DiamondRock Hospitality (DRH) 8-K Diamondrock Hospitality Company Exceeds Prior Guidance for Full Year 2005 Results and Raises Dividend

Exhibit 99.1

COMPANY CONTACT:

Mark W. Brugger
(240) 744-1150

FOR IMMEDIATE RELEASE

WEDNESDAY, MARCH 1, 2006

DIAMONDROCK HOSPITALITY COMPANY EXCEEDS PRIOR GUIDANCE FOR FULL YEAR 2005
RESULTS AND RAISES DIVIDEND

BETHESDA, Maryland, March 1, 2006 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH) today announced results of operations for the fiscal year ended December 31, 2005.  DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner and acquirer of premium hotels in North America.  

Fourth Quarter 2005 Highlights
	•	Same-store revenue per available room (“RevPAR”) increased 13.1 percent over the comparable period in 2004 for the twelve hotels addressed in prior guidance.
	•	Hotel profit margins increased 269 basis points, as measured by hotel-level adjusted earnings before interest expense, income taxes, depreciation and amortization (“Hotel Adjusted EBITDA Margins”) for the twelve hotels.
	•	Adjusted EBITDA of $21.8 million.
	•	Adjusted Funds from Operations (“Adjusted FFO”) of $15.3 million, or $0.30 per diluted share.
	•	Acquired the Orlando Airport Marriott for $70 million.

Full Year 2005 Highlights
	•	RevPAR increased 11.2 percent over the comparable period in 2004 for the twelve hotels.
	•	Hotel Adjusted EBITDA Margins increased 233 basis points for the twelve hotels.
	•	Adjusted EBITDA of $47.1 million.
	•	Adjusted FFO of $31.1 million, or $0.79 per diluted share.
	•	Completed over $600 million of hotel acquisitions during 2005.

DiamondRock Hospitality Company
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William W. McCarten, chairman and chief executive officer, stated, “2005 was a remarkable year for DiamondRock.  We successfully completed our initial public offering and acquired nine additional high quality hotels in a very competitive acquisition environment. Our exclusive acquisition sourcing relationship with Marriott has been a real advantage.  In addition to our success at raising and successfully investing our capital, we are very proud of our financial results.  Our hotel portfolio is performing well, exceeding our initial underwriting, and we are excited by our prospects in 2006.  We believe that our portfolio will continue to benefit from the current strong demand for lodging and the preliminary impact of our value added asset management strategies – for example, in 2006, we intend to invest $84 million in our hotels, which should deliver value for many years to come.”

Comparison with Prior Guidance for Full Year 2005

The following table reflects our prior guidance for the full year 2005 compared to our actual results for 2005:

	Prior Guidance		Actual
RevPAR Growth (1)		9% - 10%		11.2%
Hotel Adjusted EBITDA Margin Growth (1)		210 bps – 230 bps		233 bps
Adjusted EBITDA		$44M - $46M		$47.1M
Adjusted FFO		$28.4M-$30.4M		$31.1M

(1) Represents pro forma RevPAR growth and Hotel Adjusted EBITDA Margin growth for the twelve hotels addressed in prior guidance (excludes the three hotels that we acquired in the second half of 2005 -- Oak Brook Hills Marriott Resort, SpringHill Suites Atlanta Buckhead and Orlando Airport Marriott).

Operating Results

Please see “Certain Definitions” and “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “twelve hotels,” “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margin,” “FFO” and “Adjusted FFO.” Moreover, the discussions of RevPAR, Adjusted EBITDA and Hotel Adjusted EBITDA Margin assume that the acquired hotels were owned by the Company  for the entire reporting periods of 2005 and 2004.

          Fourth Quarter Results

For the fourth fiscal quarter, beginning September 10, 2005 and ended December 31, 2005, the Company reported:

• Revenues of $104.2 million

• Net income of $1.6 million ($0.03 per diluted share)

• Adjusted EBITDA of $21.8 million

• Adjusted FFO of $15.3 million ($0.30 per diluted share)

RevPAR for the twelve hotels increased 13.1 percent from $95.92 to $108.51 as compared to the same period in 2004, driven by an 11.9 percent increase in the average daily rate and a 0.75 percentage point increase in occupancy. During the fourth quarter we excluded out-of-service rooms related to the renovation at the Torrance Marriott from the RevPAR calculation.

Hotel Adjusted EBITDA Margins for our twelve hotels increased 269 basis points to 25.0 percent over the same period in the prior year. 

DiamondRock Hospitality Company
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Full Year 2005 Results

For the fiscal year ended December 31, 2005, the Company reported:

• Revenues of $229.5 million

• Net loss of $7.3 million ($0.19 per diluted share)

• Adjusted EBITDA of $47.1 million

• Adjusted FFO of $31.1 million ($0.79 per diluted share)

RevPAR for our twelve hotels increased 11.2 percent to $109.58 compared to $98.54 in the same period in 2004, driven by a 9.8 percent increase in the average daily rate and a 1 percentage point increase in occupancy. During 2005 we excluded out-of-service rooms related to the renovations at the Courtyard New York/Manhattan Fifth Avenue and the Torrance Marriott from the RevPAR calculation.    

