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CNL Hotels & Resorts, Inc. Reports 1st Qtr Net
Income Was $9.0 million; RevPAR Up 11.6%
Hotel Operating Statistics

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Portfolio Outperforms Expectations During
Its Highest-Performing Seasonal Period

ORLANDO, Fla., May 16, 2005 - CNL Hotels & Resorts, Inc., the nation's second largest hotel real estate investment trust ("REIT"), today announced results of operations for the first quarter ended March 31, 2005.

First Quarter Highlights

  • RevPAR increased 11.6% -- Revenue per available room ("RevPAR") increased to $106.25 for the quarter.
  • Total revenue increased 88.8% -- Total revenue was $429.4 million for the quarter, compared to $227.4 million in the same period of 2004.
  • Earnings per diluted share increased 200% -- Net income was $9.0 million, or $0.06 per diluted share for the quarter, compared to $3.0 million, or $0.02 per diluted share in the same period of 2004.
  • FFO per diluted share increased 56.0% -- Funds from Operations ("FFO") were $59.3 million, or $0.39 per diluted share for the quarter, compared to $34.3 million, or $0.25 per diluted share in the same period of 2004.
  • EBITDA increased 105% -- EBITDA, which is earnings before interest expense, income taxes, depreciation and amortization, was $119.5 million for the quarter, compared to $58.3 million in the same period of 2004.
"We are pleased with our first quarter results, which reflect the significant impact from integrating several luxury resorts and upper-upscale properties acquired in April of last year," stated Thomas J. Hutchison III, chief executive officer. "Consistent with our strategic objective to maximize internal growth, our portfolio outperformed expectations during its highest- performing seasonal period and we are optimistic that we can continue to drive this early momentum."

Operating Performance Results

RevPAR for the Company's 121 adjusted comparable properties increased by 11.6% in the first quarter as compared to the same period of 2004, resulting from a 6.5% gain in ADR to $143.97 and a 3.3 percentage point increase in occupancy to 73.8%. Total adjusted comparable properties EBITDA margins improved in the first quarter by 1.1 percentage points to 32.8%.

John A. Griswold, president and chief operating officer, stated, "Through our active portfolio management efforts and a progressing industry recovery, we achieved strong year-over-year increases in RevPAR primarily driven by rate. We are seeing increases across our portfolio with improved profit margins and continued gains in market share."

The Company references non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission, such as RevPAR, ADR, FFO, FFO per diluted share, EBITDA, EBITDA margins and adjusted comparable operating performance. For further detail, refer to the accompanying "Financial and Portfolio Information" section.

Financing Transactions

In February 2005, the Company obtained a $400 million loan secured by the Hotel del Coronado in San Diego, Calif. This property is owned through a partnership in which the Company has a 70% interest. Approximately $290 million of the loan proceeds were used to refinance existing partnership debt. A portion of the loan proceeds will finance improvements to the property and has allowed the partnership to make a distribution to the Company and its partner as a return of capital, which the Company intends to reinvest in its current portfolio. Further, the partnership is evaluating the use of the remaining loan proceeds to develop additional units at the property.

In May 2005, a joint venture in which the Company has a 44% interest obtained a commitment for a $300 million loan to be secured by the JW Marriott Desert Ridge Resort & Spa in Phoenix, Ariz. The loan is expected to fund in June 2005. Approximately $275 million of the loan proceeds will be used to refinance all of the construction debt of the partnership. The remaining loan proceeds will be used to pay expenses related to the extinguishment of the existing debt and closing of the new loan.

"The significant appreciation in value at the Hotel del Coronado has enabled us to take advantage of a lower cost of debt and allows additional investment in the property and our portfolio," stated C. Brian Strickland, executive vice president and chief financial officer. "We are also pleased with the performance of the JW Marriott Desert Ridge Resort and are ahead of schedule on the refinance of construction debt. The performance of this unique property continues to strengthen, allowing the partnership to reduce its cost of debt and increase the cash flow to the Company."

Recent Announcements

On April 18, 2005, the Company entered into a purchase and sale agreement to sell 30 non-strategic properties to an affiliate of Ashford Hospitality Trust, Inc. for $465 million in cash with a net gain of $35.5 million. The 30 properties were acquired or developed by the Company between 1999 and 2003, and represent four brands of Marriott International, Inc. in the select- service and extended-stay segments: Courtyard®, Residence Inn®, TownePlace Suites® and SpringHill Suites®. The Company expects the sale of these properties to be completed in June 2005, and intends to use the majority of the proceeds to retire existing long-term debt.

Mr. Hutchison added, "This sale will enable us to capitalize on favorable lodging market fundamentals and further our strategy to actively reinvest capital in the portfolio, while we continue to focus on selective acquisitions in the luxury resort and upper-upscale industry segments."

The Company intends to reinvest approximately $128 million in its portfolio in 2005, through value-enhancing renovation and development projects at core properties.

On April 8, 2005, the Company announced that a special committee of its Board of Directors is in discussions with its advisor, CNL Hospitality Corp., regarding the possible amendment of its existing merger agreement. The Company anticipates that any modifications to the merger agreement will be submitted to its stockholders for approval.
 

