from registration provided by Section 4(2) of the Securities Act, since the
redemption transactions did not involve a public offering.
Equity
Compensation Plan Information
The following table sets forth as of
December 31, 2009, information concerning our equity compensation plans,
including the number of shares issuable and available for issuances under our
plans, options, warrants and rights; weighted average exercise price of
outstanding options, warrants and rights; and the number of securities remaining
available for future issuance.
Equity
Compensation Plan Information
|
Plan
category
|
|
|
Number
of shares to be issued upon exercise of outstanding options, warrants and
rights
|
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
|
Number
of shares remaining available for future issuance
|
Equity
compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options
|
|
|
40,000
|
|
|
$
|
18.05
|
|
|
|
|
Unvested
Restricted Stock
|
|
|
2,480,348
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,520,348
|
|
|
|
|
|
|
284,572
|
|
Item
6. Selected Financial Data
The following tables set forth
selected financial data for us that have been derived from our audited
consolidated financial statements and the notes thereto. This data
should be read in conjunction with Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, and our audited consolidated
financial statements and notes thereto, appearing elsewhere in this Annual
Report.
SELECTED
FINANCIAL DATA
(in
thousands, except per share data)
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
Statement
of Operations Data:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
908,701
|
|
|
$
|
1,102,912
|
|
|
$
|
993,834
|
|
|
$
|
963,264
|
|
|
$
|
885,668
|
|
Income
(loss) from continuing operations
(b)
|
|
(105,720
|
)
|
|
|
(63,007
|
)
|
|
|
54,004
|
|
|
|
5,405
|
|
|
|
(22,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
$
|
(2.27
|
)
|
|
$
|
(1.65
|
)
|
|
$
|
0.25
|
|
|
$
|
(0.52
|
)
|
|
$
|
(1.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distributions declared per common share
(c)
|
$
|
-
|
|
|
$
|
0.85
|
|
|
$
|
1.20
|
|
|
$
|
0.80
|
|
|
$
|
0.15
|
|
Hotel
EBITDA
(d)
|
|
211,678
|
|
|
|
311,601
|
|
|
|
303,388
|
|
|
|
300,757
|
|
|
|
260,072
|
|
Cash
flows provided by operating activities
|
|
72,907
|
|
|
|
153,163
|
|
|
|
137,337
|
|
|
|
147,700
|
|
|
|
111,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
2,625,994
|
|
|
$
|
2,512,269
|
|
|
$
|
2,683,835
|
|
|
$
|
2,583,249
|
|
|
$
|
2,920,263
|
|
Total
debt, net of
discount
|
|
1,773,314
|
|
|
|
1,551,686
|
|
|
|
1,475,607
|
|
|
|
1,369,153
|
|
|
|
1,675,280
|
|
__________
(a)
|
All
years presented have been adjusted to reflect sold hotels as discontinued
operations.
|
(b) Included
in income (loss) from continuing operations are the following amounts (in
thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
Impairment
loss
|
$
|
-
|
|
|
$
|
(60,822
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Impairment
loss on unconsolidated hotels
|
|
(2,068
|
)
|
|
|
(12,696
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Hurricane
loss
|
|
-
|
|
|
|
(952
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,481
|
)
|
Hurricane
loss on unconsolidated hotels
|
|
-
|
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Conversion
costs
|
|
(447
|
)
|
|
|
(507
|
)
|
|
|
(491
|
)
|
|
|
-
|
|
|
|
-
|
|
Severance
costs
|
|
(607
|
)
|
|
|
(944
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Lease
termination costs
|
|
(469
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Charges
related to debt extinguishment
|
|
(1,721
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,318
|
)
|
|
|
(5,200
|
)
|
Abandoned
projects
|
|
-
|
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
(33
|
)
|
|
|
(265
|
)
|
Gain
(loss) on sale of assets
|
|
723
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(92
|
)
|
|
|
469
|
|
Gain
on sale of condominiums
|
|
-
|
|
|
|
-
|
|
|
|
18,622
|
|
|
|
-
|
|
|
|
-
|
|
Gain
on involuntary conversion
|
|
-
|
|
|
|
3,095
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(c)
|
We
suspended payment of our common dividend in December 2008 and our
preferred dividend in March 2009 in light of the deepening recession and
dysfunctional capital markets, and the attendant impact on our industry
and us. Our Board of Directors will determine the amount of
future common and preferred dividends for each quarter, if any, based upon
various factors including operating results, economic conditions, other
operating trends, our financial condition and capital requirements, as
well as the minimum REIT distribution requirements. Unpaid
preferred dividends continue to accrue, and accrued and current preferred
dividends must be paid in full prior to payment of any common
dividends.
|
(d)
|
A
more detailed description and computation of Hotel EBITDA is contained in
the “Non-GAAP Financial Measures” section of Management’s Discussion and
Analysis of Financial Condition and Results of Operations in
Item 7.
|
Item
7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
We are
focused on increasing market share, limiting expenses to preserve margins and
managing our balance sheet by extending debt maturities and ensuring sufficient
liquidity. These efforts became more critical as lodging demand began
to contract in 2008. We worked closely with our brand/managers to
develop extensive cost containment initiatives in the face of a lower RevPAR
environment. Many of our hotels have been able to reduce labor costs
permanently, and all of our hotels have trimmed non-critical functions. These
cost reductions enabled us to minimize margin erosion at our hotels in 2009
despite reduced hotel revenues.
We also worked to maintain the
optimal mix of business in our hotels to maximize rate and
occupancy. In 2009, we completed the last phase of a multi-year,
portfolio-wide renovation program designed to enhance the competitive
positioning and value of our hotels. The average market share for our
hotel portfolio grew 1.4% in 2009, following a 3.0% gain in 2008, as a result of
these initiatives.
In June
2009, we completed the final phase of the comprehensive redevelopment of the San
Francisco Marriott-Union Square, which is situated in one of the premier hotel
markets in the United States. The Hotel was rebranded as a Marriott
hotel in April 2009. RevPAR during the second half of 2009 (under the
Marriott flag) increased 64% at this hotel, compared to 2008, and its market
share increased by 105%. Its market share index during the second
half of 2009 was 106% compared to 80% for 2007 (before renovation).
In spite
of the global recession and dysfunctional capital markets, we were able to take
the following steps to build additional flexibility into our capital
structure:
·
|
In
October 2009, we issued $636 million (aggregate principal amount) of
our 10% senior secured notes due 2014. We received
approximately $558 million in net proceeds after original issue
discount, fees and expenses related to the offering. These
proceeds were used to repurchase approximately $428 million (in
aggregate principal amount) of our senior notes due in 2011 and for
general corporate purposes.
|
·
|
In
June 2009, we obtained a $201 million non-recourse term loan secured
by nine hotels that matures in 2011. This loan can be extended
for up to two years, subject to satisfying certain conditions that we
expect to satisfy.
|
·
|
In
June 2009, we repaid and terminated our line of credit. By
terminating our line of credit, we eliminated certain restrictive
corporate debt covenants.
|
·
|
In
March 2009, we refinanced a $116 million secured loan maturing in
2009 with a $120 million non-recourse term loan that matures in 2014,
secured by the same seven hotels.
|
·
|
We
held discussions with current and potential lenders to modify and/or
refinance all of our 2010 debt maturities (many of these discussions are
ongoing).
|
·
|
We
increased cash held on our balance sheet by more than
$200 million.
|
We
suspended our common dividend in December 2008 and our preferred dividend in
March 2009. Although dividends are not paid unless declared by FelCor’s Board of
Directors, unpaid preferred dividends continue to accrue, and accrued and
current preferred dividends must be paid in full prior to payment of any common
dividends. FelCor’s Board of Directors will determine whether to declare future
dividends based upon various factors, including operating results, economic
conditions, other operating trends, our financial condition and capital
requirements, as well as FelCor’s minimum REIT distribution
requirements.
RevPAR
and Hotel Operating Margin
Our 2009
RevPAR declined by 17.6%, compared to 2008. The decline in RevPAR
reflected depressed hotel demand, particularly from business travel, and was
exacerbated by increased hotel supply growth. Occupancy at our
Consolidated Hotels dropped 7.2% because of continued demand declines and
increased supply growth. The occupancy decline drove pricing down,
and ADR declined 11.2% at our Consolidated Hotels. While, in the
fourth quarter of 2009 and the beginning of 2010, we have seen supply growth in
our markets moderate and demand begin to stabilize in certain markets (providing
some stabilization for occupancy), we are still experiencing weak corporate
travel, providing little opportunity to improve ADR.
In response to the weakening economy,
we worked with our brand/managers to implement extensive cost containment
initiatives at our hotels. Many of our hotels have been able to
reduce labor costs permanently, and all of our hotels have trimmed non-critical
functions. These cost reductions have enabled us to minimize margin
erosion at our hotels despite reduced hotel revenues. Our hotel
operating expenses decreased 11.9% compared to 2008. The decline in
expenses reflects various factors including: decreased labor costs and improved
efficiencies (including permanent hotel staffing reductions), decreased other
room expenses and decreased incentive management fees. Employee
headcount at our hotels declined 14% compared to 2008.
Financial
Comparison (in thousands, except RevPAR, Hotel EBITDA margin and percentage
change)
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
%
Change
2009-2008
|
|
2007
|
|
%
Change 2008-2007
|
RevPAR
|
$
|
81.62
|
|
|
$
|
99.00
|
|
|
|
(17.6
|
)%
|
|
$
|
97.85
|
|
|
|
1.2
|
%
|
Hotel
EBITDA
(a)
|
|
211,678
|
|
|
|
311,601
|
|
|
|
(32.1
|
)%
|
|
|
303,388
|
|
|
|
2.7
|
%
|
Hotel
EBITDA margin
(a)
|
|
23.4
|
%
|
|
|
28.3
|
%
|
|
|
(17.3
|
)%
|
|
|
28.0
|
%
|
|
|
1.1
|
%
|
Income
(loss) from continuing operations
(b)
|
|
(105,720
|
)
|
|
|
(63,007
|
)
|
|
|
(67.8
|
)%
|
|
|
54,004
|
|
|
|
(216.7
|
)%
|
|
(a)
|
Hotel
EBITDA and Hotel EBITDA margin are non-GAAP financial
measures. A discussion of the use, limitations and importance
of these non-GAAP financial measures and detailed reconciliations to the
most comparable GAAP measure are found elsewhere in Management’s
Discussion and Analysis of Financial Condition and Results of Operations
under the section “Non-GAAP Financial
Measures.”
|
|
(b)
|
The
following amounts are included in income (loss) from continuing operations
(in thousands):
|
|
|
Year
Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Impairment
loss
|
$
|
-
|
|
|
$
|
(60,822
|
)
|
|
$
|
-
|
|
|
Impairment
loss on unconsolidated hotels
|
|
(2,068
|
)
|
|
|
(12,696
|
)
|
|
|
-
|
|
|
Hurricane
loss
|
|
-
|
|
|
|
(952
|
)
|
|
|
-
|
|
|
Hurricane
loss on unconsolidated hotels
|
|
-
|
|
|
|
(50
|
)
|
|
|
-
|
|
|
Conversion
costs
|
|
(447
|
)
|
|
|
(507
|
)
|
|
|
(491
|
)
|
|
Severance
costs
|
|
(607
|
)
|
|
|
(944
|
)
|
|
|
-
|
|
|
Lease
termination costs
|
|
(469
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Charges
related to debt extinguishment
|
|
(1,721
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Abandoned
projects
|
|
-
|
|
|
|
-
|
|
|
|
(22
|
)
|
|
Gain
on sale of assets
|
|
723
|
|
|
|
-
|
|
|
|
-
|
|
|
Gain
on sale of condominiums
|
|
-
|
|
|
|
-
|
|
|
|
18,622
|
|
|
Gain
on involuntary conversion
|
|
-
|
|
|
|
3,095
|
|
|
|
-
|
|
Results
of Operations
Comparison
of the Years Ended December 31, 2009 and 2008
For the
year ended December 31, 2009, we recorded a $146.8 million net loss
attributable to common stockholders compared to a $158.0 million net loss
attributable to common stockholders in 2008. Our 2009 loss included a
$3.5 million impairment charge and a $910,000 gain from disposition (both
included in discontinued operations). In 2009, we also recorded
losses from debt extinguishment in continuing operations
($1.7 million). Our 2008 loss included a $120.6 million
impairment charge ($60.8 million related to Consolidated Hotels in
continuing operations, $47.1 million related to consolidated hotels in
discontinued operations and $12.7 million related to equity method
investments), $11.1 million in accrued liquidated damages (in discontinued
operations), and hurricane-related expenses of $1.7 million
($1.0 million in continuing operations and $717,000 in discontinued
operations). These 2008 charges were partially offset by a
$3.1 million gain in continuing operations related to involuntary
conversions (associated with the final settlement of 2005 hurricane claims), and
a $1.2 million adjustment to gains in discontinued operations (associated
with prior year hotel sales).
In
2009:
|
·
|
Total revenue
was
$908.7 million, a 17.6% decrease compared to 2008. The
decrease in revenue is attributed principally to a 17.6% decrease in
RevPAR, which was driven by a 7.2% decrease in occupancy and an 11.2%
decrease in ADR.
|
|
·
|
Hotel departmental
expenses
decreased $45.6 million (12.3%) compared to
2008. This expense reduction reflects: (i) the 7.2% decrease in
occupancy; (ii) a $24.6 million decrease in labor costs, which
included permanent reductions related to a decrease in hotel employees;
(iii) reduced non-critical room expenses, such as guest transportation,
in-room amenities, bath linen quantities, and newspaper service; and (iv)
menu modifications and reduced food costs in banquet and restaurant
outlets. As a percentage of total revenue, hotel departmental
expenses increased from 33.8% to 36.0% compared to 2008. While
we made significant reductions in our departmental expenses, they were not
sufficient enough to completely offset the decrease in
revenue.
|
|
·
|
Other property related
costs
decreased $35.4 million (12.0%) compared to
2008. The expense reduction consisted of: (i) a
$12.1 million decrease in labor costs; (ii) a $10.1 million
decrease in marketing assessments, credit card commissions and frequent
guest expense (all of which reflect the decrease in revenue); (iii) a
$3.3 million decrease in repairs and maintenance, partially
attributed to our recently completed renovation program; (iv) reductions
in other non-critical expenses; and (v) improved energy
efficiency. As a percentage of total revenue, other property
related costs increased from 26.7% to 28.5% compared to
2008. While we made significant reductions in our other
property related costs, they were not sufficient enough to completely
offset the decrease in revenue.
|
|
·
|
Management and franchise fees
decreased $12.5 million compared to 2008 reflecting the
decrease in revenue. As a percent of total revenue, franchise
fees and base management fees remained essentially unchanged from 2008 to
2009 (these fees are based on a percentage of
revenue). Incentive management fees, which are based on the
profitability of the hotels, decreased
$4.0 million.
|
|
·
|
Taxes, insurance and lease
expenses
decreased $13.6 million compared to
2008 This decrease relates primarily to: (i) a
$13.2 million decrease in hotel percentage lease expense, attributed
to decreased revenue at our consolidated hotel lessees; (ii) a
$1.2 million decrease in property and general liability insurance,
attributed to improved insurance rates and liability claims experience;
and (iii) a $2.0 million decrease in land leases, attributed to
decreases in percentage rent based on revenue. This was
partially offset by a $2.7 million increase in real estate and other
taxes, largely attributed to successful resolution of property tax appeals
in 2008. As a percentage of total revenue, taxes, insurance and
lease expense increased from 10.2% in 2008 to
10.9%.
|
|
·
|
Corporate expenses
increased $3.5 million compared to 2008. The increase in
corporate expenses is attributed to bonuses awarded in recognition of the
accomplishment of corporate goals including: successful restructuring of
our debt in the face of the dysfunctional debt market and ongoing
recession in 2009 and our portfolio’s relative performance, compared to
our peers, from our efforts to improve market share and limit the effect
of reduced revenue on Hotel EBITDA.
|
|
·
|
Depreciation and amortization
expense
increased $9.9 million, compared to 2008, primarily
attributable to increased depreciation due from the $75.9 million and
$142.9 million of consolidated hotel capital expenditures completed
in 2009 and 2008, respectively.
|
|
·
|
Impairment
charge
. In 2008, we identified six hotels as candidates
to be sold (these hotels continue to be held for investment at December
31, 2009), and tested these hotels for impairment using undiscounted
estimated cash flows over a shortened estimated remaining hold
period. Of the hotels tested, four hotels failed the test, and
as a result, we recorded impairment charges of
$22.3 million. In addition, because of triggering events
in 2008 related to changes in the capital markets, dropping travel demand
and the combined effect on our stock price, we tested all of our hotels to
determine if further assessment for potential impairment was
required. We had one hotel with a short-term ground lease fail
this test. We determined that the book value of this hotel was
not fully recoverable, and as such, recorded a $38.5 million
impairment charge.
|
|
·
|
Other Expense
decreased
$1.7 million compared to 2008. This decrease was primarily
attributable to (i) hurricane related expenses of $1.0 million
at 12 of our hotels affected by hurricanes in 2008; (ii) a decrease
in condominium management fee expenses due to a decrease in condominium
revenue; and (iii) a decrease in severance
costs.
|
|
·
|
Net interest expense
increased $6.8 million compared to 2008. This increase is
primarily attributable to the issuance of our $636 million senior
secured notes in October 2009.
|
|
·
|
Charges related to debt
extinguishment
. In 2009, we retired $428
million of senior
notes maturing in 2011 and terminated our line of credit. We
incurred a $1.7 million charge associated with these
transactions.
|
|
·
|
Equity in loss of
unconsolidated entities
was $4.8 million compared to a
$10.9 million loss in 2008. We recorded $2.1 million
and $12.7 million of impairment charges on our equity method
investments in 2009 and 2008, respectively. The remainder of
the change is attributed to current year operating losses from decreased
revenue at our unconsolidated
hotels.
|
|
·
|
Discontinued operations
primarily consisted of: (i) a $1.8 million adjustment to gains
on sale (resulting from a change in the federal tax law that allowed
recovery of previously paid alternative minimum taxes on gains from hotel
sales in 2006 and 2007) and (ii) the following items related to two hotels
sold in December 2009: a $3.4 million impairment loss, a $911,000
loss on sale (primarily related to selling costs), and $833,000 2009
operating losses. Discontinued operations
in 2008 primarily
consisted of: (i) a $1.2 million adjustment to gain on sales
from revision of the tax liability associated with gains from hotel sales
in 2006 and 2007 and (ii) the following items related to two hotels sold
in December 2009: a $47.1 million impairment loss, an
$11.1 million liquidated damage charge and $717,000 of hurricane
losses.
|
Comparison
of the Years Ended December 31, 2008 and 2007
For the
year ended December 31, 2008, we recorded net loss attributable to common
stockholders of $158.0 million, compared to net income attributable to
common stockholders of $50.3 million in 2007. Our 2008 loss
included a $120.6 million impairment charge ($60.8 million related to
consolidated hotels in continuing operations, $47.1 million related to
consolidated hotels in discontinued operations and $12.7 million related to
equity method investments), $11.1 million accrued liquidated damages (in
discontinued operations), and $1.7 million hurricane related expenses
($952,000 in continuing operations and $717,000 in discontinued
operations). These 2008 charges were partially offset by a
$3.1 million gain (in continuing operations) related to involuntary
conversions from the final settlement of 2005 hurricane claims and a
$1.2 million adjustment to gains in discontinued operations from prior year
hotel sales. Our 2007 net income included (i) gains from sale of
hotels ($39.0 million, $28.0 million in discontinued operations and
$11.0 million in income from unconsolidated entities), (ii) gain from the
sale of condominiums ($18.6 million), and (iii) operating income from
hotels sold in 2007 and 2009 included in discontinued operations
($8.7 million).
Our 2008
results of operations include two hotels acquired in December
2007. As such, our 2008 financial statements reflect increases in
revenues and expenses associated with these hotels that are not reflected in our
2007 financial statements.
In
2008:
|
·
|
Total revenues
increased $109.1 million compared to 2007, of which
$93.8 million related to the two hotels acquired in December
2007. The remainder of the increase is principally attributable
to the 1% increase in RevPAR at our Consolidated Hotels from 2007 to
2008.
|
|
·
|
Hotel departmental
expenses
increased $53.9 million compared to 2007, of which
$47.7 million is attributable to the two hotels acquired in December
2007 and the remainder primarily reflects expenses associated with
increased occupancy compared to 2007. As a percentage of total revenue,
hotel departmental expenses increased from 32.0% to 33.8% compared to
2007. Rooms expense decreased as a percentage of total revenue from 20.0%
to 19.2%, but food and beverage expense increased as a percent of total
revenue from 10.0% to 12.0%, and other operating department expenses
increased as a percent of total revenue from 2.1% to 2.5% compared to
2007. The increases in food and beverage expense and other department
expenses as a percent of total revenue are primarily due to the mix and
nature of the business of the two hotels acquired in December 2007, which
are both resort properties. ADR at these hotels was nearly 40% higher than
the remainder of the portfolio in 2008, which was the principal reason for
the improvement in rooms expense as a percentage of total revenue. Food
and beverage generally has significantly higher expenses as a percent of
revenue than rooms, and those hotels contributed 25% of our food and
beverage revenue during 2008.
|
|
·
|
Other property-related
costs
increased $27.9 million, compared to 2007, of which
$24.0 million related to the two hotels acquired in December
2007. As a percentage of total revenue, other property
operating costs remained essentially unchanged at 26.7% in 2008 compared
to 26.8% in 2007.
|
|
·
|
Management and franchise
fees
increased $3.9 million, compared to 2007, of which
$1.1 million resulted primarily from increases in revenue and
$2.8 million related to the two hotels acquired in December
2007. There was essentially no change in management and
franchise fees as a percentage of revenue in 2008 compared to
2007.
|
|
·
|
Taxes, insurance and lease
expense
decreased $7.3 million compared to 2007, despite a
$4.7 million increase related to the two hotels acquired in December
2007. The decrease from 2007 is primarily related to a decrease
in percentage rent expense of $7.4 million, related to percentage
leases reset in late 2007, a decrease in real estate and other taxes of
$1.1 million, largely from reduced assessed values and successful
resolution of prior year property taxes disputed, and a decrease in
property insurance of
$1.3 million.
|
|
·
|
Depreciation and amortization
expense
increased $30.9 million compared to 2007, of which
increase $8.2 million related to the two hotels acquired in December
2007. The remainder of the increase reflects increased
depreciation associated with hotel capital expenditures
($142.9 million in 2008 and $227.5 million in
2007).
|
|
·
|
Impairment
charge.
In 2008, we identified six hotels as candidates
to be sold (these hotels continue to be held for investment as of December
31, 2009), and we tested these hotels for impairment using undiscounted
estimated cash flows over a shortened estimated remaining hold
period. Of the hotels tested, four hotels failed the test, as a
result of which we recorded impairment charges of
$22.3 million. Because of triggering events in 2008
related to changes in the capital markets, dropping travel demand and the
combined effect on our stock price, we tested all of our hotel assets to
determine if further
|
assessment
for potential impairment was required for any of our hotels. We had
one hotel with a short-term ground lease, in addition to the sale candidates
noted above, fail this test. We determined that the book value of
this hotel was not fully recoverable, and as such, recorded a $38.5 million
impairment charge for this hotel.
|
·
|
Other expenses
increased $3.0 million compared to 2007. This increase was
primarily attributable to: (i) hurricane-related expenses of
$1.0 million at 12 of our hotels affected by hurricanes in 2008,
(ii) severance costs of $944,000 related to the staffing reductions
at our hotels and (iii) amortization of intangible assets of $839,000
related to the hotels acquired in December
2007.
|
|
·
|
Net interest expense
increased $6.3 million compared to 2007. This change is
primarily attributable to: (i) a decrease in interest income of
$4.8 million due to lower cash balances and interest rates earned on
those balances; (ii) an increase in interest expense of
$7.7 million related to the mortgage debt on the two hotels acquired
in December 2007; and (iii) a reduction in capitalized interest of
$3.5 million related to lower renovation-related construction in
progress, all of which was partially offset by lower interest expense of
$9.7 million due to lower interest rates applicable to our
floating-rate debt.
|
|
·
|
Equity in income (loss) from
unconsolidated entities
decreased by $31.3 million compared to
2007, which decrease primarily reflects income received from the gain of
$11.0 million, on the sale of an unconsolidated hotel during the
first quarter of 2007, impairment charges of $12.7 million recorded
in 2008, and resetting several percentage leases in late
2007. The impairment charges were comprised of
$3.3 million (of which our share was $1.7 million) taken under
ASC 360-10-35 and $11.0 million taken under ASC 323-10-35, related to
other-than-temporary declines in value of certain equity method
investments. The impairment under ASC 323-10-35 includes a
charge of $6.6 million for one investment related to a hotel that we
do not intend to sell.
|
|
·
|
Gain on involuntary
conversion.
In 2008, we settled insurance claims
relating to 2005 hurricane losses and realized a related $3.1 million
gain from involuntary conversion.
|
|
·
|
Gain on sale of
condominiums.
In 2007, we finalized the sale of 179 of
the 184 units at our Royale Palms condominium project and recognized a
related $18.6 million gain on sale under the completed contract
method.
|
|
·
|
Discontinued operations
primarily consisted of: (i) a $1.2 million adjustment to gain
on sales resulting from a revision in the tax liability associated with
gains of $71.2 million from hotel sales in 2006 and 2007 and (ii) the
following items related to two hotels sold in December 2009: impairment
losses of $47.1 million, liquidated damages of $11.1 million, and
hurricane losses of $717,000. Discontinued operations for 2007
primarily consisted of: (i) operating income of $8.7 million related
to the hotels we sold in 2009 and 2007, (ii) charges related to early debt
repayment of $902,000 related to the hotels we sold in 2007, and (iii)
gains of $28.0 million related to the sale of 10 hotels during
2007.
|
Non-GAAP
Financial Measures
We refer
in this Annual Report to certain “non-GAAP financial measures.” These
measures, including Hotel EBITDA and Hotel EBITDA margin, are measures of our
financial performance that are not calculated and presented in accordance with
generally accepted accounting principles, or GAAP. The following
tables reconcile these non-GAAP measures to the most comparable GAAP financial
measure. Immediately following the reconciliations, we include a
discussion of why we believe these measures are useful supplemental measures of
our performance and of the limitations upon such measures.
The following tables detail our
computation of Hotel EBITDA, Hotel EBITDA margin, hotel operating expenses and
the reconciliation of total operating expenses to hotel operating expenses with
respect to our Consolidated Hotels at the dates presented.
Hotel
EBITDA and Hotel EBITDA Margin
(dollars
in thousands)
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Total
revenue
|
$
|
908,701
|
|
|
$
|
1,102,912
|
|
|
$
|
993,834
|
|
Other
revenue
|
|
(2,843
|
)
|
|
|
(2,983
|
)
|
|
|
(3,089
|
)
|
Revenue
from acquired hotels
(a)
|
|
-
|
|
|
|
-
|
|
|
|
94,164
|
|
Hotel
revenue
|
|
905,858
|
|
|
|
1,099,929
|
|
|
|
1,084,909
|
|
Hotel
operating expenses
(a)
|
|
(694,180
|
)
|
|
|
(788,328
|
)
|
|
|
(781,521
|
)
|
Hotel
EBITDA
|
$
|
211,678
|
|
|
$
|
311,601
|
|
|
$
|
303,388
|
|
Hotel
EBITDA margin
(b)
|
|
23.4
|
%
|
|
|
28.3
|
%
|
|
|
28.0
|
%
|
|
(a)
|
We
have included amounts for two hotels acquired in December 2007, prior to
our ownership of these hotels, for comparison
purposes.
|
|
(b)
|
Hotel
EBITDA as a percentage of hotel
revenue.
|
Reconciliation
of Total Operating Expenses to Hotel Operating Expenses
(dollars
in thousands)
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Total
operating expenses
|
$
|
902,972
|
|
|
$
|
1,059,293
|
|
|
$
|
886,320
|
|
Unconsolidated
taxes, insurance and lease expense
|
|
8,079
|
|
|
|
8,212
|
|
|
|
7,314
|
|
Consolidated
hotel lease expense
|
|
(41,121
|
)
|
|
|
(54,266
|
)
|
|
|
(61,652
|
)
|
Corporate
expenses
|
|
(24,216
|
)
|
|
|
(20,698
|
)
|
|
|
(20,718
|
)
|
Depreciation
and amortization
|
|
(147,445
|
)
|
|
|
(137,570
|
)
|
|
|
(106,682
|
)
|
Impairment
loss
|
|
-
|
|
|
|
(60,822
|
)
|
|
|
-
|
|
Other
expenses
|
|
(4,089
|
)
|
|
|
(5,821
|
)
|
|
|
(2,825
|
)
|
Expenses
from acquired hotels
(a)
|
|
-
|
|
|
|
-
|
|
|
|
79,764
|
|
Hotel
operating expenses
|
$
|
694,180
|
|
|
$
|
788,328
|
|
|
$
|
781,521
|
|
|
(a)
|
We
have included amounts for two hotels acquired in December 2007, prior to
our ownership of these hotels, for comparison
purposes.
|
The following tables reconcile net
income (loss) attributable to FelCor to Hotel EBITDA and the ratio of operating
income (loss) to total revenue to Hotel EBITDA margin.
