Strategic Hotels & Resorts (BEE+C) 8-K/A Cims Limited Partnership and Inter-continental Florida Limited

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information gives effect to the formation and structuring transactions that occurred at the time of our initial public offering, proceeds received from a preferred stock offering, the acquisition of an interest in two joint ventures which own the Chicago and Miami InterContinental hotels and corporate interest rate swaps which effectively fix the interest rate on a portion of our variable rate debt. The pro forma adjustments related to the formation and structuring transactions principally include (a) recording the Paris Marriott and the Hamburg Marriott hotels’ operations as lease revenue, (b) eliminating the operations of the properties distributed at the time of our initial public offering from our financial statements, (c) reflecting interest expense for the entire year consistent with the debt put in place at the time of the initial public offering, (d) reflecting the effects of the initial public offering, and (e) recording minority interest related to the operations in our operating partnership that are not owned by us. The historical financial information for the period ended March 31, 2005 and for the year ended December 31, 2004 has been derived from our unaudited financial statements included in our March 31, 2005 Form 10-Q and our audited financial statements included in our 2004 Form 10-K, respectively. The unaudited pro forma statement of operations data for the period ended March 31, 2005 and for the year ended December 31, 2004 are presented as if the formation and structuring transactions, the preferred stock offering, the acquisition of the Chicago and Miami InterContinental hotels and the corporate interest rate swaps had occurred on January 1, 2004. The unaudited pro forma balance sheet data as of March 31, 2005 is presented as if the preferred stock offering and the acquisition of the 85% interest in the Chicago and Miami InterContinental hotels had occurred on March 31, 2005.

The unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would actually have been if the transactions had in fact occurred on the earlier date discussed above. It also does not project or forecast our consolidated results of operations for any future date or period.

Unaudited and Pro Forma Consolidated Balance Sheets

March 31, 2005

(in thousands)

	Strategic Hotel Capital, Inc. and Subsidiaries Historical March 31, 2005			InterContinental Acquisition			Strategic Hotel Capital, Inc. and Subsidiaries Pro Forma March 31, 2005
Assets
Property and equipment	$	955,043		$	300,914	1(a)	$	1,255,957
Less accumulated depreciation		(232,214	)					(232,214	)
Net property and equipment		722,829			300,914			1,023,743
Goodwill		66,626						66,626
Intangible assets		1,561			2,083	1(b)		3,644
Investment in hotel joint venture		11,770						11,770
Cash and cash equivalents		84,325			159	1(c)		43,548
					3,057	1(d)
					44,000	1(e)
					(87,993	) 1(f)
Restricted cash and cash equivalents		24,438			1,902	1(g)		26,340
Accounts receivable, net		23,364			409	1(h)		23,773
Deferred financing costs, net		10,468			2,546	1(i)		13,014
Other assets		85,302			1,616	1(j)		87,350
					70	1(k)
					362	1(l)
Total assets	$	1,030,683		$	269,125		$	1,299,808
Liabilities and Owners’ Equity
Liabilities:
Mortgages and other debt payable	$	488,634		$	202,000	1(m)	$	690,634
Bank credit facility					44,000	1(e)		44,000
Accounts payable and accrued expenses		59,658			7,513	1(n)		67,171
Distributions payable		9,075						9,075
Deferred fees on management contracts		2,290						2,290
Deferred gain on sale of hotels		112,785						112,785
Total liabilities		672,442			253,513			925,955
Minority interests - IHG					15,612	1(o)		15,612
Minority interests		61,760						61,760
Owners’ equity:
Preferred shares		97,540						97,540
Common shares		301						301
Additional paid-in capital		484,722						484,722
Deferred compensation		(2,985	)					(2,985	)
Accumulated deficit		(264,774	)					(264,774	)
Accumulated distributions to owners		(20,483	)					(20,483	)
Accumulated other comprehensive income		2,160						2,160
Total owners’ equity		296,481			—			296,481
Total liabilities and owners’ equity	$	1,030,683		$	269,125		$	1,299,808

