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DiamondRock Hospitality Reports 3rd Qtr 2011 Net Loss of $1 million
Compared to Net Loss of $3.5 million for Comparable 2010 Period;
Revpar Increased 7.2%; Enters Agreement to Sell three Non-Core Hotels

Hotel Operating Statistics

BETHESDA, Md., Oct. 19, 2011 -- DiamondRock Hospitality Company (the "Company") (NYSE: DRH) today announced results of operations for its third fiscal quarter ended September 9, 2011 and that it has entered into a purchase and sale agreement to sell a portfolio of three non-core hotels. The Company is a lodging-focused real estate investment trust that owns a portfolio of premium hotels in the United States.

Third Quarter 2011 Highlights

  • Sale Agreement for Three-Hotel Portfolio: The Company entered into an agreement to sell a portfolio of three non-core hotels, the Griffin Gate Marriott Resort and Spa, Renaissance Waverly and Renaissance Austin, to an affiliate of Inland American for a contractual purchase price of $262.5 million. The sale is expected to close by the end of the year.
  • Pro Forma RevPAR: The Company's Pro Forma RevPAR was $126.05, an increase of 7.2% from the comparable period in 2010. Pro Forma RevPAR is calculated assuming the Company owned all of its hotels since January 1, 2010 but excludes the operating results of the Frenchman's Reef & Morning Star Marriott Beach Resort due to the impact of the extensive renovation of the hotel in 2011.
  • Pro Forma Hotel Adjusted EBITDA Margin: The Company's Pro Forma Hotel Adjusted EBITDA margin was 27.19%, an increase of 44 basis points from the comparable period in 2010. Pro Forma Hotel Adjusted EBITDA margin is calculated assuming the Company owned all of its hotels since January 1, 2010 but excludes Frenchman's Reef & Morning Star Marriott Beach Resort.
  • Adjusted EBITDA: The Company's Adjusted EBITDA was $41.7 million.
  • Adjusted FFO: The Company's Adjusted FFO was $26.2 million and Adjusted FFO per diluted share was $0.16.
  • Acquisition of the Courtyard Denver: On July 22, 2011, the Company acquired the Courtyard Denver Downtown for approximately $46 million.
  • Dividends: The Company declared a quarterly dividend of $0.08 per share during the third quarter.

Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company, stated, "We are pleased to announce the pending sale of three non-core hotels. The sale improves our portfolio quality, increases our concentration in key urban gateway locations, and provides DiamondRock with significant investment capacity to be opportunistic despite the turmoil in the capital markets. The third quarter results reflect strong lodging fundamentals and our group booking pace for 2012 is excellent, with group revenue on the books up 10 percent."

Sale Agreement for Three-Hotel Portfolio

The Company has entered into a purchase and sale agreement to sell a portfolio of three non-core hotels to an affiliate of Inland American for a contractual purchase price of $262.5 million. The 1,422-room portfolio consists of the 409-room Griffin Gate Marriott Resort and Spa located in Lexington, Kentucky, the 521-room Renaissance Waverly located in Atlanta, Georgia, and the 492-room Renaissance Austin located in the Arboretum submarket of Austin, Texas.

Upon the sale of the hotels, the Company expects to receive net cash proceeds of approximately $80 million and be relieved of $180 million of mortgage debt. The transaction is expected to close during the fourth quarter and is subject to the satisfaction of closing conditions, including the receipt of lender consents. The Company expects to record a net gain upon completion of the transaction of approximately $5.0 million to $6.0 million.

Excluding the three hotels improves the Company's 2011 Pro Forma RevPAR by nearly $5. The disposition lowers the Company's leverage by reducing 2011 Pro Forma Net Debt-to-EBITDA ratio to 4.8 times from 5.6 times.

Operating Results

Please see "Certain Definitions" and "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margins," "FFO" and "Adjusted FFO." Moreover, the discussions of "Pro Forma RevPAR" and "Pro Forma Hotel Adjusted EBITDA Margin" assume the Company owned its 26 hotels since January 1, 2010 but exclude the operating results of the Frenchman's Reef & Morning Star Marriott Beach Resort ("Frenchman's Reef") due to the impact of the extensive renovation of the hotel in 2011, which includes partial closure of the hotel.

For the third quarter beginning June 18, 2011 and ending September 9, 2011, the Company reported the following:

  • Pro Forma RevPAR growth of 7.2% and Pro Forma Hotel Adjusted EBITDA margin expansion of 44 basis points compared to the comparable period in 2010.
  • Revenues of $179.0 million compared to $151.1 million for the comparable period in 2010.
  • Adjusted EBITDA of $41.7 million compared to $33.0 million for the comparable period in 2010.
  • Adjusted FFO of $26.2 million and Adjusted FFO per diluted share of $0.16 compared to $22.4 million and $0.15, respectively, for the comparable period in 2010.
  • Net loss of $1.0 million (or $0.01 per diluted share) compared to a net loss of $3.5 million (or $0.02 per diluted share) for the comparable period in 2010.

The third quarter Pro Forma RevPAR growth of 7.2% (from $117.63 to $126.05) was driven by a 2.7% increase in the average daily rate (from $153.32 to $157.41) and a 3.4 percentage point increase in occupancy (from 76.7 percent to 80.1 percent). The third quarter Pro Forma Hotel Adjusted EBITDA margin increased 44 basis points (from 26.75% to 27.19%) from the comparable period in 2010.

If the three-hotel portfolio to be sold were excluded, the Company's third quarter Pro Forma RevPAR growth would improve to 7.3% and Hotel Adjusted EBITDA margin expansion would improve to 170 basis points.

The Company's third quarter Pro Forma Hotel Adjusted EBITDA margin was negatively impacted by an increase in property taxes as a result of the expiration of the PILOT program at the Westin Boston Waterfront Hotel and a difficult comparison from the successful multi-year property tax appeal at the Renaissance Waverly recorded during the third quarter of 2010. Excluding these property tax items, the Company's Pro Forma Hotel Adjusted EBITDA margin growth would increase to 185 basis points.

The Company's third quarter results reflect $1.2 million of legal expenses incurred related to the bankruptcy proceedings of the Allerton Hotel and a $1.7 million accrual for the tentative settlement of litigation at the Los Angeles Airport Marriott, which is discussed further below.

For the period from January 1, 2011 to September 9, 2011, the Company reported the following:

  • Pro Forma RevPAR growth of 6.1% and Pro Forma Hotel Adjusted EBITDA margin expansion of 66 basis points compared to the comparable period in 2010.
  • Revenues of $470.8 million compared to $415.1 million for the comparable period in 2010.
  • Adjusted EBITDA of $101.7 million compared to $87.3 million for the comparable period in 2010.
  • Adjusted FFO of $63.6 million and Adjusted FFO per diluted share of $0.38 compared to $56.0 million and $0.40, respectively, for the comparable period in 2010.
  • Net loss of $12.6 million (or $0.08 per diluted share) compared to a net loss of $11.0 million (or $0.08 per diluted share) for the comparable period in 2010.

The year-to-date Pro Forma RevPAR growth of 6.1% (from $109.03 to $115.68) was driven by a 3.7% increase in the average daily rate (from $149.95 to $155.55) and a 1.7 percentage point increase in occupancy (from 72.7 percent to 74.4 percent). Year-to-date Pro Forma Hotel Adjusted EBITDA margin increased 66 basis points (from 24.35% to 25.01%) from the comparable period in 2010.

If the three-hotel portfolio to be sold were excluded, the Company's year-to-date Pro Forma RevPAR growth would improve to 6.3% and Hotel Adjusted EBITDA margin expansion would improve to 108 basis points.

Dividends

The Company's Board of Directors declared a quarterly dividend of $0.08 per share to stockholders of record as of September 9, 2011. The dividend was paid on September 20, 2011.