Reconciliation
of Net Income (Loss) to Hotel EBITDA
(in
thousands)
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Net
income (loss)
|
$
|
(109,091
|
)
|
|
$
|
(120,487
|
)
|
|
$
|
89,824
|
|
Discontinued
operations
|
|
3,371
|
|
|
|
57,480
|
|
|
|
(35,820
|
)
|
EBITDA
from acquired hotels
(a)
|
|
-
|
|
|
|
-
|
|
|
|
14,400
|
|
Equity
in loss (income) from unconsolidated entities
|
|
4,814
|
|
|
|
10,932
|
|
|
|
(20,357
|
)
|
Consolidated
hotel lease expense
|
|
41,121
|
|
|
|
54,266
|
|
|
|
61,652
|
|
Unconsolidated
taxes, insurance and lease expense
|
|
(8,079
|
)
|
|
|
(8,212
|
)
|
|
|
(7,314
|
)
|
Interest
expense, net
|
|
105,637
|
|
|
|
98,789
|
|
|
|
92,489
|
|
Impairment
loss
|
|
-
|
|
|
|
60,822
|
|
|
|
-
|
|
Charges
related to debt extinguishment
|
|
1,721
|
|
|
|
-
|
|
|
|
-
|
|
Corporate
expenses
|
|
24,216
|
|
|
|
20,698
|
|
|
|
20,718
|
|
Depreciation
and amortization
|
|
147,445
|
|
|
|
137,570
|
|
|
|
106,682
|
|
Retail
space rental and other revenue
|
|
(2,843
|
)
|
|
|
(2,983
|
)
|
|
|
(3,089
|
)
|
Other
expenses
|
|
4,089
|
|
|
|
5,821
|
|
|
|
2,825
|
|
Gain
on involuntary conversion
|
|
-
|
|
|
|
(3,095
|
)
|
|
|
-
|
|
Gain
on sale of condominiums
|
|
-
|
|
|
|
-
|
|
|
|
(18,622
|
)
|
Gain
on sale of assets
|
|
(723
|
)
|
|
|
-
|
|
|
|
-
|
|
Hotel
EBITDA
|
$
|
211,678
|
|
|
$
|
311,601
|
|
|
$
|
303,388
|
|
|
(a)
|
We
have included amounts for two hotels acquired in December 2007, prior to
our ownership of these hotels, for comparison
purposes.
|
Reconciliation
of Ratio of Operating Income (Loss) to Total Revenues to Hotel EBITDA
Margin
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Ratio
of operating income (loss) to total revenues
|
|
0.6
|
%
|
|
|
4.0
|
%
|
|
|
10.8
|
%
|
Other
revenue
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Revenue
from acquired hotels
(a)
|
|
-
|
|
|
|
-
|
|
|
|
7.8
|
|
Unconsolidated
taxes, insurance and lease expense
|
|
(0.9
|
)
|
|
|
(0.7
|
)
|
|
|
(0.7
|
)
|
Consolidated
lease expense
|
|
4.5
|
|
|
|
4.9
|
|
|
|
5.7
|
|
Other
expenses
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.3
|
|
Corporate
expenses
|
|
2.7
|
|
|
|
1.9
|
|
|
|
1.9
|
|
Depreciation
and amortization
|
|
16.3
|
|
|
|
12.5
|
|
|
|
9.8
|
|
Impairment
loss
|
|
-
|
|
|
|
5.5
|
|
|
|
-
|
|
Expenses
from acquired hotels
(a)
|
|
-
|
|
|
|
-
|
|
|
|
(7.3
|
)
|
Hotel
EBITDA margin
|
|
23.4
|
%
|
|
|
28.3
|
%
|
|
|
28.0
|
%
|
|
(a)
|
We
have included amounts for two hotels acquired in December 2007, prior to
our ownership of these hotels, for comparison
purposes.
|
Hotel
EBITDA and Hotel EBITDA Margin
Hotel
EBITDA and Hotel EBITDA margin are commonly used measures of performance in the
hotel industry and give investors a more complete understanding of the operating
results over which our individual hotels and brand/managers have direct
control. We believe that Hotel EBITDA and Hotel EBITDA margin are
useful to investors by providing greater transparency with respect to two
significant measures that we use in our financial and operational
decision-making. Additionally, using these measures facilitates
comparisons with other hotel REITs and hotel owners. We present Hotel
EBITDA and Hotel EBITDA margin by eliminating all revenues and expenses from
continuing operations not directly associated with hotel operations, including
corporate-level expenses, depreciation and amortization, and expenses related to
our capital structure. We eliminate corporate-level costs and
expenses because we believe property-level results provide investors with
supplemental information into the ongoing operational performance of our hotels
and the effectiveness of management on a property-level basis. We
eliminate depreciation and amortization because, even though depreciation and
amortization are property-level expenses, we do not believe that these non-cash
expenses, which are based on historical cost accounting for real estate assets,
and implicitly assume that the value of real estate assets diminishes
predictably over time, accurately reflect an adjustment in the value of our
assets. We also eliminate consolidated percentage rent paid to
unconsolidated entities, which is effectively eliminated by noncontrolling
interests and equity in income from unconsolidated subsidiaries, and include the
cost of unconsolidated taxes, insurance and lease expense, to reflect the entire
operating costs applicable to our Consolidated Hotels. Hotel EBITDA
and Hotel EBITDA margins are presented on a same-store basis including the
historical results of operations from the two hotels acquired in December
2007.
Use
and Limitations of Non-GAAP Measures
Our
management and Board of Directors use Hotel EBITDA and Hotel EBITDA margin to
evaluate the performance of our hotels and to facilitate comparisons between us
and other lodging REITs, hotel owners who are not REITs and other capital
intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in
evaluating hotel-level performance and the operating efficiency of our hotel
managers.
The use
of these non-GAAP financial measures has certain limitations. Hotel
EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable to
Hotel EBITDA and Hotel EBITDA margin as calculated by other real estate
companies. These measures do not reflect certain expenses that we
incurred and will incur, such as depreciation, interest and capital
expenditures. Management compensates for these limitations by
separately considering the impact of these excluded items to the extent they are
material to operating decisions or assessments of our operating
performance. Our reconciliations to the most comparable GAAP
financial measures, and our consolidated statements of operations and cash
flows, include interest expense, capital expenditures, and other excluded items,
all of which should be considered when evaluating our performance, as well as
the usefulness of our non-GAAP financial measures.
These
non-GAAP financial measures are used in addition to and in conjunction with
results presented in accordance with GAAP. They should not be
considered as alternatives to operating profit, cash flow from operations, or
any other operating performance measure prescribed by GAAP. Hotel
EBITDA and Hotel EBITDA margin reflect additional ways of viewing our operations
that we believe, when viewed with our GAAP results and the reconciliations to
the corresponding GAAP financial measures, provide a more complete understanding
of factors and trends affecting our business than could be obtained absent this
disclosure. Management strongly encourages investors to review our
financial information in its entirety and not to rely on a single financial
measure.
Liquidity
and Capital Resources
Operating
Activities
During
2009, hotel operations provided most of the cash needed to meet our cash
requirements including paying normal-course, capital expenditures. For the year
ended December 31, 2009, cash provided by operating activities (primarily
hotel operations), was $72.9 million, which reflects an $80.3 million
decrease, compared to 2008, due primarily to declining hotel revenues. At
December 31, 2009, we had $263.5 million of cash on hand, including
approximately $36.4 million held under management agreements to meet
working capital needs.
The
global recession has resulted in considerable negative pressure on travel
spending. As a result, lodging demand was weak throughout 2009 and contributed
to further reductions of our Consolidated Hotel RevPAR. For 2010, we expect
RevPAR to decline by 1% to 5% compared to 2009, and we expect cash from
operating activities to range from negative $6 million to positive
$6 million.
We are
subject to increases in hotel operating expenses, including wage and benefit
costs, repair and maintenance expenses, utilities and insurance expenses that
can fluctuate disproportionately to revenues. Some of these operating expenses
are difficult to predict and control, which lends volatility in our operating
results. As a result of the decline in RevPAR and weak travel demand beginning
in late 2008, we implemented extensive cost containment initiatives at our
hotels, including reducing headcount and improving productivity and energy
efficiency. If RevPAR continues to decrease and/or Hotel EBITDA margins shrink,
our operations, earnings and/or cash flow could be materially adversely
affected.
Investing
Activities
For the
year ended December 31, 2009, cash used in investing activities decreased
$68.7 million, compared to 2008, due primarily to reduced spending on hotel
capital expenditures.
We made
extensive capital investments in our hotels between 2006 and 2008, and all of
our hotels have been renovated. As a result, we have significantly curtailed
capital spending in 2009. We expect to spend a limited amount of capital in the
near future without compromising the value and quality of our hotels. In 2009,
we completed approximately $75.9 million of capital improvements at our
hotels (of which $37 million was spent on renovation and redevelopment
projects).
Our
liquidity preservation efforts also extend to acquisitions and redevelopment
projects. We did not acquire any hotels during 2008 or 2009. We have also
postponed spending on redevelopment projects, other than to advance ongoing
approval and entitlement processes.
In order
to enhance long-term shareholder value, as part of our strategic plan (as in the
past and as market conditions allow), we intend to sell lower-growth hotels that
no longer meet our investment criteria, thereby freeing our capital for
redeployment (e.g., reduce overall leverage, acquire other hotels or invest in
remaining FelCor properties). We regularly evaluate demand and supply
trends for each hotel, portfolio concentration risk and future capital
needs. We sold two hotels in 2009, and we expect to identify
additional hotels for sale when hotel cash flows recover and the hotel
transaction market improves.
Financing
Activities
For the
year ended December 31, 2009, cash provided by financing activities increased by
$228.9 million compared to 2008, due primarily to net proceeds from a
$201 million secured term loan and net proceeds of $558 million from
the offering of $636 million in aggregate principal amount of our 10%
senior secured notes due 2014 partially offset by the repurchase of
$428 million of our senior notes due in 2011 and repayment of
$128 million on our line of credit.
We
suspended payment of our common dividend in December 2008 and our preferred
dividend in March 2009 (we paid approximately $10 million of preferred dividends
in January 2009). Our Board of Directors will determine the amount of future
common and preferred dividends, if any, based upon various factors including
operating results, economic conditions, other operating trends, our financial
condition and capital requirements, as well as minimum REIT distribution
requirements. Unpaid preferred dividends continue to accrue, and
accrued and current preferred dividends must be paid in full prior to payment of
any common dividends.
For 2010,
we expect negative cash flow after capital expenditures and normally occurring
principal payments, which will be funded from cash on hand.
Capital
markets, and our access to financing on reasonably acceptable terms, have
historically been affected by external events and circumstances, such as
recessions, major bank failures, rising unemployment, shrinking GDP, acts of
terrorism, etc. Events or circumstances of similar magnitude or impact could
adversely affect the availability and cost of our capital going
forward. In addition, if the current recession continues, our
operating cash flow and the availability and cost of capital for our business
will continue to be adversely affected.
Line of Credit
. In
June 2009, we repaid the $128 million balance under our line of credit,
which was then terminated. By terminating our line of credit, we eliminated
certain restrictive corporate debt covenants.
Secured Debt
. At
December 31, 2009, we had consolidated secured debt totaling $1.7 billion,
encumbering 67 of our consolidated hotels with an aggregate net book value of
$2.1 billion (including 14 hotels that were encumbered by our new 10%
senior secured notes issued in October 2009). Except in the case of
our new senior notes, our mortgage debt is recourse solely to the specific
hotels securing the debt. However, a violation of any of the recourse
carve-out provisions, including fraud, misapplication of funds and other
customary recourse carve-out provisions, could cause this debt to become fully
recourse to us. Much of our hotel mortgage debt allows us to
substitute collateral under certain conditions. Most of our mortgage
debt is prepayable, subject to various prepayment, yield maintenance or
defeasance obligations.
Loans
secured by certain of our hotels provide for lock-box arrangements under certain
circumstances. We generally are permitted to retain an amount required to cover
our budgeted hotel operating expenses, taxes, debt service, insurance and
capital expenditure reserves but the remaining revenues would flow through a
lock-box if a specified debt service coverage ratio is not met. With
the exception of one hotel, all of our hotels subject to lock-box provisions
currently exceed the applicable minimum debt service coverage
ratios.
2009 Secured
Financings
.
|
•
|
In
October 2009, we issued $636 million of 10% senior secured notes due
2014. The new senior secured notes are secured by a pledge of our limited
partner interests in FelCor LP, first mortgages and related security
interests on up to 14 hotels and pledges of equity interests in certain
wholly-owned subsidiaries. We received approximately $558 million of
net proceeds from sale of these notes after original issue discount, fees
and expenses related to the offering. The proceeds were used to repurchase
approximately $428 million of our senior notes due in 2011 (all of
our floating-rate senior notes and $213 million of our 8½% senior
notes) and for general corporate
purposes.
|
|
•
|
In
June 2009, we obtained a $201 million non-recourse term loan secured
by nine hotels. This loan bears interest at LIBOR (subject to a 2% floor)
plus 350 basis points, and initially matures in 2011, but can be extended
for as many as two years, subject to satisfying certain conditions that we
expect to satisfy. The proceeds from this loan were used for general
corporate purposes.
|
|
•
|
In
March 2009, we obtained a $120 million loan secured by seven hotels.
The proceeds of the loan were used to repay the balance of an existing
$116 million loan secured by the same properties that would have
matured on April 1, 2009. The new loan matures in 2014 and bears interest
at 9.02%.
|
Maturing Debt
. We
successfully refinanced all of our debt that matured in 2009, extended the
maturity of one loan scheduled to mature in 2010, as well as refinanced nearly
all of our corporate debt that was scheduled to mature in 2011. We
continue to make progress with the various lenders to modify and/or refinance
our remaining secured debt scheduled to mature in May 2010. That debt
consists of eight non-recourse mortgage loans with a combined current balance of
$243 million, secured by 13 hotels (six of which are cross-collateralized
to secure one loan). With regard to these loans, we believe that
extending the maturity dates is in the best interest of the lenders and
FelCor. As a consequence, we intend to seek such
extensions. In addition, we intend to discuss other loan modification
options, as well as explore other refinancing opportunities and potential asset
sales as a means of satisfying our obligations under our other mortgage debt as
they mature. With regard to two of these loans, the mortgaged hotels’
cash flows do not cover debt service, and we stopped funding the short-falls in
December 2009.
Senior Notes
. In
October 2009, we issued $636 million in aggregate principal amount of our
10% senior secured notes due 2014. Our 10% senior notes require that
we satisfy total leverage, secured leverage and interest coverage tests in order
to: (i) incur additional indebtedness except to refinance maturing debt with
replacement debt, as defined under our indentures; (ii) pay dividends in excess
of the minimum distributions required to meet the REIT qualification test; (iii)
repurchase capital stock; or (iv) merge. We are currently restricted from paying
dividends (except to the extent necessary to satisfy the REIT qualification
requirement that we distribute currently at least 90% of our taxable income) and
repurchasing capital stock in connection with these tests. In
connection with the sale of our new senior notes, we amended the indenture
governing our 8½% senior notes (of which $87 million remain outstanding) to
eliminate substantially all of the restrictive covenants, guarantees, collateral
and certain events of default provisions.
Interest Rate Caps
.
To fulfill requirements under certain loans, we entered into interest rate cap
agreements with aggregate notional amounts of $427.2 million at
December 31, 2009 and 2008. These interest rate caps were not designated as
hedges and had insignificant fair values at both December 31, 2009 and
2008, resulting in no significant net earnings impact.
Consolidated debt consisted of the
following (in thousands):
|
Encumbered
|
|
|
|
|
|
December
31,
|
|
Hotels
|
|
Interest
Rate
|
|
Maturity
Date
|
|
2009
|
|
2008
|
Mortgage
debt
(a)
|
7
hotels
|
|
|
8.68
|
%
|
|
May
2010
|
|
$
|
130,379
|
|
$
|
133,704
|
Mortgage
debt
|
6
hotels
|
|
|
8.73
|
|
|
May
2010
|
|
|
112,703
|
|
|
116,285
|
Senior
notes
|
none
|
|
|
8.50
|
(b)
|
|
June
2011
|
|
|
86,604
|
|
|
299,414
|
Mortgage
debt
(a)
|
2
hotels
|
|
|
6.15
|
|
|
June
2011
(c)
|
|
|
14,150
|
|
|
14,641
|
Mortgage
debt
|
9
hotels
|
|
L
+
|
3.50
|
(d)
|
|
August
2011
(e)
|
|
|
200,425
|
|
|
-
|
Line
of credit
|
none
|
|
L
+
|
0.80
|
|
|
August
2011
|
|
|
-
|
|
|
113,000
|
Mortgage
debt
|
12
hotels
|
|
L
+
|
0.93
|
(f)
|
|
November
2011
(g)
|
|
|
250,000
|
|
|
250,000
|
Senior
floating rate notes
|
none
|
|
L
+
|
1.875
|
|
|
December
2011
|
|
|
-
|
|
|
215,000
|
Mortgage
debt
(a)
|
2
hotels
|
|
L
+
|
1.55
|
(h)
|
|
May
2012
(i)
|
|
|
176,555
|
|
|
176,267
|
Mortgage
debt
|
1
hotel
|
|
|
8.77
|
|
|
May
2013
(j)
|
|
|
27,829
|
|
|
28,546
|
Mortgage
debt
|
7
hotels
|
|
|
9.02
|
|
|
April
2014
|
|
|
117,422
|
|
|
117,131
|
Mortgage
debt
(a)
|
5
hotels
|
|
|
6.66
|
|
|
June
- August 2014
|
|
|
70,917
|
|
|
72,517
|
Senior
secured notes
(k)
|
14
hotels
|
|
|
10.00
|
|
|
October
2014
|
|
|
572,500
|
|
|
-
|
Mortgage
debt
|
1
hotel
|
|
|
5.81
|
|
|
July
2016
|
|
|
11,741
|
|
|
12,137
|
Capital
lease and other
|
1
hotel
|
|
|
9.44
|
|
|
various
|
|
|
2,089
|
|
|
3,044
|
Total
|
67
hotels
|
|
|
|
|
|
|
|
$
|
1,773,314
|
|
$
|
1,551,686
|
(a)
|
The
hotels securing this debt are subject to separate loan agreements and are
not cross-collateralized.
|
(b)
|
As
a result of a rating down-grade in February 2009, the interest rate on our
8½% senior notes increased to 9%.
|
(c)
|
In
February 2010, the maturity date on these loans was extended from June
2009 to June 2011.
|
(d)
|
LIBOR
for this loan is subject to a 2% floor.
|
(e)
|
This
loan can be extended for as many as two years, subject to satisfying
certain conditions.
|
(f)
|
We
have purchased an interest rate cap that caps LIBOR at 7.8% and expires in
November 2010 for this notional amount.
|
(g)
|
The
maturity date assumes that we will exercise the remaining one-year
extension option that is exercisable, at our sole discretion, and would
extend the current November 2010 maturity to 2011.
|
(h)
|
We
have purchased interest rate caps that cap LIBOR at 6.5% and expire in May
2010 for aggregate notional amounts of
$177 million.
|
(i)
|
We
have exercised the first of three successive one-year extension options
that extend, at our sole discretion, maturity to 2012.
|
(j)
|
In
February 2010, the maturity date on this loan was extended from May 2010
to May 2013.
|
(k)
|
These
senior notes have $636 million in aggregate principal outstanding and
were sold at a discount that provides an effective yield of 12.875% before
transaction costs.
|
Contractual
Obligations
We have obligations and commitments to
make certain future payments under debt agreements and various
contracts. The following schedule details these obligations at
December 31, 2009 (in thousands):
|
Total
|
|
Less
Than
1
Year
|
|
1
– 3
Years
|
|
|
4
– 5
Years
|
|
After
5
Years
|
Debt
(a)
|
$
|
1,968,145
|
|
$
|
305,938
|
|
$
|
793,555
|
(b)
|
|
$
|
857,914
|
|
$
|
10,738
|
Operating
leases
|
|
404,625
|
|
|
34,349
|
|
|
63,027
|
|
|
|
25,893
|
|
|
281,356
|
Purchase
obligations
|
|
10,025
|
|
|
10,025
|
|
|
-
|
|
|
|
-
|
|
|
-
|
IHG
liquidated damages
|
|
10,054
|
|
|
10,054
|
|
|
-
|
|
|
|
-
|
|
|
-
|
Total
contractual obligations
|
$
|
2,392,849
|
|
$
|
360,366
|
|
$
|
856,582
|
|
|
$
|
883,807
|
|
$
|
292,094
|
(a)
|
Our
long-term debt consists of both secured and unsecured debt and includes
both principal and interest. Interest expense for variable rate
debt was calculated using the interest rate at December 31,
2009.
|
(b)
|
Assumes
the extension through November 2011, at our option, of $250 million
of debt with a current maturity of November 2010 and the extension through
May 2012, at our option, of $176 million of debt with a current
maturity of May 2010.
|
|
Off-Balance
Sheet Arrangements
|
At December 31, 2009, we had
unconsolidated 50% investments in ventures that own an aggregate of
15 hotels (referred to as hotel joint ventures). We had an
unconsolidated 50% investment in a venture that leases one of those
15 hotels (referred to as an operating lessee). Of the remaining
joint venture hotels, we own more than 50% of the operating lessees operating 13
hotels and one hotel is operated without a lease. We also owned a 50%
interest in entities that provide condominium management services and develop
condominiums in Myrtle Beach, South Carolina. None of our directors,
officers or employees owns any interest in any of these joint ventures or
entities. The hotel joint ventures had $215.0 million of
non-recourse mortgage debt relating to these 15 hotels, of which our pro rata
portion was $107.5 million, none of which is reflected as a liability on
our consolidated balance sheet. Our liabilities with regard to
non-recourse debt and the liabilities of our subsidiaries that are members or
partners in joint ventures are generally limited to guarantees of the borrowing
entity’s obligations to pay for the lender’s losses caused by misconduct, fraud
or misappropriation of funds by the venture and other typical exceptions from
the non-recourse provisions in the mortgages, such as for environmental
liabilities.
We have recorded equity in income
(loss) of unconsolidated entities of $(4.8) million, $(10.9) million;
and $20.4 million for the years ended December 31, 2009, 2008 and
2007, respectively, and received distributions of $9.0 million (of which
$2.8 million was provided from operations), $27.8 million (of which
$3.0 million was provided from operations), and $9.8 million (of which
$0.9 million was provided from operations), for the years 2009, 2008 and
2007, respectively. The principal source of income for our hotel
joint ventures is percentage lease revenue from their operating
lessees.
Capital
expenditures on the hotels owned by our hotel joint ventures are generally
funded from the income from operations of these ventures. However, if
a venture has insufficient cash flow to meet operating expenses or make
necessary capital improvements, the venture may make a capital call upon the
venture members or partners to fund such necessary improvements. It
is possible that, in the event of a capital call, the other joint venture member
or partner may be unwilling or unable to make the necessary capital
contributions. Under such circumstances, we may elect to make the
other party’s contribution as a loan to the venture or as an additional capital
contribution by us. Under certain circumstances, a capital
contribution by us may increase our equity investment to greater than 50% and
may require that we consolidate the venture, including all of its assets and
liabilities, into our consolidated financial statements.
With
respect to those ventures that are partnerships, the hotels owned by these
ventures could perform below expectations and result in the insolvency of the
ventures and the acceleration of their debts, unless the members or partners
provide additional capital. In some ventures, the members or partners
may be required to make additional capital contributions or have their interest
in the venture be reduced or offset for the benefit of any party making the
required investment on their behalf. We may be faced with the choice
of losing our investment in a venture or investing additional capital under
circumstances that do not assure a return on that investment.
Inflation
Operators of hotels, in general,
possess the ability to adjust room rates daily to reflect the effects of
inflation. Competitive pressures may, however, require us to reduce
room rates in the near term and may limit our ability to raise room rates in the
future. We are also subject to the risk that inflation will cause
increases in hotel operating expenses disproportionately to
revenues.
Seasonality
The lodging business is seasonal in
nature. Generally, hotel revenues are greater in the second and third
calendar quarters than in the first and fourth calendar quarters, although this
may not be true for hotels in major tourist destinations. Revenues for hotels in
tourist areas generally are substantially greater during tourist season than
other times of the year. Seasonal variations in revenue at our hotels
can be expected to cause quarterly fluctuations in our
revenues. Quarterly earnings also may be adversely affected by events
beyond our control, such as extreme weather conditions, economic factors and
other considerations affecting travel. To the extent that cash flow
from operations is insufficient during any quarter, due to temporary or seasonal
fluctuations in revenues, we may utilize cash on hand or borrowings to satisfy
our obligations.
Critical
Accounting Policies and Estimates
Our discussion and analysis of our
financial condition and results of operations is based upon our consolidated
financial statements, which have been prepared in accordance with
GAAP. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities.
On an on-going basis, we evaluate our
estimates, including those related to bad debts, the carrying value of
investments in hotels, litigation, and other contingencies. We base
our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
We believe the following critical
accounting policies affect the most significant judgments and estimates used in
the preparation of our consolidated financial statements.