Hotel Adjusted EBITDA Margins for our twelve hotels increased 233 basis points to 25.9 percent compared to the same period in the prior year. 

2005 Acquisitions

The Company acquired nine hotels during 2005 as follows:

• The Torrance Marriott for a contractual purchase price of $61.5 million.

• A portfolio of four hotels, including the Los Angeles Airport Marriott, the Renaissance Worthington (Fort Worth), the Marriott Atlanta Alpharetta Marriott, and the Marriott Frenchman’s Reef & Morning Star Marriott Beach Resort (St. Thomas, USVI) for a contractual purchase price of $315.0 million.

• The Vail Marriott Mountain Resort & Spa for a contractual purchase price of $62.0 million.

• The SpringHill Suites Atlanta Buckhead in the Buckhead area of Atlanta, Georgia for a contractual purchase price of $34.1 million.

• The Oak Brook Hills Resort & Conference Center in Oak Brook, Illinois for a contractual purchase price of $64.0 million.  This hotel was rebranded as the Oak Brook Hills Marriott Resort.

• The Orlando Airport Marriott for a contractual purchase price of $70 million.

Balance Sheet & Recent Financings

As of December 31, 2005, the Company had total assets of $966.0 million (including $23.1 million of restricted cash available for capital improvement projects) and $431.2 million of total debt.  Over 90 percent of our debt is long-term, fixed-rate, single property limited recourse mortgage debt.  The Company’s debt bears interest at a weighted average rate of 5.6 percent per annum and has a weighted average maturity of 8.3 years.

On July 8, 2005, the Company entered into its senior secured revolving credit facility.  The facility has a three-year term and a $75.0 million limit, with an ability to increase the facility up to $250 million with lender approval.  As long as the Company maintains a debt-to-asset value of less than 65 percent, outstanding funds on the credit facility will bear interest at LIBOR plus 1.45 percent.  Wachovia Bank, Citigroup North America, and Bank of America participated in the credit facility.  As of December 31, 2005, the Company’s revolving credit facility had $12 million outstanding and $11.4 million reserved in connection with a letter of credit issued in conjunction with the property level debt on the Orlando Airport Marriott to cover renovations.  

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Recent Developments

We have a commitment from Lehman Brothers Bank to refinance the mortgage loan on the Courtyard Manhattan/Fifth Avenue that would have matured on January 2007.  Pursuant to this commitment, we expect to refinance the $23 million existing floating rate loan with a $51 million fixed rate loan that matures in 10 years and is interest only for five years. The interest rate will be fixed upon funding of the loan at the 10-year swap rate plus 90 basis points. 

Outlook

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 guidance below includes the estimated disruption impact of the planned $84 million of renovations of our hotels during 2006.  Furthermore, the RevPAR and Hotel Adjusted EBITDA margin guidance are presented on a pro forma basis as they assume that the acquired hotels were owned by the Company for the entire comparable reporting periods of 2005.  Finally, our guidance does not reflect the impact of any additional hotel acquisitions or dispositions.

For the full year 2006 the Company expects:

• RevPAR to increase in the range of 8 to 10 percent for our fifteen hotels.  The newly built SpringHill Suites Atlanta Buckhead is included only during comparable periods.

• Hotel Adjusted EBITDA Margins to increase approximately 160 to 210 basis points for our fifteen.  The newly built SpringHill Suites Atlanta Buckhead is included only during comparable periods.

• Adjusted EBITDA of $92.0 million to $96.0 million.

• Adjusted FFO of $64.4 million to $68.4 million.

• Total capital expenditures of approximately $84 million.

The Company expects that its 2006 results will contribute to full year Adjusted FFO as follows: first quarter of 16 – 18%, second quarter of 30 – 32%, third quarter of 19 – 21% and fourth quarter of 31 – 33%. The seasonality of the Company’s results is partially impacted by our reporting calendar (described in detail beginning on page 6) and by the timing of our 2006 capital expenditures (discussed in detail on page 5).

Dividend Update

          Fourth Quarter Dividend

The Company declared a dividend of $0.1725 per share, payable to its common stockholders of record as of December 30, 2005.  The dividend was paid on January 17, 2006. 

          Increased Dividend for First Quarter 2006

The Board of Directors for the Company has approved an increase in the quarterly dividend.  A cash dividend of $0.18 per share will be paid to shareholders of record as of March 24, 2006 – the last day of the Company’s first fiscal quarter 2006. The dividend will be paid on April 11, 2006.

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2005-06 Major Capital Expenditures

The Company has and continues to make significant capital investments in its hotels.  The Company has approximately $84 million of planned capital expenditures during 2006 (please see page 16 for a breakdown of such expenditures by property). The significant capital projects for 2005-06 are as follows:

• Bethesda Marriott Suites: The Company is currently completing renovations of the guestsuites.