Conrad Chicago-New Performance Guarantee

The Company has furthered its positive relationship with Hilton. In October 2011, the Company and Hilton amended the management agreement for the Conrad Chicago to include a performance guarantee for the remaining term of the agreement, which ends in 2015. Additionally, the Company believes that there are compelling investment opportunities at the hotel and expects to invest $3.5 million in the hotel to add 4,100 square feet of new meeting space, reposition the food and beverage outlets and re-concept the hotel lobby.

The Conrad Chicago had failed the performance test under the management agreement. During the second quarter, the Company accrued approximately $1.0 million for repayment of key money to Hilton due upon termination. After discussions, the Company and Hilton agreed to restructure the management agreement and retain the Conrad brand. Under the terms of the amended management agreement the key money repayment is no longer due. Accordingly, the Company reversed the $1.0 million key money repayment accrual during the third quarter, which is deducted in calculating the Company's Adjusted EBITDA and Adjusted FFO.

Courtyard Denver Downtown Acquisition

On July 22, 2011, the Company completed the acquisition of the 177-room Courtyard Denver Downtown for approximately $46 million. The acquisition was funded with corporate cash, a draw on the Company's credit facility and the assumption of a $27.2 million mortgage loan (prepayable beginning in February 2012). The hotel is consistently ranked first in its competitive set of downtown Denver hotels. The hotel, created from a conversion of a historic department store, enjoys a superb location in downtown Denver and is centrally located on the 16th Street Pedestrian Mall in the heart of Denver's Central Business District. With its premier location and strong brand, the hotel is able to charge full-service average daily rates with the lower limited–service cost structure. The hotel has achieved a RevPAR premium to the nearest full-service Marriott for seven consecutive years. Earlier this year, the hotel completed an extensive guest room renovation and is in excellent physical condition.

Allerton Hotel Mortgage Loan Update

The Company owns the senior mortgage loan secured by the Allerton Hotel, located in downtown Chicago, Illinois. The loan matured in January 2010 and is in default. During the second quarter of 2011, the borrower filed for bankruptcy protection in the Northern District of Illinois. The senior mortgage loan is secured by substantially all of the assets of the borrower, including the Allerton Hotel. The filing of the bankruptcy case had the effect of, among other things, automatically staying the foreclosure proceedings that the Company had previously filed against the borrower. The Company continues to vigorously pursue its rights in the bankruptcy case and expects resolution by next summer.

The Company has incurred approximately $1.2 million in legal fees as of September 9, 2011 and expects to incur an additional $1.0 million of legal fees during the remainder of the year. These legal costs were not fully reflected in the Company's prior earnings guidance.

Due to the uncertainty of the timing and amount of cash payments expected, the Company is not currently accruing any interest income on the Allerton loan. However, the Company includes all cash received from the borrower in its calculations of Adjusted EBITDA and Adjusted FFO. During the period from January 1, 2011 to September 9, 2011, the Company received $1.7 million of cash interest payments from the borrower. Subsequent to September 9, 2011, the Company received additional cash interest payments of $0.5 million. The Company's 2011 Adjusted EBITDA and Adjusted FFO guidance assumes $1.3 million of cash interest payments will be received in the fourth quarter of 2011 on the Allerton loan. Subsequent to the end of the third fiscal quarter, the borrower agreed to continue to pay interest at the default rate through December 2011. The Company agreed to fund cash flow shortfalls, if any, during the first quarter of 2012 up to $800,000, which will be treated as additional principal.

Los Angeles Airport Marriott Litigation

During the third quarter, the Company accrued $1.7 million for its contribution to the settlement of litigation involving its Los Angeles Airport Marriott. The settlement was recorded in corporate expenses and is added back in calculating the Company's Adjusted EBITDA and Adjusted FFO due to the unusual and one-time nature of the charge. The Company and certain other defendants reached a tentative settlement of the matter, which involved claims by certain employees at the Los Angeles Airport Marriott. The settlement is pending approval by the Superior Court of California, Los Angeles County.

Capital Expenditures

During 2011, the Company continued to invest in its portfolio. The Company commenced or plans to commence approximately $65 million of capital improvements at its hotels. Of that amount, approximately $40 million will be funded from corporate cash, $20 million from restricted cash reserves held by hotel managers and $5 million from Marriott International as a contribution towards the capital investment program at Frenchman's Reef. In total, the Company has invested approximately $35 million in capital improvements at its hotels through September 9, 2011.

The Company's 2011 capital expenditures budget includes approximately $37 million for the 2011 portion of the Frenchman's Reef capital investment program, which includes the $5 million contribution from Marriott International. The Company has substantially completed the work scheduled for 2011 in its comprehensive $45 million capital investment program at Frenchman's Reef. The majority of the renovation and repositioning program commenced in early May 2011 when two of the resort's four buildings closed, representing approximately 300 guestrooms. In October 2011, the hotel reopened substantially all of its guestrooms, restaurants, three new resort pools, fitness center and state-of-the-art spa. The Company currently expects $6.5 million of displaced profits from renovation disruption in 2011 related to this project.

Balance Sheet

The Company continues to maintain its straightforward capital structure. The Company has no preferred equity outstanding and continues to own 100% of its properties.

As of September 9, 2011, the Company had $28.8 million of unrestricted cash on hand and $1.1 billion of debt outstanding, which consists of $945.9 million of fixed rate, property-specific mortgage debt with limited near-term maturities and $130 million outstanding on the Company's $200 million corporate credit facility. Twelve of the Company's 26 hotels are unencumbered by mortgage debt. The unencumbered hotels have a cost basis of approximately $1.0 billion.

Outlook and Guidance

The Company is providing guidance, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the Securities and Exchange Commission. The RevPAR guidance assumes that all of the Company's hotels were owned since January 1, 2010 but excludes Frenchman's Reef for all of 2011 because it was partially closed for the renovation.

The Company is revising its full year 2011 guidance to include its assessment of the current hotel operator forecasts and incremental legal fees related to the Allerton Hotel bankruptcy proceedings. In addition, the Company continues to expect to receive $3 million in cash interest payments from the Allerton Hotel mortgage loan during 2011.

The Company expects full year results as follows:

  • RevPAR to increase 6 percent to 7 percent;

  • Adjusted EBITDA of $166 million to $170 million;

  • Adjusted FFO of $105 million to $109 million, which assumes income tax expense to range from $4.4 million to $5.4 million; and

  • Adjusted FFO per share of $0.63 to $0.65 based on 167 million diluted weighted average shares.

Earnings Call

The Company will host a conference call to discuss its third quarter results on Wednesday, October 19, 2011, at 10:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 888-680-0894 (for domestic callers) or 617-213-4860 (for international callers). The participant passcode is 38397476. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company's website at www.drhc.com. A replay of the webcast will also be archived on the website for one year.

About the Company

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of premium hotel properties. The Company currently owns 26 premium hotels with approximately 12,000 rooms and holds one senior mortgage loan. The Company's hotels are generally operated under globally recognized brands such as Hilton, Marriott, and Westin. For further information, please visit DiamondRock Hospitality Company's website at www.drhc.com.

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as "believe," "expect," "intend," "project," "forecast," "plan" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at the Company's hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company's indebtedness; relationships with property managers; the ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; risks associated with the bankruptcy proceedings on the Allerton Hotel; risks associated with the development of a hotel by a third-party developer; risks associated with the ongoing renovation and repositioning of the Frenchman's Reef & Morning Star Marriott Beach Resort; risks associated with completing the pending sale of the three-hotel portfolio and other risk factors contained in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Reporting Periods for Statement of Operations

The results reported in the Company's consolidated statements of operations are based on results of its hotels reported by hotel managers. The Company's hotel managers use different reporting periods. Marriott International, the manager of most of the Company's properties, uses a fiscal year ending on the Friday closest to December 31 and reports 12 weeks of operations for the first three quarters and 16 or 17 weeks for the fourth quarter of the year for its domestic managed hotels. In contrast, Marriott International for its non-domestic hotels (including Frenchman's Reef), Davidson Hotel Company, manager of the Westin Atlanta North, Vail Resorts, manager of the Vail Marriott, Hilton Hotels Corporation, manager of the Conrad Chicago and the Hilton Minneapolis, Westin Hotel Management, L.P., manager of the Westin Boston Waterfront, Alliance Hospitality Management, manager of the Hilton Garden Inn Chelsea, Sage Hospitality, manager of the JW Marriott Denver Cherry Creek and the Courtyard Denver, and Highgate Hotels, manager of the Lexington Hotel, report results on a monthly basis. Additionally, the Company, as a REIT, is required by U.S. federal tax laws to report results on a calendar year basis. As a result, the Company has adopted the reporting periods used by Marriott International for its domestic hotels, except that the fiscal year always ends on December 31 to comply with REIT rules. The first three fiscal quarters end on the same day as Marriott International's fiscal quarters but the fourth quarter ends on December 31 and full year results, as reported in the statement of operations, always include the same number of days as the calendar year.