•
|
We
are required by GAAP to record an impairment charge when we believe that
an investment in one or more of our hotels held for investment has been
impaired, such that future undiscounted cash flows would not recover the
book basis, or net book value, of the investment. We test for
impairment when certain events occur, including one or more of the
following: projected cash flows are significantly less than
recent historical cash flows; significant changes in legal factors or
actions by a regulator that could affect the value of our hotels; events
that could cause changes or uncertainty in travel patterns; and a current
expectation that, more likely than not, a hotel will be sold or otherwise
disposed of significantly before the end of its previously estimated
useful life. In the evaluation of impairment of our hotels, and
in establishing impairment charges, we made many assumptions and estimates
on a hotel by hotel basis, which included the
following:
|
|
•
|
Annual
cash flow growth rates for revenues and expenses;
|
|
•
|
Holding
periods;
|
|
•
|
Expected
remaining useful lives of assets;
|
|
•
|
Estimates
in fair values taking into consideration future cash flows, capitalization
rates, discount rates and comparable selling prices;
and
|
|
•
|
Future
capital expenditures.
|
|
We
are also required under GAAP to record an impairment charge when one or
more of our investments in unconsolidated subsidiaries experiences an
other-than-temporary decline in fair value. Any decline in fair
value that is not expected to be recovered in the next 12 months is
considered other-than-temporary. We record an impairment in our
equity based investments as a reduction in the carrying value of the
investment. Our estimates of fair values are based on future
cash flow estimates, capitalization rates, discount rates and comparable
selling prices.
|
|
|
|
Changes
in these estimates, future adverse changes in market conditions or poor
operating results of underlying hotels could result in an inability to
recover the carrying value of our hotels or investments in unconsolidated
entities, thereby requiring future impairment charges.
|
|
|
•
|
We
capitalize interest and certain other costs, such as property taxes, land
leases, property insurance and employee costs related to hotels undergoing
major renovations and redevelopments. Such costs capitalized in
2009, 2008 and 2007 were $5.9 million, $6.8 million and
$12.5 million, respectively. We make estimates with regard
to when components of the renovated asset or redevelopment project are
taken out of service or placed in service when determining the appropriate
amount and time to capitalize these costs. If these estimates
are inaccurate, we could capitalize too much or too little with regard to
a particular project.
|
|
|
•
|
Depreciation
expense is based on the estimated useful life of our assets, and
amortization expense for leasehold improvements is the shorter of the
lease term or the estimated useful life of the related
assets. The lives of the assets are based on a number of
assumptions including cost and timing of capital expenditures to maintain
and refurbish the assets, as well as specific market and economic
conditions. While we believe our estimates are reasonable, a
change in the estimated lives could affect depreciation and amortization
expense and net income (loss) or the gain or loss on the sale of any of
our hotels.
|
|
|
•
|
Investments
in hotel properties are stated at acquisition cost and allocated to land,
property and equipment, identifiable intangible assets and assumed debt
and other liabilities at fair value. Any remaining unallocated
acquisition costs are treated as goodwill. Property and
equipment are recorded at fair value based on current replacement cost for
similar capacity and allocated to buildings, improvements, furniture,
fixtures and equipment using appraisals and valuations prepared by
management and/or independent third parties. Identifiable
intangible assets (typically contracts including ground and retail leases
and management and franchise agreements) are recorded at fair value,
although no value is generally allocated to contracts which are at market
terms. Above-market and below-market contract values are based
on the present value of the difference between contractual amounts to be
paid pursuant to the contracts acquired and our estimate of the fair value
of contract rates for corresponding contracts measured over the period
equal to the remaining non-cancelable term of the
contract. Intangible assets are amortized using the
straight-line method over the remaining non-cancelable term of the related
agreements. In making estimates of fair values for purposes of
allocating purchase price, we may utilize a number of sources such as
those obtained in connection with the acquisition or financing of a
property and other market data, including third-party appraisals and
valuations.
|
|
|
•
|
We
make estimates with respect to contingent liabilities for losses covered
by insurance. We record liabilities for self-insured losses
under our insurance programs when it becomes probable that an asset has
been impaired or a liability has been incurred at the date of our
financial statements and the amount of the loss can be reasonably
estimated. We are self-insured for the first $250,000, per
occurrence, of our general liability claims with regard to 57 of our
hotels. We review the adequacy of our reserves for our
self-insured claims on a regular basis. Our reserves are
intended to cover the estimated ultimate uninsured liability for losses
with respect to reported and unreported claims incurred at the end of each
accounting period. These reserves represent estimates at a
given date, generally utilizing projections based on claims, historical
settlement of claims and estimates of future costs to settle
claims. Estimates are also required since there may be delays
in reporting. Because establishment of insurance reserves is an
inherently uncertain process involving estimates, currently established
reserves may not be sufficient. If our insurance reserves of
$3.2 million, at December 31, 2009, for general liability losses
are insufficient, we will record an additional expense in future
periods. Property and catastrophic losses are event-driven
losses and, as such, until a loss occurs and the amount of loss can be
reasonably estimated, no liability is recorded. We had recorded
no contingent liabilities with regard to property or catastrophic losses
at December 31, 2009.
|
|
|
•
|
Our
Taxable REIT Subsidiaries, or TRSs, have cumulative potential future tax
deductions totaling $348.5 million. The net deferred
income tax asset associated with these potential future tax deductions was
$132.4 million. We have recorded a valuation allowance of
$132.3 million related to our TRSs deferred tax asset, because of the
uncertainty of realizing the asset’s benefit. The objectives of
accounting for income taxes are to recognize the amount of taxes payable
or refundable for the current year and deferred tax liabilities and assets
for the future tax consequences of events that have been recognized in an
entity’s financial statements or tax returns. We have
considered future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for a valuation
allowance. In the event we were to determine that we would be
able to realize all or a portion of our deferred tax assets in the future,
an adjustment to the deferred tax asset would increase operating income in
the period such determination was
made.
|
Recent
Changes to Accounting Standards
The FASB recently amended its guidance
surrounding a company’s analysis to determine whether any of its variable
interests constitute controlling financial interests in a variable interest
entity. This analysis identifies the primary beneficiary of a
variable interest entity as the enterprise that has both of the following
characteristics: a) the power to direct the activities of a variable
interest entity that most significantly impact the entity’s economic performance
and b) the obligation to absorb losses of the entity that could potentially
be significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity.
Additionally, an enterprise is required
to assess whether it has an implicit financial responsibility to ensure that a
variable interest entity operates as designed when determining whether it has
the power to direct the activities of the variable interest entity that most
significantly impact the entity’s economic performance. The new
guidance also requires ongoing reassessments of whether an enterprise is the
primary beneficiary of a variable interest entity. The guidance is
effective for the first annual reporting period that begins after
November 15, 2009 and, accordingly, we will reevaluate our interests in
variable interest entities for the period beginning on January 1, 2010 to
determine that the entities are reflected properly in the financial statements
as investments or consolidated entities. We do not anticipate that
the implementation of this guidance will have a material effect on our financial
statements.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
At December 31, 2009, approximately 65%
of our consolidated debt had fixed interest rates. In some cases,
market rates of interest are below the rates we are obligated to pay on our
fixed-rate debt.
The following tables provide
information about our financial instruments that are sensitive to changes in
interest rates. For debt obligations, the tables present scheduled
maturities and weighted average interest rates, by maturity
dates. The fair value of our fixed rate debt indicates the estimated
principal amount of debt having the same debt service requirements that could
have been borrowed at the date presented, at then current market interest
rates.
December
31, 2009
|
|
Expected
Maturity Date
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Thereafter
|
|
Total
|
|
Fair
Value
|
Liabilities
|
(dollars
in thousands)
|
Fixed
rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
$
|
251,840
|
|
$
|
105,955
|
|
$
|
4,539
|
|
$
|
32,742
|
|
$
|
805,126
|
|
$
|
9,376
|
|
$
|
1,209,578
|
|
$
|
1,207,728
|
Average
interest rate
|
|
8.69%
|
|
|
8.62%
|
|
|
7.67%
|
|
|
8.61%
|
|
|
9.61%
|
|
|
5.81%
|
|
|
9.27%
|
|
|
|
Floating
rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
1,978
|
|
|
448,800
|
|
|
177,225
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
628,003
|
|
|
541,773
|
Average
interest rate
(a)
|
|
5.28%
|
|
|
4.01%
|
|
|
4.91%
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4.27%
|
|
|
|
Total
debt
|
$
|
253,818
|
|
$
|
554,755
|
|
$
|
181,764
|
|
$
|
32,742
|
|
$
|
805,126
|
|
$
|
9,376
|
|
$
|
1,837,581
|
|
|
|
Average
interest rate
|
|
8.66%
|
|
|
4.89%
|
|
|
4.98%
|
|
|
8.61%
|
|
|
9.61%
|
|
|
5.81%
|
|
|
7.56%
|
|
|
|
Net
discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64,267
|
)
|
|
|
Total
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,773,314
|
|
|
|
|
(a)
|
The
average floating interest rate represents the implied forward rates in the
yield curve at December 31,
2009.
|
December
31, 2008
|
|
Expected
Maturity Date
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
Thereafter
|
|
Total
|
|
Fair
Value
|
Liabilities
|
(dollars
in thousands)
|
Fixed
rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
$
|
142,427
|
|
$
|
274,014
|
|
$
|
303,029
|
|
$
|
2,415
|
|
$
|
2,590
|
|
$
|
73,245
|
|
$
|
797,720
|
|
$
|
685,512
|
Average
interest rate
|
|
7.27%
|
|
|
8.70%
|
|
|
8.49%
|
|
|
6.49%
|
|
|
6.49%
|
|
|
6.54%
|
|
|
8.15%
|
|
|
|
Floating
rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
285
|
|
|
-
|
|
|
578,000
|
|
|
177,225
|
|
|
-
|
|
|
-
|
|
|
755,510
|
|
|
565,555
|
Average
interest rate
(a)
|
|
4.25%
|
|
|
-
|
|
|
3.91%
|
|
|
4.65%
|
|
|
-
|
|
|
-
|
|
|
4.08%
|
|
|
|
Total
debt
|
$
|
142,712
|
|
$
|
274,014
|
|
$
|
881,029
|
|
$
|
179,640
|
|
$
|
2,590
|
|
$
|
73,245
|
|
$
|
1,553,230
|
|
|
|
Average
interest rate
|
|
7.27%
|
|
|
8.70%
|
|
|
5.48%
|
|
|
4.67%
|
|
|
6.49%
|
|
|
6.54%
|
|
|
6.17%
|
|
|
|
Net
discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,544
|
)
|
|
|
Total
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,551,686
|
|
|
|
|
(a)
|
The
average floating interest rate represents the implied forward rates in the
yield curve at December 31,
2008.
|
We had no
interest rate swap agreements at December 31, 2009 or 2008.
Item
8. Financial Statements and Supplementary
Data
FELCOR
LODGING TRUST INCORPORATED
INDEX
TO FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting
Firm
|
52
|
Consolidated
Balance Sheets – December 31, 2009 and
2008
|
53
|
Consolidated
Statements of Operations for the years ended December 31, 2009, 2008
and 2007
|
54
|
Consolidated
Statements of Comprehensive Income (Loss) for the years ended
December 31, 2009, 2008 and 2007
|
55
|
Consolidated
Statements of Equity for the years ended December 31, 2009, 2008 and
2007
|
56
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008
and 2007
|
58
|
Notes
to Consolidated Financial
Statements
|
59
|
Schedule
III – Real Estate and Accumulated Depreciation as of December 31,
2009
|
85
|
Report of Independent
Registered Public Accounting Firm
To the
Board of Directors and Stockholders of FelCor Lodging Trust
Incorporated
In our
opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, comprehensive income (loss), equity, and
cash flows present fairly, in all material respects, the financial position of
FelCor Lodging Trust Incorporated and its subsidiaries at December 31, 2009
and 2008, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement
schedule, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in Management’s Report on Internal Control over Financial
Reporting (not presented herein) appearing under Item 9A of FelCor Lodging Trust
Incorporated's 2009 Annual Report on Form 10-K. Our responsibility is
to express opinions on these financial statements, on the financial statement
schedule, and on the Company's internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
As
discussed in Note 2 to the consolidated financial statements, the Company
changed the manner in which it computes earnings per share and the manner in
which it accounts for noncontrolling interests effective January 1,
2009.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/
PricewaterhouseCoopers LLP
Dallas,
Texas
February
25, 2010
FELCOR
LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE
SHEETS
December 31,
2009 and 2008
(in
thousands)
|
2009
|
|
2008
|
Assets
|
|
|
|
|
|
|
|
Investment
in hotels, net of accumulated depreciation of $916,604 at
December 31,
2009 and $816,271 at December 31, 2008
|
$
|
2,180,394
|
|
|
$
|
2,279,026
|
|
Investment
in unconsolidated entities
|
|
82,040
|
|
|
|
94,506
|
|
Cash
and cash equivalents
|
|
263,531
|
|
|
|
50,187
|
|
Restricted
cash
|
|
18,708
|
|
|
|
13,213
|
|
Accounts
receivable, net of allowance for doubtful accounts of $406
at
December 31, 2009 and $521 at December 31, 2008
|
|
28,678
|
|
|
|
35,240
|
|
Deferred
expenses, net of accumulated amortization of $14,502 at
December 31,
2009 and $13,087 at December 31, 2008
|
|
19,977
|
|
|
|
5,556
|
|
Other
assets
|
|
32,666
|
|
|
|
34,541
|
|
Total
assets
|
$
|
2,625,994
|
|
|
$
|
2,512,269
|
|
|
|
|
|
|
|
|
|
Liabilities
and Equity
|
|
|
|
|
|
|
|
Debt,
net of discount of $64,267 at December 31, 2009 and $1,544 at
December
31, 2008
|
$
|
1,773,314
|
|
|
$
|
1,551,686
|
|
Distributions
payable
|
|
37,580
|
|
|
|
8,545
|
|
Accrued
expenses and other liabilities
|
|
131,339
|
|
|
|
132,604
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
1,942,233
|
|
|
|
1,692,835
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests in FelCor LP at redemption value, 295 and 296
units issued and outstanding at December 31, 2009 and 2008,
respectively
|
|
1,062
|
|
|
|
545
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value, 20,000 shares authorized:
|
|
|
|
|
|
|
|
Series
A Cumulative Convertible Preferred Stock, 12,880 shares,
liquidation
value of $322,011, issued and outstanding at
December
31, 2009 and 2008
|
|
309,362
|
|
|
|
309,362
|
|
Series
C Cumulative Redeemable Preferred Stock, 68 shares,
liquidation
value
of $169,950, issued and outstanding at December 31, 2009
and
2008
|
|
169,412
|
|
|
|
169,412
|
|
Common
stock, $.01 par value, 200,000 shares authorized and 69,413
shares
issued, including shares in treasury, at December 31,
2009
and
2008
|
|
694
|
|
|
|
694
|
|
Additional
paid-in capital
|
|
2,021,837
|
|
|
|
2,045,482
|
|
Accumulated
other comprehensive income
|
|
23,528
|
|
|
|
15,347
|
|
Accumulated
deficit
|
|
(1,792,822
|
)
|
|
|
(1,645,947
|
)
|
Less:
Common stock in treasury, at cost, of 3,845 and 5,189 shares
at
December 31, 2009 and 2008, respectively
|
|
(71,895
|
)
|
|
|
(99,245
|
)
|
|
|
|
|
|
|
|
|
Total
FelCor stockholders’ equity
|
|
660,116
|
|
|
|
795,105
|
|
Noncontrolling
interests in other partnerships
|
|
22,583
|
|
|
|
23,784
|
|
Total
equity
|
|
682,699
|
|
|
|
818,889
|
|
|
|
|
|
|
|
|
|
Total
liabilities and equity
|
$
|
2,625,994
|
|
|
$
|
2,512,269
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FELCOR
LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS
OF OPERATIONS
For
the Years Ended December 31, 2009, 2008 and 2007
(in
thousands, except per share data)
|
2009
|
|
2008
|
|
2007
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
operating revenue
|
$
|
905,858
|
|
|
$
|
1,099,929
|
|
|
$
|
990,745
|
|
Other
revenue
|
|
2,843
|
|
|
|
2,983
|
|
|
|
3,089
|
|
Total
revenues
|
|
908,701
|
|
|
|
1,102,912
|
|
|
|
993,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
departmental expenses
|
|
326,704
|
|
|
|
372,319
|
|
|
|
318,424
|
|
Other
property operating costs
|
|
258,546
|
|
|
|
293,969
|
|
|
|
266,093
|
|
Management
and franchise fees
|
|
43,221
|
|
|
|
55,720
|
|
|
|
51,863
|
|
Taxes,
insurance and lease expenses
|
|
98,751
|
|
|
|
112,374
|
|
|
|
119,715
|
|
Corporate
expenses
|
|
24,216
|
|
|
|
20,698
|
|
|
|
20,718
|
|
Depreciation
and amortization
|
|
147,445
|
|
|
|
137,570
|
|
|
|
106,682
|
|
Impairment
loss
|
|
-
|
|
|
|
60,822
|
|
|
|
-
|
|
Other
expenses
|
|
4,089
|
|
|
|
5,821
|
|
|
|
2,825
|
|
Total
operating expenses
|
|
902,972
|
|
|
|
1,059,293
|
|
|
|
886,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
5,729
|
|
|
|
43,619
|
|
|
|
107,514
|
|
Interest
expense, net
|
|
(105,637
|
)
|
|
|
(98,789
|
)
|
|
|
(92,489
|
)
|
Charges
related to debt extinguishment
|
|
(1,721
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before equity in income of unconsolidated
entities,
noncontrolling interests and gain on sale of assets
|
|
(101,629
|
)
|
|
|
(55,170
|
)
|
|
|
15,025
|
|
Equity
in income (loss) from unconsolidated entities
|
|
(4,814
|
)
|
|
|
(10,932
|
)
|
|
|
20,357
|
|
Gain
on involuntary conversion
|
|
-
|
|
|
|
3,095
|
|
|
|
-
|
|
Gain
on sale of assets
|
|
723
|
|
|
|
-
|
|
|
|
-
|
|
Gain
on sale of condominiums
|
|
-
|
|
|
|
-
|
|
|
|
18,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
(105,720
|
)
|
|
|
(63,007
|
)
|
|
|
54,004
|
|
Discontinued
operations
|
|
(3,371
|
)
|
|
|
(57,480
|
)
|
|
|
35,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
(109,091
|
)
|
|
|
(120,487
|
)
|
|
|
89,824
|
|
Net
loss (income) attributable to noncontrolling interests in other
partnerships
|
|
297
|
|
|
|
(1,191
|
)
|
|
|
309
|
|
Net
loss (income) attributable to redeemable noncontrolling interests in
FelCor LP
|
|
672
|
|
|
|
2,433
|
|
|
|
(1,094
|
)
|
Net
income (loss) attributable to FelCor
|
|
(108,122
|
)
|
|
|
(119,245
|
)
|
|
|
89,039
|
|
Preferred
dividends
|
|
(38,713
|
)
|
|
|
(38,713
|
)
|
|
|
(38,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to FelCor common stockholders
|
$
|
(146,835
|
)
|
|
$
|
(157,958
|
)
|
|
$
|
50,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted per common share data:
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
$
|
(2.27
|
)
|
|
$
|
(1.65
|
)
|
|
$
|
0.25
|
|
Net
income (loss)
|
$
|
(2.33
|
)
|
|
$
|
(2.57
|
)
|
|
$
|
0.80
|
|
Basic
weighted average common shares outstanding
|
|
63,114
|
|
|
|
61,979
|
|
|
|
61,600
|
|
Diluted
weighted average common shares outstanding
|
|
63,114
|
|
|
|
61,979
|
|
|
|
61,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FELCOR
LODGING TRUST INCORPORATED
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For
the years ended December 31, 2009, 2008 and 2007
(in
thousands)
|
2009
|
|
2008
|
|
2007
|
Net
income (loss)
|
$
|
(109,091
|
)
|
|
$
|
(120,487
|
)
|
|
$
|
89,824
|
|
Foreign
currency translation adjustment
|
|
8,219
|
|
|
|
(12,032
|
)
|
|
|
11,611
|
|
Comprehensive
income (loss)
|
|
(100,872
|
)
|
|
|
(132,519
|
)
|
|
|
101,435
|
|
Comprehensive
loss (income) attributable to noncontrolling interests in other
partnerships
|
|
297
|
|
|
|
(1,191
|
)
|
|
|
309
|
|
Comprehensive
loss (income) to redeemable noncontrolling interests in FelCor
LP
|
|
634
|
|
|
|
2,612
|
|
|
|
(1,342
|
)
|
Comprehensive
income (loss) attributable to FelCor
|
$
|
(99,941
|
)
|
|
$
|
(131,098
|
)
|
|
$
|
100,402
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FELCOR
LODGING TRUST INCORPORATED
CONSOLIDATED
STATEMENTS OF EQUITY
For
the years ended December 31, 2009, 2008 and 2007
(in
thousands)
|
Preferred
Stock
|
|
Common
Stock
|
|
|
|
Accumulated
|
|
|
|
|
|
Noncontrolling
|
|
|
|
|
|
Number
of Shares
|
|
Amount
|
|
Number
of Shares
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
Other
Comprehensive Income (Loss)
|
|
Accumulated
Deficit
|
|
Treasury
Stock
|
|
Interests
in Other Partnerships
|
|
Comprehensive
Income (Loss)
|
|
Total
Equity
|
Balance
at December 31, 2006
|
12,948
|
|
|
$
|
478,774
|
|
|
69,438
|
|
$
|
694
|
|
$
|
2,049,078
|
|
|
$
|
15,500
|
|
|
$
|
(1,409,790
|
)
|
|
$
|
(141,280
|
)
|
|
$
|
28,172
|
|
|
|
|
|
|
$
|
1,021,148
|
|
Issuance of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(8,850
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
9,259
|
|
|
|
-
|
|
|
|
|
|
|
|
409
|
|
Exercise of stock options
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
731
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,569
|
|
|
|
-
|
|
|
|
|
|
|
|
6,300
|
|
Amortization
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,294
|
|
|
|
-
|
|
|
|
-
|
|
|
|
–
|
|
|
|
-
|
|
|
|
|
|
|
|
4,294
|
|
Forfeiture of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
684
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,564
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(1,880)
|
|
Common
stock exchanged for treasury shares
|
-
|
|
|
|
-
|
|
|
(25
|
)
|
|
-
|
|
|
(488
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
488
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Conversion
of operating partnership units into common shares
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Allocation
to redeemable noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,336
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
8,344
|
|
Contribution
from noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,431
|
|
|
|
|
|
|
|
2,431
|
|
Distribution
to noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,030
|
)
|
|
|
|
|
|
|
(5,030)
|
|
Dividends
Declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.20 per common share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(74,930
|
)
|
|
|
-
|
|
|
|
–
|
|
|
|
|
|
|
|
(74,930)
|
|
$1.95
per Series A preferred share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,116
|
)
|
|
|
-
|
|
|
|
–
|
|
|
|
|
|
|
|
(25,116)
|
|
$2.00
per Series C depositary preferred share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
|
-
|
|
|
|
–
|
|
|
|
|
|
|
|
(13,596)
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange translation
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
11,363
|
|
|
|
-
|
|
|
|
-
|
|
|
|
–
|
|
|
$
|
11,363
|
|
|
|
|
|
Net income
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
89,039
|
|
|
|
-
|
|
|
|
(309
|
)
|
|
|
88.730
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,093
|
|
|
|
100,093
|
|
Balance
at December 31, 2007
|
12,948
|
|
|
|
478,774
|
|
|
69,413
|
|
|
694
|
|
|
2,053,761
|
|
|
|
26,871
|
|
|
|
(1,434,393
|
)
|
|
|
(128,504
|
)
|
|
|
25,264
|
|
|
|
|
|
|
|
1,022,467
|
|
Issuance
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(9,013
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
9,572
|
|
|
|
-
|
|
|
|
|
|
|
|
559
|
|
Amortization
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,943
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
4,943
|
|
Forfeiture
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(548
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(548
|
)
|
Conversion
of operating partnership units into common shares
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(20,235
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
20,235
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Allocation
to redeemable noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
16,064
|
|
|
|
329
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
16,393
|
|
Costs
related to shelf registration
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(38
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(38
|
)
|
Contribution
from noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
565
|
|
|
|
|
|
|
|
565
|
|
Distribution
to noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,236
|
)
|
|
|
|
|
|
|
(3,236
|
)
|
Dividends
declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.85
per common share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(53,596
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(53,596
|
)
|
$1.95
per Series A preferred share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,117
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(25,117
|
)
|
$2.00
per Series C depositary preferred share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(13,596
|
)
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
(11,853
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(11,853
|
)
|
|
|
|
|
Net loss
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(119,245
|
)
|
|
|
-
|
|
|
|
1,191
|
|
|
|
(118,054
|
)
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(129,907
|
)
|
|
|
(129,907
|
)
|
Balance
at December 31, 2008
|
12,948
|
|
|
$
|
478,774
|
|
|
69,413
|
|
$
|
694
|
|
$
|
2,045,482
|
|
|
$
|
15,347
|
|
|
$
|
(1,645,947
|
)
|
|
$
|
(99,245
|
)
|
|
$
|
23,784
|
|
|
|
|
|
|
$
|
818,889
|
|
FELCOR
LODGING TRUST INCORPORATED
CONSOLIDATED
STATEMENTS OF EQUITY – (continued)
For
the years ended December 31, 2009, 2008 and 2007
(in
thousands)
|
Preferred
Stock
|
|
Common
Stock
|
|
|
|
Accumulated
|
|
|
|
|
|
Noncontrolling
|
|
|
|
|
|
Number
of Shares
|
|
Amount
|
|
Number
of Shares
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
Other
Comprehensive Income (Loss)
|
|
Accumulated
Deficit
|
|
Treasury
Stock
|
|
Interests
in Other Partnerships
|
|
Comprehensive
Income (Loss)
|
|
Total
Equity
|
Balance
at December 31, 2008
|
12,948
|
|
|
$
|
478,774
|
|
|
69,413
|
|
$
|
694
|
|
$
|
2,045,482
|
|
|
$
|
15,347
|
|
|
$
|
(1,645,947
|
)
|
|
$
|
(99,245
|
)
|
|
$
|
23,784
|
|
|
|
|
|
|
$
|
818,889
|
|
Issuance
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(27,510
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
27,526
|
|
|
|
-
|
|
|
|
|
|
|
|
16
|
|
Amortization
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,139
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
5,139
|
|
Forfeiture
of stock awards
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
63
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(193
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(130
|
)
|
Conversion
of operating partnership units into common shares
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Allocation
to redeemable noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,152
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(1,152
|
)
|
Contribution
from noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
534
|
|
|
|
|
|
|
|
534
|
|
Distribution
to noncontrolling interests
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,606
|
)
|
|
|
|
|
|
|
(1,606
|
)
|
Other
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(168
|
)
|
|
|
-
|
|
|
|
(40
|
)
|
|
|
-
|
|
|
|
168
|
|
|
|
|
|
|
|
(40
|
)
|
Accrued
preferred dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.833
per Series A preferred share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,117
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(25,117
|
)
|
$2.00
per Series C depositary preferred share
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,462
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(12,462
|
)
|
Dividends
declared and paid ($0.167 per
Series
C depository preferred share)
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,134
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(1,134
|
)
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange tra
nslation
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
8,181
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
8,181
|
|
|
|
|
|
Net loss
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
(108,122
|
)
|
|
|
-
|
|
|
|
(297
|
)
|
|
|
(108,419
|
)
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(100,238
|
)
|
|
|
(100,238
|
)
|
Balance
at December 31, 2009
|
12,948
|
|
|
$
|
478,774
|
|
|
69,413
|
|
$
|
694
|
|
$
|
2,021,837
|
|
|
$
|
23,528
|
|
|
$
|
(1,792,822
|
)
|
|
$
|
(71,895
|
)
|
|
$
|
22,583
|
|
|
|
|
|
|
$
|
682,699
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FELCOR
LODGING TRUST INCORPORATED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
the Years Ended December 31, 2009, 2008 and 2007
(in
thousands)
|
2009
|
|
2008
|
|
2007
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
|
(109,091
|
)
|
|
$
|
(120,487
|
)
|
|
$
|
89,824
|
|
Adjustments
to reconcile net income (loss) to net cash provided by
operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
150,088
|
|
|
|
141,668
|
|
|
|
110,765
|
|
Gain
on involuntary conversion
|
|
-
|
|
|
|
(3,095
|
)
|
|
|
-
|
|
Gain
on sale of assets
|
|
(1,633
|
)
|
|
|
(1,193
|
)
|
|
|
(47,195
|
)
|
Amortization
of deferred financing fees and debt discount
|
|
7,120
|
|
|
|
2,959
|
|
|
|
2,663
|
|
Amortization
of unearned officers' and directors' compensation
|
|
5,165
|
|
|
|
4,451
|
|
|
|
4,239
|
|
Equity
in (income) loss from unconsolidated entities
|
|
4,814
|
|
|
|
10,932
|
|
|
|
(20,357
|
)
|
Distributions
of income from unconsolidated entities
|
|
2,789
|
|
|
|
2,973
|
|
|
|
947
|
|
Charges
related to early debt extinguishment
|
|
1,721
|
|
|
|
-
|
|
|
|
901
|
|
Impairment
loss hotels
|
|
3,448
|
|
|
|
107,963
|
|
|
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
5,369
|
|
|
|
3,675
|
|
|
|
(19
|
)
|
Restricted
cash-operations
|
|
345
|
|
|
|
(71
|
)
|
|
|
3,787
|
|
Other
assets
|
|
(1,520
|
)
|
|
|
(386
|
)
|
|
|
6,564
|
|
Accrued
expenses and other liabilities
|
|
4,292
|
|
|
|
3,774
|
|
|
|
(14,782
|
)
|
Net
cash flow provided by operating activities
|
|
72,907
|
|
|
|
153,163
|
|
|
|
137,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of hotels
|
|
-
|
|
|
|
-
|
|
|
|
(50,424
|
)
|
Improvements
and additions to hotels
|
|
(75,949
|
)
|
|
|
(142,897
|
)
|
|
|
(227,518
|
)
|
Additions
to condominium project
|
|
(154
|
)
|
|
|
(752
|
)
|
|
|
(8,299
|
)
|
Proceeds
from sale of hotels
|
|
25,038
|
|
|
|
-
|
|
|
|
165,107
|
|
Proceeds
from sale of condominiums
|
|
-
|
|
|
|
-
|
|
|
|
20,669
|
|
Proceeds
received from property damage insurance
|
|
-
|
|
|
|
2,005
|
|
|
|
2,034
|
|
Purchase
of investment securities
|
|
-
|
|
|
|
-
|
|
|
|
(8,246
|
)
|
Decrease
(increase) in restricted cash-investing
|
|
(3,373
|
)
|
|
|
1,705
|
|
|
|
7,334
|
|
Redemption
of investment securities
|
|
1,719
|
|
|
|
5,397
|
|
|
|
743
|
|
Cash
distributions from unconsolidated entities
|
|
6,200
|
|
|
|
24,858
|
|
|
|
8,812
|
|
Capital
contributions to unconsolidated entities
|
|
(444
|
)
|
|
|
(5,995
|
)
|
|
|
(4,650
|
)
|
Net
cash flow used in investing activities
|
|
(46,963
|
)
|
|
|
(115,679
|
)
|
|
|
(94,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
988,486
|
|
|
|
187,285
|
|
|
|
25,492
|
|
Repayment
of borrowings
|
|
(772,375
|
)
|
|
|
(111,744
|
)
|
|
|
(30,312
|
)
|
Payment
of debt issuance costs
|
|
(19,532
|
)
|
|
|
(21
|
)
|
|
|
(1,187
|
)
|
Exercise
of stock options
|
|
-
|
|
|
|
-
|
|
|
|
6,280
|
|
Distributions
paid to other partnerships’ noncontrolling interests
|
|
(1,606
|
)
|
|
|
(3,236
|
)
|
|
|
(5,030
|
)
|
Contribution
from noncontrolling interests
|
|
534
|
|
|
|
565
|
|
|
|
2,431
|
|
Distributions
paid to redeemable noncontrolling interests in FelCor LP
|
|
-
|
|
|
|
(1,559
|
)
|
|
|
(1,481
|
)
|
Distributions
paid to preferred stockholders
|
|
(9,679
|
)
|
|
|
(38,713
|
)
|
|
|
(38,712
|
)
|
Distributions
paid to common stockholders
|
|
-
|
|
|
|
(75,686
|
)
|
|
|
(68,599
|
)
|
Net
cash flow provided by (used in) financing activities
|
|
185,828
|
|
|
|
(43,109
|
)
|
|
|
(111,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
1,572
|
|
|
|
(1,797
|
)
|
|
|
1,649
|
|
Net
change in cash and cash equivalents
|
|
213,344
|
|
|
|
(7,422
|
)
|
|
|
(66,570
|
)
|
Cash
and cash equivalents at beginning of periods
|
|
50,187
|
|
|
|
57,609
|
|
|
|
124,179
|
|
Cash
and cash equivalents at end of periods
|
$
|
263,531
|
|
|
$
|
50,187
|
|
|
$
|
57,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information — interest paid
|
$
|
85,587
|
|
|
$
|
100,505
|
|
|
$
|
101,657
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FelCor Lodging Trust Incorporated
(NYSE:FCH), or FelCor, is a Maryland corporation operating as a real estate
investment trust, or REIT. We are the sole general partner of, and
the owner of a greater than 99% partnership interest in, FelCor Lodging Limited
Partnership, or FelCor LP, through which we held ownership interests in
85 hotels with approximately 24,000 rooms at December 31,
2009. When used in this report, “we,” “us” and “our” refer to FelCor
and its consolidated subsidiaries, unless otherwise indicated.
