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Summit Hotel Properties Reports 2012 Results

First Quarter 2013 Outlook

The Company is providing guidance for the first quarter based on 91 current hotels 1 and the issuance of 17,250,000 additional shares of common stock on January 14, 2013. Except as described in footnote 1 below, it assumes no additional hotels are acquired or sold in the first quarter and no additional issuances of equity securities.

  Low-end   High-end

Pro forma RevPAR (91) 1

$ 74.00 $ 76.00

Pro forma RevPAR Growth (91)

5.0% 7.0%

RevPAR (same-store 63) 2

$ 64.00 $ 66.00
RevPAR Growth (same-store 63) 5.0% 7.0%
Adjusted FFO $ 10,600 $ 11,900

Adjusted FFO per diluted unit 3

$ 0.16 $ 0.18
Renovation capital deployed $ 9,000 $ 11,000
Interest expense $ 4,000 $ 4,500
Income tax expense $ - $ 400
 

1 In addition to the Company’s portfolio of 83 hotels (8,957 guestrooms) at December 31, 2012 (excluding the AmericInn Hotel & Suites in Golden, CO that was held for sale at year end), includes: the 151 - guestroom Hyatt Place (Universal), Orlando, FL; the 149 - guestroom Hyatt Place (Convention Center), Orlando, FL; the 126 - guestroom Hyatt Place, Chicago (Hoffman Estates) IL; and the 252 - guestroom Holiday Inn Express & Suites, San Francisco, CA. Assumes the acquisition of the 153 - guestroom Courtyard, New Orleans (Metairie), LA; the 120 - guestroom Residence Inn, New Orleans (Metairie), LA; the 208 - guestroom Springhill Suites (Convention Center), New Orleans, LA; the 202 - guestroom Courtyard (Convention Center), New Orleans, LA; and the 140 - guestroom Courtyard (French Quarter), New Orleans, LA currently under contract. Also reflects the sale of the 62 – guestroom AmericInn Hotel & Suites, Lakewood, CO and the 149 - guestroom Hampton Inn, Denver (Greenwood), CO.

2 First quarter same-store RevPAR guidance anticipates 75 to 125 basis points of RevPAR disruption and $0.2 to $0.3 million of EBITDA disruption in the first quarter of 2013 due to renovation work.

3 Assumed weighted average diluted common units of 66,160,000 for first quarter 2013.

Full Year 2013 Outlook

The Company is providing guidance for full year 2013 based on 93 current hotels 1 and the issuance of 17,250,000 additional shares of common stock on January 14, 2013. Except as described in footnote 1 below, it assumes no additional hotels are acquired or sold in 2013 and no additional issuances of equity securities. US GDP growth was assumed to be in the range of 2.0 to 2.9 percent as forecasted by Smith Travel Research and PwC’s Hospitality Directions economic outlooks.

  Low-end   High-end

Pro forma RevPAR (93) 1

$ 78.00 $ 80.00
Pro Forma RevPAR Growth (93) 5.0% 7.0%
RevPAR (same-store 63) $ 69.00 $ 71.00
RevPAR Growth (same-store 63) 5.0% 7.0%

Adjusted FFO 2

$ 57,500 $ 61,000

Adjusted FFO per diluted unit 3

$ 0.84 $ 0.90
Renovation capital deployed $ 38,000 $ 48,000
Interest expense $ 19,500 $ 20,500
Income tax expense $ 800 $ 1,200
 

1 In addition to the Company’s portfolio of 83 hotels (8,957 guestrooms) at December 31, 2012 (excluding the AmericInn Hotel & Suites in Golden, CO that was held for sale at year end), includes: the 151 - guestroom Hyatt Place (Universal), Orlando; FL, the 149 - guestroom Hyatt Place (Convention Center), Orlando, FL; the 126 - guestroom Hyatt Place, Chicago (Hoffman Estates), IL; and the 252 - guestroom Holiday Inn Express & Suites, San Francisco, CA. Assumes the acquisition of: the 153 - guestroom Courtyard, New Orleans (Metairie), LA; the 120 - guestroom Residence Inn, New Orleans (Metairie), LA; the 208 - guestroom Springhill Suites (Convention Center), New Orleans, LA; the 202 - guestroom Courtyard (Convention Center), New Orleans, LA; the 140 - guestroom Courtyard (French Quarter), New Orleans, LA; the 93 - guestroom Holiday Inn Express & Suites, Minneapolis (Minnetonka), MN; and the 97 - guestroom Hilton Garden Inn, Minneapolis (Eden Prairie), MN currently under contract. Also reflects the sale of the 62 – guestroom AmericInn Hotel & Suites, Lakewood, CO and the 149 - guestroom Hampton Inn, Denver (Greenwood), CO.