• Courtyard Manhattan Fifth Avenue: The Company substantially completed the guestroom and corridor renovation during 2005.  The renovation of the lobby and other public spaces will be completed by the second quarter of 2006.

• Courtyard Manhattan Midtown East: The Company is currently completing the renovation of guestrooms, lobby, restaurant and meeting space.  The project is expected to be completed by the end of the first quarter of 2006.

• Frenchman’s Reef & Morning Star Marriott Beach Resort: The Company completed in 2005 the replacement of case goods in a portion of the guestrooms.  The Company is currently planning several significant projects at the hotel during 2006, including additional replacement of case goods in select rooms and the renovation of guestrooms, restaurants, and certain meeting space.

• Los Angeles Airport Marriott:  In 2005, the Company completed a renovation of the hotel ballroom, conversion of a food outlet to a junior ballroom and renovation of the hotel bar.  Additionally, the Company will accelerate the timing of a complete room renovation from 2007 to 2006.  The project will consist of the renovation of the hotel guestrooms and bathrooms and is being funded, in part, by a $1.5 million non-recoverable contribution from Marriott International. The renovation is scheduled to begin in April 2006 and be completed by November 2006.

• Marriott Griffin Gate Resort: The Company substantially completed a renovation of the hotel ballroom, corridors and public space in 2005.

• Oak Brook Hills Marriott Resort: The Company will begin a significant renovation in the fourth quarter of 2006.  The renovation will include the hotel guestrooms and bathrooms, the hotel main ballroom and meeting rooms and the hotel lobby.

• Orlando Airport Marriott:  The Company will begin a significant renovation in 2006. The renovation will include the hotel guestrooms and bathrooms, the hotel meeting rooms and the hotel lobby.

• Torrance Marriott: The Company is currently completing the renovation of the Torrance Marriott.  The initial phase of the project consisted of the renovation of the hotel guestroom soft goods and bathrooms and the renovation of the hotel’s main ballroom and meeting rooms, which were completed in January 2006. During the second and third quarter of 2006, renovations will include the hotel lobby and the conversion of a food and beverage outlet to meeting space.

• Vail Marriott: The Company is currently evaluating a major renovation of the hotel ballrooms.

The completed capital projects were accomplished on time and on (or under) budget. The capital projects in process are forecasted to be completed on time and on budget.

DiamondRock Hospitality Company
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Earnings Call

The Company will host a conference call to discuss fourth quarter and full year 2005 results and 2006 guidance on Thursday, March 2, 2006, at 2:00pm. EST.  To participate in the live call, investors are invited to dial 1-866-356-4281 (for domestic callers) or 617-597-5395 (for international callers).  The participant passcode is 10500447. 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 30 days. 

About the Company

DiamondRock Hospitality Company is a self-advised REIT that is an owner and acquirer of premium hotel properties.  As of December 31, 2005, the Company owned 15 hotels that comprised 6,119 rooms.  The Company has a strategic acquisition sourcing relationship with Marriott International.  For further information, please visit the 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 “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” 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 our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to complete planned renovation on budget; our 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; our ability to complete acquisitions, including, without limitation, the Chicago Marriott; our ability to raise equity capital; the performance of acquired properties after they are acquired; necessary capital expenditures on the acquired properties; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described from time to time 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 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 we report in our consolidated statements of operations are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, the manager of the majority of our hotel properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen 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) and Vail Resorts, our manager of the Vail Marriott, report results on a monthly basis. Additionally, the Company, as a REIT, is required by tax law to report results on a calendar year. 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 our fourth quarter ends on December 31 and our full year results, as reported in our statement of operations, always includes the same number of days as the calendar year.

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Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our 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 we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report any results for Frenchman’s Reef or for the Vail Marriott for the month of operations that ends after our fiscal quarter-end because neither Vail Resorts nor Marriott International make mid- month results available to us. As a result, our quarterly results of operations include results from Frenchman’s Reef and the Vail Marriott 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.

Reporting Periods for Hotel Operating Statistics and Comparable Hotel Results

In contrast to the reporting periods for our consolidated statement of operations, our hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) and our comparable hotel results are always reported based on the reporting cycle used by Marriott International for our Marriott- managed hotels. This facilitates year-to-year comparisons, as each reporting period will be comprised of the same number of days of operations as in the prior year (except in the case of fourth quarters comprised of seventeen weeks versus sixteen weeks). This means, however, that the reporting periods we use for hotel operating statistics and our comparable hotels results may differ slightly from the reporting periods used for our statements of operations for the first and fourth quarters and the full year. Results from hotel managers reporting on a monthly basis are included in our operating statistics and comparable hotel results consistent with their reporting in our consolidated statement of operations for the hotel operating statistics and comparable hotel results reported herein.