Notes to Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2005

1. InterContinental Acquisition– We entered into joint venture agreements with InterContinental Hotels Group (the Ventures) and on April 1, 2005 we purchased an 85% controlling interest in the Ventures which own the InterContinental hotels in Chicago and Miami. In connection with this transaction, the Ventures obtained $202.0 million of mortgage debt financing. The following pro forma adjustments were made to account for this acquisition and related debt financing:

a) Reflects property and equipment at an aggregate value of $300.9 million.

b) Reflects $2.1 million of intangible assets.

c) Reflects $0.2 million of hotel-level cash and cash equivalents.

d) Reflects $3.1 million of cash deposited into the taxable REIT subsidiary for advance rent.

e) Reflects $44.0 million of borrowings on the bank credit facility to fund the transaction.

f) Reflects $88.0 million of cash paid to fund the transaction.

g) Reflects $1.9 million of initial furniture, fixtures and equipment (FF&E) reserve.

h) Reflects $0.4 million of net accounts receivable.

i) Reflects the estimated $2.5 million of deferred financing costs applicable to closing the new mortgage debt financing that is collateralized by the assets.

j) Reflects $1.6 million of other assets.

k) Reflects $0.1 million paid for the cap premium.

l) Reflects $0.4 million of prepaid interest on the $202.0 million mortgage debt financing.

m) Reflects $202.0 million principal amount of new debt.

n) Reflects $7.5 million of accounts payable and accrued expenses.

o) Reflects the $15.6 million minority interest adjustment for InterContinental Hotels Group’s 15% interest in the Venture.

Unaudited and Pro Forma Consolidated Statements of Operations

For the Three Months Ended March 31, 2005

(in thousands, except per share amounts)

	Strategic Hotel Capital, Inc. and Subsidiaries Historical			InterContinental Acquisition			Other Adjustments			Strategic Hotel Capital, Inc. and Subsidiaries Pro Forma
Revenues:
Rooms	$	61,868		$	14,420	(1a)	$	—		$	76,288
Food and beverage		35,319			8,632	(1b)					43,951
Other hotel operating revenue		12,278			809	(1c)					13,087
		109,465			23,861			—			133,326
Lease revenue		4,071									4,071
Total revenues		113,536			23,861			—			137,397
Operating Costs and Expenses:
Rooms		13,261			3,794	(1d)					17,055
Food and beverage		24,985			5,760	(1e)					30,745
Other departmental expenses		29,881			5,806	(1f)					35,687
Management fees		4,266			244	(1g)					4,510
Other property level expenses		6,376			1,511	(1h)					7,887
Lease expense		3,573									3,573
Depreciation and amortization		10,587			3,535	(1i)					14,122
Corporate expenses		4,757									4,757
Total operating costs and expenses		97,686			20,650			—			118,336
Operating Income		15,850			3,211			—			19,061
Interest expense		(7,482	)		(3,037	)(1j)		829	(2a)		(10,665	)
					(127	)(1k)		(848	)(2b)
Interest income		292									292
Other income, net		1,662									1,662
Income (loss) before income taxes and minority interest		10,322			47			(19	)		10,350
Income tax expense		(1,020	)								(1,020	)
Minority interests		(2,203	)					(8	)(2c)		(2,211	)
Income (loss) from continuing operations	$	7,099		$	47		$	(27	)	$	7,119
Pro forma income from continuing operations available to common shareholders per share:
Basic:										$	0.17	(3)
Diluted:										$	0.16	(3)

Notes to Unaudited and Pro Forma Consolidated Statements of Operations for the Three Months

Ended March 31, 2005

1. InterContinental Acquisition – We entered into joint venture agreements with InterContinental Hotels Group (the Ventures) and on April 1, 2005 we purchased an 85% controlling interest in the Ventures which own the InterContinental hotels in Chicago and Miami. In connection with this transaction, the Ventures obtained $202.0 million of debt financing and entered into an interest rate cap agreement. Based on current expectations and nature of our preferred return, we do not anticipate recording a minority interest allocation to InterContinental Hotels Group during the first year. The following pro forma adjustments were made to account for this acquisition and related debt financing:

a) Reflects $14.4 million of room revenue.