2 Adjusted FFO guidance on 93 hotels is based in part on 2013 Hotel EBITDA margin change in the range of 100 to 175 basis points on the 83 hotels owned on December 31, 2012 (excluding the AmericInn Hotel & Suites in Golden, Co that was held for sale at year end). It also assumes additional charges in the range of $0.4 million to $0.6 million that are associated with the consolidation of the Company’s corporate office from Sioux Falls, SD to Austin, TX prior to the end of 2013.

3 Assumed weighted average diluted common units of 68,133,000 for full year 2013.

Earnings Call

The Company will conduct its quarterly conference call on Wednesday, February 27, 2013 at 9:00am EST. To participate in the conference call please dial 866-510-0676. The participant passcode for the call is 44189639. Additionally, a live webcast of the call will be available through the Company’s website, www.shpreit.com . A replay of the conference call will be available until 11:59pm EST Wednesday March 6, 2013 by dialing 888-286-8010; participant passcode 18479433. A replay of the conference call will also be available on the Company’s website until June 7, 2013.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused primarily on acquiring and owning premium-branded select-service hotels in the upscale and upper midscale segments of the lodging industry. As of February 25, 2013, the Company’s portfolio consisted of 86 hotels with a total of 9,486 rooms located in 22 states. Additional information about Summit may be found at the Company’s website, www.shpreit.com.

Forward-Looking Statements

This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “plan” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Examples of forward-looking statements include the following: projections of the Company’s revenues and expenses, capital expenditures or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions, dispositions, financings or services; forecasts of the Company’s future financial performance and potential increases in average daily rate, occupancy, RevPAR, room supply and demand, funds from operations and adjusted funds from operations; US GDP growth; estimated sources and uses of available capital; and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission (“SEC”), including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

For information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and its quarterly and other periodic filings with the SEC.

The following condensed consolidated balance sheets and statements of operations are those of Summit Hotel OP, LP (the Operating Partnership), Summit Hotel Properties, Inc’s. (the REIT) consolidated operating partnership. Such financial results for the periods presented are identical to those of the REIT; however, we believe the reconciliation of FFO, AFFO, EBITDA and Adjusted EBITDA to net income (loss) presented in the Operating Partnership’s statement of operations is more beneficial, as it eliminates the presentation of noncontrolling interests represented by the equity interests held by limited partners of the Operating Partnership, other than the REIT. In addition, FFO and AFFO results on a total per common unit basis provides for a more consistent period over period presentation now and in future periods.

The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company’s expectations.

SUMMIT HOTEL PROPERTIES

Condensed Consolidated Balance Sheets

December 31, 2012 and December 31, 2011

Amounts in thousands

 
  2012   2011
ASSETS
 
Investment in hotel properties, net $ 734,362 $ 498,876
Investment in hotel properties under development 10,303 -
Land held for development 15,802 20,295
Assets held for sale 4,836 -
Cash and cash equivalents 13,980 10,537
Restricted cash 3,624 1,464
Trade receivables 5,478 3,425
Prepaid expenses and other 5,311 4,721
Deferred charges, net 8,895 8,924
Deferred tax asset 3,997 2,196
Other assets   4,201   3,567
TOTAL ASSETS $ 810,789 $ 554,005
 
 
LIABILITIES AND EQUITY
 
LIABILITIES
Debt $ 312,613 $ 217,104
Accounts payable 5,013 1,671
Accrued expenses 18,985 15,781
Derivative financial instruments   641   -
TOTAL LIABILITIES   337,252   234,556
 