CNL Hotels & Resorts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets - UNAUDITED
(in thousands, except per share data)

                                                   March 31,    December 31,
                                                     2005           2004
                     ASSETS
    Hotel and resort properties, less
     accumulated depreciation of $373,731 and
     $322,559, respectively                       $4,936,578     $4,965,012
    Investments in unconsolidated entities             9,003         10,248
    Real estate held for sale                          2,689          7,532
    Cash and cash equivalents                         77,393        108,678
    Restricted cash                                  166,747        140,761
    Receivables, less allowance for doubtful
     accounts of $1,599 and $1,623, respectively     122,405         89,616
    Goodwill                                         515,192        515,192
    Intangibles, less accumulated amortization
      of $9,581 and $7,196, respectively             368,087        370,472
    Prepaid expenses and other assets                 77,128         61,716
    Loan costs, less accumulated amortization
     of $20,940 and $17,205, respectively             44,592         47,818
                                                  $6,319,814     $6,317,045

             LIABILITIES AND STOCKHOLDERS' EQUITY
    Mortgages payable                             $3,530,846     $3,488,805
    Accounts payable and accrued expenses            197,170        191,285
    Other liabilities                                 55,060         58,044
    Due to related parties                             2,688          5,885
    Membership deposits                              220,202        214,246
      Total liabilities                            4,005,966      3,958,265
    Commitments and contingencies
    Minority interests                               145,106        148,825
    Stockholders' equity:
      Preferred stock, without par value.
        Authorized and unissued 1,500 shares              --             --
      Excess shares, $.01 par value per share.
        Authorized and unissued 31,500 shares             --             --
      Common stock, $.01 par value per share.
        Authorized 225,000 shares; issued 156,869
         and 154,975 shares, respectively;
         outstanding 152,829 and 152,913 shares,
         respectively                                  1,529          1,531
      Capital in excess of par value               2,739,526      2,740,430
      Accumulated distributions in excess of
       net income                                  (572,334)      (527,790)
      Accumulated other comprehensive loss                21        (4,216)
      Total stockholders' equity                   2,168,742      2,209,955
                                                  $6,319,814     $6,317,045
 

                 CNL Hotels & Resorts, Inc. and Subsidiaries

          Condensed Consolidated statement of operations - UNAUDITED
                    (in thousands, except per share data)

                                                 Three Months Ended March 31,
                                                     2005            2004
    Revenues:
      Room                                         $254,441       $152,179
      Food and beverage                             109,657         49,792
      Other hotel and resort operating departments   61,193         13,976
      Rental income from operating leases             3,184          9,116
      Interest and other income                         922          2,347
                                                    429,397        227,410
    Expenses:
      Room                                           57,849         36,612
      Food and beverage                              70,928         36,824
      Other hotel and resort operating departments   33,680          8,246
      Property operations                            71,891         46,343
      Repairs and maintenance                        16,462         10,552
      Hotel and resort management fees               14,674          7,158
      Sales and marketing                            23,969         15,337
      Credit enhancement funding                         --        (6,376)
      General and administrative                      4,605          3,525
      State and local taxes                           2,039          1,087
      Asset management fees to related party          7,366          4,946
      Depreciation and amortization                  53,653         30,890
                                                    357,116        195,144

    Operating profit                                 72,281         32,266

    Interest and loan cost amortization            (56,896)       (26,118)
    Loss on extinguishment of debt                  (4,206)             --

    Income before equity in losses of
     unconsolidated entities, minority
     interests and income tax (expense) benefit      11,179          6,148
    (Expense) benefit from income taxes               (429)          1,120
    Minority interests                              (1,762)        (2,252)
    Equity in losses of unconsolidated entities       (492)        (2,635)

    Income from continuing operations                 8,496          2,381
    Income from discontinued operations                 470            589
    Net income                                       $8,966         $2,970
    Earnings per share of common stock
     (basic and diluted):
      Continuing operations                           $0.06          $0.02
      Discontinued operations                            --             --
                                                      $0.06          $0.02
    Weighted average number of shares
     of common stock outstanding:
      Basic and diluted                             152,913        135,707

    The following is a reconciliation of net income to FFO and FFO per diluted
share for the three months ended March 31 (in thousands, except per share
data):

                                                         Three Months
                                                        Ended March 31,
                                                      2005 (1)        2004
    Net income                                        $8,966         $2,970
    Adjustments:
      Effect of unconsolidated entities               3,548          3,570
      Effect of minority interest                   (3,153)        (3,039)
      Depreciation and amortization of real
       estate assets                                 50,645         30,840
      Gain on sale of real estate assets              (660)             --
    Funds from operations                           $59,346        $34,341
    Weighted average shares:
      Basic and diluted                             152,913        135,707

    FFO per share                                     $0.39          $0.25

The following is a reconciliation of net income to EBITDA for the three months ended March 31 (in thousands):

                                                         Three Months
                                                        Ended March 31,
                                                      2005 (1)        2004
    Income from Continuing Operations                $8,496         $2,381
     Adjustments:
      Interest and loan cost amortization            56,896         26,118
      Income tax expense (benefit)                      429        (1,120)
      Depreciation and amortization                  53,653         30,890
    EBITDA                                         $119,474        $58,269

    (1) Results of operations for the three months ended March 31, 2005 do not
        include $6.0 million in net cash flows received for member deposits.
        Additionally, the three months ended March 31, 2005 includes $4.2
        million of loss on extinguishment of debt.
 