Two consequences of the reporting cycle the Company has adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) the first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years.

While the reporting calendar the Company adopted is more closely aligned with the reporting calendar used by the manager of most of its properties, one final consequence of the calendar is the Company is unable to report any results for Frenchman's Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, Westin Boston Waterfront, Hilton Minneapolis, Hilton Garden Inn Chelsea, JW Marriott Denver Cherry Creek, Courtyard Denver or the Lexington Hotel for the month of operations that ends after its fiscal quarter-end because none of Vail Resorts, Davidson Hotel Company, Hilton Hotels Corporation, Westin Hotel Management, L.P., Alliance Hospitality Management, Sage Hospitality, Highgate Hotels and Marriott International (for international hotels) make mid-month results available. As a result, the quarterly results of operations include results from these hotels as follows: first quarter (January and February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.

DIAMONDROCK HOSPITALITY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 9, 2011 and December 31, 2010
(in thousands, except share amounts)



September 9, 2011


December 31, 2010



(Unaudited)




ASSETS





Property and equipment, at cost

$

2,962,709



$

2,468,289



Less: accumulated depreciation

(462,986)



(396,686)




2,499,723



2,071,603



Deferred financing costs, net

6,720



5,492



Restricted cash

65,645



51,936



Due from hotel managers

65,454



50,715



Note receivable

56,247



57,951



Favorable lease assets, net

43,594



42,622



Prepaid and other assets

71,445



50,089



Cash and cash equivalents

28,777



84,201



Total assets

$

2,837,605



$

2,414,609



LIABILITIES AND STOCKHOLDERS' EQUITY





Liabilities:





Mortgage debt

$

945,888



$

780,880



Senior unsecured credit facility

130,000





Total debt

1,075,888



780,880



Deferred income related to key money, net

22,216



19,199



Unfavorable contract liabilities, net

82,490



83,613



Due to hotel managers

42,487



36,168



Dividends declared and unpaid

13,569





Accounts payable and accrued expenses

91,397



81,232



Total other liabilities

252,159



220,212



Stockholders' Equity:





Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding





Common stock, $0.01 par value; 200,000,000 shares authorized; 167,502,359 and 154,570,543 shares issued and outstanding at September 9, 2011 and December 31, 2010, respectively

1,675



1,546



Additional paid-in capital

1,707,240



1,558,047



Accumulated deficit

(199,357)



(146,076)



Total stockholders' equity

1,509,558



1,413,517



Total liabilities and stockholders' equity

$

2,837,605



$

2,414,609















DIAMONDROCK HOSPITALITY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended September 9, 2011 and September 10, 2010 and
the Periods from January 1, 2011 to September 9, 2011 and January 1, 2010 to September 10, 2010
(in thousands, except per share amounts)



Fiscal Quarter Ended


Period From







January 1, 2011 to September 9, 2011


January 1, 2010 to September 10, 2010



September 9, 2011


September 10, 2010





(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


Revenues:









Rooms

$

125,100



$

99,703



$

316,284



$

267,081



Food and beverage

44,671



43,370



131,137



126,620



Other

9,224



8,040



23,347



21,364



Total revenues

178,995



151,113



470,768



415,065



Operating Expenses:









Rooms

33,398



26,979



84,642



71,510



Food and beverage

31,024



30,534



91,276



86,748



Management fees

5,214



5,080



15,603



13,634



Other hotel expenses

64,296



55,613



170,227



152,232



Depreciation and amortization

23,801



21,297



66,835



59,278



Hotel acquisition costs

445



899



2,604



1,236



Corporate expenses

6,453



3,948



14,901



10,859



Total operating expenses

164,631



144,350



446,088



395,497



Operating profit

14,364



6,763



24,680



19,568



Other Expenses (Income):









Interest income

(24)



(283)



(590)



(650)



Interest expense

13,605



11,240



37,088



30,455



Total other expenses

13,581



10,957



36,498



29,805



Income (loss) before income taxes

783



(4,194)



(11,818)



(10,237)



Income tax (expense) benefit

(1,798)



660



(795)



(803)



Net loss

$

(1,015)



$

(3,534)



$

(12,613)



$

(11,040)



Loss per share:









Basic and diluted loss per share

$

(0.01)



$

(0.02)



$

(0.08)



$

(0.08)























Non-GAAP Financial Measures

The Company uses the following four non-GAAP financial measures that it believes are useful to investors as key measures of its operating performance: (1) EBITDA, (2) FFO, (3) Adjusted EBITDA and (4) Adjusted FFO.

EBITDA represents net (loss) income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company believes EBITDA is useful to an investor in evaluating its operating performance because it helps investors evaluate and compare the results of its operations from period to period by removing the impact of the Company's capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization) from its operating results. The Company also uses EBITDA as one measure in determining the value of hotel acquisitions and dispositions.




Historical (in 000s)



Fiscal Quarter Ended


Period From



September 9, 2011


September 10, 2010


January 1, 2011 to September 9, 2011


January 1, 2010 to September 10, 2010


Net loss

$ (1,015)


$ (3,534)


$ (12,613)


$ (11,040)


Interest expense

13,605


11,240


37,088


30,455


Income tax expense (benefit)

1,798


(660)


795


803


Depreciation and amortization

23,801


21,297


66,835


59,278


EBITDA

$ 38,189


$ 28,343


$ 92,105


$ 79,496

















Full Year 2011 Forecast (in 000s)







Low End


High End


Net loss





$ (6,800)


$ (1,800)


Interest expense





56,000


55,000


Income tax expense





4,400


5,400


Depreciation and amortization





100,000


99,000


EBITDA





$ 153,600


$ 157,600














The Company also evaluates its performance by reviewing Adjusted EBITDA because it believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income (loss), is beneficial to a complete understanding of the Company's operating performance. The Company adjusts EBITDA for the following items, which may occur in any period, and refers to this measure as Adjusted EBITDA:

  • Non-Cash Ground Rent: The Company excludes the non-cash expense incurred from straight lining the rent from its ground lease obligations and the non-cash amortization of its favorable lease assets.
  • The impact of the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the Company's acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Radisson Lexington. The amortization of the unfavorable contract liabilities does not reflect the underlying performance of the Company.
  • Cumulative effect of a change in accounting principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. The Company excludes these one-time adjustments because they do not reflect its actual performance for that period.
  • Gains from Early Extinguishment of Debt: The Company excludes the effect of gains recorded on the early extinguishment of debt because it believes that including them in EBITDA is not consistent with reflecting the ongoing performance of its hotels.
  • Impairment Losses: The Company excludes the effect of impairment losses recorded because it believes that including them in EBITDA is not consistent with reflecting the ongoing performance of its hotels. In addition, the Company believes that impairment charges are similar to depreciation expense, which is also excluded from EBITDA.
  • Gains or Losses on Dispositions: The Company excludes the effect of gains or losses on dispositions from EBITDA because it believes that including them is not consistent with reflecting the ongoing performance of its remaining hotels.
  • Acquisition Costs: The Company excludes acquisition transaction costs expensed during the period because it believes that including these costs in EBITDA is not consistent with the underlying performance of the Company.
  • Mortgage Loan Interest Payments Received: The Company includes cash payments received on its senior loan secured by the Allerton Hotel in Adjusted EBITDA. GAAP requires the Company to record the cash received from the borrower as a reduction of its basis in the mortgage loan due to the uncertainty over the timing and amount of cash payments on the loan. The Company believes that these cash payments reflect its return on its investment in the mortgage loan and should be included in Adjusted EBITDA as they relate to the ongoing operating performance of the Company.
  • Other Non-Cash and /or Unusual Items: The Company excludes the effect of certain non-cash and/or unusual items because it believes that including these costs in EBITDA is not consistent with the underlying performance of the Company. During the third fiscal quarter ended September 9, 2011 the Company reversed the accrual made in the second fiscal quarter 2011 for the repayment of key money to Hilton based on the execution of an amended management agreement for the Conrad Chicago. In addition, the Company recorded an accrual for the tentative settlement of litigation at the Los Angeles Airport Marriott. The Company excluded these unusual items from EBITDA because it believes that including them would not be consistent with reflecting the ongoing performance of its hotels.









Fiscal Quarter Ended


Period From



September 9, 2011


September 10, 2010


January 1, 2011 to September 9, 2011


January 1, 2010 to September 10, 2010


EBITDA

$ 38,189


$ 28,343


$ 92,105


$ 79,496


Non-cash ground rent

1,658


1,538


4,878


5,104


Non-cash amortization of unfavorable contract liabilities

(432)


(409)


(1,284)


(1,203)


Accrual for net key money repayment

(864)


-


-


-


Mortgage loan cash payments

1,099


1,250


1,704


1,250


Hurricane remediation expense

-


1,391


-


1,391


Litigation settlement

1,650


-


1,650


-


Acquisition costs

445


899


2,604


1,236


Adjusted EBITDA

$ 41,745


$ 33,012


$ 101,657


$ 87,274
















Full Year 2011 Forecast (in 000s)







Low End


High End


EBITDA





$ 153,600


$ 157,600


Non-cash ground rent





7,000


7,000


Non-cash amortization of unfavorable contract liabilities





(1,850)


(1,850)


Litigation settlement





1,650


1,650


Mortgage loan cash payments





3,000


3,000


Acquisition costs





2,600


2,600


Adjusted EBITDA





$ 166,000


$ 170,000














The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net (loss) income determined in accordance with GAAP, excluding gains (losses) from sales of property, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. The Company also uses FFO as one measure in assessing its results.




Historical (in 000s)



Fiscal Quarter Ended


Period From



September 9, 2011


September 10, 2010


January 1, 2011 to September 9, 2011


January 1, 2010 to September 10, 2010


Net loss

$ (1,015)


$ (3,534)


$ (12,613)


$ (11,040)


Real estate related depreciation amortization

23,801


21,297


66,835


59,278


FFO

22,786


17,763


54,222


48,238


FFO per share (basic and diluted)

$ 0.14


$ 0.11


$ 0.33


$ 0.34






























Full Year 2011 Forecast (in 000s)







Low End


High End


Net loss





$ (6,800)


$ (1,800)


Depreciation and amortization





100,000


99,000


FFO





$ 93,200


$ 97,200


FFO per share (basic and diluted)





$ 0.56


$ 0.58














The Company also evaluates its performance by reviewing Adjusted FFO because it believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), is beneficial to a complete understanding of the Company's operating performance. The Company adjusts FFO for the following items, which may occur in any period, and refers to this measure as Adjusted FFO:

  • Non-Cash Ground Rent: The Company excludes the non-cash expense incurred from straight lining the rent from its ground lease obligations and the non-cash amortization of its favorable lease assets.
  • The impact of the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the Company's acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Radisson Lexington. The amortization of the unfavorable contract liabilities does not reflect the underlying performance of the Company.
  • The impact of the non-cash amortization of the debt premiums recorded in conjunction with the acquisitions of the JW Marriott Denver at Cherry Creek and Courtyard Denver Downtown.
  • Cumulative effect of a change in accounting principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. The Company excludes these one-time adjustments because they do not reflect its actual performance for that period.
  • Gains from Early Extinguishment of Debt: The Company excludes the effect of gains recorded on the early extinguishment of debt because it believes that including them in FFO is not consistent with reflecting the ongoing performance of its hotels.
  • Impairment Losses: The Company excludes the effect of impairment losses recorded because it believes that including them in FFO is not consistent with reflecting the ongoing performance of its assets. In addition, the Company believes that impairment charges are similar to depreciation expense and gains or losses on dispositions, both of which are excluded from FFO.
  • Acquisition Costs: The Company excludes acquisition transaction costs expensed during the period because it believes that including these costs in FFO is not consistent with the underlying performance of the Company.
  • Mortgage Loan Interest Payments Received: The Company includes cash payments received on its senior loan secured by the Allerton Hotel in Adjusted FFO. GAAP requires the Company to record the cash received from the borrower as a reduction of its basis in the mortgage loan due to the uncertainty over the timing and amount of cash payments on the loan. The Company believes that these cash payments reflect its return on its investment in the mortgage loan and should be included in Adjusted FFO as they relate to the ongoing operating performance of the Company.
  • Other Non-Cash and /or Unusual Items: The Company excludes the effect of certain non-cash and/or unusual items because it believes that including these costs in EBITDA is not consistent with the underlying performance of the Company. During the third fiscal quarter ended September 9, 2011 the Company reversed the accrual made in the second fiscal quarter 2011 for the repayment of key money to Hilton based on the execution of an amended management agreement for the Conrad Chicago. In addition, the Company recorded an accrual for the tentative settlement of litigation at the Los Angeles Airport Marriott. The Company excluded these unusual items from EBITDA because it believes that including them would not be consistent with reflecting the ongoing performance of its hotels





Historical (in 000s)



Fiscal Quarter Ended


Period From



September 9, 2011


September 10, 2010


January 1, 2011 to September 9, 2011


January 1, 2010 to September 10, 2010


FFO

$ 22,786


$ 17,763


$ 54,222


$ 48,238


Non-cash ground rent

1,658


1,538


4,878


5,104


Non-cash amortization of unfavorable contract liabilities

(432)


(409)


(1,284)


(1,203)


Accrual for key money repayment

(864)


-


-


-


Hurricane remediation expense

-


1,391


-


1,391


Mortgage loan cash payments

1,099


1,250


1,704


1,250


Litigation settlement

1,650


-


1,650


-


Amortization of debt premium

(134)


-


(161)


-


Acquisition costs

445


899


2,604


1,236


Adjusted FFO

$ 26,208


$ 22,432


$ 63,613


$ 56,016


Adjusted FFO per share (basic and diluted)

$ 0.16


$ 0.15


$ 0.38


$ 0.40







Full Year 2011 Forecast (in 000s)







Low End


High End


FFO





$ 93,200


$ 97,200


Non-cash ground rent





7,000


7,000


Non-cash amortization of unfavorable contract liabilities





(1,850)


(1,850)


Acquisition costs





2,600


2,600


Litigation settlement





1,650


1,650


Debt premium amortization





(600)


(600)


Mortgage loan cash payments





3,000


3,000


Adjusted FFO





$ 105,000


$ 109,000


Adjusted FFO per share (diluted)





$ 0.63


$ 0.65
















Quarterly Pro Forma Financial Information

The following table is presented to provide investors with selected historical quarterly operating information to include the operating results for the Company's hotels as if they were owned since January 1, 2010 but exclude Frenchman's Reef due to the impact of its extensive renovation.