COMMITMENTS AND CONTINGENCIES
   
EQUITY   473,537   319,449
 
TOTAL LIABILITIES AND EQUITY $ 810,789 $ 554,005
 

SUMMIT HOTEL PROPERTIES

Condensed Consolidated Statements of Operations

Amounts in thousands

   
Company and
Company Predecessor
Fourth Quarter   Year
2012   2011 2012 2011
 
REVENUE
Room revenue $ 49,067 $ 32,199 $ 181,598 $ 137,022
Other hotel operations revenue   2,356     1,369     7,944     5,641  
Total Revenue   51,423     33,568     189,542     142,663  
 
EXPENSES
Hotel operating expenses
Rooms 15,829 10,588 54,083 42,343
Other direct 7,146 5,355 25,125 21,858
Other indirect 14,263 10,434 51,062 38,236
Other   242     182     911     773  
Total hotel operating expenses 37,480 26,559 131,181 103,210
Depreciation and amortization 9,543 7,328 34,263 28,359
Corporate general and administrative:
Salaries and other compensation 2,476 913 6,039 3,082
Other 776 1,313 3,534 3,479
Hotel property acquisition costs 1,477 72 3,050 254
Loss on impairment of assets   660     -     660     -  
Total Expenses   52,412     36,185     178,727     138,384  
 
INCOME (LOSS) FROM OPERATIONS   (989 )   (2,617 )   10,815     4,279  
 
OTHER INCOME (EXPENSE)
Interest income 15 1 35 23
Other income 234 - 731 -
Interest expense (3,885 ) (3,023 ) (15,585 ) (17,021 )
Debt transaction costs (10 ) - (661 ) -
Gain (loss) on disposal of assets 1 - (198 ) (36 )
Gain (loss) on derivative financial instruments   -     -     (2 )   -  
Total Other Income (Expense)   (3,645 )   (3,022 )   (15,680 )   (17,034 )
 
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (4,634 ) (5,639 ) (4,865 ) (12,755 )
 
INCOME TAX (EXPENSE) BENEFIT   1,139     2,683     1,238     1,865  
 
INCOME (LOSS) FROM CONTINUING OPERATIONS (3,495 ) (2,956 ) (3,627 ) (10,890 )
 
INCOME (LOSS) FROM DISCONTINUING OPERATIONS   2,746     (252 )   1,357     506  
 
NET INCOME (LOSS) (749 ) (3,208 ) (2,270 ) (10,384 )
 
PREFERRED DIVIDENDS   (1,156 )   (411 )   (4,625 )   (411 )
 
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON UNIT HOLDERS $ (1,905 ) $ (3,619 ) $ (6,895 ) $ (10,795 )
 
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
Basic   50,894     37,378     40,780     37,378  
 
Diluted   51,086     37,378     40,912     37,378  
 

SUMMIT HOTEL PROPERTIES

FFO

Amounts in thousands, except per common unit

(Unaudited)

   
Company and
Company Predecessor
Fourth Quarter   Year
2012   2011 2012 2011
NET INCOME (LOSS) $ (749 ) $ (3,208 ) $ (2,270 ) $ (10,384 )
Preferred dividends (1,156 ) (411 ) (4,625 ) (411 )
Depreciation and amortization 9,710 7,737 34,871 29,807
Loss on impairment of assets 207 - 2,305 -
(Gain) loss on disposal of assets   (3,010 )   -     (2,811 )   36  
Funds From Operations $ 5,002 $ 4,118 $ 27,470 $ 19,048
Per common unit $ 0.10 $ 0.11 $ 0.67 $ 0.51
 
 
Equity based compensation 422 - 1,205 480
Hotel property acquisition costs 1,477 72 3,050 254
Loss on impairment of assets 660 - 660 -
Debt transaction costs 10 - 661 -
(Gain) loss on derivatives - - 2 -

Non-recurring operating expenses related to IPO 1

- - - 710

Corporate G&A related to IPO 1

- - - 476

Interest expense related to prepayment penalties 1

- - 522 5,600

Non-recurring income tax expense related to IPO 1

  -     -     -     339  
Adjusted Funds From Operations $ 7,571 $ 4,190 $ 33,570 $ 26,907
Per common unit $ 0.15 $ 0.11 $ 0.82 $ 0.72
 
Weighted average diluted common units 51,086 37,378 40,912 37,378
 

1 Includes expenses related to the transfer and assumption of indebtedness and other contractual obligations of the predecessor in connection with the IPO and the Company’s formation transactions in 2011.