Ground Leases

Three of our hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, and Salt Lake City Downtown Marriott.  In addition, part of a parking structure at a fourth hotel and two golf courses at two additional hotels are also subject to ground leases.  In accordance with GAAP, the Company records rent expense on a straight-line basis for ground leases that provide minimal rental payments that increase in pre-established amounts over the remaining term of the ground lease.  For the full year 2005, contractual cash rent payable on the ground leases totaled $1.7 million and the Company recorded approximately $8.8 million in ground rent expense.  The non-cash portion of ground rent expense recorded for the full year was $7.1 million.

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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS

	(Unaudited )
	December 31, 2005			December 31, 2004
ASSETS
Property and equipment, at cost	$	899,309,856		$	286,727,306
Less: accumulated depreciation		(28,747,457	)		(1,084,867	)
		870,562,399			285,642,439
Restricted cash		23,109,153			17,482,515
Due from hotel managers		38,964,986			2,626,262
Favorable lease asset, net		10,601,577			—
Purchase deposits and pre-acquisition costs		—			3,272,219
Prepaid and other assets		10,495,765			4,340,259
Cash and cash equivalents		9,431,741			76,983,107
Deferred financing costs, net		2,846,661			1,344,378
Total assets	$	966,012,282		$	391,691,179
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Debt, at face amount	$	428,394,735		$	177,827,573
Debt premium		2,782,322			2,944,237
Total debt		431,177,057			180,771,810
Deferred income related to key money, net		10,311,322			2,490,385
Unfavorable lease liability, net		5,384,431			5,776,946
Due to hotel managers		22,790,896			3,985,795
Dividends declared and unpaid		8,896,101			—
Accounts payable and accrued expenses		24,064,047			3,078,825
Total other liabilities		71,446,797			15,331,951
Shareholders’ Equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $.01 par value; 100,000,000 shares authorized; 50,819,864 and 21,020,100 shares issued and outstanding at December 31, 2005 and 2004, respectively
		508,199			210,201
Additional paid-in capital		491,951,223			197,494,842
Accumulated deficit		(29,070,994	)		(2,117,625	)
Total shareholders’ equity		463,388,428			195,587,418
Total liabilities and shareholders’ equity	$	966,012,282		$	391,691,179

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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS

	(Unaudited) Year Ended December 31, 2005			Period from May 6, 2004 (Inception) to December 31, 2004
Revenues:
Rooms	$	151,755,924		$	5,137,370
Food and beverage		63,261,282			1,507,960
Other		14,433,057			428,534
Total revenues		229,450,263			7,073,864
Operating Expenses:
Rooms		37,432,635			1,455,380
Food and beverage		47,281,237			1,266,827
Management fees		8,107,902			260,724
Other hotel expenses		88,447,484			3,183,959
Depreciation and amortization		27,590,234			1,053,283
Corporate expenses		13,461,528			4,114,165
Total operating expenses		222,321,020			11,334,338
Operating income (loss)		7,129,243			(4,260,474	)
Interest income		(1,548,635	)		(1,333,837	)
Interest expense		17,367,079			773,101
Total other expenses (income)		15,818,444			(560,736	)
Loss before income taxes		(8,689,201	)		(3,699,738	)
Income tax benefit		1,353,261			1,582,113
Net loss	$	(7,335,940	)	$	(2,117,625	)
Loss per share:
Basic and diluted	$	(0.19	)	$	(0.12	)
Weighted-average number of common shares outstanding:
Basic and diluted		39,145,789			18,162,916

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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS

	(Unaudited) Year Ended December 31, 2005			Period from May 6, 2004 (Inception) to December 31, 2004
Cash flows from operating activities:
Net loss	$	(7,335,940	)	$	(2,117,625	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		27,590,234			1,053,283
Amortization of deferred financing costs as interest		1,343,899			28,615
Non-cash straight-line ground rent		7,120,368			—
Market value adjustment to interest rate caps		(7,837	)		25,655
Amortization of debt premium and unfavorable lease liability		(302,179	)		(10,814	)
Amortization of deferred income and corporate depreciation		(115,118	)		21,969
Stock-based compensation		6,308,098			1,357,083
Income tax benefit		(2,104,371	)		(1,521,213	)
Changes in assets and liabilities:
Prepaid expenses and other assets		(832,736	)		(581,477	)
Due to/from hotel managers		(15,915,027	)		(2,626,262	)
Accounts payable and accrued expenses		4,076,637			3,545,232
Net cash provided by (used in) operating activities		19,826,028			(825,554	)
Cash flows from investing activities:
Hotel acquisitions		(611,604,489	)		(273,827,972	)
Receipt of deferred Key Money		8,008,750			2,500,000
Hotel capital expenditures		(18,007,635	)		—
Change in restricted cash		1,726,776			(480,515	)
Purchase deposits and pre-acquisition costs		—			(3,272,219	)
Net cash used in investing activities		(619,876,598	)		(275,080,706	)
Cash flows from financing activities:
Proceeds from debt		317,500,000			158,000,000
Repayments of mortgage debt		(56,948,685	)		—
Scheduled mortgage debt principal payments		(2,932,838	)		—
Payment of financing costs		(2,846,182	)		(1,372,993	)
Cash paid for interest rate caps		—			(85,600	)
Proceeds from sale of common stock		291,799,785			197,376,548
Payment of costs related to sale of common stock		(3,353,504	)		(1,028,588	)
Payment of dividends		(10,719,372	)		—
Net cash provided by financing activities		532,499,204			352,889,367
Net (decrease) increase in cash and cash equivalents		(67,551,366	)		76,983,107
Cash and cash equivalents, beginning of period		76,983,107			—
Cash and cash equivalents, end of period	$	9,431,741		$	76,983,107
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	15,601,243		$	350,979
Cash paid for income taxes	$	1,005,629		$	—
Non-cash Investing and Financing Activities:
Repayment of mortgage debt with restricted cash	$	7,051,315		$	—