Of the 85
hotels in which we had an ownership interest at December 31, 2009, we owned
a 100% interest in 64 hotels, a 90% or greater interest in entities owning four
hotels, an 81% interest in an entity owning one hotel, a 60% interest in an
entity owning one hotel and a 50% interest in entities owning 15
hotels. We consolidate our real estate interests in the 70 hotels in
which we held greater than 50% ownership interests, and we record the real
estate interests of the 15 hotels in which we held 50% ownership interests using
the equity method.
At
December 31, 2009, 84 of the 85 hotels in which we had ownership interests, were
leased to operating lessees, and one 50%-owned hotel was operated without a
lease. We held greater than 50% ownership interests and had direct or
indirect controlling interests in the lessees of 83 of the 84 hotels that were
leased to operating lessees. Because we owned controlling interests
in these lessees (including 13 of the 15 hotels in which we owned 50% of the
real estate interests), we consolidated our lessee interests in these hotels (we
refer to these 83 hotels as our Consolidated Hotels). Of our
Consolidated Hotels, we owned 50% of the real estate interests in each of 13
hotels (we accounted for the ownership in our real estate interests of these
hotels by the equity method) and more than 50% of the real estate interests in
each of the remaining 70 hotels. We also owned 50% of the real estate
interests in each of our two hotels that were either leased to a lessee in which
we owned 50% interest (our lessee interests in this hotel is not consolidated
because we do not have controlling interest) or operated without a
lease.
At
December 31, 2009, we had an aggregate of 65,862,801 shares and units
outstanding, consisting of 65,567,841 shares of FelCor common stock and 294,960
units of FelCor LP limited partnership interest not owned by
FelCor.
The following table illustrates the
distribution of our 83 Consolidated Hotels among our premier brands at
December 31, 2009:
|
Brand
|
|
|
Hotels
|
|
Rooms
|
|
|
Embassy
Suites Hotels
|
|
47
|
|
|
12,132
|
|
|
|
Holiday
Inn
|
|
15
|
|
|
5,154
|
|
|
|
Sheraton
and Westin
|
|
9
|
|
|
3,217
|
|
|
|
Doubletree
|
|
7
|
|
|
1,471
|
|
|
|
Renaissance
and Marriott
|
|
3
|
|
|
1,321
|
|
|
|
Hilton
|
|
2
|
|
|
559
|
|
|
|
Total
hotels
|
|
83
|
|
|
|
|
|
At December 31, 2009, our
Consolidated Hotels were located in the United States (81 hotels in 23 states)
and Canada (two hotels in Ontario), with concentrations in California (15
hotels), Florida (12 hotels) and Texas (11 hotels). In 2009,
approximately 47% of our Hotel EBITDA was generated from hotels in these three
states.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
– (continued)
At December 31, 2009, of our
83 Consolidated Hotels (i) subsidiaries of Hilton Hotels Corporation,
or Hilton, managed 54 hotels, (ii) subsidiaries of InterContinental Hotels
Group, or IHG, managed 15 hotels, (iii) subsidiaries of Starwood Hotels
& Resorts Worldwide Inc., or Starwood, managed nine hotels, (iv)
subsidiaries of Marriott International Inc., or Marriott, managed three hotels,
and (iv) independent management companies managed two hotels.
Our hotels managed by Marriott are
accounted for on a fiscal year comprised of 52 or 53 weeks ending on the Friday
closest to December 31. Their 2009, 2008 and 2007 fiscal years
ended on January 1, 2010, January 2, 2009 and December 28, 2007,
respectively.
2. Summary
of Significant Accounting Policies
Principles of Consolidation
—
Our accompanying consolidated financial statements include the assets,
liabilities, revenues and expenses of all majority-owned
subsidiaries. Intercompany transactions and balances are eliminated
in consolidation. Investments in unconsolidated entities (consisting
entirely of 50 percent owned ventures) are accounted for by the equity
method. None of our less than wholly owned subsidiaries are
considered variable interest entities. We follow the voting interest
model and consolidate entities in which we have greater than 50% ownership
interest and report entities in which we have 50% or less ownership interest
under the equity method.
Use of Estimates
— The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America, requires that management
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Investment in Hotels
— Our
hotels are stated at cost and are depreciated using the straight-line method
over estimated useful lives of 40 years for buildings, 15 to 30 years for
improvements and five to ten years for furniture, fixtures, and
equipment.
We periodically review the carrying
value of each of our hotels to determine if circumstances exist indicating an
impairment in the carrying value of the investment in the hotel or modification
of depreciation periods. If facts or circumstances support the
possibility of impairment of a hotel, we prepare a projection of the
undiscounted future cash flows, without interest charges, over the shorter of
the hotel’s estimated useful life or the expected hold period, and determine if
the investment in such hotel is recoverable based on the undiscounted future
cash flows. If impairment is indicated, we make an adjustment to
reduce the carrying value of the hotel to its then fair value. We use
recent operating results and current market information to arrive at our
estimates of fair value.
Maintenance and repairs are expensed,
and major renewals and improvements are capitalized. Upon the sale or
disposition of a fixed asset, the asset and related accumulated depreciation are
removed from our accounts and the related gain or loss is included in
operations.
Acquisition of Hotels
—
Investments in hotel properties are stated at acquisition cost and allocated to
land, property and equipment, identifiable intangible assets and assumed debt
and other liabilities at fair value. Any remaining unallocated
acquisition costs are treated as goodwill. Property and equipment are
recorded at fair value based on current replacement cost for similar capacity
and allocated to buildings, improvements, furniture, fixtures and equipment
using appraisals and valuations prepared by management and/or independent third
parties. Identifiable intangible assets (typically contracts
including ground and retail leases and management and franchise agreements) are
recorded at fair value, although no value is generally allocated to contracts
which are at market terms. Above-market and below-market contract
values are based on the present value of the
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary
of Significant Accounting Policies — (continued)
difference
between contractual amounts to be paid pursuant to the contracts acquired and
our estimate of the fair value of contract rates for corresponding contracts
measured over the period equal to the remaining non-cancelable term of the
contract. Intangible assets are amortized using the straight-line
method over the remaining non-cancelable term of the related
agreements. In making estimates of fair values for purposes of
allocating purchase price, we may utilize a number of sources such as those
obtained in connection with the acquisition or financing of a property and other
market data, including third-party appraisals and valuations.
Investment in Unconsolidated
Entities
— We own a 50% interest in various real estate ventures in which
the partners or members jointly make all material decisions concerning the
business affairs and operations. Additionally, we also own a preferred equity
interest in one of these real estate ventures. Because we do not
control these entities, we carry our investment in unconsolidated entities at
cost, plus our equity in net earnings or losses, less distributions received
since the date of acquisition and any adjustment for impairment. Our
equity in net earnings or losses is adjusted for the straight-line depreciation,
over the lower of 40 years or the remaining life of the venture, of the
difference between our cost and our proportionate share of the underlying net
assets at the date of acquisition. We periodically review our
investment in unconsolidated entities for other-than-temporary declines in fair
value. Any decline that is not expected to be recovered in the next
12 months is considered other-than-temporary and an impairment is recorded
as a reduction in the carrying value of the investment. Estimated
fair values are based on our projections of cash flows, market capitalization
rates and sales prices of comparable assets.
We track
inception-to-date contributions, distributions and earnings for each of our
unconsolidated investments. We determine the character of cash
distributions from our unconsolidated investments for purposes of our
consolidated statements of cash flows as follows:
|
•
|
Cash
distributions up to the aggregate historical earnings of the
unconsolidated entity are recorded as an operating activity (
i.e.
a distribution of
earnings); and
|
|
•
|
Cash
distributions in excess of aggregate historical earnings are recorded as
an investing activity (
i.e.
a distribution of
contributed capital).
|
Hotels Held for Sale —
We
consider each individual hotel to be an identifiable component of our
business. We do not consider hotels held for sale until it is
probable that the sale will be completed within one year. We had no
hotels held for sale at December 31, 2009 or 2008.
We do not
depreciate hotel assets that are classified as held for sale. Upon
designating a hotel as held for sale, and quarterly thereafter, we review the
carrying value of the hotel and, as appropriate, adjust its carrying value to
the lesser of depreciated cost or fair value, less cost to sell. Any
adjustment in the carrying value of a hotel classified as held for sale is
reflected in discontinued operations. We include in discontinued
operations the operating results of hotels classified as held for sale or that
have been sold.
Cash and Cash Equivalents
—
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
We place cash deposits at major
banks. Our bank account balances may exceed the Federal Depository
Insurance Limits; however, management believes the credit risk related to these
deposits is minimal.
Restricted Cash
—Restricted
cash includes reserves for capital expenditures, real estate taxes, and
insurance, as well as cash collateral deposits for mortgage debt agreement
provisions and capital expenditure obligations on sold hotels.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2.
Summary
of Significant Accounting Policies —
(continued)
Deferred Expenses
— Deferred
expenses, consisting primarily of loan costs, are recorded at
cost. Amortization is computed using a method that approximates the
effective interest method over the maturity of the related debt.
Other Assets —
Other assets
consist primarily of hotel operating inventories, prepaid expenses and
deposits.
Revenue Recognition
— Nearly
100% of our revenue is comprised of hotel operating revenues, such as room
revenue, food and beverage revenue, and revenue from other hotel operating
departments (such as telephone, parking and business centers). These
revenues are recorded net of any sales or occupancy taxes collected from our
guests as earned. All rebates or discounts are recorded, when
allowed, as a reduction in revenue, and there are no material contingent
obligations with respect to rebates or discounts offered by us. All
revenues are recorded on an accrual basis, as earned. Appropriate
allowances are made for doubtful accounts and are recorded as a bad debt
expense. The remainder of our revenue is from condominium management
fee income and other sources.
We do not have any time-share
arrangements and do not sponsor any frequent guest programs for which we would
have any contingent liability. We participate in frequent guest
programs sponsored by the brand owners of our hotels and we expense the charges
associated with those programs (typically consisting of a percentage of the
total guest charges incurred by a participating guest) as
incurred. When a guest redeems accumulated frequent guest points at
one of our hotels, the hotel bills the sponsor for the services provided in
redemption of such points and records revenue in the amount of the charges
billed to the sponsor. We have no loss contingencies or ongoing
obligation associated with frequent guest programs beyond what is paid to the
brand owner following a guest’s stay.
We
recognize revenue from the sale of condominium units using the completed
contract method.
Foreign Currency Translation
— Results of operations for our Canadian hotels are maintained in Canadian
dollars and translated using the weighted average exchange rates during the
period. Assets and liabilities are translated to U.S. dollars using
the exchange rate in effect at the balance sheet date. Resulting
translation adjustments are reflected in accumulated other comprehensive income
and were $23.5 million and $15.3 million as of December 31, 2009
and 2008, respectively.
Capitalized Costs
— We
capitalize interest and certain other costs, such as property taxes, land
leases, property insurance and employee costs relating to hotels undergoing
major renovations and redevelopments. We cease capitalizing these
costs to projects when construction is substantially complete. Such
costs capitalized in 2009, 2008 and 2007, were $5.9 million,
$6.8 million and $12.5 million, respectively.
Net Income (Loss) Per Common
Share
— On January 1, 2009, we adopted a policy that treats unvested
share-based payment awards containing non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) as participating securities for
computation of earnings per share (pursuant to the two-class method, in
accordance with the Accounting Standards codification, or ASC, 260-10-45-59A
through 45-70). We retrospectively adjusted all prior-period earnings
per share data accordingly.
We
compute basic earnings per share by dividing net income (loss) attributable to
common stockholders less dividends declared on unvested restricted stock
(adjusted for forfeiture assumptions) by the weighted average number of common
shares outstanding. We compute diluted earnings per share by dividing
net income (loss) attributable to common stockholders less dividends declared on
unvested restricted stock (adjusted for forfeiture assumptions) by the weighted
average number of common shares and equivalents outstanding. Common
stock equivalents represent shares issuable upon exercise of stock
options.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary
of Significant Accounting Policies — (continued)
For all years presented, our Series A
cumulative preferred stock, or Series A preferred stock, if converted to
common shares, would be antidilutive; accordingly, we do not assume conversion
of the Series A preferred stock in the computation of diluted earnings per
share.
Stock Compensation
¾
We apply a
fair-value-based measurement method in accounting for share-based payment
transactions with employees
Derivatives
¾
We recognize
derivatives as either assets or liabilities on the balance sheet and measure
those instruments at fair value. Additionally, the fair value
adjustments will affect either equity or net income, depending on whether the
derivative instrument qualifies as a hedge for accounting purposes and the
nature of the hedging activity.
Segment Information
¾
We have determined
that our business is conducted in one operating segment.
Distributions and Dividends
—
We declared aggregate common dividends of $0.85 per share in
2008. We suspended payment of our common dividend in December
2008 and our preferred dividend in March 2009 in light of the deepening
recession and dysfunctional capital markets, and the attendant impact on our
industry and FelCor. Our Board of Directors will determine the amount
of future common and preferred dividends for each quarter, if any, based upon
various factors including operating results, economic conditions, other
operating trends, our financial condition and capital requirements, as well as
the minimum REIT distribution requirements. Unpaid preferred
dividends continue to accrue, and accrued and current preferred dividends must
be paid in full prior to payment of any common dividends. Our ability
to make distributions is dependent on our receipt of quarterly distributions
from FelCor LP, and FelCor LP’s ability to make distributions is dependent upon
the results of operations of our hotels.
Noncontrolling Interests
—
Effective January 1, 2009, we adopted an accounting policy establishing and
expanding accounting and reporting standards for noncontrolling interests (which
were formerly known as minority interests) in a subsidiary and the
deconsolidation of a subsidiary. As a result of our adoption of this
policy, amounts previously reported as minority interests in other partnerships
on our balance sheets are now presented as noncontrolling interests in other
partnerships within equity. There has been no change in the
measurement of this line item from amounts previously
reported. Minority interests in FelCor LP have also been
recharacterized as noncontrolling interests, but because of the redemption
feature of these units, have been included in the mezzanine section (between
liabilities and equity) on our accompanying consolidated balance
sheets. These units are redeemable at the option of the holders for a
like number of shares of our common stock or, at our option, the cash equivalent
thereof. The measurement of noncontrolling interests in FelCor LP is
now presented at the fair value of the units as of the balance sheet date (based
on our stock price as of the balance sheet date times the number of outstanding
units). Previously, these interests were measured based on the
noncontrolling interests in FelCor LP’s pro rata share of total common
interests. The revised presentation and measurement has been adopted
retrospectively.
Noncontrolling
interests in other partnerships represent the proportionate share of the equity
in other partnerships not owned by us. Noncontrolling interests in
FelCor LP represents the redemption value of FelCor LP units not owned by
us. We allocate income and loss to noncontrolling interests in FelCor
LP and other partnerships based on the weighted average percentage ownership
throughout the year.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary
of Significant Accounting Policies — (continued)
Income Taxes
— We have
elected to be treated as a REIT under Sections 856 to 860 of the Internal
Revenue Code. We generally lease our hotels to wholly-owned taxable
REIT subsidiaries, or TRSs, that are subject to federal and state income
taxes. Through these lessees we record room revenue, food and
beverage revenue and other revenue related to the operations of our
hotels. We account for income taxes using the asset and liability
method under which deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. A valuation allowance is recorded for net
deferred tax assets that are not expected to be realized.
We
determine whether it is “more-likely-than-not” that a tax position will be
sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position. Once it is determined that a position meets the
more-likely-than-not recognition threshold, the position is measured to
determine the amount of benefit to recognize in the financial
statements. We apply this policy to all tax positions related to
income taxes.
3. Investment
in Hotels
Investment in hotels consisted of the
following (in thousands):
|
December
31,
|
|
2009
|
|
2008
|
Building
and
improvements
|
$
|
2,265,846
|
|
|
$
|
2,251,052
|
|
Furniture,
fixtures and equipment
|
|
591,994
|
|
|
|
580,797
|
|
Land
|
|
226,436
|
|
|
|
233,558
|
|
Construction
in
progress
|
|
12,722
|
|
|
|
29,890
|
|
|
|
3,096,998
|
|
|
|
3,095,297
|
|
Accumulated
depreciation
|
|
(916,604
|
)
|
|
|
(816,271
|
)
|
|
$
|
2,180,394
|
|
|
$
|
2,279,026
|
|
In 2009, we wrote off fully depreciated
furniture, fixtures and equipment aggregating approximately
$17.5 million.
We invested $75.9 million and
$142.9 million in additions and improvements to our consolidated hotels
during the years ended December 31, 2009 and 2008, respectively.
4.
|
Acquisitions
of Hotels
|
In
December 2007, we acquired the Renaissance Esmeralda Resort & Spa in Indian
Wells, California and the Renaissance Vinoy Resort & Golf Club in
St. Petersburg, Florida.
The following unaudited pro forma
financial data for the year ended December 31, 2007 is presented to illustrate
the estimated effects of these acquisitions as if they had occurred as of the
beginning of 2007. The pro forma information includes adjustments for
the results of operations for operating properties (operating expenses,
depreciation and amortization and interest expense). The following
unaudited pro forma financial data is not necessarily indicative of the results
of operations if the acquisition had been completed on the assumed date (in
thousands):
Total
revenues
|
$
|
1,087,998
|
|
Net
income
|
|
82,780
|
|
Earnings
per share – basic
|
|
0.69
|
|
Earnings
per share – diluted
|
|
0.69
|
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
5. Impairment
Charges
Our hotels are comprised of operations
and cash flows that can clearly be distinguished, operationally and for
financial reporting purposes, from the remainder of our
operations. Accordingly, we consider our hotels to be components for
purposes of determining impairment charges and reporting discontinued
operations.
A hotel
held for investment is tested for impairment whenever changes in circumstances
indicate its carrying value may not be recoverable. The test is
conducted using the undiscounted cash flows for the shorter of the estimated
remaining holding periods or the useful life of the hotel. When
testing for recoverability of hotels held for investment, we use projected cash
flows over the expected hold period. Those hotels held for investment
that fail the impairment test described in ASC 360-10-35 are written down to
their then current estimated fair value, before any selling expense, and
continue to be depreciated over their remaining useful lives.
We
consider a sale to be probable within the next twelve months (for purposes of
determining whether a hotel is held for sale) in the period the buyer completes
its due diligence review of the asset, we have an executed contract for sale,
and we have received a substantial non-refundable deposit. We test
hotels held for sale for impairment each reporting period and record them at the
lower of their carrying amounts or fair value less costs to
sell. Once we designate a hotel as held for sale it is not
depreciated. We did not have any hotels designated as held for sale
at December 31, 2009 or 2008.
When
determining fair value for purposes of determining impairment, we use a
combination of historical and projected cash flows and other available market
information, such as recent sales prices for similar assets in specific
markets. The cash flows used for determining fair values are
discounted using a reasonable capitalization rate, or as earlier noted, based on
the local market conditions using recent sales of similar assets. In
some cases, we are able to establish fair value based on credible offers
received from prospective buyers.
In 2008, we identified eight hotels as
candidates to be sold thereby reducing our estimated remaining hold period for
these hotels. We tested these eight hotels for impairment using
undiscounted estimated cash flows over a shortened estimated remaining hold
period. Of the hotels tested, four failed the test, which resulted in
$69.5 million of impairment charges (of which $47.1 million is
included in discontinued operations), to write down these hotel assets to our
then current estimate of their fair market value before selling
expenses. We recorded a $3.4 million impairment charge (included
in discontinued operations) on two of these sale candidates in 2009 because they
failed updated impairment tests. The valuations used in the 2009
impairment charges were based on third-party offers to purchase (a Level 2
input) at a price less than our previously estimated fair
value. These two hotels were sold in December 2009 for gross proceeds
of $26 million.
Because of triggering events in 2008
related to changes in the capital markets, drop in travel demand and the
combined effect on our stock price, we tested all of our hotel assets to
determine if further assessment for potential impairment was required for any of
our hotels. We had one hotel with a short-term ground lease, in
addition to the sale candidates noted above, fail this test. We
determined the book value of this hotel was not fully recoverable, and as such,
recorded a $38.5 million impairment charge.
In 2008, one of our unconsolidated
investees recorded a $3.3 million impairment charge on its long-lived
assets (of which our share was $1.7 million). We also recorded
impairment charges of $11.0 million related to other-than-temporary
declines in value of certain equity method investments. This includes
an impairment charge of $6.6 million for one investment related to a hotel
that we do not intend to sell. In accordance with ASC 323-10-35,
other-than temporary declines in fair value of our investment in unconsolidated
entities result in reductions in the carrying value of these
investments. We consider a decline in value in our equity method
investments that is not estimated to recover within 12 months to be
other-than-temporary.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
5. Impairment
Charges – (continued)
We may be subject to additional
impairment charges in the event that operating results of individual hotels are
materially different from our forecasts, the economy and lodging industry
weakens, or if we shorten our contemplated holding period for certain of our
hotels.
6. Discontinued
Operations
The results of operations of the two
hotels we sold in 2009 and the 11 hotels we sold in 2007 are presented in
discontinued operations for the periods presented. We had no hotels
held for sale at December 31, 2009 or 2008.
Results
of operations for the hotels included in discontinued operations are as
follows:
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Hotel
operating revenue
|
$
|
20,185
|
|
|
$
|
26,864
|
|
|
$
|
54,570
|
|
Operating
expenses
(a)
|
|
(24,466
|
)
|
|
|
(85,537
|
)
|
|
|
(45,822
|
)
|
Operating
income (loss)
|
|
(4,281
|
)
|
|
|
(58,673
|
)
|
|
|
8,748
|
|
Direct
interest costs, net
|
|
-
|
|
|
|
-
|
|
|
|
(14
|
)
|
Loss
on the early extinguishment of debt
|
|
-
|
|
|
|
-
|
|
|
|
(902
|
)
|
Gain
on sale, net of tax
|
|
910
|
|
|
|
1,193
|
|
|
|
27,988
|
|
Income
(loss) from discontinued operations
|
$
|
(3,371
|
)
|
|
$
|
(57,480
|
)
|
|
$
|
35,820
|
|
|
(a)
|
Includes
impairment charges of $3.4 million and $47.1 million for the
years ended December 31, 2009 and 2008, respectively, and liquidated
damages of $11.1 million for the year ended December 31,
2008.
|
In 2009, we recorded a
$1.8 million adjustment to gains on sale resulting from a change in the
federal tax law that allowed for the recovery of previously paid alternative
minimum taxes on gains from hotel sales in 2006 and 2007. This was
offset by net losses of $911,000 (primarily related to selling costs) recorded
on the sale of two hotels.
In 2008, we recorded a revision in
income tax related to prior year gains on sales of hotels, which resulted in
additional gains of $1.2 million related to these sales.
In 2007, we sold 11 hotels for
aggregate gross proceeds of $191.0 million. We owned 100%
ownership interests in 10 of these hotels and recorded a gain on sale of
$28.0 million, which was net of approximately $1.8 million in
taxes. With respect to one hotel sold in 2007, although the operating
income and expenses were consolidated because of our majority ownership of the
operating lessee, the hotel was owned by a 50% owned unconsolidated venture, and
the venture recorded a gain of $15.6 million, of which we recorded our pro
rata share as income from unconsolidated entities.
7. Condominium
Project
Development
of our 184-unit Royale Palms condominium project in Myrtle Beach, South Carolina
was completed in 2007. In 2007, we recognized gains under the
completed contract method of $18.6 million, net of $1.0 million of
tax, from the sale of 179 units. We expect that the remaining five
condominium units will be sold on a selective basis to maximize the selling
price. We obtained a construction loan in 2005 to build this project,
which we repaid in May 2007 from proceeds of condominium sales.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investment
in Unconsolidated Entities
We owned 50% interests in joint
venture entities that owned 15 hotels and 17 hotels at December 31, 2009
and 2008, respectively. We also owned a 50% interest in entities that
own real estate in Myrtle Beach, South Carolina, provide condominium management
services, and lease one hotel. We account for our investments in
these unconsolidated entities under the equity method. We do not have
any majority-owned subsidiaries that are not consolidated in our financial
statements. We make adjustments to our equity in income from
unconsolidated entities related to the difference between our basis in
investment in unconsolidated entities compared to the historical basis of the
assets recorded by the joint ventures.
The
following table summarizes combined financial information for our unconsolidated
entities
(in
thousands):
|
December 31,
|
|
2009
|
|
2008
|
Investment
in hotels, net of accumulated depreciation
|
$
|
259,977
|
|
$
|
290,504
|
Total
assets
|
$
|
279,611
|
|
$
|
317,672
|
Debt
|
$
|
214,963
|
|
$
|
224,440
|
Total
liabilities
|
$
|
220,389
|
|
$
|
233,296
|
Equity
|
$
|
59,222
|
|
$
|
84,376
|
Our unconsolidated entities’ debt at
December 31, 2009, consisted entirely of non-recourse mortgage
debt.