SUMMIT HOTEL PROPERTIES

EBITDA

Amounts in thousands

(Unaudited)

   
Company and
Company Predecessor
Fourth Quarter   Year
2012   2011 2012 2011
NET INCOME (LOSS) $ (749 ) $ (3,208 ) $ (2,270 ) $ (10,384 )
Depreciation and amortization 9,710 7,737 34,871 29,807
Interest income (15 ) (1 ) (35 ) (23 )
Interest expense 3,527 (1,481 ) 15,764 17,859
Income tax expense (benefit)   (1,175 )   3,961     (1,289 )   (1,986 )
EBITDA $ 11,298 $ 7,008 $ 47,041 $ 35,273
 
 
Equity based compensation 422 - 1,205 480
Hotel property acquisition costs 1,477 72 3,050 254
Loss on impairment of assets 867 - 2,965 -
Debt transaction costs 10 - 661 -
(Gain) loss on disposal of assets (3,010 ) - (2,811 ) 36
(Gain) loss on derivatives - - 2 -

Non-recurring operating expenses related to IPO 1

- - - 710

Corporate G&A related to IPO 1

  -     -     -     476  
ADJUSTED EBITDA $ 11,064 $ 7,080 $ 52,113 $ 37,229
 

1 Includes expenses related to the transfer and assumption of indebtedness and other contractual obligations of the predecessor in connection with the IPO and the Company’s formation transactions in 2011.

SUMMIT HOTEL PROPERTIES

Pro Forma Hotel Operational Data 1

Schedule of Property Level Results

Amounts in thousands

(Unaudited)

     
Company and
Company Predecessor
Fourth Quarter   Year
2012   2011 2012 2011
REVENUE
Room Revenue $ 53,194 $ 47,366 $ 226,958 $ 206,198
Other hotel operations revenue   2,535   2,462   10,213   10,155
Total Revenue   55,729   49,829   237,171   216,353
 
EXPENSES
Hotel operating expenses
Rooms 17,050 16,061 67,333 63,332
Other direct 7,697 7,251 31,281 32,693

2

Other indirect 15,363 14,472 63,572 57,189

2

Other   261   246   1,134   1,156
Total Operating expenses   40,370   38,030   163,320   154,370
 
Hotel EBITDA $ 15,359 $ 11,799 $ 73,851 $ 61,984
 

1  For purposes of this press release, pro forma information includes operating results for the Company’s 83 hotels owned as of December 31, 2012, which excludes the AmericInn Hotel & Suites in Golden, CO that was held for sale at year end, as if such hotels had been owned by the Company since January 1, 2011. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.

2 Includes expenses related to the Company’s predecessor in connection with the IPO in 2011.

SUMMIT HOTEL PROPERTIES

Pro Forma 1 and Same-Store 2 Statistical Data for the Hotels

(Unaudited)

   
Company and
Company Predecessor
Pro forma Fourth Quarter   Pro Forma Year
2012   2011 2012 2011
Total Portfolio (83 hotels)
Rooms Occupied 551,387 513,134 2,318,227 2,187,374
Rooms Available 823,657 824,535 3,278,655 3,268,298
Occupancy 66.9% 62.2% 70.7% 66.9%
ADR $96.47 $92.31 $97.90 $94.27
RevPAR $64.58 $57.45 $69.22 $63.09
 
Occupancy Growth 471 bps 378 bps
ADR Growth 4.5% 3.9%
RevPAR Growth 12.4% 9.7%
 
Fourth Quarter Year
2012 2011 2012 2011
Same Store (59 hotels)
Rooms Occupied 359,440 327,314 1,528,650 1,425,102
Rooms Available 555,925 556,355 2,211,828 2,207,883
Occupancy 64.7% 58.8% 69.1% 64.6%
ADR $92.18 $87.87 $93.51 $89.66
RevPAR $59.60 $51.70 $64.63 $57.87
 
Occupancy Growth 582 bps 457 bps
ADR Growth 4.9% 4.3%
RevPAR Growth 15.3% 11.7%
 

1 For purposes of this press release, pro forma information includes operating results for the Company’s 83 hotels owned as of December 31, 2012, which excludes the AmericInn Hotel & Suites in Golden, CO that was held for sale at year end, as if such hotels had been owned by the Company since January 1, 2011. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.