b) Reflects $8.6 million of food and beverage revenue.

c) Reflects $0.8 million of other hotel operating revenue.

d) Reflects $3.8 million of rooms expense.

e) Reflects $5.8 million of food and beverage expense.

f) Reflects $5.8 million of other departmental expenses.

g) Reflects $0.2 million of management fees.

h) Reflects $1.5 million of other property level expenses.

i) Reflects $3.5 million of depreciation and amortization expense.

j) Reflects $3.0 million interest expense related to the new $202.0 million of variable mortgage debt that is collateralized by the assets and additional interest expense on our revolving credit facility. We used a weighted average LIBOR rate of 2.71% plus the designated spreads to calculate interest expense for the floating rate loans.

k) Reflects $0.1 million of amortization of estimated deferred financing costs applicable to closing the mortgage loan agreement. Financing costs are amortized to interest expense over the life of the new loan agreement (5 years) using the straight-line method, which approximates the effective interest method.

2. Other Adjustments – To account for corporate interest rate swaps and to adjust minority interest for all pro forma activity, we have made the following additional adjustments:

a) Reflects the $0.8 million elimination of historical interest expense related to the revolving credit facility. The debt to which this historical interest expense relates is assumed retired with the net proceeds received from the preferred offering.

b) Reflects the $0.8 million adjustment to swap $75.0 million of the variable-rate debt to a fixed rate of 4.42%, $75.0 million of the variable-rate debt to a fixed rate of 4.59% and an additional $50.0 million of the variable-rate debt to a fixed rate of 4.12%.

c) Reflects the $8,000 adjustment for minority interest to give effect to the weighted average 23.7% interest in the operating partnership owned by others.

3. Income From Continuing Operations Available to Common Shareholders Per Share Calculation – The following table calculates the weighted average basic and diluted income from continuing operations available to common shareholders per share:

	(In thousands except per share amounts)
	Basic			Diluted
Basic shares outstanding at March 31, 2005		30,247			30,247
Restricted Stock Units					110
Diluted shares outstanding at March 31, 2005					30,357
Pro forma income from continuing operations for the three months ended March 31, 2005	$	7,119		$	7,119
Pro forma preferred shareholder dividend		(2,125	)		(2,125	)
Pro forma income from continuing operations available to common shareholders for the three months ended March 31, 2005	$	4,994		$	4,994
Pro forma income from continuing operations available to common shareholders per share for the three months ended March 31, 2005 – basic and diluted	$	0.17		$	0.16

Unaudited and Pro Forma Consolidated Statements of Operations

For the Year Ended December 31, 2004

(in thousands, except per share amounts)