Quarter 3, 2010


Quarter 4, 2010


Full Year 2010


Quarter 1, 2011


Quarter 2, 2011


RevPAR

$ 117.63


$ 118.76


$ 112.11


$ 94.36


$ 123.85


Revenues (in thousands)

$ 166,670


$ 227,497


$ 685,324


$ 121,541


$ 177,825


Hotel Adjusted EBITDA (in thousands)

$ 44,592


$ 67,109


$ 178,680


$ 21,020


$ 49,977


% of Full Year

25.0%


37.6%


100.0%


11.1%


26.3%


Hotel Adjusted EBITDA Margin

26.75%


29.50%


26.07%


17.29%


28.10%


Available Rooms

982,360


1,307,402


4,133,444


854,009


982,544
















The following table is presented to provide investors with selected historical quarterly operating information to include the operating results for the Company's hotels as if they were owned since January 1, 2010 but exclude Frenchman's Reef and the three hotels that are under agreement to be sold.




Quarter 3, 2010


Quarter 4, 2010


Full Year 2010


Quarter 1, 2011


Quarter 2, 2011


RevPAR

$ 122.60


$ 121.99


$ 115.73


$ 96.04


$ 128.65


Revenues (in thousands)

$ 147,980


$ 199,049


$ 600,275


$ 103,028


$ 158,488


Hotel Adjusted EBITDA (in thousands)

$ 38,353


$ 58,156


$ 154,275


$ 16,446


$ 44,822


% of Full Year

24.9%


37.7%


100.0%


9.8%


26.7%


Hotel Adjusted EBITDA Margin

25.92%


29.22%


25.70%


15.96%


28.28%


Available Rooms

862,912


1,148,138


3,614,414


734,561


863,096
















Certain Definitions

In this release, when we discuss "Hotel Adjusted EBITDA," we exclude from Hotel EBITDA the non-cash expense incurred by the hotels due to the straight lining of the rent from our ground lease obligations, the non-cash amortization of our favorable lease assets, the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Radisson Lexington. Hotel EBITDA represents hotel net income excluding: (1) interest expense; (2) income taxes; and (3) depreciation and amortization. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues. Net debt is calculated as total debt outstanding less unrestricted cash.

DIAMONDROCK HOSPITALITY COMPANY


PRO FORMA HOTEL OPERATING DATA (1)
Schedule of Property Level Results
(in thousands)
(unaudited)



Fiscal Quarter Ended




Period From





September 9, 2011


September 10, 2010


% Change


January 1, 2011 to September 9, 2011


January 1, 2010 to September 10, 2010


% Change


Revenues:













Rooms

$ 123,852


$ 115,551


7.2%


$ 326,123


$ 308,126


5.8%


Food and beverage

43,803


42,700


2.6%


126,257


126,868


(0.5%)


Other

9,059


8,419


7.6%


23,700


22,832


3.8%


Total revenues

176,714


166,670


6.0%


476,080


457,826


4.0%















Operating Expenses:













Rooms

32,734


31,089


5.3%


88,783


84,434


5.2%


Food and beverage

29,926


29,124


2.8%


86,684


85,569


1.3%


Other direct departmental

5,056


4,746


6.5%


13,617


13,257


2.7%


General and administrative

14,545


14,306


1.7%


41,103


40,679


1.0%


Utilities

6,313


6,520


(3.2%)


16,962


17,081


(0.7%)


Repairs and maintenance

7,665


7,309


4.9%


21,973


20,960


4.8%


Sales and marketing

13,766


12,926


6.5%


37,819


35,383


6.9%


Base management fees

4,699


4,406


6.7%


12,614


12,052


4.7%


Incentive management fees

1,328


991


34.0%


3,008


2,497


20.5%


Property taxes

8,263


6,392


29.3%


22,097


22,253


(0.7%)


Ground rent

3,407


3,244


5.0%


9,763


9,377


4.1%


Other fixed expenses

2,187


2,144


2.0%


6,273


6,281


(0.1%)


Total hotel operating expenses

129,889


123,197


5.4%


360,696


349,823


3.1%















Hotel EBITDA

46,825


43,473


7.7%


115,384


108,003


6.8%


Non-cash ground rent

1,658


1,551


6.9%


4,941


4,743


4.2%


Non-cash amortization of unfavorable contract liabilities

(432)


(432)


-


(1,278)


(1,278)


-


Hotel Adjusted EBITDA

$ 48,051


$ 44,592


7.8%


$ 119,047


$ 111,468


6.8%















(1) The pro forma operating data includes the operating results for the Company's hotels assuming they were owned since January 1, 2010 but excludes the Frenchman's Reef & Morning Star Marriott Beach Resort from all periods presented due to the extensive 2011 renovation.



















Market Capitalization as of September 9, 2011
(in thousands, except per share data)







Enterprise Value








Common equity capitalization (at September 9, 2011 closing price of $7.05/share)


$ 1,188,257


Consolidated debt


1,075,888


Cash and cash equivalents


(28,777)






Total enterprise value


$ 2,235,368










Share Reconciliation








Common shares outstanding


167,502






Unvested restricted stock held by management and employees


1,011


Share grants under deferred compensation plan held by directors

34






Combined shares outstanding


168,547











Debt Summary as of September 9, 2011
(dollars in thousands)












Property


Interest Rate


Term


Outstanding Principal


Maturity












Courtyard Manhattan / Midtown East


8.810%


Fixed


$ 42,390


October 2014


Salt Lake City Marriott Downtown


5.500%


Fixed


30,591


January 2015


Courtyard Manhattan / Fifth Avenue


6.480%


Fixed


50,841


June 2016


Los Angeles Airport Marriott


5.300%


Fixed


82,600


July 2015


Marriott Frenchman's Reef

5.440%


Fixed


59,880


August 2015


Renaissance Worthington


5.400%


Fixed


55,746


July 2015


Orlando Airport Marriott


5.680%


Fixed


58,520


January 2016


Chicago Marriott Downtown


5.975%


Fixed


215,027


April 2016


Austin Renaissance Hotel


5.507%


Fixed


83,000


December 2016


Waverly Renaissance Hotel


5.503%


Fixed


97,000


December 2016


Hilton Minneapolis


5.464%


Fixed


99,415


May 2021


JW Marriott Denver Cherry Creek


6.470%


Fixed


42,085


July 2015


Courtyard Denver Downtown


6.260%


Fixed


27,140


August 2012


Debt premiums (1)






1,653




Total mortgage debt






945,888














Senior Unsecured Credit Facility


LIBOR + 3.00


Variable


130,000


August 2014


Total Debt




$ 1,075,888





(1) The debt premiums are purchase accounting adjustments to record the debt on the JW Marriott Denver Cherry Creek and Courtyard Denver Downtown at their respective acquisition date fair values. The premiums will be amortized over the life of the loans into interest expense.


















Pro Forma Operating Statistics – Third Quarter (1)






















ADR


Occupancy


RevPAR


Hotel Adjusted EBITDA Margin




3Q 2011

3Q 2010

B/(W)


3Q 2011

3Q 2010

B/(W)


3Q 2011

3Q 2010

B/(W)


3Q 2011

3Q 2010

B/(W)




















Atlanta Alpharetta


$ 133.08

$ 117.07

13.7%


67.2%

69.0%

(1.8%)


$ 89.46

$ 80.72

10.8%


26.65%

22.55%

410 bps


Westin Atlanta North (2)


$ 106.95

$ 102.37

4.5%


76.2%

72.0%

4.2%


$ 81.44

$ 73.72

10.5%


14.10%

13.43%

67 bps


Atlanta Waverly


$ 125.83

$ 120.96

4.0%


70.7%

63.7%

7.0%


$ 88.96

$ 77.04

15.5%


24.24%

47.07%

-2283 bps


Renaissance Austin


$ 132.98

$ 137.25

(3.1%)


60.3%

57.5%

2.8%


$ 80.24

$ 78.89

1.7%


20.88%

22.79%

-191 bps


Bethesda Marriott Suites


$ 148.97

$ 152.06

(2.0%)


61.7%

67.6%

(5.9%)


$ 91.94

$ 102.87

(10.6%)