The following table sets forth
summarized combined statement of operations information for our unconsolidated
entities (in thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Total
revenues
|
$
|
66,261
|
|
|
$
|
90,113
|
|
|
$
|
103,801
|
|
Net
income (loss)
|
$
|
(4,988
|
)
(a)
|
|
$
|
3,946
|
(a)
|
|
$
|
38,908
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to FelCor
|
$
|
(2,494
|
)
|
|
$
|
1,973
|
|
|
$
|
19,173
|
|
Impairment
loss
|
|
(476
|
)
(c)
|
|
|
(11,038
|
)
(d)
|
|
|
-
|
|
Additional
gain on sale related to basis difference
|
|
-
|
|
|
|
-
|
|
|
|
3,336
|
(b)
|
Tax
related to sale of asset by venture
|
|
-
|
|
|
|
-
|
|
|
|
(310
|
)
(e)
|
Depreciation
of cost in excess of book value
|
|
(1,844
|
)
|
|
|
(1,867
|
)
|
|
|
(1,842
|
)
|
Equity
in income (loss) from unconsolidated entities
|
$
|
(4,814
|
)
|
|
$
|
(10,932
|
)
|
|
$
|
20,357
|
|
|
(a)
|
Net
income (loss) included impairment charges of $3.2 million for 2009
and $3.3 million for 2008. These impairments were based on
sales contracts (a Level 2 input) for two hotels owned by one of our joint
ventures.
|
|
(b)
|
In
the first quarter of 2007, a 50% owned joint venture entity sold its
Embassy Suites Hotel in Covina, California. The sale of this
hotel resulted in a gain of $15.6 million for this
venture. Our basis in this unconsolidated hotel was lower than
the venture’s basis, resulting in an additional gain on
sale.
|
|
(c)
|
As
a result of an impairment charge recorded by one of our joint ventures,
the net book value of the joint venture’s assets no longer supported the
recovery of our investment. Therefore, we recorded an
additional impairment charge to reduce our investment in this joint
venture to zero. We have no obligation to provide this joint
venture with future funding.
|
|
(d)
|
Represents
an $11.0 million impairment charge related to other-than-temporary
declines in fair value related to certain unconsolidated
entities.
|
|
(e)
|
In
the third quarter of 2007, a 50% owned joint venture entity sold its
Hampton Inn in Hays, Kansas for an insignificant book
gain. This sale caused FelCor to incur a $310,000 tax
obligation.
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investment
in Unconsolidated Entities — (continued)
The
following table summarizes the components of our investment in unconsolidated
entities (in thousands):
|
December
31,
|
|
2009
|
|
|
2008
|
|
Hotel
related
investments
|
$
|
18,969
|
|
|
$
|
28,762
|
|
Cost
in excess of book value of hotel investments
|
|
52,429
|
|
|
|
54,273
|
|
Land
and condominium investments
|
|
10,642
|
|
|
|
11,471
|
|
|
$
|
82,040
|
|
|
$
|
94,506
|
|
The following table summarizes the
components of our equity in income (loss) from unconsolidated entities (in
thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Hotel
related
investments
|
$
|
(4,291
|
)
|
|
$
|
(10,366
|
)
|
|
$
|
20,500
|
|
Other
investments
|
|
(523
|
)
|
|
|
(566
|
)
|
|
|
(143
|
)
|
Equity
in income (loss) from unconsolidated entities
|
$
|
(4,814
|
)
|
|
$
|
(10,932
|
)
|
|
$
|
20,357
|
|
In 2009,
a 50%-owned joint venture entity sold the Ramada Hotel in Hays, Kansas, and the
Holiday Inn in Salina, Kansas, for aggregate gross proceeds of
$5.3 million. All proceeds from this sale were used to repay the
associated mortgage debt.
In 2008,
a 50%-owned joint venture refinanced a non-recourse loan secured by eight
unconsolidated hotels. Of the $140 million in gross proceeds,
$87 million were used to repay maturing debt, and the balance was either
retained in the joint venture or distributed to the joint venture
partners.
In 2008, a 50%-owned joint venture
repaid (with contributions from the joint venturers) a maturing
$12.0 million non-recourse loan secured by one hotel. Our
contribution was $6.0 million.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
9. Debt
Consolidated
debt consisted of the following (in thousands):
|
Encumbered
|
|
|
|
|
|
December
31,
|
|
Hotels
|
|
Interest
Rate
|
|
Maturity
Date
|
|
2009
|
|
2008
|
Mortgage
debt
(a)
|
7
hotels
|
|
|
8.68
|
%
|
|
May
2010
|
|
$
|
130,379
|
|
$
|
133,704
|
Mortgage
debt
|
6
hotels
|
|
|
8.73
|
|
|
May
2010
|
|
|
112,703
|
|
|
116,285
|
Senior
notes
|
none
|
|
|
8.50
|
(b)
|
|
June
2011
|
|
|
86,604
|
|
|
299,414
|
Mortgage
debt
(a)
|
2
hotels
|
|
|
6.15
|
|
|
June
2011
(c)
|
|
|
14,150
|
|
|
14,641
|
Mortgage
debt
|
9
hotels
|
|
L
+
|
3.50
|
(d)
|
|
August
2011
(e)
|
|
|
200,425
|
|
|
-
|
Line
of credit
|
none
|
|
L
+
|
0.80
|
|
|
August
2011
|
|
|
-
|
|
|
113,000
|
Mortgage
debt
|
12
hotels
|
|
L
+
|
0.93
|
(f)
|
|
November
2011
(g)
|
|
|
250,000
|
|
|
250,000
|
Senior
floating rate notes
|
none
|
|
L
+
|
1.875
|
|
|
December
2011
|
|
|
-
|
|
|
215,000
|
Mortgage
debt
(a)
|
2
hotels
|
|
L
+
|
1.55
|
(h)
|
|
May
2012
(i)
|
|
|
176,555
|
|
|
176,267
|
Mortgage
debt
|
1
hotel
|
|
|
8.77
|
|
|
May
2013
(j)
|
|
|
27,829
|
|
|
28,546
|
Mortgage
debt
|
7
hotels
|
|
|
9.02
|
|
|
April
2014
|
|
|
117,422
|
|
|
117,131
|
Mortgage
debt
(a)
|
5
hotels
|
|
|
6.66
|
|
|
June
- August 2014
|
|
|
70,917
|
|
|
72,517
|
Senior
secured notes
(k)
|
14
hotels
|
|
|
10.00
|
|
|
October
2014
|
|
|
572,500
|
|
|
-
|
Mortgage
debt
|
1
hotel
|
|
|
5.81
|
|
|
July
2016
|
|
|
11,741
|
|
|
12,137
|
Capital
lease and other
|
1
hotel
|
|
|
9.44
|
|
|
various
|
|
|
2,089
|
|
|
3,044
|
Total
|
67
hotels
|
|
|
|
|
|
|
|
$
|
1,773,314
|
|
$
|
1,551,686
|
(a)
|
The
hotels securing this debt are subject to separate loan agreements and are
not cross-collateralized.
|
(b)
|
As
a result of a rating down-grade in February 2009, the interest rate on our
8½% senior notes increased to 9%.
|
(c)
|
In
February 2010, the maturity date on these loans was extended from June
2009 to June 2011.
|
(d)
|
LIBOR
for this loan is subject to a 2% floor.
|
(e)
|
This
loan can be extended for as many as two years, subject to satisfying
certain conditions.
|
(f)
|
We
have purchased an interest rate cap that caps LIBOR at 7.8% and expires in
November 2010 for this notional amount.
|
(g)
|
The
maturity date assumes that we will exercise the remaining one-year
extension option that is exercisable, at our sole discretion, and would
extend the current November 2010 maturity to 2011.
|
(h)
|
We
have purchased interest rate caps that cap LIBOR at 6.5% and expire in May
2010 for aggregate notional amounts of
$177 million.
|
(i)
|
We
have exercised the first of three successive one-year extension options
that extend, at our sole discretion, maturity to 2012.
|
(j)
|
In
February 2010, the maturity date on this loan was extended from May 2010
to May 2013.
|
(k)
|
These
senior notes have $636 million in aggregate principal outstanding and
were sold at a discount that provides an effective yield of 12.875% before
transaction costs.
|
In
October 2009, we completed a private placement of $636 million in aggregate
principal amount of our 10% senior secured notes due 2014. The new
notes are secured by a pledge of our limited partner interests in FelCor LP,
first mortgages and related security interests on up to 14 hotels and pledges of
equity interests in certain wholly-owned subsidiaries. Net proceeds
from the new notes were approximately $558 million after original issue
discount, fees and expenses related to the offering. The proceeds of
these notes were used to retire approximately $428 million of our senior
notes due in 2011 (all of our floating-rate senior secured notes and
$213 million of our 8½% senior notes) and for general corporate
purposes.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In June
2009, we obtained a $201 million non-recourse term loan secured by nine
hotels. This loan bears interest at LIBOR (subject to a 2% floor)
plus 350 basis points and matures in 2011, but can be extended for as many as
two years, subject to satisfying certain conditions that we expect to
satisfy. The proceeds from this new loan were used for general
corporate purposes.
In June 2009, we repaid the
$128 million balance under our line of credit, which was then
terminated. By terminating our line of credit, we eliminated certain
restrictive corporate debt covenants.
In March
2009, we obtained a $120 million loan agreement secured by seven
hotels. The proceeds of the loan were used to repay the balance of an
existing loan secured by the same properties that would have matured on
April 1, 2009. The new loan matures in 2014 and bears interest at
9.02%.
We
successfully refinanced all of our debt that matured in 2009, extended the
maturity of one loan scheduled to mature in 2010, as well as refinanced nearly
all of our corporate debt that was scheduled to mature in 2011. We
continue to make progress with the various lenders to modify and/or refinance
our remaining secured debt scheduled to mature in May 2010. That debt
consists of eight non-recourse mortgage loans with a combined current balance of
$243 million, secured by 13 hotels (six of which are cross-collateralized
to secure one loan). With regard to these loans, we believe that
extending the maturity dates is in the best interest of the lenders and
FelCor. As a consequence, we intend to seek such
extensions. In addition, we intend to discuss other loan modification
options, as well as explore other refinancing opportunities and potential asset
sales as a means of satisfying our obligations under our other mortgage debt as
they mature. With regard to two of these loans, the mortgaged hotels’
cash flows do not cover debt service, and we stopped funding the short-falls in
December 2009.
Our 10%
senior notes require that we satisfy total leverage, secured leverage and
interest coverage tests in order to: (i) incur additional indebtedness except to
refinance maturing debt with replacement debt, as defined under our indentures;
(ii) pay dividends in excess of the minimum distributions required to meet the
REIT qualification test; (iii) repurchase capital stock; or (iv) merge. We are
currently restricted from paying dividends (except to the extent necessary to
satisfy the REIT qualification requirement that we distribute currently at least
90% of our taxable income) and repurchasing capital stock in connection with
these tests. In connection with the sale of our new senior notes, we
amended the indenture governing our 8½% senior notes (of which $87 million
remain outstanding) to eliminate substantially all of the restrictive covenants,
guarantees, collateral and certain events of default provisions.
At
December 31, 2009, we had consolidated secured debt totaling $1.7 billion,
encumbering 67 of our consolidated hotels with an aggregate net book value of
$2.1 billion (including 14 hotels that were encumbered by our new 10%
senior secured notes issued in October 2009). Except in the case
of our new senior notes, our mortgage debt is recourse solely to the specific
assets securing the debt. However, a violation of any of the recourse
carve-out provisions, including fraud, misapplication of funds and other
customary recourse carve-out provisions, could cause this debt to become fully
recourse to us. Much of our hotel mortgage debt allows us to
substitute collateral under certain conditions. Most of our mortgage
debt is prepayable subject to various prepayment, yield maintenance or
defeasance obligations.
Loans
secured by certain of our hotels provide for lock-box arrangements under certain
circumstances. We generally are permitted to retain an amount required to cover
our budgeted hotel operating expenses, taxes, debt service, insurance and
capital expenditure reserves but the remaining revenues would flow through a
lock-box if a specified debt service coverage ratio is not met. With
the exception of one hotel, all of our hotels subject to lock-box provisions
currently exceed the applicable minimum debt service coverage
ratios.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
To fulfill requirements under certain
loans, we owned interest rate caps with aggregate notional amounts of
$427.2 million as of December 31, 2009 and 2008. These
interest rate cap agreements have not been designated as hedges, and have
insignificant fair values at December 31, 2009 and 2008, resulting in no
significant net earnings impact.
We
reported interest income of $700,000, $1.6 million and $6.4 million
for the years ended December 31, 2009, 2008 and 2007, respectively, which
is included in net interest expense. We capitalized interest of
$767,000, $1.4 million and $4.8 million, for the years ended
December 31, 2009, 2008 and 2007, respectively.
The early retirement of certain
indebtedness in 2009, resulted in net charges related to debt extinguishment of
$1.7 million.
Future
scheduled principal payments on debt obligations at December 31, 2009, are
as follows (in thousands):
Year
|
|
|
2010
|
$
|
253,818
|
|
2011
|
|
554,755
|
(a)
|
2012
|
|
181,764
|
(b)
|
2013
|
|
32,742
|
|
2014
|
|
805,126
|
|
2015
and
thereafter
|
|
9,376
|
|
|
|
1,837,581
|
|
Discount
accretion over
term
|
|
(64,267
|
)
|
|
$
|
1,773,314
|
|
|
(a)
|
Assumes
our exercise of extension options through November 2011 on debt
aggregating $250 million.
|
|
(b)
|
Assumes
our exercise of extension options through May 2012 on debt aggregating
$176 million.
|
10. Fair
Value of Financial Instruments
Our
estimates of the fair value of (i) accounts receivable, accounts payable and
accrued expenses approximate carrying value due to the relatively short maturity
of these instruments; and (ii) our publicly traded debt is based on observable
market data, and our debt that is not traded publicly is based on estimated
effective borrowing rates for debt with similar terms, loan to estimated fair
value and remaining maturities (the estimated fair value of our debt was
$1.7 billion at December 31, 2009).
Disclosures about fair value of
financial instruments are based on pertinent information available to management
as of December 31, 2009. Considerable judgment is necessary to
interpret market data and develop estimated fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that we could realize on disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
11. Income
Taxes
We
elected to be treated as a REIT under the federal income tax laws. As a REIT, we
generally are not subject to federal income taxation at the corporate level on
taxable income that is distributed to our stockholders. We may, however, be
subject to certain state and local taxes on our income and property and to
federal income and excise taxes on our undistributed taxable
income. Our taxable REIT subsidiaries, or TRSs, formed to lease our
hotels, are subject to federal, state and local income taxes. A REIT
is subject to a number of organizational and operational requirements, including
a requirement that it currently distribute at least 90% of its annual taxable
income to its stockholders. If we fail to qualify as a REIT in any
taxable year, we will be subject to federal income taxes at regular corporate
rates (including any applicable alternative minimum tax) and may not qualify as
a REIT for four subsequent years. In connection with our election to
be treated as a REIT, our charter imposes restrictions on the ownership and
transfer of shares of our common stock. FelCor LP expects to make distributions
on its units sufficient to enable us to meet our distribution obligations as a
REIT.
We
account for income taxes using the asset and liability method, under which
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
Reconciliation between our
TRS’s GAAP net income (loss) and taxable gain (loss):
The following table reconciles our
TRS’s GAAP net income (loss) to taxable income (loss) (in
thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
GAAP consolidated
net income (loss) attributable to FelCor
|
$
|
(108,122
|
)
|
|
$
|
(119,245
|
)
|
|
$
|
89,039
|
|
GAAP
net loss (income) from REIT operations
|
|
66,977
|
|
|
|
84,287
|
|
|
|
(75,688
|
)
|
GAAP
net income (loss) of taxable subsidiaries
|
|
(41,145
|
)
|
|
|
(34,958
|
)
|
|
|
13,351
|
|
Tax
gain (loss) in excess of book gains on sale of hotels
|
|
(1,821
|
)
|
|
|
(346
|
)
|
|
|
2,928
|
|
Depreciation
and amortization
(a)
|
|
(269
|
)
|
|
|
(482
|
)
|
|
|
(2,410
|
)
|
Employee
benefits not deductible for tax
|
|
(4,205
|
)
|
|
|
(4,224
|
)
|
|
|
(5,107
|
)
|
Unearned
fee reductions
|
|
4,828
|
|
|
|
-
|
|
|
|
-
|
|
Tax
adjustment to lease expense
(b)
|
|
11,769
|
|
|
|
11,773
|
|
|
|
10,137
|
|
Other
book/tax differences
|
|
7,799
|
|
|
|
(8
|
)
|
|
|
2,514
|
|
Tax
gain (loss) of taxable subsidiaries
|
$
|
(23,044
|
)
|
|
$
|
(28,245
|
)
|
|
$
|
21,413
|
|
|
(a)
|
The
changes in book/tax differences in depreciation and amortization
principally result from book and tax basis differences, differences in
depreciable lives and accelerated depreciation
methods.
|
|
(b)
|
For
tax purposes, we record a reduction in intercompany rent between our REIT
entities and TRS entities. In February 2010, we filed amended
TRS tax returns for the years ending December 31, 2008, 2007 and 2006 to
reflect rent reductions of $11.8 million, $10.1 million and
$7.6 million, respectively. These amendments had no impact
on our consolidated financial statements as sufficient TRS NOLs were
available to absorb the reduction in
rents.
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
11. Income
Taxes — (continued)
Summary of TRS’s net
deferred tax asset:
Our TRS
had a deferred tax asset, on which we had a 100% valuation allowance, primarily
comprised of the following (in thousands):
|
December
31,
|
|
2009
|
|
2008
|
Accumulated
net operating losses of our TRS
|
$
|
128,305
|
|
|
$
|
116,600
|
|
Tax
property basis in excess of book
|
|
-
|
|
|
|
1,350
|
|
Accrued
employee benefits not deductible for tax
|
|
3,967
|
|
|
|
5,565
|
|
Bad
debt allowance not deductible for tax
|
|
147
|
|
|
|
198
|
|
Gross
deferred tax assets
|
|
132,419
|
|
|
|
123,713
|
|
Valuation
allowance
|
|
(132,291
|
)
|
|
|
(123,713
|
)
|
Deferred
tax asset after valuation allowance
|
|
128
|
|
|
|
-
|
|
Deferred
tax liability – book property basis in excess of tax
|
|
(128
|
)
|
|
|
-
|
|
Net
deferred tax asset
|
$
|
-
|
|
|
$
|
-
|
|
We have provided a valuation
allowance against our deferred tax asset at December 31, 2009 and 2008,
that results in no net deferred tax asset at December 31, 2009 and 2008 due
to the uncertainty of realization (because of historical operating
losses). Accordingly, no provision or benefit for income taxes is
reflected in the accompanying Consolidated Statements of
Operations. At December 31, 2009, our TRS had net operating loss
carryforwards for federal income tax purposes of $337.6 million, which are
available to offset future taxable income, if any, and do not begin to expire
until 2022.
Reconciliation between REIT
GAAP net income (loss) and taxable income:
The following table reconciles REIT
GAAP net income (loss) to taxable income (in thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
GAAP
net income (loss) from REIT operations
|
$
|
(66,977
|
)
|
|
$
|
(84,287
|
)
|
|
$
|
75,688
|
|
Book/tax
differences, net:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
(a)
|
|
(11,608
|
)
|
|
|
(21,927
|
)
|
|
|
(9,246
|
)
|
Noncontrolling
interests
|
|
(222
|
)
|
|
|
(2,889
|
)
|
|
|
(339
|
)
|
Equity
in loss from unconsolidated entities
|
|
2,068
|
|
|
|
12,696
|
|
|
|
-
|
|
Tax
loss in excess of book gains on sale of hotels
|
|
(26,922
|
)
|
|
|
-
|
|
|
|
427
|
|
Impairment
loss not deductible for tax
|
|
3,448
|
|
|
|
107,963
|
|
|
|
-
|
|
Liquidated
damages
|
|
(1,000
|
)
|
|
|
11,060
|
|
|
|
-
|
|
Tax
adjustment to lease revenue
(b)
|
|
(11,769
|
)
|
|
|
(11,773
|
)
|
|
|
(10,137
|
)
|
Other
|
|
6,431
|
|
|
|
704
|
|
|
|
(618
|
)
|
Taxable
income (loss) subject to distribution requirement
(c)
|
$
|
(106,551
|
)
|
|
$
|
11,547
|
|
|
$
|
55,775
|
|
|
(a)
|
Book/tax
differences in depreciation and amortization principally result from
differences in depreciable lives and accelerated depreciation
methods.
|
|
(b)
|
For
tax purposes, we record a reduction in intercompany rent between our REIT
entities and TRS entities. In February 2010, we filed amended
TRS tax returns for the years ending December 31, 2008, 2007 and 2006 to
reflect rent reductions of $11.8 million, $10.1 million and
$7.6 million, respectively. These amendments had no impact
on our consolidated financial statements as sufficient TRS NOLs were
available to absorb the reduction in
rents.
|
|
(c)
|
The
dividend distribution requirement is 90% of taxable
income.
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
11. Income
Taxes — (continued)
At December 31, 2009, we had net
operating loss carryforwards for federal income tax purposes of
$106.6 million, which we expect to use to offset future distribution
requirements.
Characterization of
distributions:
For
income tax purposes, distributions paid consist of ordinary income, capital
gains, return of capital or a combination thereof. Distributions paid
per share were characterized as follows:
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
income
|
$
|
-
|
|
-
|
|
$
|
0.85
|
(a)
|
100.00
|
|
$
|
0.860
|
|
71.63
|
Return
of capital
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
|
0.340
|
|
28.37
|
|
$
|
-
|
|
-
|
|
$
|
0.85
|
|
100.00
|
|
$
|
1.200
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock – Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
income
|
$
|
-
|
|
-
|
|
$
|
1.463
|
(a)(b)
|
100.00
|
|
$
|
1.95
|
|
100.00
|
Return
of capital
|
|
0.4875
|
|
100.00
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
$
|
0.4875
|
|
100.00
|
|
$
|
1.463
|
|
100.00
|
|
$
|
1.95
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock – Series C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
income
|
$
|
-
|
|
-
|
|
$
|
1.50
|
(a)(b)
|
100.00
|
|
$
|
2.00
|
|
100.00
|
Return
of capital
|
|
0.50
|
|
100.00
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
$
|
0.50
|
|
100.00
|
|
$
|
1.50
|
|
100.00
|
|
$
|
2.00
|
|
100.00
|
|
(a)
|
Dividend
income in 2008 consists of ordinary dividend income and qualified dividend
income.
|
|
(b)
|
The
fourth quarter 2008 preferred distributions paid January 31, 2009,
were treated as 2009 distributions for tax
purposes.
|
12. Capital
Stock
At December 31, 2009, we had
$600 million of common stock, preferred stock, and/or common stock warrants
available for offerings under a shelf registration statement previously declared
effective.
Preferred
Stock
Our Board of Directors is authorized to
provide for the issuance of up to 20 million shares of preferred stock in
one or more series, to establish the number of shares in each series, to fix the
designation, powers, preferences and rights of each such series, and the
qualifications, limitations or restrictions thereof.
Our
Series A preferred stock bears an annual cumulative dividend payable in
arrears equal to the greater of $1.95 per share or the cash distributions
declared or paid for the corresponding period on the number of shares of common
stock into which the Series A preferred stock is then
convertible. Each share of the Series A preferred stock is
convertible at the stockholder’s option to 0.7752 shares of common stock,
subject to certain adjustments.
Our 8% Series C Cumulative Redeemable
preferred stock, or Series C preferred stock, bears an annual cumulative
dividend of 8% of the liquidation preference (equivalent to $2.00 per depositary
share). We may call the Series C preferred stock and the
corresponding depositary shares at $25 per depositary share. These
shares have no stated maturity, sinking fund or mandatory redemption, and are
not convertible into any of our other securities. The Series C
preferred stock has a liquidation preference of $2,500 per share (equivalent to
$25 per depositary share).
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
12. Capital
Stock – (continued)
We suspended payment of our common
dividend in December 2008 and our preferred dividend in March 2009 in light of
the deepening recession and dysfunctional capital markets, and the attendant
impact on our industry and FelCor. Our Board of Directors will
determine the amount of future common and preferred dividends for each quarter,
if any, based upon various factors including operating results, economic
conditions, other operating trends, our financial condition and capital
requirements, as well as the minimum REIT distribution
requirements. Unpaid preferred dividends continue to accrue, and
accrued and current preferred dividends must be paid in full prior to payment of
any common dividends. Accrued dividends payable on our Series A and
Series C preferred stock aggregating $37.6 million were outstanding at
December 31, 2009. Accrued dividends payable on our Series A and
Series C preferred stock aggregating $8.5 million at December 31,
2008, were paid in January 2009.
FelCor
LP Units
We are the sole general partner of
FelCor LP and are obligated to contribute the net proceeds from any issuance of
our equity securities to FelCor LP in exchange for units of partnership
interest, or Units, corresponding in number and terms to the equity securities
issued by us. Units of limited partner interest may also be issued by
FelCor LP to third parties in exchange for cash or property, and Units so issued
to third parties are redeemable at the option of the holders thereof for a like
number of shares of our common stock or, at our option, for the cash equivalent
thereof. During 2009, 2008 and 2007, 883 Units, 1,057,928 Units, and
1,245 Units, respectively, were exchanged for a like number of common shares
issued from treasury stock.
13. Hotel
Operating Revenue, Departmental Expenses, and Other Property Operating
Costs
Hotel operating revenue from continuing
operations was comprised of the following (in thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
|
Room
revenue
|
$
|
710,530
|
|
$
|
864,980
|
|
$
|
809,415
|
|
Food
and beverage revenue
|
|
139,045
|
|
|
173,432
|
|
|
131,023
|
|
Other
operating departments
|
|
56,283
|
|
|
61,517
|
|
|
50,307
|
|
|
|
|
|
|
|
|
|
|
|
Total
hotel operating revenues
|
$
|
905,858
|
|
$
|
1,099,929
|
|
$
|
990,745
|
|
Nearly 100% of our revenue in all
periods presented was comprised of hotel operating revenues, which includes room
revenue, food and beverage revenue, and revenue from other operating departments
(such as telephone, parking and business centers). These revenues are
recorded net of any sales or occupancy taxes collected from our guests. All
rebates or discounts are recorded, when allowed, as a reduction in revenue, and
there are no material contingent obligations with respect to rebates or
discounts offered by us. All revenues are recorded on an accrual basis, as
earned. Appropriate allowances are made for doubtful accounts and are
recorded as a bad debt expense. The remainder of our revenue was from
condominium management fee income and other sources.
We do not have any time-share
arrangements and do not sponsor any guest frequency programs for which we would
have any contingent liability. We participate in guest frequency
programs sponsored by the brand owners of our hotels, and we expense the charges
associated with those programs (typically consisting of a percentage of the
total guest charges incurred by a participating guest) as
incurred. When a guest redeems accumulated guest frequency points at
one of our hotels, the hotel bills the sponsor for the services provided in
redemption of such points and records revenue in the amount of the charges
billed to the sponsor. Associated with the guest frequency programs,
we have no loss contingencies or ongoing obligation beyond what is paid to the
brand owner at the time of the guest’s stay.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
13.
|
Hotel
Operating Revenue, Departmental Expenses, and Other Property Operating
Costs – (continued)
|
Hotel departmental expenses from
continuing operations were comprised of the following (in
thousands):
|
Year
Ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
Room
|
$
|
189,587
|
|
|
$
|
211,732
|
|
|
$
|
198,461
|
Food
and beverage
|
|
111,514
|
|
|
|
132,732
|
|
|
|
99,343
|
Other
operating departments
|
|
25,603
|
|
|
|
27,855
|
|
|
|
20,620
|
|
|
|
|
|
|
|
|
|
|
|
Total hotel departmental
expenses
|
$
|
326,704
|
|
|
$
|
372,319
|
|
|
$
|
318,424
|
Other property operating costs from
continuing operations were comprised of the following (in
thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Hotel
general and administrative expense
|
$
|
82,598
|
|
$
|
95,539
|
|
$
|
84,026
|
Marketing
|
|
76,030
|
|
|
89,195
|
|
|
82,235
|
Repair
and maintenance
|
|
50,085
|
|
|
55,683
|
|
|
53,052
|
Utilities
|
|
49,833
|
|
|
53,552
|
|
|
46,780
|
|
|
|
|
|
|
|
|
|
Total
other property operating costs
|
$
|
258,546
|
|
$
|
293,969
|
|
$
|
266,093
|
Hotel departmental expenses and other
property operating costs include hotel compensation and benefit expenses of
$287.4 million, $324.0 million, and $279.6 million for the year
ended December 31, 2009, 2008 and 2007, respectively.