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Non-GAAP Financial Measures

          We use the following four non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) EBITDA (2) Adjusted EBITDA, (3) FFO and (4) Adjusted FFO.

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

	Historical
	Fiscal Quarter Ended December 31, 2005			Year Ended December 31, 2005
Net income (loss)	$	1,553,658		$	(7,335,940	)
Interest expense		6,726,091			17,367,079
Income tax benefit		(227,762	)		(1,353,261	)
Depreciation and amortization		11,517,708			27,590,234
EBITDA	$	19,569,695		$	36,268,112

	Forecast Full Year 2006
	Low End		High End
Net income	$	19,900,000	$	23,900,000
Interest expense		27,000,000		27,000,000
Income tax expense		600,000		600,000
Depreciation and amortization		37,000,000		37,000,000
EBITDA	$	84,500,000	$	88,500,000

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          Management also evaluates our performance by reviewing Adjusted EBITDA because the Company believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:

• Non-Cash Ground Rent: We exclude the non-cash expense incurred from straight lining the rent from our ground lease obligations and the non-cash amortization of our favorable lease asset.

• The impact of fully vested irrevocable commitments to issue 382,500 shares of stock to our five senior executive officers made in connection with our initial public offering and expensed in the second quarter.  These were grants and do 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.  We exclude these one-time adjustments because they do not reflect our actual performance for that period.

• Impairment Losses: We exclude the effect of impairment losses recorded because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets.  In addition, we believe that impairment charges are similar to gains (losses) on dispositions and depreciation expense, both of which are also excluded from EBITDA.

	Historical
	Fiscal Quarter Ended December 31, 2005		Year Ended December 31, 2005
EBITDA	$	19,569,695	$	36,268,112
Non-cash ground rent		2,210,090		7,120,368
Initial public offering stock grants		—		3,736,250
Adjusted EBITDA	$	21,779,785	$	47,124,730

	Forecast Full Year 2006
	Low End		High End
EBITDA	$	84,500,000	$	88,500,000
Non-cash ground rent		7,500,000		7,500,000
Adjusted EBITDA	$	92,000,000	$	96,000,000

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          We compute FFO in accordance with standards established by NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure.

	Historical
	Fiscal Quarter Ended December 31, 2005		Year Ended December 31, 2005
Net income (loss)	$	1,553,658	$	(7,335,940	)
Real estate related depreciation and amortization		11,517,708		27,590,234
FFO	$	13,071,366	$	20,254,294
FFO per Share (Basic and Diluted)	$	0.26	$	0.52

	Forecast Full Year 2006
	Low End		High End
Net income	$	19,900,000	$	23,900,000
Real estate related depreciation and amortization		37,000,000		37,000,000
FFO	$	56,900,000	$	60,900,000

          Management also evaluates our performance by reviewing Adjusted FFO because the Company believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust FFO for the following items, which may occur in any period, and refer to this measure as Adjusted FFO:

• Non-Cash Ground Rent: We exclude the non-cash expense incurred from straight lining the rent from our ground lease obligations and the non-cash amortization of our favorable lease asset.

• The impact of fully vested irrevocable commitments to issue 382,500 shares of stock to our five senior executive officers made in connection with the initial public offering and expensed in the second quarter.  The impact of these grants do 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.  We exclude these one-time adjustments because they do not reflect our actual performance for that period.

• Impairment Losses: We exclude the effect of impairment losses recorded because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets.  In addition, we believe that impairment charges are similar to gains (losses) on dispositions and depreciation expense, both of which are also excluded from EBITDA.