16.69%

20.71%

-402 bps


Boston Westin (2)


$ 198.48

$ 184.80

7.4%


83.1%

79.9%

3.2%


$ 164.90

$ 147.72

11.6%


28.75%

25.37%

338 bps


Renaissance Charleston


$ 154.80

$ 151.90

1.9%


86.2%

88.7%

(2.5%)


$ 133.36

$ 134.71

(1.0%)


27.41%

30.46%

-305 bps


Hilton Garden Inn Chelsea (2)


$ 207.11

$ 195.82

5.8%


95.2%

93.6%

1.6%


$ 197.27

$ 183.30

7.6%


45.04%

40.51%

453 bps


Chicago Marriott


$ 178.04

$ 175.41

1.5%


85.6%

84.7%

0.9%


$ 152.46

$ 148.52

2.7%


24.78%

23.71%

107 bps


Chicago Conrad (2)


$ 210.88

$ 198.78

6.1%


93.8%

89.4%

4.4%


$ 197.82

$ 177.66

11.3%


37.64%

31.85%

579 bps


Courtyard Denver Downtown (2)


$ 161.38

$ 151.73

6.4%


91.1%

87.1%

4.0%


$ 147.02

$ 132.15

11.3%


47.74%

45.50%

224 bps


Courtyard Fifth Avenue


$ 244.40

$ 247.56

(1.3%)


90.1%

84.7%

5.4%


$ 220.19

$ 209.72

5.0%


25.37%

23.72%

165 bps


Courtyard Midtown East


$ 247.58

$ 235.92

4.9%


88.7%

87.4%

1.3%


$ 219.68

$ 206.26

6.5%


31.49%

28.91%

258 bps


Frenchman's Reef (2)


$ 187.66

$ 175.16

7.1%


90.7%

85.6%

5.1%


$ 170.19

$ 149.90

13.5%


(53.68%)

5.01%

-5869 bps


Griffin Gate Marriott


$ 132.95

$ 127.74

4.1%


68.3%

71.2%

(2.9%)


$ 90.80

$ 90.99

(0.2%)


24.84%

28.91%

-407 bps


JW Marriott Denver Cherry Creek (2)


$ 241.65

$ 227.13

6.4%


78.1%

79.0%

(0.9%)


$ 188.85

$ 179.50

5.2%


35.24%

31.57%

367 bps


Los Angeles Airport


$ 103.61

$ 100.33

3.3%


90.9%

85.3%

5.6%


$ 94.15

$ 85.59

10.0%


16.02%

13.81%

221 bps


Hilton Minneapolis (2)


$ 150.53

$ 143.14

5.2%


89.7%

84.8%

4.9%


$ 135.04

$ 121.33

11.3%


37.15%

35.33%

182 bps


Oak Brook Hills


$ 116.53

$ 109.28

6.6%


64.6%

61.5%

3.1%


$ 75.26

$ 67.25

11.9%


16.45%

17.55%

-110 bps


Orlando Airport Marriott


$ 88.73

$ 86.92

2.1%


68.6%

65.1%

3.5%


$ 60.91

$ 56.60

7.6%


7.19%

7.35%

-16 bps


Salt Lake City Marriott


$ 129.37

$ 133.49

(3.1%)


58.2%

53.6%

4.6%


$ 75.34

$ 71.58

5.3%


25.38%

21.81%

357 bps


The Lodge at Sonoma


$ 245.22

$ 214.37

14.4%


83.3%

86.1%

(2.8%)


$ 204.31

$ 184.52

10.7%


28.13%

27.59%

54 bps


Torrance Marriott South Bay


$ 105.14

$ 101.60

3.5%


86.5%

79.0%

7.5%


$ 90.91

$ 80.24

13.3%


28.12%

19.55%

857 bps


Vail Marriott (2)


$ 150.15

$ 183.45

(18.2%)


71.0%

65.7%

5.3%


$ 106.56

$ 120.61

(11.6%)


21.51%

23.24%

-173 bps


Radisson Lexington Hotel New York (2)


$ 195.16

$ 183.80

6.2%


97.6%

97.3%

0.3%


$ 190.53

$ 178.76

6.6%


35.93%

40.17%

-424 bps


Renaissance Worthington


$ 144.24

$ 156.29

(7.7%)


70.8%

54.9%

15.9%


$ 102.09

$ 85.78

19.0%


20.23%

16.52%

371 bps


Total/Weighted Average


$ 157.92

$ 154.36

2.3%


80.2%

77.1%

3.1%


$ 126.72

$ 119.01

6.5%


25.54%

25.43%

11 bps


Comparable Total/Weighted Avg. (3)


$ 157.41

$ 153.32

2.7%


80.1%

76.7%

3.4%


$ 126.05

$ 117.63

7.2%


27.19%

26.75%

44 bps


Post-Sale Total/Weighted Average (4)


$ 160.46

$ 156.14

2.8%


82.0%

78.5%

3.5%


$ 131.53

$ 122.60

7.3%


27.62%

25.92%

170 bps



(1) The pro forma operating data includes the operating results for the Company's hotels assuming they were owned since January 1, 2010.

(2) The hotel reports results on a monthly basis. The data presented is based upon the Company's reporting calendar for the third quarter and includes the months of June, July, and August.

(3) The comparable total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort from all periods presented due to the extensive 2011 renovation.

(4) The post-sale total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort and the three hotels under agreement to be sold from all periods presented.
























Pro Forma Operating Statistics – Year to Date (1)






















ADR


Occupancy


RevPAR


Hotel Adjusted EBITDA Margin




YTD 2011

YTD 2010

B/(W)


YTD 2011

YTD 2010

B/(W)


YTD 2011

YTD 2010

B/(W)


YTD 2011

YTD 2010

B/(W)




















Atlanta Alpharetta


$ 133.83

$ 118.63

12.8%


68.0%

67.5%

0.5%


$ 91.00

$ 80.07

13.7%


29.97%

24.55%

542 bps


Westin Atlanta North (2)


$ 107.92

$ 102.40

5.4%


72.3%

71.4%

0.9%


$ 78.03

$ 73.14

6.7%


14.97%

15.00%

-3 bps


Atlanta Waverly


$ 129.01

$ 126.66

1.9%


68.2%

64.7%

3.5%


$ 88.02

$ 81.93

7.4%


23.66%

29.65%

-599 bps


Renaissance Austin


$ 140.88

$ 141.71

(0.6%)


64.6%

61.7%

2.9%


$ 91.01

$ 87.46

4.1%


28.14%

28.68%

-54 bps


Bethesda Marriott Suites


$ 167.16

$ 162.00

3.2%


64.9%

67.2%

(2.3%)


$ 108.51

$ 108.83

(0.3%)


25.50%

23.89%

161 bps


Boston Westin (2)


$ 191.18

$ 186.39

2.6%


71.7%

69.6%

2.1%


$ 137.00

$ 129.65

5.7%


23.21%

23.54%

-33 bps


Renaissance Charleston


$ 168.95

$ 156.39

8.0%


84.8%

84.5%

0.3%


$ 143.30

$ 132.07

8.5%


33.13%

33.27%

-14 bps


Hilton Garden Inn Chelsea (2)


$ 195.28

$ 182.80

6.8%


92.1%

90.0%

2.1%


$ 179.76

$ 164.57

9.2%


42.65%

39.22%

343 bps


Chicago Marriott


$ 184.90

$ 176.48

4.8%


70.5%

71.7%

(1.2%)


$ 130.28

$ 126.48

3.0%


20.43%

18.63%

180 bps


Chicago Conrad (2)


$ 187.61

$ 176.17

6.5%


84.5%

77.7%

6.8%


$ 158.54

$ 136.93

15.8%


27.78%

21.88%

590 bps


Courtyard Denver Downtown (2)


$ 152.68

$ 146.22

4.4%


79.9%

82.1%

(2.2%)