14. Taxes,
Insurance and Lease Expenses
Taxes, insurance and lease expenses
from continuing operations were comprised of the following (in
thousands):
|
Year
Ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
Operating
lease expense
(a)
|
$
|
50,628
|
|
|
$
|
65,766
|
|
|
$
|
70,695
|
Real
estate and other taxes
|
|
35,622
|
|
|
|
32,904
|
|
|
|
34,021
|
Property,
general liability insurance and other
|
|
12,501
|
|
|
|
13,704
|
|
|
|
14,999
|
|
|
|
|
|
|
|
|
|
|
|
Total
taxes, insurance and lease expenses
|
$
|
98,751
|
|
|
$
|
112,374
|
|
|
$
|
119,715
|
(a)
|
Includes
hotel lease expense of $41.1 million, $54.3 million,
$61.7 million, respectively, associated with 13 hotels in 2009, 2008
and 2007, respectively, owned by unconsolidated entities and leased to our
consolidated lessees. Included in lease expense is
$16.9 million, $33.9 million and $37.0 million in
percentage rent for hotel leases and ground leases the year ended
December 31, 2009, 2008 and 2007,
respectively.
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
15. Land
Leases and Hotel Rent
We lease land occupied by certain
hotels from third parties under various operating leases that expire through
2089. Certain land leases contain contingent rent features based on
gross revenue at the respective hotels. In addition, we recognize
rent expense for 13 hotels that are owned by unconsolidated entities and
are leased to our consolidated lessees. These leases expire through
2014 and require the payment of base rents and contingent rent based on revenues
at the respective hotels. Future minimum lease payments under our
land lease obligations and hotel leases at December 31, 2009, were as
follows (in thousands):
Year
|
|
|
2010
|
$
|
34,349
|
2011
|
|
32,002
|
2012
|
|
31,025
|
2013
|
|
13,013
|
2014
|
|
12,880
|
2015
and thereafter
|
|
281,356
|
|
$
|
404,625
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
16. Earnings
Per Share
On
January 1, 2009, we adopted a policy that treats unvested share-based
payment awards containing non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) as participating securities for computation
of earnings per share (pursuant to the two-class method). We
retrospectively adjusted all prior-period earnings per share data accordingly.
The revised diluted earnings per common share amounts were reduced from their
originally reported amounts by $0.02 and $0.01 for the years ended 2008 and
2007, respectively.
The
following table sets forth the computation of basic and diluted earnings (loss)
per share (in thousands, except per share data):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to FelCor
|
$
|
(108,122
|
)
|
|
$
|
(119,245
|
)
|
|
$
|
89,039
|
|
Discontinued
operations attributable to FelCor
|
|
3,355
|
|
|
|
56,484
|
|
|
|
(33,992
|
)
|
Income
(loss) from continuing operations attributable to
FelCor
|
|
(104,767
|
)
|
|
|
(62,761
|
)
|
|
|
55,047
|
|
Less:
Preferred
dividends
|
|
(38,713
|
)
|
|
|
(38,713
|
)
|
|
|
(38,713
|
)
|
Dividends declared on unvested
restricted stock compensation
|
|
-
|
|
|
|
(1,041
|
)
|
|
|
(1,011
|
)
|
Income
(loss) from continuing operations available to FelCor common
stockholders
|
|
(143,480
|
)
|
|
|
(102,515
|
)
|
|
|
15,323
|
|
Discontinued
operations attributable to FelCor
|
|
(3,355
|
)
|
|
|
(56,484
|
)
|
|
|
33,992
|
|
Numerator
for basic and diluted income (loss) available to FelCor common
stockholders
|
$
|
(146,835
|
)
|
|
$
|
(158,999
|
)
|
|
$
|
49,315
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings (loss) per share
|
|
63,114
|
|
|
|
61,979
|
|
|
|
61,600
|
|
Denominator
for diluted earnings (loss) per share
|
|
63,114
|
|
|
|
61,979
|
|
|
|
61,618
|
|
Basic
and diluted income (loss) per share data:
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
$
|
(2.27
|
)
|
|
$
|
(1.65
|
)
|
|
$
|
0.25
|
|
Discontinued
operations
|
$
|
(0.05
|
)
|
|
$
|
(0.91
|
)
|
|
$
|
0.55
|
|
Net
income (loss)
|
$
|
(2.33
|
)
|
|
$
|
(2.57
|
)
|
|
$
|
0.80
|
|
Securities that could potentially
dilute basic earnings per share in the future that were not included in
computation of diluted earnings (loss) per share, because they would have been
antidilutive for the periods presented, are as follows (unaudited, in
thousands):
|
2009
|
|
2008
|
|
2007
|
Series
A convertible preferred shares
|
9,985
|
|
9,985
|
|
9,985
|
Series A preferred dividends that would
be excluded from net income (loss) available to FelCor common stockholders, if
the Series A preferred shares were dilutive, were $25.1 million for
all periods presented.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments,
Contingencies and Related Party Transactions
We shared the executive offices and
certain employees with TCOR Holdings, LLC (controlled by Thomas J. Corcoran,
Jr., Chairman of our Board of Directors), and TCOR Holdings, LLC paid its share
of the costs thereof, including an allocated portion of the rent, compensation
of certain personnel, office supplies, telephones, and depreciation of office
furniture, fixtures, and equipment. Any such allocation of shared
expenses must be approved by a majority of our independent
directors. TCOR Holdings, LLC paid approximately $42,000 in
2009, $60,000 in 2008 and $50,000 in 2007 for shared office costs.
Our
property insurance has a $100,000 all risk deductible, a deductible of 5% of
insured value for named windstorm coverage and a deductible of 2% to 5% of
insured value for California earthquake coverage. Substantial
uninsured or not fully-insured losses would have a material adverse impact on
our operating results, cash flows and financial condition.
Catastrophic losses,
such as the losses caused by hurricanes in 2005, could make the cost of insuring
against these types of losses prohibitively expensive or difficult to
find. In an effort to limit the cost of insurance, we purchase
catastrophic insurance coverage based on probable maximum losses based on
250-year events and have only purchased terrorism insurance to the extent
required by our lenders. We have established a self-insured retention
of $250,000 per occurrence for general liability insurance with regard to 57 of
our hotels. The remainder of our hotels participate in general
liability programs sponsored by our managers, with no deductible.
There is
no litigation pending or known to be threatened against us or affecting any of
our hotels, other than claims arising in the ordinary course of business or
which are not considered to be material. Furthermore, most of these claims are
substantially covered by insurance. We do not believe that any claims known to
us, individually or in the aggregate, will have a material adverse effect on
us
.
Our
hotels are operated under various management agreements that call for base
management fees, which range from 2% of the hotel’s total revenue to the sum of
2% of the hotel’s total revenue plus 5% of the hotel’s room revenue and
generally have an incentive provision related to the hotel’s
profitability. In addition, the management agreements generally
require us to invest approximately 3% to 5% of revenues for capital
expenditures. The management agreements have terms from 5 to 20 years
and generally have renewal options.
The management agreements governing the
operations of 35 of our Consolidated Hotels contain the right and license to
operate the hotel under the specified brands. The remaining 48
Consolidated Hotels operate under franchise or license agreements that are
separate from our management agreements. Typically, our franchise or
license agreements provide for a license fee or royalty of 4% to 5% of room
revenues. In the event we breach one of these agreements, in addition
to losing the right to use the brand name for the operation of the applicable
hotel, we may be liable, under certain circumstances, for liquidated damages
equal to the fees paid to the franchisor with respect to that hotel during the
three preceding years.
In 2009, we sold two Holiday Inn
hotels in Florida operating under management agreements with IHG. These
hotels were originally designated for redevelopment with condominiums, but
market conditions in Florida no longer make these condominium projects
feasible. We also determined that the major capital expenditures
necessary to retain the Holiday Inn flags at these hotels were not in the best
interests of our stockholders, given the shortened hold period for these
hotels. We will be required to pay replacement management fees for up to
one year and liquidated damages (net of any replacement management fees
previously paid) in December 2010; or reinvest in another hotel to be
managed by IHG and carrying an IHG brand. Given the current state of the
economy and the market for hotel acquisitions, substitution of a replacement
hotel appears unlikely prior to the relevant dates, and we will likely have to
pay IHG at least some portion of replacement management fees and/or liquidated
damages. Liquidated damages are computed based on operating results of a hotel
prior to termination. The aggregate liability related to these
hotels, if paid, is approximately $11 million. We accrued the full
amount of liquidated damages in 2008.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
18. Supplemental
Cash Flow Disclosure
Accrued dividends payable on our Series
A and Series C preferred stock aggregating $37.6 million were outstanding
at December 31, 2009. Accrued dividends payable on our common
stock, Series A and Series C preferred stock aggregating $8.5 million at
December 31, 2008, were paid in January 2009.
In 2009 and 2008, we allocated $17,000
and $20.2 million, respectively, of noncontrolling interests to additional
paid-in capital with regard to the exchange of 883 Units and 1,057,928 Units,
respectively, for common stock.
Depreciation and amortization expense
is comprised of the following (in thousands):
|
Year
Ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
Depreciation
and amortization from continuing operations
|
$
|
147,445
|
|
|
$
|
137,570
|
|
|
$
|
106,682
|
Depreciation
and amortization from discontinued operations
|
|
2,642
|
|
|
|
4,098
|
|
|
|
4,083
|
Total
depreciation and amortization expense
|
$
|
150,087
|
|
|
$
|
141,668
|
|
|
$
|
110,765
|
For the year ended December 31,
2009, our repayment of borrowings consisted of retirement of debt of
$544.3 million, payments on our line of credit of $213.0 million, and
normal recurring principal payments of $15.1 million.
For the
year ended December 31, 2008, our repayment of borrowings consisted of
retirement of debt of $23.8 million, payments on our line of credit of
$74.0 million and normal recurring principal payments of
$13.9 million.
For the
year ended December 31, 2007, our repayment of borrowings consisted of early
retirement of debt of $7.4 million, payments on our line of credit of
$10.0 million and normal recurring principal payments of
$12.9 million.
In 2007, $67.0 million of proceeds
from the sale of the Royale Palms condominium project was paid directly from the
purchasers to our lender at closing.
19. Stock
Based Compensation Plans
We sponsor three restricted stock and
stock option plans, or the Plans. We are authorized to issue
4,550,000 shares of common stock under the Plans pursuant to awards granted in
the form of incentive stock options, non-qualified stock options, and restricted
stock. All outstanding options have 10-year contractual terms and
vest either over four or five equal annual installments beginning in the year
following the date of grant or 100% at the end of a four-year vesting
term. Stock grants vest either over three, four or five equal annual
installments or over a four year schedule including time based vesting and
performance based vesting. Under the Plans, there were 284,572 shares
remaining available for grant at December 31, 2009.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
19. Stock
Based Compensation Plans – (continued)
Stock
Options
A summary of the status of our
non-qualified stock options under the Plans as of December 31, 2009, 2008
and 2007, and the changes during these years are presented in the following
tables:
|
2009
|
|
2008
|
|
2007
|
|
No.
Shares of
Underlying
Options
|
|
Weighted
Average
Exercise
Prices
|
|
No.
Shares of
Underlying
Options
|
|
Weighted
Average
Exercise
Prices
|
|
No.
Shares of
Underlying
Options
|
|
Weighted
Average
Exercise
Prices
|
Outstanding
at beginning of the year
|
40,000
|
|
|
$
|
18.05
|
|
161,356
|
|
|
$
|
21.11
|
|
598,366
|
|
|
$
|
22.62
|
Forfeited
or expired
|
-
|
|
|
$
|
-
|
|
(121,356
|
)
|
|
$
|
22.13
|
|
(147,639
|
)
|
|
$
|
26.11
|
Exercised
|
-
|
|
|
$
|
-
|
|
-
|
|
|
$
|
-
|
|
(289,371
|
)
|
|
$
|
21.68
|
Outstanding
at end of year
|
40,000
|
|
|
$
|
18.05
|
|
40,000
|
|
|
$
|
18.05
|
|
161,356
|
|
|
$
|
21.11
|
Exercisable
at end of year
|
40,000
|
|
|
$
|
18.05
|
|
40,000
|
|
|
$
|
18.05
|
|
161,356
|
|
|
$
|
21.11
|
Options
Exercisable and Outstanding
|
Range
of
Exercise
Prices
|
|
Number
Outstanding
at
12/31/09
|
|
Wgtd.
Avg.
Life
Remaining
|
|
Wgtd
Avg.
Exercise
Price
|
$15.62
to $19.50
|
|
40,000
|
|
0.85
|
|
$18.05
|
The fair value of each stock option
granted is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions for 2001 and 2000 when
options were granted: dividend yield of 12.44% to 11.28%; risk free interest
rates are different for each grant and range from 4.33% to 6.58%; the expected
lives of options were six years; and volatility of 21.04% for 2001 grants and
18.22% for 2000 grants. The weighted average fair value of options
granted during 2001, was $0.85 per share. We have issued no stock
options since 2001.
Restricted
Stock
A summary of the status of our
restricted stock grants as of December 31, 2009, 2008, and 2007, and the
changes during these years are presented below:
|
2009
|
|
2008
|
|
2007
|
|
No.
Shares
|
|
Weighted
Average
Fair Market Value
at
Grant
|
|
No.
Shares
|
|
Weighted
Average
Fair Market Value
at
Grant
|
|
No.
Shares
|
|
Weighted
Average
Fair Market Value
at
Grant
|
Outstanding
at beginning of the year
|
2,829,330
|
|
|
$
|
15.20
|
|
|
2,329,230
|
|
|
$15.85
|
|
1,880,129
|
|
|
$14.56
|
Granted
(a)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With
immediate vesting
(b)
|
16,000
|
|
|
$
|
1.01
|
|
|
45,800
|
|
|
$12.20
|
|
24,100
|
|
|
$23.61
|
With
3-year pro rata vesting
|
1,444,810
|
|
|
$
|
2.64
|
|
|
-
|
|
|
$
-
|
|
-
|
|
|
$
-
|
With
4-year pro rata vesting
|
-
|
|
|
$
|
-
|
|
|
449,300
|
|
|
$12.20
|
|
454,600
|
|
|
$20.87
|
With
5-year pro rata vesting
|
-
|
|
|
$
|
-
|
|
|
5,000
|
|
|
$12.20
|
|
5,000
|
|
|
$21.66
|
Forfeited
|
(34,953
|
)
|
|
$
|
12.52
|
|
|
-
|
|
|
|
|
(34,599
|
)
|
|
$17.80
|
Outstanding
at end of year
|
4,255,187
|
|
|
$
|
10.90
|
|
|
2,829,330
|
|
|
$15.20
|
|
2,329,230
|
|
|
$15.85
|
Vested
at end of year
|
(1,774,839
|
)
|
|
$
|
14.06
|
|
|
(1,483,976
|
)
|
|
$14.09
|
|
(1,283,724
|
)
|
|
$14.38
|
Unvested
at end of year
|
2,480,348
|
|
|
$
|
8.65
|
|
|
1,345,354
|
|
|
$16.44
|
|
1,045,506
|
|
|
$17.66
|
|
(a)
|
All
shares granted are issued out of
treasury.
|
|
(b)
|
Shares
awarded to directors.
|
The
unearned compensation cost of granted but unvested restricted stock as of
December 31, 2009 was $11.0 million. The weighted average
period over which this cost is to be amortized is approximately two
years.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
20. Employee
Benefits
We offer a 401(k) plan and health
insurance benefits to our employees. Our matching contribution to our
401(k) plan aggregated $0.9 million for each of the periods
presented. The cost of health insurance benefits were
$0.8 million during 2009, $0.9 million during 2008, and
$0.8 million during 2007.
The employees at our hotels are
employees of the respective management companies. Under the
management agreements, we reimburse the management companies for the
compensation and benefits related to the employees who work at our
hotels. We are not, however, the sponsors of their employee benefit
plans and have no obligation to fund these plans.
21. Segment
Information
We have determined that our business is
conducted in one operating segment because of the similar economic
characteristics of our hotels.
The
following table sets forth revenues from continuing operations and investment in
hotel assets represented by the following geographical areas (in
thousands):
|
Revenue
For the Year Ended December 31,
|
|
Investment
in Hotel Assets
as
of December 31,
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
California
|
$
|
211,124
|
|
$
|
258,748
|
|
$
|
208,495
|
|
$
|
527,345
|
|
$
|
526,770
|
|
$
|
547,451
|
Texas
|
|
98,180
|
|
|
118,856
|
|
|
114,802
|
|
|
203,841
|
|
|
214,294
|
|
|
226,724
|
Florida
|
|
146,011
|
|
|
177,788
|
|
|
126,889
|
|
|
405,479
|
|
|
455,636
|
|
|
505,480
|
Georgia
|
|
48,930
|
|
|
58,345
|
|
|
59,198
|
|
|
126,118
|
|
|
126,851
|
|
|
126,896
|
Other
states
|
|
380,081
|
|
|
456,566
|
|
|
452,730
|
|
|
859,852
|
|
|
904,105
|
|
|
928,378
|
Canada
|
|
24,375
|
|
|
32,609
|
|
|
31,720
|
|
|
57,759
|
|
|
51,370
|
|
|
65,128
|
Total
|
$
|
908,701
|
|
$
|
1,102,912
|
|
$
|
993,834
|
|
$
|
2,180,394
|
|
$
|
2,279,026
|
|
$
|
2,400,057
|
22.
|
Recently
Issued Statements of Financial Accounting
Standards
|
The FASB recently amended its guidance
surrounding a company’s analysis to determine whether any of its variable
interests constitute controlling financial interests in a variable interest
entity. This analysis identifies the primary beneficiary of a
variable interest entity as the enterprise that has both of the following
characteristics: a) the power to direct the activities of a variable
interest entity that most significantly impact the entity’s economic performance
and b) the obligation to absorb losses of the entity that could potentially
be significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity.
Additionally, an enterprise is required
to assess whether it has an implicit financial responsibility to ensure that a
variable interest entity operates as designed when determining whether it has
the power to direct the activities of the variable interest entity that most
significantly impact the entity’s economic performance. The new
guidance also requires ongoing reassessments of whether an enterprise is the
primary beneficiary of a variable interest entity. The guidance is
effective for the first annual reporting period that begins after
November 15, 2009 and, accordingly, we will reevaluate our interests in
variable interest entities for the period beginning on January 1, 2010 to
determine that the entities are reflected properly in the financial statements
as investments or consolidated entities. We do not anticipate that
the implementation of this guidance will have a material effect on our financial
statements.
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
23. Quarterly
Operating Results (unaudited)
Our unaudited consolidated quarterly
operating data for the years ended December 31, 2009 and 2008 follows (in
thousands, except per share data). In the opinion of management, all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of quarterly results have been reflected in the data. It is
also management’s opinion, however, that quarterly operating data for hotel
enterprises are not indicative of results to be achieved in succeeding quarters
or years. In order to obtain a more accurate indication of
performance, there should be a review of operating results, changes in
stockholders’ equity and cash flows for a period of several years.
2009
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
Total
revenues
|
$
|
228,019
|
|
|
$
|
236,258
|
|
|
$
|
225,289
|
|
|
$
|
219,135
|
|
Income
(loss) from continuing operations
|
$
|
(20,568
|
)
|
|
$
|
(11,454
|
)
|
|
$
|
(22,538
|
)
|
|
$
|
(51,160
|
)
|
Discontinued
operations
|
$
|
(854
|
)
|
|
$
|
486
|
|
|
$
|
(2,936
|
)
|
|
$
|
(67
|
)
|
Net
income (loss) attributable to FelCor
|
$
|
(21,064
|
)
|
|
$
|
(11,195
|
)
|
|
$
|
(25,140
|
)
|
|
$
|
(50,723
|
)
|
Net
income (loss) attributable to FelCor common stockholders
|
$
|
(30,742
|
)
|
|
$
|
(20,873
|
)
|
|
$
|
(34,818
|
)
|
|
$
|
(60,402
|
)
|
Comprehensive
income (loss) attributable to FelCor
|
$
|
(22,765
|
)
|
|
$
|
(7,055
|
)
|
|
$
|
(20,455
|
)
|
|
$
|
(49,666
|
)
|
Basic
per common share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations
|
$
|
(0.47
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.96
|
)
|
Discontinued
operations
|
$
|
(0.01
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.05
|
)
|
|
$
|
-
|
|
Net
income
(loss)
|
$
|
(0.49
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.96
|
)
|
Basic
weighted average common shares outstanding
|
|
62,989
|
|
|
|
63,101
|
|
|
|
63,086
|
|
|
|
63,087
|
|
Diluted weighted average common
shares outstanding
|
|
62,989
|
|
|
|
63,101
|
|
|
|
63,086
|
|
|
|
63,087
|
|
2008
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Total
revenues
|
$
|
283,915
|
|
|
$
|
298,633
|
|
|
$
|
271,371
|
|
|
$
|
248,993
|
|
Income
(loss) from continuing operations
|
$
|
(13,676
|
)
|
|
$
|
23,960
|
|
|
$
|
(5,879
|
)
|
|
$
|
(67,412
|
)
|
Discontinued
operations
|
$
|
797
|
|
|
$
|
484
|
|
|
$
|
(36,691
|
)
|
|
$
|
(22,070
|
)
|
Net
income (loss) attributable to FelCor
|
$
|
(12,473
|
)
|
|
$
|
23,262
|
|
|
$
|
(41,640
|
)
|
|
$
|
(88,394
|
)
|
Net
income (loss) attributable to FelCor common stockholders
|
$
|
(22,151
|
)
|
|
$
|
13,584
|
|
|
$
|
(51,318
|
)
|
|
$
|
(98,073
|
)
|
Comprehensive
income (loss) attributable to FelCor
|
$
|
(14,166
|
)
|
|
$
|
23,499
|
|
|
$
|
(44,265
|
)
|
|
$
|
(96,166
|
)
|
Basic
and diluted per common share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations
|
$
|
(0.38
|
)
|
|
$
|
0.20
|
|
|
$
|
(0.25
|
)
|
|
$
|
(1.22
|
)
|
Discontinued
operations
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.58
|
)
|
|
$
|
(0.35
|
)
|
Net
income (loss)
|
$
|
(0.37
|
)
|
|
$
|
0.21
|
|
|
$
|
(0.83
|
)
|
|
$
|
(1.57
|
)
|
Basic
weighted average common shares outstanding
|
|
61,714
|
|
|
|
61,822
|
|
|
|
61,828
|
|
|
|
62,429
|
|
Diluted
weighted average common shares outstanding
|
|
61,714
|
|
|
|
61,822
|
|
|
|
61,828
|
|
|
|
62,429
|
|
FELCOR
LODGING TRUST INCORPORATED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
24. Noncontrolling
Interests
We record the noncontrolling interests
of other consolidated partnerships as a separate component of equity in the
condensed consolidated balance sheets. Additionally, the condensed
consolidated statements of operations separately present earnings and other
comprehensive income attributable to controlling and non-controlling
interests. We adjust the noncontrolling interests of FelCor LP each
period so that the carrying value equals the greater of its carrying value based
on the accumulation of historical cost or its redemption value. The
historical cost of the noncontrolling interests of FelCor LP is based on the
proportional relationship between the carrying value of equity associated with
our common stockholders relative to that of the unitholders of
FelCor LP. Net income (loss) is allocated to the noncontrolling
partners of FelCor LP based on their weighted average ownership percentage
during the period. At December 31, 2009, approximately
$1.1 million of cash or FelCor common stock, at our option, would be paid
to the noncontrolling interests of FelCor LP if the partnership were
terminated. This balance is equivalent to the 294,960 partnership
units outstanding valued at the December 31, 2009 FelCor common stock
closing price of $3.60, which we have assumed would be equal to the value
provided to outside partners upon liquidation of FelCor LP.
The changes in redeemable
noncontrolling interests are shown below (in thousands):
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
Balance
at beginning of
period
|
$
|
545
|
|
|
$
|
21,109
|
|
Redemption
value
allocation
|
|
1,152
|
|
|
|
(16,393
|
)
|
Distributions
|
|
-
|
|
|
|
(1,559
|
)
|
Comprehensive
income (loss):
|
|
|
|
|
|
|
|
Foreign exchange
translation
|
|
37
|
|
|
|
(179
|
)
|
Net income
(loss)
|
|
(672
|
)
|
|
|
(2,433
|
)
|
Balance
at end of
period
|
$
|
1,062
|
|
|
$
|
545
|
|
25. Subsequent
Events
We have performed an evaluation of
subsequent events through February 25, 2010 (which is the date the
financial statements were issued), and the results of this evaluation are
appropriately reflected in these financial statements.