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	Historical
	Fiscal Quarter Ended December 31, 2005		Year Ended December 31, 2005
FFO	$	13,071,366	$	20,254,294
Non-cash ground rent		2,210,090		7,120,368
Initial public offering stock grants		—		3,736,250
Adjusted FFO	$	15,281,456	$	31,110,912
Adjusted FFO per Share (Basic and Diluted)	$	0.30	$	0.79

	Forecast Full Year 2006
	Low End		High End
FFO	$	56,900,000	$	60,900,000
Non-cash ground rent		7,500,000		7,500,000
Adjusted FFO	$	64,400,000	$	68,400,000

Certain Definitions

In this release, when we discuss the “twelve hotels” we are discussing all of our hotels except SpringHill Suites Atlanta Buckhead, the Oak Brook Hills Marriott Resort, and Orlando Airport Marriott.  We exclude these hotels from our discussion to enable our investors to compare our performance on a same store basis with the guidance we provided at the end of the third quarter.   

In this release, when we discuss “Hotel Adjusted EBITDA,” we exclude from Hotel EBITDA the non-cash expense incurred by the hotel due to the straight lining of the rent from our ground lease obligations and the non-cash amortization of our favorable lease asset. Hotel EBITDA represents hotel net income (loss) 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.

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Market Capitalization as of December 31, 2005

	December 31, 2005
Enterprise Value
Common equity capitalization (at 12/31/05 closing price of $11.96/share)	$	621,396,116
Consolidated debt		431,177,057
Cash and cash equivalents		(9,431,741	)
Total enterprise value	$	1,043,141,432
Dividend Per Share
Common dividend declared (holders of record on December 30, 2005)	$	0.1725
Share Reconciliation
Common shares outstanding, held by third parties		46,199,193
Common shares outstanding, held by Marriott International		4,428,571
Common shares outstanding, held by management and directors		192,100
Subtotal		50,819,864
Unvested restricted stock held by management and employees		747,000
Share grants under deferred compensation plan held by corporate officers		389,333
Combined shares outstanding		51,956,197

Debt Summary at December 31, 2005

(dollars in thousands)

Property	Interest Rate		Spread to LIBOR		Outstanding Principal		Maturity
Courtyard Manhattan / Midtown East		5.195%		Fixed	$	44,131		December 2009
Salt Lake City Marriott Downtown		5.500%		Fixed		38,016		December 2014
Courtyard Manhattan / Fifth Avenue		7.075%		270bps		23,000		January 2007
Marriott Griffin Gate Resort		5.110%		Fixed		30,442		January 2010
Bethesda Marriott Suites		7.690%		Fixed		19,305		February 2023
Los Angeles Airport Marriott		5.300%		Fixed		82,600		June 2015
Marriott Frenchman’s Reef		5.440%		Fixed		62,500		July 2015
Renaissance Worthington		5.400%		Fixed		57,400		June 2015
Orlando Airport Marriott		5.680%		Fixed		59,000		December 2015
Credit Facility Borrowings		5.758%		145bps		12,000		July 2008
Total Debt (excluding Debt Premium)		5.6% (weighted average)				428,395		8.33 yrs. (weighted average)
Fixed Interest Rate Debt to Total Debt		91.8%

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Portfolio Composition and Projected Total Investment

Property	Location		Year Opened		Number of Rooms (1)		Total Investment (1)		2006 Budgeted Capital Expenditures (2)		Total Projected Investment (3)		Projected Investment Per Room
Marriott Atlanta Alpharetta		Atlanta, GA		2000		318	$	38,833,000	$	284,000	$	39,117,000	$	123,009
Bethesda Marriott Suites		Bethesda, MD		1990		274		42,185,000		5,831,000		48,016,000		175,241
Courtyard Manhattan / Fifth Avenue		New York, NY		1990		185		41,832,000		2,575,000		44,407,000		240,038
Courtyard Manhattan / Midtown East		New York, NY		1998		307		75,382,000		2,667,000		78,049,000		254,231
Frenchman’s Reef & Morning Star Marriott Beach Resort		St. Thomas, USVI		1973/1984		504		76,106,000		10,860,000		86,966,000		172,552
Marriott Griffin Gate Resort		Lexington, KY		1981		408		49,779,000		1,933,000		51,712,000		126,745
Los Angeles Airport Marriott		Los Angeles, CA		1973		1,004		114,681,000		18,073,000		132,754,000		132,225
Oak Brook Hills Marriott Resort		Oak Brook, IL		1987		384		66,165,000		11,483,000		77,648,000		202,208
Orlando Airport Marriott		Orlando, FL		1983		486		71,154,000		12,235,000		83,389,000		171,582
Renaissance Worthington		Fort Worth, TX		1981		504		80,811,000		2,853,000		83,664,000		166,000
Salt Lake City Marriott Downtown		Salt Lake City, UT		1981		510		51,123,000		3,703,000		54,826,000		107,502
SpringHill Suites Atlanta Buckhead		Atlanta, GA		2005		220		34,341,000		40,000		34,381,000		156,277
The Lodge at Sonoma, a Renaissance Resort and Spa		Sonoma, CA		2001		182		32,430,000		486,000		32,916,000		180,857
Torrance Marriott		Los Angeles County, CA		1985		487		67,421,000		7,625,000		75,046,000		154,099
Vail Marriott Mountain Resort & Spa		Vail, CO		1983/2002		346		65,259,000		3,665,000		68,924,000		199,202
Total						6,119	$	907,502,000	$	84,313,000	$	991,815,000	$	162,088

(1)	As of December 31, 2005.
(2)	2006 Budgeted Capital Expenditures represents capital expenditures regardless of whether they will be paid for through an escrow account or owner funding.
(3)	Total projected investments for each hotel property is the gross book value of the hotel as of December 31, 2005 plus budgeted 2006 capital improvements.