	Strategic Hotel Capital, Inc. and Subsidiaries Historical			Restructure Leases			Distribution to SHC LLC			InterContinental Acquisition			Other Adjustments			Reclassify Hyatt New Orleans Lease to Management Agreement			Strategic Hotel Capital, Inc. and Subsidiaries Pro Forma
Revenues:
Rooms	$	270,820		$	(9,889	)(1a)	$	(78,070	)(2a)	$	55,695	(3a)	$	—		$	21,375	(5a)	$	259,931
Food and beverage		144,593			(2,326	)(1b)		(35,846	)(2b)		33,734	(3b)					9,560	(5b)		149,715
Other hotel operating revenue		51,064			(363	)(1c)		(8,694	)(2c)		3,686	(3c)					1,967	(5c)		47,660
		466,477			(12,578	)		(122,610	)		93,115			—			32,902			457,306
Lease revenue		24,233			4,726	(1d)		(3,535	)(2d)								(10,370	)(5d)		15,727
					673	(1n)
Total revenues		490,710			(7,179	)		(126,145	)		93,115			—			22,532			473,033
Operating Costs and Expenses:
Rooms		67,761			(2,017	)(1e)		(23,913	)(2e)		15,644	(3d)					5,332	(5e)		62,807
Food and beverage		110,768			(1,747	)(1f)		(29,865	)(2f)		23,049	(3e)					6,631	(5f)		108,836
Other departmental expenses		135,323			(2,775	)(1g)		(31,291	)(2g)		21,846	(3f)					6,634	(5g)		129,737
Management fees		17,145			(943	)(1h)		(2,921	)(2h)		978	(3g)					2,192	(5h)		16,451
Other property level expenses		30,344			(339	)(1i)		(9,769	)(2i)		5,748	(3h)					1,743	(5i)		27,727
Lease expense		6,446			4,219	(1j)														12,594
					1,929	(1o)
Depreciation and amortization		61,463			(275	)(1k)		(19,684	)(2j)		14,135	(3i)								55,271
					(368	)(1p)
Impairment losses on goodwill and hotel property		12,675																		12,675
Corporate expenses		28,845																		28,845
Total operating costs and expenses		470,770			(2,316	)		(117,443	)		81,400			—			22,532			454,943
Operating Income		19,940			(4,863	)		(8,702	)		11,715			—			—			18,090
Interest expense		(64,578	)		5,495	(1l)		22,326	(2k)		(6,653	)(3j)		31,341	(4a)					(37,671	)
					1,311	(1q)					(509	)(3k)		4,105	(4d)
														(27,670	)(4b)
														(2,839	)(4c)
Interest income		1,270						(88	)(2l)											1,182
Loss on early extinguishment of debt		(21,934	)					12,663	(2m)											(9,271	)
Other income (expenses), net		3,132			67	(1r)		2,725	(2n)											5,924
Loss before income taxes and minority interest		(62,170	)		2,010			28,924			4,553			4,937			—			(21,746	)
Income tax expense		(4,990	)		(657	)(1m)														(5,647	)
Minority interests		4,831						(24	)(2o)					(4,807	)(4e)					7,352
														7,352	(4f)
(Loss) income from continuing operations	$	(62,329	)	$	1,353		$	28,900		$	4,553		$	7,482		$	—		$	(20,041	)
Pro forma loss from continuing operations available to common shareholders per share for the year ended December 31, 2004:
Basic and diluted:																			$	(1.02	)(6)

Notes to Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2004

1. Restructure Leases

Paris Marriott Lease Restructure—In July 2003, we sold the real estate applicable to the Paris Marriott to Deutsche Immobilien Fonds Aktiengesellschaft (DIFA), which then leased the hotel back to us. This transaction is described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Trends and Events – Sales of Hotels” in our 2004 Form 10-K. After this transaction, we continued to report the Paris Marriott on our consolidated balance sheet and continued to consolidate its results because of our continued involvement in supporting the lease of the property through a collateralized guarantee. In conjunction with the formation and structuring transactions at the time of our initial public offering, we changed the terms of the related collateralized guarantee and no longer have continuing involvement as defined by GAAP. Accordingly, we record the Paris Marriott as an operating lease and record rent expense instead of mortgage interest and depreciation expense. Also, in conjunction with the formation and structuring transactions, we sublease the Paris Marriott to SanMon Services, LLC, or its designated subsidiary, and record lease revenue from this hotel. The following pro forma adjustments were made to account for this restructuring:

a) Reflects the $9.9 million elimination of rooms revenue.

b) Reflects the $2.3 million elimination of food and beverage revenue.

c) Reflects the $0.4 million elimination of other hotel operating revenue.

d) Reflects $4.7 million of lease revenue.

e) Reflects the $2.0 million elimination of rooms expense.

f) Reflects the $1.7 million elimination of food and beverage expense.

g) Reflects the $2.8 million elimination of other departmental expenses.

h) Reflects the $0.9 million elimination of management fees.

i) Reflects the $0.3 million elimination of other property level expenses.

j) Reflects the $4.2 million of lease expense under the operating lease, reduced by the realized portion of the deferred gain.

k) Reflects the $0.3 million elimination of depreciation expense.

l) Reflects the $5.5 million elimination of interest expense due to the removal of the financing obligation upon sale of the hotel.

m) Reflects the $0.7 million of deferred tax expense.