FELCOR
LODGING TRUST INCORPORATED
Schedule
III – Real Estate and Accumulated Depreciation
as
of December 31, 2009
(in
thousands)
|
|
|
|
Initial
Cost
|
|
Cost
Capitalized
Subsequent
to Acquisition
|
|
Gross
Amounts at Which Carried at Close of Period
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Life
Upon
|
Location
|
|
Encumbrances
|
|
Land
|
|
Building
and
Improvements
|
|
Land
|
|
|
Building
and
Improvements
|
|
Land
|
|
Building
and
Improvements
|
|
Total
|
|
Depreciation
Buildings
&
Improvements
|
|
Year
Opened
|
|
Date
Acquired
|
|
Which
Depreciation
is
Computed
|
Birmingham,
AL (a)
|
|
$
|
24,705
|
|
$
|
2,843
|
|
$
|
29,286
|
|
$
|
-
|
|
|
$
|
3,643
|
|
$
|
2,843
|
|
$
|
32,929
|
|
$
|
35,772
|
|
$
|
10,770
|
|
1987
|
|
1/3/1996
|
|
15 -
40 Yrs
|
Phoenix
- Biltmore, AZ (a)
|
|
|
19,314
|
|
|
4,694
|
|
|
38,998
|
|
|
-
|
|
|
|
3,001
|
|
|
4,694
|
|
|
41,999
|
|
|
46,693
|
|
|
14,223
|
|
1985
|
|
1/3/1996
|
|
15 -
40 Yrs
|
Phoenix
– Crescent, AZ (b)
|
|
|
22,051
|
|
|
3,608
|
|
|
29,583
|
|
|
-
|
|
|
|
1,721
|
|
|
3,608
|
|
|
31,304
|
|
|
34,912
|
|
|
9,741
|
|
1986
|
|
6/30/1997
|
|
15 -
40 Yrs
|
Phoenix
– Tempe, AZ (a)
|
|
|
22,944
|
|
|
3,951
|
|
|
34,371
|
|
|
-
|
|
|
|
2,025
|
|
|
3,951
|
|
|
36,396
|
|
|
40,347
|
|
|
10,464
|
|
1986
|
|
5/4/1998
|
|
15 -
40 Yrs
|
Anaheim
– North, CA (a)
|
|
|
23,595
|
|
|
2,548
|
|
|
14,832
|
|
|
-
|
|
|
|
1,807
|
|
|
2,548
|
|
|
16,639
|
|
|
19,187
|
|
|
5,609
|
|
1987
|
|
1/3/1996
|
|
15 -
40 Yrs
|
Dana
Point – Doheny Beach, CA (c)
|
|
|
-
|
|
|
1,787
|
|
|
15,545
|
|
|
-
|
|
|
|
3,329
|
|
|
1,787
|
|
|
18,874
|
|
|
20,661
|
|
|
5,708
|
|
1992
|
|
2/21/1997
|
|
15 -
40 Yrs
|
Indian
Wells – Esmeralda Resort & Spa, CA (d)
|
|
|
87,642
|
|
|
30,948
|
|
|
73,507
|
|
|
-
|
|
|
|
1,278
|
|
|
30,948
|
|
|
74,785
|
|
|
105,733
|
|
|
3,753
|
|
1989
|
|
12/16/2007
|
|
15 -
40 Yrs
|
Los
Angeles – International Airport – South, CA (a)
|
|
|
-
|
|
|
2,660
|
|
|
17,997
|
|
|
-
|
|
|
|
1,761
|
|
|
2,660
|
|
|
19,758
|
|
|
22,418
|
|
|
7,250
|
|
1985
|
|
3/27/1996
|
|
15 -
40 Yrs
|
Milpitas
– Silicon Valley, CA (a)
|
|
|
18,399
|
|
|
4,021
|
|
|
23,677
|
|
|
-
|
|
|
|
3,471
|
|
|
4,021
|
|
|
27,148
|
|
|
31,169
|
|
|
9,006
|
|
1987
|
|
1/3/1996
|
|
15 -
40 Yrs
|
Napa
Valley, CA (a)
|
|
|
11,293
|
|
|
2,218
|
|
|
14,205
|
|
|
-
|
|
|
|
2,789
|
|
|
2,218
|
|
|
16,994
|
|
|
19,212
|
|
|
5,439
|
|
1985
|
|
5/8/1996
|
|
15 -
40 Yrs
|
Oxnard
- Mandalay Beach – Hotel & Resort, CA (a)
|
|
|
34,749
|
|
|
2,930
|
|
|
22,125
|
|
|
-
|
|
|
|
6,188
|
|
|
2,930
|
|
|
28,313
|
|
|
31,243
|
|
|
8,881
|
|
1986
|
|
5/8/1996
|
|
15 -
40 Yrs
|
San
Diego – On the Bay, CA (e)
|
|
|
(i)
|
|
|
-
|
|
|
68,229
|
|
|
-
|
|
|
|
8,240
|
|
|
-
|
|
|
76,469
|
|
|
76,469
|
|
|
25,424
|
|
1965
|
|
7/28/1998
|
|
15 -
40 Yrs
|
San
Francisco – Airport/Burlingame, CA (a)
|
|
|
(i)
|
|
|
-
|
|
|
39,929
|
|
|
-
|
|
|
|
2,009
|
|
|
-
|
|
|
41,938
|
|
|
41,938
|
|
|
14,383
|
|
1986
|
|
11/6/1995
|
|
15 -
40 Yrs
|
San
Francisco – Airport/South San Francisco, CA (a)
|
|
|
22,389
|
|
|
3,418
|
|
|
31,737
|
|
|
-
|
|
|
|
3,459
|
|
|
3,418
|
|
|
35,196
|
|
|
38,614
|
|
|
11,826
|
|
1988
|
|
1/3/1996
|
|
15 -
40 Yrs
|
San
Francisco - Fisherman’s Wharf, CA (e)
|
|
|
(i)
|
|
|
-
|
|
|
61,883
|
|
|
-
|
|
|
|
2,864
|
|
|
-
|
|
|
64,747
|
|
|
64,747
|
|
|
30,103
|
|
1970
|
|
7/28/1998
|
|
15 -
40 Yrs
|
San
Francisco –Union Square, CA (f)
|
|
|
(i)
|
|
|
8,466
|
|
|
73,684
|
|
|
(434
|
)
|
|
|
47,400
|
|
|
8,032
|
|
|
121,084
|
|
|
129,116
|
|
|
24,056
|
|
1970
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Santa
Barbara – Goleta, CA (e)
|
|
|
15,106
|
|
|
1,683
|
|
|
14,647
|
|
|
4
|
|
|
|
1,569
|
|
|
1,687
|
|
|
16,216
|
|
|
17,903
|
|
|
4,466
|
|
1969
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Santa
Monica Beach – at the Pier, CA (e)
|
|
|
27,489
|
|
|
10,200
|
|
|
16,580
|
|
|
-
|
|
|
|
329
|
|
|
10,200
|
|
|
16,909
|
|
|
27,109
|
|
|
2,464
|
|
1967
|
|
3/11/2004
|
|
15 -
40 Yrs
|
Toronto
- Airport, Canada (e)
|
|
|
(i)
|
|
|
-
|
|
|
21,041
|
|
|
-
|
|
|
|
15,457
|
|
|
-
|
|
|
36,498
|
|
|
36,498
|
|
|
11,220
|
|
1970
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Toronto
- Yorkdale, Canada (e)
|
|
|
(i)
|
|
|
1,566
|
|
|
13,633
|
|
|
701
|
|
|
|
13,467
|
|
|
2,267
|
|
|
27,100
|
|
|
29,367
|
|
|
8,868
|
|
1970
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Wilmington,
DE (c)
|
|
|
9,228
|
|
|
1,379
|
|
|
12,487
|
|
|
-
|
|
|
|
11,159
|
|
|
1,379
|
|
|
23,646
|
|
|
25,025
|
|
|
6,805
|
|
1972
|
|
3/20/1998
|
|
15 -
40 Yrs
|
Boca
Raton, FL (a)
|
|
|
4,922
|
|
|
1,868
|
|
|
16,253
|
|
|
-
|
|
|
|
2,801
|
|
|
1,868
|
|
|
19,054
|
|
|
20,922
|
|
|
6,685
|
|
1989
|
|
2/28/1996
|
|
15 -
40 Yrs
|
Deerfield
Beach – Resort & Spa, FL (a)
|
|
|
28,420
|
|
|
4,523
|
|
|
29,443
|
|
|
68
|
|
|
|
5,761
|
|
|
4,591
|
|
|
35,204
|
|
|
39,795
|
|
|
11,194
|
|
1987
|
|
1/3/1996
|
|
15 -
40 Yrs
|
Ft.
Lauderdale – 17th Street, FL (a)
|
|
|
15,407
|
|
|
5,329
|
|
|
47,850
|
|
|
(163
|
)
|
|
|
4,513
|
|
|
5,166
|
|
|
52,363
|
|
|
57,529
|
|
|
17,779
|
|
1986
|
|
1/3/1996
|
|
15 -
40 Yrs
|
Ft.
Lauderdale – Cypress Creek, FL (b)
|
|
|
10,617
|
|
|
3,009
|
|
|
26,177
|
|
|
-
|
|
|
|
2,148
|
|
|
3,009
|
|
|
28,325
|
|
|
31,334
|
|
|
8,274
|
|
1986
|
|
5/4/1998
|
|
15 -
40 Yrs
|
Jacksonville
– Baymeadows, FL (a)
|
|
|
23,590
|
|
|
1,130
|
|
|
9,608
|
|
|
-
|
|
|
|
7,928
|
|
|
1,130
|
|
|
17,536
|
|
|
18,666
|
|
|
5,882
|
|
1986
|
|
7/28/1994
|
|
15 -
40 Yrs
|
Miami
– International Airport, FL (a)
|
|
|
12,393
|
|
|
4,135
|
|
|
24,950
|
|
|
-
|
|
|
|
5,260
|
|
|
4,135
|
|
|
30,210
|
|
|
34,345
|
|
|
9,588
|
|
1983
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Orlando
– International Airport, FL (e)
|
|
|
8,881
|
|
|
2,549
|
|
|
22,188
|
|
|
6
|
|
|
|
3,005
|
|
|
2,555
|
|
|
25,193
|
|
|
27,748
|
|
|
7,486
|
|
1984
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Orlando
– International Drive South/Convention, FL (a)
|
|
|
21,716
|
|
|
1,632
|
|
|
13,870
|
|
|
-
|
|
|
|
3,044
|
|
|
1,632
|
|
|
16,914
|
|
|
18,546
|
|
|
6,223
|
|
1985
|
|
7/28/1994
|
|
15 -
40 Yrs
|
Orlando
(North), FL (a)
|
|
|
(i)
|
|
|
1,673
|
|
|
14,218
|
|
|
(18
|
)
|
|
|
8,332
|
|
|
1,655
|
|
|
22,550
|
|
|
24,205
|
|
|
8,093
|
|
1985
|
|
7/28/1994
|
|
15 -
40 Yrs
|
Orlando
– Walt Disney World Resort, FL (c)
|
|
|
(i)
|
|
|
-
|
|
|
28,092
|
|
|
-
|
|
|
|
1,337
|
|
|
-
|
|
|
29,429
|
|
|
29,429
|
|
|
9,919
|
|
1987
|
|
7/28/1997
|
|
15 -
40 Yrs
|
St.
Petersburg – Vinoy Resort & Golf Club, FL (d)
|
|
|
88,912
|
|
|
-
|
|
|
100,823
|
|
|
-
|
|
|
|
2,187
|
|
|
-
|
|
|
103,010
|
|
|
103,010
|
|
|
4,578
|
|
1925
|
|
12/16/07
|
|
15 -
40 Yrs
|
Tampa
– Tampa Bay, FL (c)
|
|
|
12,950
|
|
|
2,142
|
|
|
18,639
|
|
|
1
|
|
|
|
2,708
|
|
|
2,143
|
|
|
21,347
|
|
|
23,490
|
|
|
6,691
|
|
1986
|
|
7/28/1997
|
|
15 -
40 Yrs
|
Atlanta
– Airport, GA (a)
|
|
|
12,237
|
|
|
2,568
|
|
|
22,342
|
|
|
-
|
|
|
|
2,843
|
|
|
2,568
|
|
|
25,185
|
|
|
27,753
|
|
|
7,036
|
|
1989
|
|
5/4/1998
|
|
15 -
40 Yrs
|
Atlanta
– Buckhead, GA (a)
|
|
|
32,602
|
|
|
7,303
|
|
|
38,996
|
|
|
(300
|
)
|
|
|
2,730
|
|
|
7,003
|
|
|
41,726
|
|
|
48,729
|
|
|
13,435
|
|
1988
|
|
10/17/1996
|
|
15 -
40 Yrs
|
Atlanta
– Galleria, GA (b)
|
|
|
14,700
|
|
|
5,052
|
|
|
28,507
|
|
|
-
|
|
|
|
1,875
|
|
|
5,052
|
|
|
30,382
|
|
|
35,434
|
|
|
9,454
|
|
1990
|
|
6/30/1997
|
|
15 -
40 Yrs
|
Atlanta
– Gateway-Atlanta Airport, GA (b)
|
|
|
(i)
|
|
|
5,113
|
|
|
22,857
|
|
|
-
|
|
|
|
1,597
|
|
|
5,113
|
|
|
24,454
|
|
|
29,567
|
|
|
7,398
|
|
1986
|
|
6/30/1997
|
|
15 -
40 Yrs
|
FELCOR
LODGING TRUST INCORPORATED
Schedule
III – Real Estate and Accumulated Depreciation – (continued)
as
of December 31, 2009
(in
thousands)
|
|
|
|
Initial
Cost
|
|
Cost
Capitalized
Subsequent
to Acquisition
|
|
Gross
Amounts at Which Carried at Close of Period
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Life
Upon
|
Location
|
|
Encumbrances
|
|
Land
|
|
Building
and
Improvements
|
|
Land
|
|
|
Building
and
Improvements
|
|
Land
|
|
Building
and
Improvements
|
|
Total
|
|
Depreciation
Buildings
&
Improvements
|
|
Year
Opened
|
|
Date
Acquired
|
|
Which
Depreciation
is
Computed
|
Chicago
– Northshore/Deerfield (Northbrook), IL (a)
|
|
|
14,103
|
|
|
2,305
|
|
|
20,054
|
|
|
-
|
|
|
|
1,839
|
|
|
2,305
|
|
|
21,893
|
|
|
24,198
|
|
|
7,153
|
|
1987
|
|
6/20/1996
|
|
15 -
40 Yrs
|
Chicago
– Gateway – O’Hare, IL (b)
|
|
|
20,417
|
|
|
8,178
|
|
|
37,043
|
|
|
-
|
|
|
|
4,063
|
|
|
8,178
|
|
|
41,106
|
|
|
49,284
|
|
|
12,004
|
|
1994
|
|
6/30/1997
|
|
15 -
40 Yrs
|
Indianapolis
– North, IN (a)
|
|
|
11,741
|
|
|
5,125
|
|
|
13,821
|
|
|
-
|
|
|
|
7,291
|
|
|
5,125
|
|
|
21,112
|
|
|
26,237
|
|
|
8,551
|
|
1986
|
|
8/1/1996
|
|
15 -
40 Yrs
|
Lexington
– Lexington Green, KY (g)
|
|
|
17,721
|
|
|
1,955
|
|
|
13,604
|
|
|
-
|
|
|
|
490
|
|
|
1,955
|
|
|
14,094
|
|
|
16,049
|
|
|
4,845
|
|
1987
|
|
1/10/1996
|
|
15 -
40 Yrs
|
Baton
Rouge, LA (a)
|
|
|
19,014
|
|
|
2,350
|
|
|
19,092
|
|
|
1
|
|
|
|
2,312
|
|
|
2,351
|
|
|
21,404
|
|
|
23,755
|
|
|
7,131
|
|
1985
|
|
1/3/1996
|
|
15 -
40 Yrs
|
New
Orleans – Convention Center, LA (a)
|
|
|
27,829
|
|
|
3,647
|
|
|
31,993
|
|
|
-
|
|
|
|
8,323
|
|
|
3,647
|
|
|
40,316
|
|
|
43,963
|
|
|
14,337
|
|
1984
|
|
12/1/1994
|
|
15 -
40 Yrs
|
New
Orleans – French Quarter, LA (e)
|
|
|
(i)
|
|
|
-
|
|
|
50,732
|
|
|
-
|
|
|
|
9,098
|
|
|
-
|
|
|
59,830
|
|
|
59,830
|
|
|
17,310
|
|
1969
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Boston
– at Beacon Hill, MA (e)
|
|
|
(i)
|
|
|
-
|
|
|
45,192
|
|
|
-
|
|
|
|
8,948
|
|
|
-
|
|
|
54,140
|
|
|
54,140
|
|
|
19,539
|
|
1968
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Boston
– Marlborough, MA (a)
|
|
|
17,401
|
|
|
948
|
|
|
8,143
|
|
|
761
|
|
|
|
14,238
|
|
|
1,709
|
|
|
22,381
|
|
|
24,090
|
|
|
7,166
|
|
1988
|
|
6/30/1995
|
|
15 -
40 Yrs
|
Baltimore
– at BWI Airport, MD (a)
|
|
|
21,768
|
|
|
2,568
|
|
|
22,433
|
|
|
(2
|
)
|
|
|
3,205
|
|
|
2,566
|
|
|
25,638
|
|
|
28,204
|
|
|
8,025
|
|
1987
|
|
3/20/1997
|
|
15 -
40 Yrs
|
Bloomington,
MN (a)
|
|
|
18,350
|
|
|
2,038
|
|
|
17,731
|
|
|
-
|
|
|
|
3,087
|
|
|
2,038
|
|
|
20,818
|
|
|
22,856
|
|
|
6,233
|
|
1980
|
|
2/1/1997
|
|
15 -
40 Yrs
|
Minneapolis
– Airport, MN (a)
|
|
|
16,212
|
|
|
5,417
|
|
|
36,508
|
|
|
24
|
|
|
|
2,091
|
|
|
5,441
|
|
|
38,599
|
|
|
44,040
|
|
|
13,180
|
|
1986
|
|
11/6/1995
|
|
15 -
40 Yrs
|
St
Paul – Downtown, MN (a)
|
|
|
1,735
|
|
|
1,156
|
|
|
17,315
|
|
|
-
|
|
|
|
1,596
|
|
|
1,156
|
|
|
18,911
|
|
|
20,067
|
|
|
6,360
|
|
1983
|
|
11/15/1995
|
|
15 -
40 Yrs
|
Charlotte
– SouthPark, NC (c)
|
|
|
18,347
|
|
|
1,458
|
|
|
12,681
|
|
|
-
|
|
|
|
2,735
|
|
|
1,458
|
|
|
15,416
|
|
|
16,874
|
|
|
3,159
|
|
N/A
|
|
7/12/2002
|
|
15 -
40 Yrs
|
Raleigh/Durham,
NC (c)
|
|
|
17,290
|
|
|
2,124
|
|
|
18,476
|
|
|
-
|
|
|
|
2,174
|
|
|
2,124
|
|
|
20,650
|
|
|
22,774
|
|
|
6,315
|
|
1987
|
|
7/28/1997
|
|
15 -
40 Yrs
|
Piscataway
– Somerset, NJ (a)
|
|
|
17,637
|
|
|
1,755
|
|
|
17,563
|
|
|
-
|
|
|
|
2,227
|
|
|
1,755
|
|
|
19,790
|
|
|
21,545
|
|
|
6,666
|
|
1988
|
|
1/10/1996
|
|
15 -
40 Yrs
|
Philadelphia
– Historic District, PA (e)
|
|
|
26,580
|
|
|
3,164
|
|
|
27,535
|
|
|
7
|
|
|
|
9,301
|
|
|
3,171
|
|
|
36,836
|
|
|
40,007
|
|
|
11,425
|
|
1972
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Philadelphia
– Society Hill, PA (b)
|
|
|
27,767
|
|
|
4,542
|
|
|
45,121
|
|
|
-
|
|
|
|
5,981
|
|
|
4,542
|
|
|
51,102
|
|
|
55,644
|
|
|
15,059
|
|
1986
|
|
10/1/1997
|
|
15 -
40 Yrs
|
Pittsburgh
– at University Center (Oakland), PA (e)
|
|
|
14,911
|
|
|
-
|
|
|
25,031
|
|
|
-
|
|
|
|
2,947
|
|
|
-
|
|
|
27,978
|
|
|
27,978
|
|
|
8,242
|
|
1988
|
|
11/1/1998
|
|
15 -
40 Yrs
|
Charleston
– Mills House, SC (e)
|
|
|
25,538
|
|
|
3,251
|
|
|
28,295
|
|
|
7
|
|
|
|
4,663
|
|
|
3,258
|
|
|
32,958
|
|
|
36,216
|
|
|
8,693
|
|
1982
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Myrtle
Beach – Oceanfront Resort, SC (a)
|
|
|
(i)
|
|
|
2,940
|
|
|
24,988
|
|
|
-
|
|
|
|
5,311
|
|
|
2,940
|
|
|
30,299
|
|
|
33,239
|
|
|
9,063
|
|
1987
|
|
12/5/1996
|
|
15 -
40 Yrs
|
Myrtle
Beach Resort (g)
|
|
|
21,524
|
|
|
9,000
|
|
|
19,844
|
|
|
6
|
|
|
|
29,247
|
|
|
9,006
|
|
|
49,091
|
|
|
58,097
|
|
|
7,380
|
|
1974
|
|
7/23/2002
|
|
15 -
40 Yrs
|
Nashville
– Airport – Opryland Area, TN (a)
|
|
|
18,899
|
|
|
1,118
|
|
|
9,506
|
|
|
-
|
|
|
|
1,313
|
|
|
1,118
|
|
|
10,819
|
|
|
11,937
|
|
|
4,625
|
|
1985
|
|
7/28/1994
|
|
15 -
40 Yrs
|
Nashville
– Opryland – Airport (Briley Parkway), TN (e)
|
|
|
(i)
|
|
|
-
|
|
|
27,734
|
|
|
-
|
|
|
|
3,236
|
|
|
-
|
|
|
30,970
|
|
|
30,970
|
|
|
11,389
|
|
1981
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Austin,
TX (c)
|
|
|
8,716
|
|
|
2,508
|
|
|
21,908
|
|
|
-
|
|
|
|
2,839
|
|
|
2,508
|
|
|
24,747
|
|
|
27,255
|
|
|
7,894
|
|
1987
|
|
3/20/1997
|
|
15 -
40 Yrs
|
Corpus
Christi, TX (a)
|
|
|
4,531
|
|
|
1,113
|
|
|
9,618
|
|
|
51
|
|
|
|
4,480
|
|
|
1,164
|
|
|
14,098
|
|
|
15,262
|
|
|
4,527
|
|
1984
|
|
7/19/1995
|
|
15 -
40 Yrs
|
Dallas
– DFW International Airport South, TX (a)
|
|
|
19,302
|
|
|
4,041
|
|
|
35,156
|
|
|
-
|
|
|
|
1,164
|
|
|
4,041
|
|
|
36,320
|
|
|
40,361
|
|
|
10,202
|
|
1985
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Dallas
– Love Field, TX (a)
|
|
|
16,500
|
|
|
1,934
|
|
|
16,674
|
|
|
-
|
|
|
|
3,215
|
|
|
1,934
|
|
|
19,889
|
|
|
21,823
|
|
|
6,749
|
|
1986
|
|
3/29/1995
|
|
15 -
40 Yrs
|
Dallas
– Market Center, TX (a)
|
|
|
(i)
|
|
|
2,560
|
|
|
23,751
|
|
|
-
|
|
|
|
2,311
|
|
|
2,560
|
|
|
26,062
|
|
|
28,622
|
|
|
7,875
|
|
1980
|
|
6/30/1997
|
|
15 -
40 Yrs
|
Dallas
– Park Central, TX (h)
|
|
|
-
|
|
|
4,513
|
|
|
43,125
|
|
|
762
|
|
|
|
7,728
|
|
|
5,275
|
|
|
50,853
|
|
|
56,128
|
|
|
15,176
|
|
1983
|
|
6/30/1997
|
|
15 -
40 Yrs
|
Houston
- Medical Center, TX (e)
|
|
|
22,821
|
|
|
-
|
|
|
22,027
|
|
|
-
|
|
|
|
4,689
|
|
|
-
|
|
|
26,716
|
|
|
26,716
|
|
|
7,210
|
|
1984
|
|
7/28/1998
|
|
15 -
40 Yrs
|
San
Antonio - International Airport, TX (e)
|
|
|
23,800
|
|
|
3,351
|
|
|
29,168
|
|
|
(185
|
)
|
|
|
3,758
|
|
|
3,166
|
|
|
32,926
|
|
|
36,092
|
|
|
9,672
|
|
1981
|
|
7/28/1998
|
|
15 -
40 Yrs
|
Burlington
Hotel & Conference Center, VT (b)
|
|
|
17,150
|
|
|
3,136
|
|
|
27,283
|
|
|
(2
|
)
|
|
|
2,657
|
|
|
3,134
|
|
|
29,940
|
|
|
33,074
|
|
|
8,831
|
|
1967
|
|
12/4/1997
|
|
15 -
40 Yrs
|
|
|
$
|
1,113,855
|
|
$
|
225,141
|
|
$
|
1,951,934
|
|
$
|
1,295
|
|
|
$
|
363,592
|
|
$
|
226,436
|
|
$
|
2,315,526
|
|
$
|
2,541,962
|
|
$
|
672,160
|
|
|
|
|
|
|
FELCOR
LODGING TRUST INCORPORATED
Schedule
III – Real Estate and Accumulated Depreciation – (continued)
as
of December 31, 2009
(in
thousands)
(a)Embassy
Suites Hotel
|
(b)Sheraton
|
(c)Doubletree
Guest Suites
|
(d)Renaissance
Resort
|
(e)Holiday
Inn
|
(f)Marriott
|
(g)Hilton
|
(h)Westin
|
(i)This
hotel provides collateral for our $636 million senior notes due in
October 2014.
|
|
Year
Ended December 31,
|
|
2009
|
|
2008
|
|
2007
|
Reconciliation
of Land and Buildings and Improvements
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
$
|
2,586,034
|
|
|
$
|
2,542,784
|
|
|
$
|
2,262,354
|
|
Additions
during period:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
-
|
|
|
|
-
|
|
|
|
205,278
|
|
Improvements
|
|
51,895
|
|
|
|
43,250
|
|
|
|
75,152
|
|
Deductions
during period:
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of properties
|
|
(95,967
|
)
|
|
|
-
|
|
|
|
-
|
|
Balance
at end of period before impairment charges
|
|
2,541,962
|
|
|
|
2,586,034
|
|
|
|
2,542,784
|
|
Cumulative
impairment charges on real estate assets owned at end of
period
|
|
(49,680
|
)
|
|
|
(101,424
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
$
|
2,492,282
|
|
|
$
|
2,484,610
|
|
|
$
|
2,542,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
$
|
629,920
|
|
|
$
|
567,954
|
|
|
$
|
503,145
|
|
Additions
during period:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
for the period
|
|
69,408
|
|
|
|
61,966
|
|
|
|
64,809
|
|
Deductions
during period:
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of properties
|
|
(27,168
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
$
|
672,160
|
|
|
$
|
629,920
|
|
|
$
|
567,954
|
|
Item
9. Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
None.
Item
9A. Controls
and Procedures
Evaluation
of Disclosure Controls and Procedures.
Under the supervision and with the
participation of FelCor’s management, including its chief executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of
the period covered by this report (the “Evaluation Date”). Based on
this evaluation, our chief executive officer and principal financial officer
concluded, as of the Evaluation Date, that our disclosure controls and
procedures were effective, such that the information relating to us required to
be disclosed in our reports is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms, and is accumulated and
communicated to our management, including our chief executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Changes
in Internal Control over Financial Reporting.
There
have not been any changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934)
during the fourth quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Management’s
Report on Internal Control over Financial Reporting.
Our management is responsible for
establishing and maintaining adequate internal control over financial
reporting. A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles.
Our management assessed the
effectiveness of our internal control over financial reporting as of
December 31, 2009. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on our assessment, we have concluded that, as of
December 31, 2009, our internal control over financial reporting is effective,
based on those criteria.
The effectiveness of our internal
control over financial reporting as of December 31, 2009, has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm
as stated in their report, which appears on page 52 of this Annual
Report.
Item
9B. Other
Information
None.
PART
III
Item
10. Directors, Executive Officers of the Registrant and
Corporate Governance
The information called for by this Item
is contained in our definitive Proxy Statement for our 2010 Annual Meeting of
Stockholders, and is incorporated herein by reference.
Item
11. Executive Compensation
The information called for by this Item
is contained in our definitive Proxy Statement for our 2010 Annual Meeting of
Stockholders, and is incorporated herein by reference.
Item
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder
Matters
|
The information called for by this Item
is contained in our definitive Proxy Statement for our 2010 Annual Meeting of
Stockholders, or in Item 5 of this Annual Report for the year ended
December 31, 2009, and is incorporated herein by reference.
Item
13. Certain Relationships, Related Transactions and Director
Independence
The information called for by this Item
is contained in our definitive Proxy Statement for our 2010 Annual Meeting of
Stockholders, and is incorporated herein by reference.
Item
14. Principal Accountant Fees and Services
The information called for by this Item
is contained in our definitive Proxy Statement for our 2010 Annual Meeting of
Stockholders, and is incorporated herein by reference.
PART
IV
Item
15. Exhibits and Financial Statement Schedules
(a) The
following is a list of documents filed as a part of this report:
(1) Financial
Statements.
Included
herein at pages 51 through 84.
(2) Financial
Statement Schedules.
The
following financial statement schedule is included herein at pages 85 through
87.
Schedule III - Real Estate and
Accumulated Depreciation for FelCor Lodging Trust Incorporated
All other schedules for which provision
is made in Regulation S-X are either not required to be included herein under
the related instructions, are inapplicable or the related information is
included in the footnotes to the applicable financial statement and, therefore,
have been omitted.
(b) Exhibits.