2 For purposes of this press release, same store information includes operating results for same store properties owned at all times by the Company during the three-month and twelve-month periods ended December 31, 2012 and 2011.

SUMMIT HOTEL PROPERTIES

Pro Forma Statistical Data for the Hotels 1

Amounts in thousands, except ADR and RevPAR

(Unaudited)

 
2012
Q1   Q2   Q3   Q4   Year
 
Room Revenue $ 53,581 $ 59,299 $ 60,884 $ 53,194 $ 226,958
Other Revenue   2,570   2,603   2,505   2,535   10,213
Total Revenue $ 56,151 $ 61,902 $ 63,389 $ 55,729 $ 237,171
         
Hotel EBITDA $ 17,262 $ 20,545 $ 20,684 $ 15,359 $ 73,851
 
Rooms occupied 546,030 606,118 614,692 551,387 2,318,227
Rooms available 815,654 815,208 824,136 823,657 3,278,655
 
Occupancy 66.9% 74.4% 74.6% 66.9% 70.7%
ADR $98.13 $97.83 $99.05 $96.47 $97.90
RevPAR $65.69 $72.74 $73.88 $64.58 $69.22
 

1 The above pro forma information includes operating results for the Company’s 83 hotels owned as of December 31, 2012, which excludes the AmericInn Hotel & Suites in Golden, CO that was held for sale at year end, as if such hotels had been owned by the Company since January 1, 2012. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.

SUMMIT HOTEL PROPERTIES

Estimated Sources and Uses of Cash

December 31, 2012 and Subsequent Events

Amounts in thousands

   
    Sources   Uses
As of December 31, 2012
Cash and Cash Equivalents $ 14,000 $ -
Secured Credit Facility Borrowing Capacity 112,100 -
Outstanding Borrowings on Revolving Credit Facility (58,000 ) -
 
Completed Transactions (Subsequent to December 31, 2012)
Net Proceeds of Public Offering on January 14, 2013 148,000 -
Hotel Acquisitions
Hyatt Place Portfolio (3 hotels) – Hotel Purchase Price (1) - 36,100
San Francisco, CA Holiday Inn Express & Suites – Hotel Purchase Price (2) - 60,500
San Francisco, CA Holiday Inn Express & Suites - IHG Equity Contribution (2) 7,500 -
Debt Financing
First National Bank of Omaha - Loan Pay-off (3) - 22,800
KeyBank – CMBS loan (4) 29,400 -
San Francisco, CA Holiday Inn Express & Suites – Assumed Mortgage Debt (2) 23,500 -
Dispositions
Golden, CO AmericInn Hotel & Suites (5) 2,600 -
Denver, CO Hampton Inn (6) 5,500 -
 
Anticipated Transactions
Hotel Acquisitions
Minneapolis (Eden Prairie), MN Hilton Garden Inn (7) - 10,200
Minneapolis (Minnetonka), MN Holiday Inn Express & Suites (7) - 6,900
New Orleans, LA Portfolio (5 hotels) (8) - 135,000
Minneapolis, MN Hyatt Place - Downtown (Construction Loan/Purchase) (9) - 21,000
Debt Financing
KeyBank – CMBS loans (4) 44,600 -
Minneapolis (Eden Prairie), MN Hilton Garden Inn – Assumed Mortgage Debt (7) 6,500 -
Minneapolis (Minnetonka), MN Holiday Inn Express & Suites – Assumed Mortgage Debt (7) 3,800 -
New Orleans, LA Portfolio Anticipated Mortgage Debt (8) 67,500 -
Dispositions
Jacksonville, FL land sale (10) 1,900 -
Anticipated Capital Expenditures
Scheduled Q1 2013 Maintenance Cap Ex (11) - 9,000
 
Estimated Net Cash Available After Completed and Anticipated Transactions Described Above
Cash and Cash Equivalents - 10,000
Secured Credit Facility Borrowing Capacity - 112,100
Outstanding Borrowings on Revolving Credit Facility (12)     -       (14,700 )
Total   $ 408,900     $ 408,900  
 

Note: The Company’s announced or anticipated acquisition and financing activities outlined are subject to satisfactory completion of the Company’s and lender’s due diligence and satisfaction of customary closing conditions, and the Company can give no assurance that the anticipated activities will be consummated.