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Selected Financial and Operating Information by Property

Properties Owned as of December 31, 2005

(in thousands, except selected operating information)

The following tables present, except where noted, selected financial and operating information by property for the fiscal quarter ended December 31, 2005, the period from January 1, 2005 to December 31, 2005, and the comparable periods of 2004. Where relevant, the data is pro forma as it assumes that the hotels were owned by the Company for the entire reporting periods of 2005 and 2004. Hotel Adjusted EBITDA reflects property net operating income excluding corporate expenses, the non-cash expense incurred from straight lining the rent from our ground lease obligations (where applicable), interest expense and depreciation and amortization.

	Fiscal Fourth Quarter									Full Year
	2005			2004			Change			2005			2004			Change
MARRIOTT ATLANTA ALPHARETTA
Average Occupancy		61.2	%		58.3	%		2.9 pts			60.6	%		59.9	%		0.8 pts
ADR	$	131.89		$	120.57			9.4	%	$	132.60		$	121.20			9.4	%
RevPAR	$	80.74		$	70.33			14.8	%	$	80.42		$	72.59			10.8	%
Total Revenues	$	4,601		$	4,100			12.2	%	$	14,211		$	12,915			10.0	%
Net Income / (Loss)	$	1,175		$	822					$	3,139		$	2,413
Plus: Depreciation	$	437		$	405					$	1,380		$	1,317
Hotel Adjusted EBITDA	$	1,612		$	1,227			31.4	%	$	4,519		$	3,730			21.1	%
BETHESDA MARRIOTT SUITES
Average Occupancy		77.9	%		75.8	%		2.1 pts			77.4	%		74.6	%		2.8 pts
ADR	$	162.77		$	151.84			7.2	%	$	160.38		$	153.74			4.3	%
RevPAR	$	126.83		$	115.13			10.2	%	$	124.13		$	114.74			8.2	%
Total Revenues	$	5,415		$	4,861			11.4	%	$	16,579		$	15,504			6.9	%
Net Income / (Loss)	$	(1,603	)	$	(1,830	)				$	(5,503	)	$	(5,941	)
Plus: Depreciation	$	742		$	707					$	2,363		$	2,298
Plus: Interest Expense	$	413		$	423					$	1,368		$	1,374
Plus: Non-Cash Ground Rent	$	2,006		$	2,006					$	6,552		$	6,552
Hotel Adjusted EBITDA	$	1,558		$	1,306			19.3	%	$	4,780		$	4,284			11.6	%

SPRINGHILL SUITES ATLANTA BUCKHEAD
(This property opened for business on July 1, 2005. The results presented below represent only our period of ownership.)
Average Occupancy		76.9	%	N/A	N/A		65.8	%	N/A	N/A
ADR	$	104.99		N/A	N/A	$	103.19		N/A	N/A
RevPAR	$	80.74		N/A	N/A	$	67.92		N/A	N/A
Total Revenues	$	2,188		N/A	N/A	$	2,665		N/A	N/A
Net Income / (Loss)	$	584		N/A	N/A	$	578		N/A	N/A
Plus: Depreciation	$	362		N/A	N/A	$	519		N/A	N/A
Hotel Adjusted EBITDA	$	946		N/A	N/A	$	1,097		N/A	N/A