$ 121.96

$ 120.04

1.6%


43.20%

42.54%

66 bps


Courtyard Fifth Avenue


$ 243.78

$ 235.93

3.3%


85.8%

86.1%

(0.3%)


$ 209.19

$ 203.18

3.0%


24.78%

24.29%

49 bps


Courtyard Midtown East


$ 243.92

$ 221.64

10.1%


83.2%

85.6%

(2.4%)


$ 203.01

$ 189.62

7.1%


30.34%

28.40%

194 bps


Frenchman's Reef (2)


$ 239.39

$ 232.26

3.1%


83.7%

84.8%

(1.1%)


$ 200.46

$ 197.00

1.8%


8.75%

25.80%

-1705 bps


Griffin Gate Marriott


$ 130.04

$ 124.17

4.7%


61.0%

63.7%

(2.7%)


$ 79.33

$ 79.11

0.3%


22.74%

22.62%

12 bps


JW Marriott Denver Cherry Creek (2)


$ 231.79

$ 215.38

7.6%


71.7%

73.9%

(2.2%)


$ 166.20

$ 159.07

4.5%


28.53%

27.21%

132 bps


Los Angeles Airport


$ 104.64

$ 102.44

2.1%


86.3%

82.4%

3.9%


$ 90.29

$ 84.45

6.9%


17.65%

15.65%

200 bps


Hilton Minneapolis (2)


$ 139.47

$ 131.83

5.8%


76.3%

74.6%

1.7%


$ 106.41

$ 98.31

8.2%


30.41%

28.85%

156 bps


Oak Brook Hills


$ 113.64

$ 106.83

6.4%


54.5%

52.6%

1.9%


$ 61.87

$ 56.22

10.0%


8.61%

10.09%

-148 bps


Orlando Airport Marriott


$ 99.90

$ 97.65

2.3%


77.2%

71.6%

5.6%


$ 77.12

$ 69.90

10.3%


22.05%

19.34%

271 bps


Salt Lake City Marriott


$ 127.22

$ 134.00

(5.1%)


60.0%

54.0%

6.0%


$ 76.28

$ 72.32

5.5%


25.45%

26.10%

-65 bps


The Lodge at Sonoma


$ 211.60

$ 192.22

10.1%


70.9%

68.1%

2.8%


$ 150.06

$ 130.99

14.6%


15.29%

14.36%

93 bps


Torrance Marriott South Bay


$ 105.61

$ 100.73

4.8%


81.1%

81.4%

(0.3%)


$ 85.64

$ 81.96

4.5%


24.91%

19.76%

515 bps


Vail Marriott (2)


$ 226.25

$ 232.48

(2.7%)


65.8%

65.8%

0.0%


$ 148.94

$ 152.94

(2.6%)


30.21%

32.46%

-225 bps


Radisson Lexington Hotel New York (2)


$ 180.19

$ 170.37

5.8%


95.4%

94.4%

1.0%


$ 171.84

$ 160.80

6.9%


31.65%

33.43%

-178 bps


Renaissance Worthington


$ 159.30

$ 158.77

0.3%


71.5%

66.2%

5.3%


$ 113.88

$ 105.07

8.4%


30.66%

29.87%

79 bps


Total/Weighted Average


$ 158.08

$ 153.71

2.8%


74.6%

73.2%

1.4%


$ 117.96

$ 112.50

4.9%


24.22%

24.46%

-24 bps


Comparable Total/Weighted Avg. (3)


$ 155.55

$ 149.95

3.7%


74.4%

72.7%

1.7%


$ 115.68

$ 109.03

6.1%


25.01%

24.35%

66 bps


Post-Sale Total/Weighted Average (4)


$ 158.32

$ 152.31

3.9%


75.8%

74.1%

1.7%


$ 119.93

$ 112.82

6.3%


25.01%

23.93%

108 bps



(1) The pro forma operating data includes the operating results for the Company's hotels assuming they were owned since January 1, 2010.

(2) The hotel reports results on a monthly basis. The data presented is based upon the Company's reporting calendar and includes the months of January through August.

(3) The comparable total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort from all periods presented due to the extensive 2011 renovation.

(4) The post-sale total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort and the three hotels under agreement to be sold from all periods presented.























Pro Forma Hotel Adjusted EBITDA Reconciliation














Third Quarter 2011 (1)







Plus:

Plus:

Plus:

Equals:




Total Revenues


Net Income / (Loss)

Depreciation

Interest Expense

Non-Cash Adjustments (2)

Hotel Adjusted EBITDA


Atlanta Alpharetta


$ 3,347


$ 603

$ 289

$ -

$ -

$ 892


Westin Atlanta North (3)


$ 4,149


$ 150

$ 435

$ -

$ -

$ 585


Atlanta Waverly


$ 6,946


$ (647)

$ 1,080

$ 1,251

$ -

$ 1,684


Renaissance Austin


$ 5,398


$ (897)

$ 951

$ 1,073

$ -

$ 1,127


Bethesda Marriott Suites


$ 2,978


$ (1,430)

$ 481

$ -

$ 1,446

$ 497


Boston Westin (3)


$ 18,809


$ 2,424

$ 2,866

$ -

$ 117

$ 5,407


Renaissance Charleston


$ 2,255


$ 306

$ 341

$ -

$ (29)

$ 618


Hilton Garden Inn Chelsea (3)


$ 3,146


$ 981

$ 436

$ -

$ -

$ 1,417


Chicago Marriott


$ 22,299


$ (155)

$ 2,956

$ 3,090

$ (365)

$ 5,526


Chicago Conrad (3)


$ 7,717


$ 1,760

$ 1,145

$ -

$ -

$ 2,905


Courtyard Denver Downtown (3)


$ 2,564


$ 625

$ 264

$ 335

$ -

$ 1,224


Courtyard Fifth Avenue


$ 3,492


$ (418)

$ 439

$ 817

$ 48

$ 886


Courtyard Midtown East


$ 6,017


$ 447

$ 531

$ 917

$ -

$ 1,895


Frenchman's Reef (3)


$ 3,694


$ (3,540)

$ 971

$ 586

$ -

$ (1,983)


Griffin Gate Marriott


$ 5,668


$ 650

$ 759

$ -

$ (1)

$ 1,408


JW Marriott Denver Cherry Creek (3)


$ 5,425


$ 920

$ 418

$ 574

$ -

$ 1,912


Los Angeles Airport


$ 12,394


$ (269)

$ 1,195

$ 1,060

$ -

$ 1,986


Minneapolis Hilton (3)


$ 15,402


$ 2,885

$ 1,698

$ 1,290

$ (151)

$ 5,722


Oak Brook Hills


$ 5,770


$ 92

$ 732

$ -

$ 125

$ 949


Orlando Airport Marriott


$ 3,449


$ (1,302)

$ 751

$ 799

$ -

$ 248


Salt Lake City Marriott


$ 4,744


$ 165

$ 629

$ 410

$ -

$ 1,204


The Lodge at Sonoma


$ 4,814


$ 1,032

$ 322

$ -

$ -

$ 1,354


Torrance Marriott South Bay


$ 5,387


$ 784

$ 731

$ -

$ -

$ 1,515


Vail Marriott (3)


$ 5,375


$ 644

$ 512

$ -

$ -

$ 1,156


Radisson Lexington Hotel New York (3)


$ 13,149


$ 2,334

$ 2,354

$ 3

$ 33

$ 4,724


Renaissance Worthington


$ 6,020


$ (140)

$ 626

$ 729

$ 3

$ 1,218


Total


$ 180,408


$ 8,004

$ 23,912

$ 12,934

$ 1,226

$ 46,068


Comparable Total (4)


$ 176,714


$ 11,544

$ 22,941

$ 12,348

$ 1,226

$ 48,051


Post-Sale Total (5)


$ 158,702


$ 12,438

$ 20,151

$ 10,024

$ 1,227

$ 43,832



(1) The pro forma operating data includes the operating results for the Company's hotels assuming they were owned since January 1, 2010.