Hamburg Marriott Lease Restructure – In February 2004, our joint venture consummated a sale leaseback transaction similar to the July 2003 transaction described above for the Paris Marriott. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Trends and Events – Sales of Hotels” in our 2004 Form 10-K, on March 1, 2004, we acquired our joint venture partner’s interest in this hotel. In conjunction with the formation and structuring transactions, we changed the terms of the related collateralized guarantee and no longer have continuing involvement as defined by GAAP. Accordingly, we record the Hamburg Marriott as an operating lease. The following pro forma adjustments were made to consolidate the Hamburg Marriott, including accounting for the lease restructuring and the acquisition of our joint venture partner’s interest:

n) Our subsidiary that leases the hotel from DIFA has leased the hotel to the hotel operator. This $0.7 million adjustment records lease revenues earned from the operator for January and February 2004, the periods before we wholly owned the Hamburg Marriott.

o) Reflects the $1.9 million of lease expense under the operating lease with DIFA, reduced by the realized portion of the deferred gain.

p) Reflects the $0.4 million elimination of depreciation expense.

q) Reflects the $1.3 million elimination of interest expense due to the removal of the financing obligation upon sale of the hotel.

r) Reflects the $93,000 elimination of the joint venture’s loss and $26,000 elimination of asset management fee revenues.

2. Distribution to SHC LLC – In connection with the formation and structuring transactions, a distribution of seven hotel properties was made to SHC LLC. The following pro forma adjustments were made to account for these items:

a) Reflects the $78.1 million elimination of room revenue for six hotels.

b) Reflects the $35.8 million elimination of food and beverage revenue for six hotels.

c) Reflects the $8.7 million elimination of other hotel operating revenue for six hotels.

d) Reflects the $3.5 million elimination of lease revenue for a distributed hotel under a lease agreement.

e) Reflects the $23.9 million elimination of rooms expense for six hotels.

f) Reflects the $29.9 million elimination of food and beverage expense for six hotels.

g) Reflects the $31.3 million elimination of other departmental expenses for six hotels.

h) Reflects the $2.9 million elimination of management fees for six hotels.

i) Reflects the $9.8 million elimination of other property level expenses for six hotels.

j) Reflects the $19.7 million elimination of depreciation expense for the seven hotels.

k) Reflects the $22.3 million elimination of interest expense on debt collateralized by the seven hotels.

l) Reflects the $88,000 elimination of interest income.

m) Reflects the $12.7 million elimination of loss on early extinguishment of debt, which represented the unamortized deferred financing costs applicable to debt refinanced in June 2004 related to the properties distributed to Strategic Hotel Capital LLC (SHC LLC).

n) Reflects the $2.8 million elimination of the Czech forward currency contract income due to the distribution of the liability to SHC LLC because this liability is the obligation of SHC LLC and not of Strategic Hotel Capital, Inc. (SHCI).

o) Reflects the $24,000 elimination of prior minority interests applicable to the properties distributed to SHC LLC. The composition of our minority interest will further change as a result of the formation and structuring transactions as described further in 3f) below.

3. InterContinental Acquisition – We entered into joint venture agreements with InterContinental Hotels Group (the Ventures) and on April 1, 2005 we purchased an 85% controlling interest in the Ventures which own the Intercontinental hotels in Chicago and Miami. In connection with this transaction, the Ventures obtained $202.0 million of debt financing and entered into an interest rate cap agreement. Based on current expectations and nature of our preferred return, we do not anticipate recording a minority interest allocation to InterContinental Hotels Group during the first year. The following pro forma adjustments were made to account for this acquisition and related debt financing:

a) Reflects $55.7 million of room revenue.

b) Reflects $33.7 million of food and beverage revenue.

c) Reflects $3.7 million of other hotel operating revenue.

d) Reflects $15.6 million of rooms expense.

e) Reflects $23.0 million of food and beverage expense.

f) Reflects $21.8 million of other departmental expenses.

g) Reflects $1.0 million of management fees.

h) Reflects $5.7 million of other property level expenses.

i) Reflects $14.1 million of depreciation and amortization expense.

j) Reflects $6.7 million interest expense primarily related to the new $202.0 million of variable mortgage debt that is collateralized by the assets. We used a weighted average LIBOR rate of 1.54% plus the designated spreads to calculate interest expense for the floating rate loan.

k) Reflects $0.5 million of amortization of estimated deferred financing costs applicable to closing the mortgage loan agreement. Financing costs are amortized to interest expense over the life of the new loan agreement (5 years) using the straight-line method, which approximates the effective interest method.