CNL Hotels & Resorts, Inc.

                     PROPERTY OPERATING DATA  - UNAUDITED

    Unaudited Property Operating Data - Comparable Properties
    Continuing Operations (1)

                                   For the Quarter Ended March 31, 2005

                                                  Var.              Var.
                                                 (ppt.)             (%)
                           Properties Occupancy  to 2004   ADR     to 2004
    Consolidated
       Luxury and Upper
        Upscale                30        72.4 %    3.8   $148.57     5.8 %
       Upscale                 46        74.5      2.7    107.08     9.8
       Midscale                31        69.3      2.3     79.60     7.0
    Total Consolidated        107        72.5 %    3.2   $121.56     7.3 %
    Unconsolidated              3        84.3      5.3    182.09     7.7
    Subtotal                  110        73.7 %    3.4   $128.74     7.5 %
    Triple Net Lease (2)        6        69.9      4.5    111.90    14.6
    Total                     116        73.6 %    3.4   $128.02     7.7 %
 

    Unaudited Property Operating Data - Adjusted Comparable Properties
    Continuing Operations (1)

                                   For the Quarter Ended March 31, 2005

                                             Var.     EBITDA        Var.
                                             (%)      Margin       (ppt.)
                                  RevPAR    to 2004     (3)       to 2004
    Consolidated
       Luxury and Upper
        Upscale                  $107.60     11.6 %     27.8 %      3.1
       Upscale                     79.81     14.0       38.1        1.7
       Midscale                    55.15     10.7       27.8       (0.4)
    Total Consolidated            $88.14     12.2 %     30.2 %      2.5
    Unconsolidated                153.42     14.9       33.6        3.8
    Subtotal                      $94.92     12.6 %     30.8 %      2.8
    Triple Net Lease (2)           78.16     22.5       26.8        6.4
    Total                         $94.16     13.0 %     30.7 %      2.9
 

                                   For the Quarter Ended March 31, 2005

                                                   Var.             Var.
                                                  (ppt.)            (%)
                           Properties Occupancy  to 2004   ADR    to 2004
    Consolidated
       Luxury and Upper
        Upscale                35     73.2 %       3.5   $178.71    4.5 %
       Upscale                 46     74.5         2.7    107.08    9.8
       Midscale                31     69.3         2.3     79.60    7.0
    Total Consolidated        112     72.9 %       3.1   $140.87    6.0 %
    Unconsolidated              3     84.3         5.3    182.09    7.7
    Subtotal                  115     74.0 %       3.3   $145.25    6.3 %
    Triple Net Lease (2)        6     69.9         4.5    111.90   14.6
    Total                     121     73.8 %       3.3   $143.97    6.5 %
 

                                             Var.     EBITDA        Var.
                                             (%)      Margin       (ppt.)
                                 RevPAR    to 2004     (3)       to 2004
    Consolidated
      Luxury and Upper
       Upscale                    $130.82      9.8 %   32.3 %         0.4
      Upscale                       79.81     14.0     38.1           1.7
      Midscale                      55.15     10.7     27.8          (0.4)
    Total Consolidated            $102.72     10.7 %   32.9 %         0.6
    Unconsolidated                 153.42     14.9     33.6           3.8
    Subtotal                      $107.44     11.3 %   33.0 %         1.0
    Triple Net Lease (2)            78.16     22.5     26.8           6.4
    Total                         $106.25     11.6 %   32.8 %         1.1
 

(1) Excludes one property held for sale. Properties previously leased to third parties, which were converted to the TRS structure and are now leased to wholly-owned TRS entities, are presented as consolidated.

(2) Our operating results include only rental revenues received from third-party lessees of these Properties, as we do not directly participate in their hotel operating revenues or expenses.

    (3) EBITDA Margin is calculated as EBITDA divided by total revenues.

Certain statements and information included in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 

CNL Hotels & Resorts, Inc. owns one of the most distinctive portfolios in the lodging industry. With a focus on luxury resorts and upper-upscale properties, the company has approximately $6.3 billion in total assets with more than 130 hotels and resorts across North America that operate under independent brands and corporate brands such as Marriott, Hilton and Hyatt. 

Contact:

CNL Hotels & Resorts
http://www.cnlhotels.com
 

Also See: CNL Hospitality Completes Acquisition of Six KSL Resorts for $1.4 billion in Cash and Assumption of $794 million Debt; KSL Appointed Interim Management Company / April 2004
John A. Griswold Trading President's Title at Tishman Hotel Corp. to Become President of CNL Hospitality Corp. / Feb 2003

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