(2) The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from our ground lease obligations,
the non-cash amortization of favorable lease assets, and the non-cash amortization of unfavorable contract liabilities.

(3) The hotel reports results on a monthly basis. The amounts presented are based on the Company's reporting calendar for the third quarter
and include the months of June, July, and August.

(4) The comparable total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort due to the extensive 2011 renovation.

(5) The post-sale total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort and the three hotels under agreement to be sold.
















Pro Forma Hotel Adjusted EBITDA Reconciliation














Third Quarter 2010 (1)







Plus:

Plus:

Plus:

Equals:




Total Revenues


Net Income / (Loss)

Depreciation

Interest Expense

Non-Cash Adjustments (2)

Hotel Adjusted EBITDA


Atlanta Alpharetta


$ 3,060


$ 404

$ 286

$ -

$ -

$ 690


Westin Atlanta North (3)


$ 3,931


$ 96

$ 432

$ -

$ -

$ 528


Atlanta Waverly


$ 6,662


$ 818

$ 1,066

$ 1,252

$ -

$ 3,136


Renaissance Austin


$ 5,982


$ (666)

$ 954

$ 1,075

$ -

$ 1,363


Bethesda Marriott Suites


$ 3,197


$ (1,292)

$ 503

$ -

$ 1,451

$ 662


Boston Westin (3)


$ 16,170


$ 1,092

$ 2,894

$ -

$ 117

$ 4,103


Renaissance Charleston


$ 2,226


$ 346

$ 361

$ -

$ (29)

$ 678


Hilton Garden Inn Chelsea (3)


$ 2,930


$ 683

$ 504

$ -

$ -

$ 1,187


Chicago Marriott


$ 21,634


$ (1,029)

$ 3,444

$ 3,079

$ (365)

$ 5,129


Chicago Conrad (3)


$ 7,096


$ 1,152

$ 1,108

$ -

$ -

$ 2,260


Courtyard Denver Downtown (3)


$ 2,299


$ 425

$ 280

$ 341

$ -

$ 1,046


Courtyard Fifth Avenue


$ 3,288


$ (504)

$ 437

$ 799

$ 48

$ 780


Courtyard Midtown East


$ 5,597


$ 183

$ 522

$ 913

$ -

$ 1,618


Frenchman's Reef (3)


$ 10,789


$ (3,043)

$ 1,402

$ 791

$ 1,391

$ 541


Griffin Gate Marriott


$ 6,046


$ 998

$ 751

$ -

$ (1)

$ 1,748


JW Marriott Denver Cherry Creek (3)


$ 5,242


$ 650

$ 420

$ 585

$ -

$ 1,655


Los Angeles Airport


$ 11,329


$ (796)

$ 1,324

$ 1,036

$ -

$ 1,564


Minneapolis Hilton (3)


$ 13,965


$ 3,535

$ 1,662

$ -

$ (263)

$ 4,934


Oak Brook Hills


$ 5,691


$ 128

$ 746

$ -

$ 125

$ 999


Orlando Airport Marriott


$ 3,238


$ (1,297)

$ 750

$ 785

$ -

$ 238


Salt Lake City Marriott


$ 4,420


$ (169)

$ 714

$ 419

$ -

$ 964


The Lodge at Sonoma


$ 4,552


$ 932

$ 324

$ -

$ -

$ 1,256


Torrance Marriott South Bay


$ 4,492


$ 125

$ 753

$ -

$ -

$ 878


Vail Marriott (3)


$ 5,835


$ 861

$ 495

$ -

$ -

$ 1,356


Radisson Lexington Hotel New York (3)


$ 12,414


$ 2,595

$ 2,355

$ 3

$ 33

$ 4,986


Renaissance Worthington


$ 5,374


$ (462)

$ 625

$ 722

$ 3

$ 888


Total


$ 177,459


$ 5,765

$ 25,112

$ 11,800

$ 2,510

$ 45,133


Comparable Total (4)


$ 166,670


$ 8,808

$ 23,710

$ 11,009

$ 1,119

$ 44,592


Post-Sale Total (5)


$ 147,980


$ 7,658

$ 20,939

$ 8,682

$ 1,120

$ 38,345



(1) The pro forma operating data includes the operating results for the Company's hotels assuming they were owned as of January 1, 2010.

(2) The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from our ground lease obligations,
the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.

(3) The hotel reports results on a monthly basis. The data presented is based upon the Company's reporting calendar for the third quarter
and includes the months of June, July and August.

(4) The comparable total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort due to the extensive 2011 renovation.

(5) The post-sale total excludes the Frenchman's Reef & Morning Star Marriott Beach Resort and the three hotels under agreement to be sold.

















Pro Forma Hotel Adjusted EBITDA Reconciliation














Year to Date 2011 (1)







Plus:

Plus:

Plus:

Equals:




Total Revenues


Net Income / (Loss)

Depreciation

Interest Expense

Non-Cash Adjustments (2)

Hotel Adjusted EBITDA


Atlanta Alpharetta


$ 10,588


$ 2,311

$ 862

$ -

$ -

$ 3,173


Westin Atlanta North (3)


$ 10,869


$ 349

$ 1,278

$ -

$ -

$ 1,627


Atlanta Waverly


$ 20,948


$ (2,030)

$ 3,232

$ 3,754

$ -

$ 4,956


Renaissance Austin


$ 19,473


$ (603)

$ 2,860

$ 3,222

$ -

$ 5,479


Bethesda Marriott Suites


$ 10,332


$ (3,160)

$ 1,452

$ -

$ 4,343

$ 2,635


Boston Westin (3)


$ 43,761


$ 1,168

$ 8,637

$ -

$ 351

$ 10,156


Renaissance Charleston


$ 7,307


$ 1,505

$ 1,003

$ -

$ (87)

$ 2,421


Hilton Garden Inn Chelsea (3)


$ 7,615


$ 1,966

$ 1,282

$ -

$ -

$ 3,248


Chicago Marriott


$ 58,405


$ (5,386)

$ 9,218

$ 9,198

$ (1,095)

$ 11,935


Chicago Conrad (3)


$ 15,952


$ 1,015

$ 3,417

$ -

$ -

$ 4,432


Courtyard Denver Downtown (3)


$ 5,673


$ 622

$ 824

$ 1,005

$ -

$ 2,451


Courtyard Fifth Avenue


$ 9,958


$ (1,405)

$ 1,316

$ 2,414

$ 143

$ 2,468


Courtyard Midtown East


$ 16,677


$ 709

$ 1,593

$ 2,757

$ -

$ 5,059


Frenchman's Reef (3)


$ 24,100


$ (2,883)

$ 2,902

$ 2,089

$ -

$ 2,108


Griffin Gate Marriott


$ 15,441


$ 1,220

$ 2,295

$ -

$ (3)

$ 3,512


JW Marriott Denver Cherry Creek (3)


$ 12,727


$ 652

$ 1,258

$ 1,721

$ -

$ 3,631


Los Angeles Airport


$ 36,999


$ (620)

$ 4,020

$ 3,131

$ -

$ 6,531


Minneapolis Hilton (3)


$ 33,980


$ 3,463

$ 5,074

$ 2,273

$ (475)

$ 10,335


Oak Brook Hills


$ 13,955


$ (1,382)

$ 2,209

$ -

$ 375

$ 1,202


Orlando Airport Marriott


$ 13,857


$ (1,571)

$ 2,260

$ 2,367

$ -

$ 3,056


Salt Lake City Marriott


$ 14,572


$ 601

$ 1,885

$ 1,223

$ -

$ 3,709


The Lodge at Sonoma


$ 11,411


$ 772

$ 973

$ -

$ -

$ 1,745


Torrance Marriott South Bay


$ 15,057


$ 1,547

$ 2,204

$ -

$ -

$ 3,751


Vail Marriott (3)


$ 17,115


$ 3,642

$ 1,529

$ -

$ -

$ 5,171


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