4. Other Adjustments – In connection with the formation and structuring transactions, we have made the following additional adjustments:

a) Reflects the $31.3 million elimination of historical interest expense related to mortgage debt on the REIT assets assumed by us. The debt to which this historical interest expense relates was retired as part of the formation and structuring transactions. These amounts reflect the actual expense incurred, based on the outstanding loan balance and the interest rates in effect during the period covered in these pro forma statements.

b) Reflects the $27.7 million interest expense primarily related to the new mortgage and mezzanine debt that is collateralized by our assets. We have computed interest expense on the new debt as part of the formation and structuring transactions of $440.0 million as if it were outstanding as of January 1, 2004. Our new indebtedness consists of $208.5 million of fixed-rate debt, $200.0 million of variable rate debt and $44.0 million of revolver debt. We used a rate of 3.21% to

calculate interest expense for the floating rate loan. Our pro forma interest expense also includes the effect of swapping $96.0 million of the variable-rate debt to a fixed rate of 5.03%. We used a rate of 5.16% to calculate interest expense for the fixed rate loan. Our pro forma interest expense also includes the effect of swapping $75.0 million of the variable-rate debt to a fixed rate of 4.42% and an additional $75.0 million of the variable-rate debt to a fixed rate of 4.59%. Our pro forma interest expense also includes interest expense applicable to the $6.9 million of debt we assumed upon acquiring the Marriott Rancho Las Palmas Resort.

c) Reflects $2.8 million of amortization of estimated financing costs applicable to closing the mortgage, mezzanine and revolving credit facility loan agreements. Financing costs are amortized to interest expense over the expected life of the new loan agreements (weighted average of 4.5 years) using the straight-line method, which approximates the effective interest method.

d) Reflects $4.1 million of interest expense applicable to convertible debentures as an adjustment necessary to arrive at the interest expense of the existing entity because the debentures were distributed to SHC LLC and redeemed or converted to SHC LLC membership units.

e) Reflects the $4.8 million elimination of historical minority interest. These amounts reflect the actual minority interest incurred during the period subsequent to the formation and structuring transactions covered in these pro forma statements.

f) Reflects the $7.4 million adjustment for minority interest to give effect to the weighted average 26.84% interest in the operating partnership owned by others.

5. Reclassify Hyatt Regency New Orleans Lease to Management Agreement – Prior to the formation and structuring transactions, the Hyatt Regency New Orleans was recorded as a lease whereby the lessee paid rent to SHC LLC, which was recorded as lease revenue in the statement of operations. In connection with the formation and structuring transactions, the Hyatt Regency New Orleans hotel lease was converted to a management agreement and we report all of the operations of the hotel. The following adjustments were made to account for restructuring the hotel lease to a management agreement:

a) Reflects $21.4 million of room revenue.

b) Reflects $9.6 million of food and beverage revenue.

c) Reflects $2.0 million of other hotel operating revenue.

d) Reflects $10.4 million elimination of lease revenue.

e) Reflects $5.3 million of rooms expense.

f) Reflects $6.6 million of food and beverage expense.

g) Reflects $6.6 million of other departmental expenses.

h) Reflects $2.2 million of management fees.

i) Reflects $1.7 million of other property level expenses.

6. Loss From Continuing Operations Available to Common Shareholders Per Share Calculation – For purposes of per share calculations, the offering was assumed to have occurred on January 1, 2004 resulting in a weighted average number of shares outstanding equal to 27,984,742.

	(In thousands except per share amounts)
Pro forma loss from continuing operations for the year ended December 31, 2004	$	(20,041	)
Pro forma preferred shareholder dividend		(8,500	)
Pro forma loss from continuing operations available to common shareholders for the year ended December 31, 2004	$	(28,541	)
Pro forma loss from continuing operations available to common shareholders per share for the year ended December 31, 2004 – basic and diluted	$	(1.02	)