The following exhibits are provided
pursuant to the provisions of Item 601 of Regulation S-K:
The
following exhibits are provided pursuant to the provisions of Item 601 of
Regulation S-K:
Exhibit
Number
|
|
Description
of Exhibit
|
|
|
|
3.1
|
Articles
of Amendment and Restatement dated June 22, 1995, amending and restating
the Charter of FelCor Lodging Trust Incorporated (“FelCor”), as amended or
supplemented by Articles of Merger dated June 23, 1995, Articles
Supplementary dated April 30, 1996, Articles of Amendment dated August 8,
1996, Articles of Amendment dated June 16, 1997, Articles of Amendment
dated October 30, 1997, Articles Supplementary filed May 6, 1998, Articles
of Merger and Articles of Amendment dated July 27, 1998, Certificate of
Correction dated March 11, 1999, Certificate of Correction to the
Articles of Merger between FelCor and Bristol Hotel Company, dated August
30, 1999, Articles Supplementary, dated April 1, 2002, Certificate of
Correction, dated March 29, 2004, to Articles Supplementary filed May 2,
1996, Articles Supplementary filed April 2, 2004, Articles Supplementary
filed August 20, 2004, Articles Supplementary filed April 6, 2005, and
Articles Supplementary filed August 29, 2005 (filed as Exhibit 4.1 to
FelCor’s Registration Statement on Form S-3 (Registration No. 333-128862)
and incorporated herein by reference).
|
|
|
3.2
|
Bylaws
of FelCor Lodging Trust Incorporated (filed as Exhibit 4.2 to FelCor’s
Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by
reference).
|
|
|
4.1
|
Form
of Share Certificate for Common Stock (filed as Exhibit 4.1 to FelCor’s
Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by
reference).
|
|
|
4.2
|
Form
of Share Certificate for $1.95 Series A Cumulative Convertible Preferred
Stock (filed as Exhibit 4.4 to FelCor’s Form 8-K, dated May 1, 1996, and
incorporated herein by reference).
|
|
|
4.3
|
Form
of Share Certificate for 8% Series C Cumulative Redeemable Preferred Stock
(filed as Exhibit 4.10.1 to FelCor’s Form 8-K, dated April 6, 2005, and
incorporated herein by reference).
|
|
|
4.4
|
Deposit
Agreement, dated April 7, 2005, between FelCor and SunTrust Bank, as
preferred share depositary (filed as Exhibit 4.11.1 to FelCor’s Form 8-K,
dated April 6, 2005, and incorporated herein by
reference).
|
4.4.1
|
Supplement
and Amendment to Deposit Agreement, dated August 30, 2005, between the
Company and SunTrust Bank, as depositary (filed as Exhibit 4.11.2 to
FelCor’s Form 8-K, dated April 6, 2005, and incorporated herein by
reference).
|
|
|
4.5
|
Form
of Depositary Receipt evidencing the Depositary Shares, which represent
the 8% Series C Cumulative Redeemable Preferred Stock (filed as Exhibit
4.12.1 to FelCor’s Form 8-K, dated April 6, 2005, and incorporated herein
by reference).
|
|
|
4.6
|
Indenture,
dated as of October 1, 2009, by and between FelCor Escrow Holdings, L.L.C.
and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to
FelCor’s Form 8-K, dated October 1, 2009, and incorporated herein by
reference).
|
|
|
4.6.1
|
First
Supplemental Indenture dated as of October 12, 2009, by and between FelCor
Escrow Holdings, L.L.C. and U.S. Bank National Association (filed as
Exhibit 4.1 to FelCor’s Form 8-K, dated October 13, 2009, and incorporated
herein by reference).
|
|
|
4.6.2
|
Second
Supplemental Indenture dated as of October 13, 2009, by and among FelCor,
FelCor Lodging Limited Partnership (“FelCor LP”), certain subsidiary
guarantors named therein, FelCor Holdings Trust, FelCor Escrow Holdings,
L.L.C. and U.S. Bank National Association (filed as Exhibit 4.2 to
FelCor’s Form 8-K dated, October 13, 2009, and incorporated herein by
reference).
|
|
|
4.7
|
Registration
Rights Agreement dated October 1, 2009 to be effective as of October 13,
2009, by and among FelCor, FelCor LP, certain subsidiary guarantors named
therein, and J.P. Morgan Securities Inc. on behalf of itself and the
initial purchasers (filed as Exhibit 4.3 to FelCor’s Form 8-K, dated
October 13, 2009, and incorporated herein by
reference).
|
|
|
10.1
|
Second
Amended and Restated Agreement of Limited Partnership of FelCor LP, dated
as of December 31, 2001 (filed as Exhibit 10.1 to FelCor’s Form 10-K for
the fiscal year ended December 31, 2001 (the “2001 Form 10-K”) and
incorporated herein by reference).
|
|
|
10.1.1
|
First
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated April 1, 2002 (filed as Exhibit 10.1.1 to FelCor’s
Form 8-K, dated April 1, 2002, and incorporated herein by
reference).
|
|
|
10.1.2
|
Second
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated August 31, 2002 (filed as Exhibit 10.1.2 to FelCor’s
Form 10-K for the fiscal year ended December 31, 2002 (the “2002 Form
10-K”), and incorporated herein by reference).
|
|
|
10.1.3
|
Third
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated October 1, 2002 (filed as Exhibit 10.1.3 to the 2002
Form 10-K and incorporated herein by reference).
|
|
|
10.1.4
|
Fourth
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated as of July 1, 2003 (filed as Exhibit 10.1.4 to
FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated
herein by reference).
|
|
|
10.1.5
|
Fifth
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated as of April 2, 2004 (filed as Exhibit 10.1.5 to
FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated
herein by reference).
|
|
|
10.1.6
|
Sixth
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated as of August 23, 2004 (filed as Exhibit 10.1.6 to
FelCor’s Form 8-K, dated August 26, 2004, and incorporated herein by
reference).
|
10.1.7
|
Seventh
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated as of April 7, 2005, which contains Addendum No. 4 to
the Second Amended and Restated Agreement of Limited Partnership of FelCor
Lodging Limited Partnership (filed as Exhibit 10.1.8 to FelCor’s Form 8-K,
dated April 6, 2006, and incorporated herein by
reference).
|
|
|
10.1.8
|
Eighth
Amendment to Second Amended and Restated Agreement of Limited Partnership
of FelCor LP, dated as of August 30, 2005 (filed as Exhibit 10.1.9 to
FelCor’s Form 8-K, dated August 29, 2005, and incorporated herein by
reference).
|
|
|
10.2.1
|
Form
of Management Agreement between subsidiaries of FelCor, as owner, and a
subsidiary of InterContinental Hotels, as manager, with respect to
FelCor’s InterContinental Hotels branded hotels (included as an exhibit to
the Leasehold Acquisition Agreement, which was filed as Exhibit 10.28 to
FelCor’s Form 10-Q for the quarter ended March 31, 2001, and incorporated
herein by reference).
|
|
|
10.2.2
|
Omnibus
Agreement between FelCor and all its various subsidiaries, controlled
entities and affiliates, and Six Continents Hotels, Inc. and all its
various subsidiaries, controlled entities and affiliates, with respect to
FelCor’s InterContinental Hotels branded hotels (filed as Exhibit 10.2.2
to FelCor’s Form 10-K for the fiscal year ended December 31, 2005 (the
“2005 Form 10-K”), and incorporated herein by
reference).
|
|
|
10.3.1
|
Form
of Management Agreement between subsidiaries of FelCor, as owner, and a
subsidiary of Hilton Hotels Corporation, as manager, with respect to
FelCor’s Embassy Suites Hotels branded hotels, including the form of
Embassy Suites Hotels License Agreement attached as an exhibit thereto,
effective prior to July 28, 2004 (filed as Exhibit 10.5 to the 2001 Form
10-K, and incorporated herein by reference).
|
|
|
10.3.2
|
Form
of Management Agreement between subsidiaries of FelCor, as owner, and a
subsidiary of Hilton Hotels Corporation, as manager, with respect to
FelCor’s Embassy Suites Hotels branded hotels, including the form of
Embassy Suites Hotels License Agreement attached as an exhibit thereto,
effective July 28, 2004 (filed as Exhibit 10.3.2 to FelCor’s Form 10-K for
the fiscal year ended December 31, 2004 (the “2004 Form 10-K”), and
incorporated herein by reference).
|
|
|
10.4
|
Form
of Management Agreement between subsidiaries of FelCor, as owner, and a
subsidiary of Hilton Hotels Corporation, as manager, with respect to
FelCor’s Doubletree and Doubletree Guest Suites branded hotels (filed as
Exhibit 10.6 to the 2001 Form 10-K and incorporated herein by
reference).
|
|
|
10.5
|
Form
of Management Agreement between subsidiaries of FelCor, as owner, and a
subsidiary of Starwood Hotels & Resorts, Inc., as manager, with
respect to FelCor’s Sheraton and Westin branded hotels (filed as Exhibit
10.7 to the 2001 Form 10-K and incorporated herein by
reference).
|
|
|
10.6
|
Executive
Employment Agreement, dated effective as of February 1, 2006, between
FelCor and Thomas J. Corcoran, Jr. (filed as Exhibit 10.36 to FelCor’s
Form 8-K, dated February 7, 2006, and incorporated herein by
reference).
|
|
|
10.6.1
|
Letter
Agreement dated March 1, 2008 between Thomas J. Corcoran, Jr. and FelCor
(filed as Exhibit 101 to FelCor’s Form 10-Q for the quarter ended March
31, 2008, and incorporated herein by reference).
|
|
|
10.7
|
Executive
Employment Agreement dated October 19, 2007, between FelCor and Richard A.
Smith (filed as Exhibit 10.1 to FelCor’s Form 10-Q for the quarter ended
September 30, 2007, and incorporated herein by
reference).
|
10.8
|
Form
of 2007 Change in Control and Severance Agreement between FelCor and each
of Rick Smith, Andy Welch, Mike DeNicola, Troy Pentecost, Jon Yellen and
Tom Corcoran (filed as Exhibit 10.1 to FelCor’s Form 8-K dated October 23,
2007, and incorporated herein by reference).
|
|
|
10.9
|
Savings
and Investment Plan of FelCor (filed as Exhibit 10.10 to the 2001 Form
10-K and incorporated herein by reference).
|
|
|
10.10
|
1998
Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to FelCor’s
Registration Statement on Form S-8 (Registration File No. 333-66041) and
incorporated herein by reference).
|
|
|
10.11
|
2001
Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.14
to the 2002 Form 10-K and incorporated herein by
reference).
|
|
|
10.12
|
Form
of Nonstatutory Stock Option Contract under Restricted Stock and Stock
Option Plans of FelCor (filed as Exhibit 10.16 to the 2004 Form 10-K and
incorporated herein by reference).
|
|
|
10.13
|
Form
of Employee Stock Grant Contract under Restricted Stock and Stock Option
Plans of FelCor (filed as Exhibit 10.17 to the 2004 Form 10-K and
incorporated herein by reference).
|
|
|
10.14
|
FelCor’s
2005 Restricted Stock and Stock Option Plan as amended (filed as Exhibit
4.4 to FelCor’s Registration Statement on Form S-8 (Registration File No.
333-151066) and incorporated herein by reference).
|
|
|
10.15
|
Form
of Employee Stock Grant Contract under Restricted Stock and Stock Option
Plans of FelCor applicable to grants in 2005 and thereafter (filed as
Exhibit 10.33 to FelCor’s Form 8-K, dated April 26, 2005, and incorporated
herein by reference).
|
|
|
10.16
|
Form
of Employee Stock Grant and Supplemental Long-Term Cash Payment Agreement
dated as of February 19, 2009 (filed as Exhibit 10.1 to FelCor’s Form 8-K,
dated February 20, 2009, and incorporated herein by
reference).
|
|
|
10.16.1
|
Amendment
to Employee Stock Grant and Supplemental Long-Term Cash Payment Agreement
dated as of February 19, 2009 (filed as Exhibit 10.1 to FelCor’s Form 8-K,
dated December 28, 2009, and incorporated herein by
reference).
|
|
|
10.17
|
Form
of Restricted Payment Contract (filed as Exhibit 10.2 to FelCor’s Form
8-K, dated December 28, 2009, and incorporated herein by
reference).
|
|
|
10.18
|
Form
of Employee Stock Grant Contract (filed as Exhibit 10.3 to FelCor’s Form
8-K, dated December 28, 2009, and incorporated herein by
reference).
|
|
|
10.19
|
Form
of Indemnification Agreement by and among FelCor, FelCor LP and individual
officers and directors of FelCor (filed as Exhibit 10.1 to FelCor’s 10-Q
for the quarter ended March 31, 2009, and incorporated herein by
reference; superseding the form of Indemnification Agreement that was
filed as Exhibit 10.1 to FelCor’s Form 8-K, dated November 9, 2006, and
incorporated herein by reference).
|
|
|
10.20
|
Form
of Guaranty Agreement by and among FelCor, FelCor LP and individual
employees of FelCor (filed as Exhibit 10.2 to FelCor’s Form 10-Q for the
quarter ended March 31, 2009, and incorporated herein by
reference).
|
|
|
10.21*
|
Summary
of Amended Annual Compensation Program for Directors of
FelCor.
|
10.22
|
Summary
of FelCor’s Performance-Based Annual Incentive Compensation Programs
(filed as Exhibit 10.1 to FelCor’s Form 8-K, dated February 18, 2010, and
incorporated herein by reference).
|
|
|
10.23.1
|
Form
Deed of Trust and Security Agreement and Fixture Filing with Assignment of
Leases and Rents, each dated as of April 20, 2000, from FelCor/MM S-7
Holdings, L.P., as Mortgagor, in favor of Massachusetts Mutual Life
Insurance Company and Teachers Insurance and Annuity Association of
America, as Mortgagee, each covering a separate hotel and securing one of
the separate Promissory Notes described in Exhibit 10.22.3 (filed as
Exhibit 10.24 to FelCor’s Form 10-Q for the quarter ended June 30, 2000
(the “June 2000 10-Q”) and incorporated herein by
reference).
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|
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10.23.2
|
Form
of Accommodation Cross-Collateralization Mortgage and Security Agreement,
each dated as of April 20, 2000, executed by FelCor/MM S-7 Holdings, L.P.,
in favor of Massachusetts Mutual Life Insurance Company and Teachers
Insurance and Annuity Association of America (filed as Exhibit 10.24.1 to
the June 2000 10-Q and incorporated herein by
reference).
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|
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10.23.3
|
Form
of fourteen separate Promissory Notes, each dated April 20, 2000, each
made by FelCor/MM S-7 Holdings, L.P., each separately payable to the order
of Massachusetts Mutual Life Insurance Company and Teachers Insurance and
Annuity Association of America, respectively, in the respective original
principal amounts of $13,500,000 (Phoenix (Crescent), Arizona),
$13,500,000 (Phoenix (Crescent), Arizona), $6,500,000 (Cypress Creek/Ft.
Lauderdale, Florida), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida),
$9,000,000 (Atlanta Galleria, Georgia), $9,000,000 (Atlanta Galleria,
Georgia), $12,500,000 (Chicago O’Hare Airport, Illinois), $12,500,000
(Chicago O’Hare Airport, Illinois), $3,500,000 (Lexington, Kentucky),
$3,500,000 (Lexington, Kentucky), $17,000,000 (Philadelphia Society Hill,
Philadelphia), $17,000,000 (Philadelphia Society Hill, Philadelphia),
$10,500,000 (South Burlington, Vermont) and $10,500,000 (South Burlington,
Vermont) (filed as Exhibit 10.24.2 to the June 2000 10-Q and incorporated
herein by reference).
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|
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10.24.1
|
Form
Deed of Trust and Security Agreement, each dated as of May 2, 2000, from
each of FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel,
L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings,
L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel,
L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings,
L.P., each as Borrower, in favor of The Chase Manhattan Bank, as
Beneficiary, each covering a separate hotel and securing one of the
separate Promissory Notes described in Exhibit 10.23.2 (filed as Exhibit
10.25 to the June 2000 10-Q and incorporated herein by
reference).
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|
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10.24.2
|
Form
of eight separate Promissory Notes, each dated May 2, 2000, made by
FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C.,
FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P.,
FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C.,
FelCor/CMB Piscataway Hotel, L.L.C. and FelCor/CMB SSF Holdings, L.P.,
each separately payable to the order of The Chase Manhattan Bank in the
respective original principal amounts of $38,250,000 (Atlanta Buckhead,
Georgia), $20,500,000 (Boston Marlborough, Massachusetts), $16,575,000
(Chicago Deerfield, Illinois), $5,338,000 (Corpus Christi, Texas),
$25,583,000 (Orlando South, Florida), $32,650,000 (New Orleans,
Louisiana), $20,728,000 (Piscataway, New Jersey) and $26,268,000 (South
San Francisco, California) (filed as Exhibit 10.25.1 to the June 2000 10-Q
and incorporated herein by reference).
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|
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10.25.1
|
Form
of Loan Agreement, each dated either May 26, 2004, June 10, 2004 or July
19, 2004, between JPMorgan Chase Bank, as lender, and each of FelCor/JPM
Boca Raton Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM
Wilmington Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM
Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., and FelCor/JPM
BWI Hotel, L.L.C. and FCH/DT BWI Hotel, L.L.C., as borrowers, and
acknowledged and agreed by FelCor LP (filed as Exhibit 10.34 to FelCor’s
Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by
reference).
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10.25.2
|
Form
of Mortgage, Renewal Mortgage, Deed of Trust, Deed to Secure Debt,
Indemnity Deed of Trust and Assignment of Leases and Rents, Security
Agreement and Fixture Filing, each dated either May 26, 2004, June 10,
2004 or July 19, 2004, from FelCor/JPM Wilmington Hotel, L.L.C., DJONT/JPM
Wilmington Leasing, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., DJONT/JPM
Phoenix Leasing, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., DJONT/JPM
Boca Raton Leasing, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., DJONT/JPM
Atlanta ES Leasing, L.L.C., FelCor/JPM Austin Holdings, L.P., DJONT/JPM
Austin Leasing, L.P., FelCor/JPM Orlando Hotel, L.L.C., DJONT/JPM Orlando
Leasing, L.L.C., FCH/DT BWI Holdings, L.P., FCH/DT BWI Hotel, L.L.C. and
DJONT/JPM BWI Leasing, L.L.C., to, and for the benefit of, JPMorgan Chase
Bank, as mortgagee or beneficiary (filed as Exhibit 10.34.1 to FelCor’s
Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by
reference).
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10.25.3
|
Form
of seven separate Promissory Notes, each dated either May 26, 2004, June
10, 2004 or July 19, 2004, made by FelCor/JPM Wilmington Hotel, L.L.C.,
FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C.,
FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P.,
FelCor/JPM Orlando Hotel, L.L.C., and FelCor/JPM BWI Hotel, L.L.C., each
separately payable to the order of JPMorgan Chase Bank in the respective
original principal amounts of $11,000,000 (Wilmington, Delaware),
$21,368,000 (Phoenix, Arizona), $5,500,000 (Boca Raton, Florida),
$13,500,000 (Atlanta, Georgia), $9,616,000 (Austin, Texas), $9,798,000
(Orlando, Florida), and $24,120,000 (Linthicum, Maryland) (filed as
Exhibit 10.34.2 to FelCor’s Form 10-Q for the quarter ended June 30, 2004,
and incorporated herein by reference).
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10.25.4
|
Form
of Guaranty of Recourse Obligations of Borrower, each dated either May 26,
2004, June 10, 2004 or July 19, 2004, made by FelCor LP in favor of
JPMorgan Chase Bank (filed as Exhibit 10.34.3 to FelCor’s Form 10-Q for
the quarter ended June 30, 2004, and incorporated herein by
reference).
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|
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10.26.1
|
Loan
Agreement, dated as of November 10, 2006, by and among FelCor/JPM Hotels,
L.L.C. and DJONT/JPM Leasing, L.L.C., as borrowers, and Bank of America,
N.A., as lender, relating to a $250 million loan from lender to borrower
(filed as Exhibit 10.35.1 to the FelCor’s Form 10-K for the fiscal year
ended December 31, 2006 (the “2006 Form 10-K”), and incorporated herein by
reference).
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|
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10.26.1.1
|
First
Amendment to Loan Agreement and Other Loan Documents, dated as of January
31, 2007, by and among FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing,
L.L.C., as borrowers, and Bank of America, N.A., as lender (filed as
Exhibit 10.35.1.1 to the 2006 Form 10-K and incorporated herein by
reference).
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|
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10.26.2
|
Form
of Mortgage, Deed of Trust and Security Agreement, each dated as of
November 10, 2006, from FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing,
L.L.C., as borrowers, in favor of Bank of America, N.A., as lender, each
covering a separate hotel and securing the Mortgage Loan (filed as Exhibit
10.35.2 to the 2006 Form 10-K and incorporated herein by
reference).
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10.26.3
|
Form
of Amended and Restated Promissory Note, each dated as of January 31,
2007, made by FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing, L.L.C.
payable to the order of either Bank of America, N.A. or JPMorgan Chase
Bank, N.A., as lender, in the original aggregate principal amount of $250
million (filed as Exhibit 10.35.3 to the 2006 Form 10-K and incorporated
herein by reference).
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10.26.4
|
Guaranty
of Recourse Obligations of Borrower, dated as of November 10, 2006, made
by FelCor LP in favor of Bank of America, N.A (filed as Exhibit 10.35.4 to
the 2006 Form 10-K and incorporated herein by
reference).
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10.27.1
|
Assumption
Agreement dated December 14, 2007 by Greenwich Capital Financial Products,
Inc., WSRH Indian Wells, L.L.C., FelCor Esmeralda (SPE), L.L.C. and FelCor
Esmeralda Leasing (SPE), L.L.C. (filed as Exhibit 10.28.1 to the FelCor’s
Form 10-K for the fiscal year ended December 31, 2007 (the “2007 Form
10-K”), and incorporated herein by reference).
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|
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10.27.2
|
Amended
and Restated Loan Agreement dated December 14, 2007 between FelCor
Esmeralda (SPE), L.L.C. and FelCor Esmeralda Leasing (SPE), L.L.C., as
borrowers, and Greenwich Financial Products, Inc., as lender (filed as
Exhibit 10.28.2 to the 2007 Form 10-K and incorporated herein by
reference).
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10.27.3
|
Amended
and Restated Promissory Note dated December 14, 2007, in the amount of
$87,975,000, made by FelCor Esmeralda (SPE), L.L.C. and FelCor Esmeralda
Leasing (SPE), L.L.C., as borrower, in favor of Greenwich Capital
Financial Products, Inc., as lender (filed as Exhibit 10.28.3 to the 2007
Form 10-K and incorporated herein by reference).
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|
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10.27.4
|
Amended
and Restated Deed of Trust, Security Agreement and Fixture Filing dated
December 14, 2007 by FelCor Esmeralda (SPE), L.L.C. and FelCor Esmeralda
Leasing (SPE), L.L.C., as trustors, to First American Title Insurance
Company, as trustee, and Greenwich Capital Financial Products, Inc., as
lender(filed as Exhibit 10.28.4 to the 2007 Form 10-K and incorporated
herein by reference).
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|
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10.28.1
|
Assumption
Agreement dated December 14, 2007 by Greenwich Capital Financial Products,
Inc., WSRH VSP, L.P., FelCor St. Pete (SPE), L.L.C. and FelCor St. Pete
Leasing (SPE), L.L.C. (filed as Exhibit 10.29.1 to the 2007 Form 10-K and
incorporated herein by reference).
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|
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10.28.2
|
Second
Amended and Restated Loan Agreement dated December 14, 2007 between FelCor
St. Pete (SPE), L.L.C. and FelCor St. Pete Leasing (SPE), L.L.C., as
borrowers, and Greenwich Financial Products, Inc., as lender (filed as
Exhibit 10.29.2 to the 2007 Form 10-K and incorporated herein by
reference).
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|
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10.28.3
|
Second
Amended and Restated Promissory Note dated December 14, 2007, in the
amount of $89,250,000, made by FelCor St. Pete (SPE), L.L.C. and FelCor
St. Pete Leasing (SPE), L.L.C., as borrower, in favor of Greenwich Capital
Financial Products, Inc., as lender (filed as Exhibit 10.29.3 to the 2007
Form 10-K and incorporated herein by reference).
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|
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10.28.4
|
Second
Amended and Restated Leasehold Mortgage, Security Agreement and Fixture
Filing dated December 14, 2007 by FelCor St. Pete (SPE), L.L.C. and FelCor
St. Pete Leasing (SPE), L.L.C., as borrower, and Greenwich Capital
Financial Products, Inc., as lender (filed as Exhibit 10.29.4 to the 2007
Form 10-K and incorporated herein by reference).
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|
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10.29.1
|
Loan
Agreement, dated March 31, 2009, by and between FelCor/CSS (SPE), L.L.C.,
as borrower, The Prudential Insurance Company of America, as lender, and
joined by DJONT Operations, L.L.C. (filed as Exhibit 10.3 to FelCor’s Form
10-Q for the quarter ended March 31, 2009, and incorporated herein by
reference).
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|
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10.29.2
|
Form
of Mortgage and Security Agreement, dated March 31, 2009, executed by
FelCor/CSS (SPE), L.L.C. and DJONT Operations, L.L.C. for the benefit of
The Prudential Insurance Company of America (filed as Exhibit 10.4 to
FelCor’s Form 10-Q for the quarter ended March 31, 2009, and incorporated
herein by reference).
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|
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10.29.3
|
Promissory
Note, dated March 31, 2009, made by FelCor/CSS (SPE), L.L.C., as borrower,
in favor of The Prudential Insurance Company of America (filed as Exhibit
10.5 to FelCor’s Form 10-Q for the quarter ended March 31, 2009, and
incorporated herein by
reference).
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10.29.4
|
Recourse
Liabilities Guarantee, dated March 31, 2009, made by FelCor and FelCor LP
in favor of The Prudential Insurance Company of America (filed as Exhibit
10.6 to FelCor’s Form 10-Q for the quarter ended March 31, 2009, and
incorporated herein by reference).
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|
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10.30.1
|
Term
Loan Agreement, dated as of June 12, 2009, among FelCor/JPM Hospitality
(SPE), L.L.C. and DJONT/JPM Hospitality Leasing (SPE), L.L.C., as
borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the
other lenders party hereto (filed as Exhibit 10.1 to FelCor’s Form 10-Q
for the quarter ended June 3, 2009, and incorporated herein by
reference).
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|
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10.30.2
|
Form
of Mortgage/Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, dated as of June 12, 2009, granted by
FelCor/JPM Hospitality (SPE), L.L.C. and DJONT/JPM Hospitality Leasing
(SPE), L.L.C. for the benefit of JPMorgan Chase Bank, N.A., as
administrative agent (filed as Exhibit 10.2 to FelCor’s Form 10-Q for the
quarter ended June 30, 2009, and incorporated herein by
reference).
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|
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10.30.3
|
Form
of Note, dated as of June 12, 2009, executed by FelCor/JPM Hospitality
(SPE), L.L.C. and DJONT/JPM Hospitality Leasing (SPE), L.L.C. for the
benefit of the lenders (filed as Exhibit 10.3 to FelCor’s Form 10-Q for
the quarter ended June 30, 2009, and incorporated herein by
reference).
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10.30.4
|
Form
of Carve Out Guaranty, dated as of June 12, 2009, by FelCor in favor of
JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.4
to FelCor’s Form 10-Q for the quarter ended June 30, 2009, and
incorporated herein by reference).
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10.30.5
|
Form
of Recourse Guaranty, dated as of June 12, 2009, by FelCor in favor of
JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.5
to FelCor’s Form 10-Q for the quarter ended June 30, 2009, and
incorporated herein by reference).
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|
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10.31
|
Pledge
Agreement dated October 13, 2009, by and among FelCor, FelCor LP, certain
subsidiary pledgors named therein, FelCor Holdings Trust, and U.S. Bank
National Association (filed as Exhibit 10.1 to FelCor’s Form 8-K dated
October 13, 2009, and incorporated herein by
reference).
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|
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21*
|
List
of Subsidiaries of FelCor.
|
|
|
23*
|
Consent
of PricewaterhouseCoopers LLP.
|
|
|
31.1*
|
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.
|
|
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32.1*
|
Certification
of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
|
|
32.2*
|
Certification
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350).
|
----------------------
*Filed
herewith
SIGNATURES
Pursuant to the requirements of Section
13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
FELCOR
LODGING TRUST INCORPORATED
|
|
|
|
|
By:
|
/s/
Jonathan H. Yellen
|
|
|
Jonathan
H. Yellen
|
|
|
Executive
Vice President
|
Date:
|
February
25, 2010
|
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
Date
|
|
|
Signature
|
|
February
25, 2010
|
/s/
Richard A. Smith
|
|
Richard
A. Smith
President
and Director (Chief Executive Officer)
|
February
25, 2010
|
/s/
Andrew J. Welch
|
|
Andrew
J. Welch
Executive
Vice President and Chief Financial Officer
(Principal
Financial Officer)
|
February
25, 2010
|
/s/
Lester C. Johnson
|
|
Lester
C. Johnson
Senior
Vice President and Chief Accounting Officer
(Principal
Accounting Officer)
|
February
25, 2010
|
/s/
Thomas J. Corcoran, Jr.
|
|
Thomas
J. Corcoran, Jr.
Chairman
of the Board and Director
|
February
25, 2010
|
/s/
Melinda J. Bush
|
|
Melinda
J. Bush, Director
|
February
25, 2010
|
/s/
Glenn A. Carlin
|
|
Glenn
A. Carlin, Director
|
February
25, 2010
|
/s/
Robert F. Cotter
|
|
Robert
F. Cotter, Director
|
February
25, 2010
|
/s/
Thomas C. Hendrick
|
|
Thomas
C. Hendrick, Director
|
February
25, 2010
|
/s/
Charles A. Ledsinger, Jr.
|
|
Charles
A. Ledsinger, Jr., Director
|
February
25, 2010
|
/s/
Robert H. Lutz, Jr.
|
|
Robert
H. Lutz, Jr., Director
|
February
25, 2010
|
/s/
Robert A. Mathewson
|
|
Robert A.
Mathewson, Director
|
February
25, 2010
|
/s/
Mark D. Rozells
|
|
Mark
D. Rozells, Director
|