SUMMIT HOTEL PROPERTIES Estimated Sources and Uses of Cash

  1. On January 22, 2013 the Company acquired the Hyatt Place portfolio, for $36.1 million including: the 151 - guestroom Hyatt Place-Universal, Orlando, FL; the 149 - guestroom Hyatt Place-Convention Center, Orlando, FL; the 125 - guestroom Hyatt Place-Hoffman Estates, Chicago, IL.
  2. On February 11, 2013, the Company, through a joint venture, acquired the 252 - guestroom Holiday Inn Express & Suites in San Francisco, CA for $60.5 million, including assumed debt of $23.5 million. Intercontinental Hotel Group contributed $7.5 million to the joint venture for a 20 percent interest.
  3. On January 14, 2013 the Company repaid a $22.8 million loan with First National Bank of Omaha.
  4. On January 25, 2013, the Company closed a CMBS loan with KeyBank. The $29.4 million loan is secured by a first mortgage on four hotels. Additional loans anticipated to close in first quarter 2013 in the amount of $44.6 million to be secured by a first mortgage on six hotels.
  5. On January 15, 2013, the Company sold the 62 – guestroom AmericInn Hotel & Suites in Golden, CO for $2.6 million. The amount shown in the table is the contractual sales price (prior to adjustments and expenses).
  6. On February 15, 2013, the Company sold the 149 - guestroom Hampton Inn, Denver, CO for $5.5 million. The amount shown in the table is the contractual sales price (prior to adjustments and expenses).
  7. The Company anticipates acquiring the 97 - guestroom Hilton Garden Inn, Minneapolis (Eden Prairie), MN and the 93 - guestroom Holiday Inn Express & Suites, Minneapolis (Minnetonka), MN in the second quarter of 2013 for $17.1 million. The Company anticipates assuming mortgage loans totaling $10.3 million with the acquisition of the hotels.
  8. The Company anticipates acquiring the New Orleans, LA Portfolio for $135 million that includes: the 153 - guestroom Courtyard by Marriott, Metairie, LA; the 120 - guestroom Residence Inn by Marriott, Metairie, LA; the 208 - guestroom Springhill Suites by Marriott, New Orleans, LA; the 202 - guestroom Courtyard by Marriott, New Orleans, LA; the 140 - guestroom Courtyard by Marriott, New Orleans, LA. Hotels are unencumbered and the Company anticipates acquiring mortgage financing for $67.5 million on a portion of the hotels in the second quarter of 2013. The Company does not have a commitment for this anticipated mortgage debt and no assurance can be provided that such financing will be obtained on favorable terms, or at all.
  9. The Company currently has a $10.3 million loan on the 213 - guestroom Hyatt Place, Minneapolis, MN construction project. Upon completion, the Company has the right to purchase the hotel for $31.0 million, including the $10.3 million currently outstanding.
  10. The Company anticipates selling a 3.25 acre parcel of vacant land in Jacksonville, FL for $1.9 million in the first quarter 2013. The amount shown in the table is the contractual sales price (prior to adjustments and expenses).
  11. Capital expenditures are provided at the mid-point of the Company's first quarter 2013 guidance.
  12. As a result of the activities described above, the Company expects a net reduction of approximately $43.3 million of borrowings on their revolving credit facility that were outstanding at December 31, 2012.

Non-GAAP Financial Measures

FFO and Adjusted FFO (“AFFO”)

As defined by the National Association of Real Estate Investment Trusts, or NAREIT, funds from operations, or FFO, represents net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization. We present FFO because we consider it an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and impairment losses, it provides a performance measure that, when compared year over year, reflects the effect to operations from trends in occupancy, room rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs because the amount of depreciation and amortization we add back to net income or loss includes amortization of deferred financing costs and amortization of franchise royalty fees. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.

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