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	Fiscal Fourth Quarter									Full Year
	2005			2004			Change			2005			2004			Change
COURTYARD MANHATTAN / FIFTH AVENUE
(This property received the Courtyard brand in January 2005. During the comparable periods of 2004, the property was branded as a Clarion for a portion of the period and unaffiliated the remainder.)
Average Occupancy		86.3	%		93.6	%		(7.3 pts	)		84.5	%		89.3	%		(4.8 pts	)
ADR	$	265.99		$	167.05			59.2	%	$	212.87		$	140.96			51.0	%
RevPAR	$	229.59		$	156.35			46.8	%	$	179.83		$	125.88			42.9	%
Total Revenues	$	4,862		$	3,339			45.6	%	$	11,525		$	8,753			31.7	%
Net Income / (Loss)	$	603		$	(398	)				$	(564	)	$	(2,172	)
Plus: Depreciation	$	623		$	615					$	2,130		$	1,846
Plus: Interest Expense	$	570		$	588					$	1,548		$	1,765
Plus: Non-Cash Ground Rent	$	96		$	—					$	313		$	—
Hotel Adjusted EBITDA	$	1,892		$	806			134.7	%	$	3,426		$	1,439			138.2	%
COURTYARD MANHATTAN / MIDTOWN EAST
Average Occupancy		87.8	%		89.5	%		(1.7 pts	)		87.9	%		89.2	%		(1.3 pts	)
ADR	$	284.65		$	240.20			18.5	%	$	230.52		$	199.43			15.6	%
RevPAR	$	249.83		$	214.94			16.2	%	$	202.52		$	177.85			13.9	%
Total Revenues	$	9,046		$	7,757			16.6	%	$	23,814		$	20,926			13.8	%
Net Income / (Loss)	$	2,906		$	1,235					$	4,504		$	1,698
Plus: Depreciation	$	432		$	882					$	2,356		$	2,866
Plus: Interest Expense	$	732		$	730					$	2,375		$	2,372
Hotel Adjusted EBITDA	$	4,070		$	2,847			43.0	%	$	9,235		$	6,936			33.1	%
FRENCHMAN’S REEF & MORNING STAR MARRIOTT BEACH RESORT
Average Occupancy		67.4	%		57.2	%		10.3 pts			78.5	%		71.5	%		7 pts
ADR	$	183.48		$	184.45			(0.5	)%	$	200.18		$	188.49			6.2	%
RevPAR	$	123.72		$	105.43			17.3	%	$	157.06		$	134.73			16.6	%
Total Revenues	$	12,274		$	10,434			17.6	%	$	45,085		$	40,207			12.1	%
Net Income / (Loss)	$	(1,209	)	$	(1,277	)				$	3,735		$	1,882
Plus: Depreciation	$	1,323		$	778					$	3,407		$	2,528
Plus: Interest Expense	$	1,057		$	1,055					$	3,436		$	3,429
Hotel Adjusted EBITDA	$	1,171		$	556			110.6	%	$	10,578		$	7,840			34.9	%

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	Fiscal Fourth Quarter									Year-to-Date
	2005			2004			Change			2005			2004			Change
MARRIOTT GRIFFIN GATE RESORT
Average Occupancy		59.6	%		67.7	%		(8.1 pts	)		63.8	%		68.1	%		(4.2 pts	)
ADR	$	131.00		$	115.98			13.0	%	$	122.22		$	110.10			11.0	%
RevPAR	$	78.04		$	78.46			(0.5	) %	$	78.00		$	74.94			4.1	%
Total Revenues	$	7,916		$	7,510			5.4	%	$	23,994		$	22,722			5.6	%
Net Income / (Loss)	$	905		$	1,004					$	2,103		$	2,043
Plus: Depreciation	$	693		$	549					$	2,138		$	1,785
Plus: Interest Expense	$	495		$	493					$	1,609		$	1,601
Plus: Non-Cash Ground Rent	$	2		$	—					$	5		$	—
Hotel Adjusted EBITDA	$	2,094		$	2,045			2.4	%	$	5,855		$	5,429			7.8	%
LOS ANGELES AIRPORT MARRIOTT
Average Occupancy		72.2	%		76.4	%		(4.3 pts	)		77.0	%		79.1	%		(2.1 pts	)
ADR	$	103.09		$	97.16			6.1	%	$	101.99		$	96.50			5.7	%
RevPAR	$	74.38		$	74.24			0.2	%	$	78.52		$	76.30			2.9	%
Total Revenues	$	15,004		$	15,040			(0.2	)%	$	49,814		$	48,593			2.5	%
Net Income / (Loss)	$	1,321		$	1,653					$	4,303		$	4,137
Plus: Depreciation	$	1,276		$	1,167					$	3,993		$	3,793
Plus: Interest Expense	$	1,376		$	1,371					$	4,479		$	4,455
Hotel Adjusted EBITDA	$	3,973		$	4,191			(5.2	)%	$	12,775		$	12,385			3.1	%
OAK BROOK HILLS MARRIOTT RESORT
(This property converted to the Marriott brand in late-July 2005. During the comparable periods of 2004 and early 2005, the property was unaffiliated.)
Average Occupancy		45.9	%		50.0	%		(4 pts	)		51.0	%		49.1	%		1.8 pts
ADR	$	131.20		$	119.81			9.5	%	$	121.85		$	121.95			(0.1	)%
RevPAR	$	60.27		$	59.85			0.7	%	$	62.13		$	59.93			3.7	%
Total Revenues	$	6,493		$	7,795			(16.7	)%	$	23,326		$	23,393			(0.3	)%
Net Income / (Loss)	$	(1,066	)	$	129					$	(473	)	$	143
Plus: Depreciation	$	1,053		$	1,054					$	3,499		$	3,425
Plus: Non-Cash Ground Rent	$	158		$	185					$	574		$	600
Hotel Adjusted EBITDA	$	145		$	1,368			(89.4	)%	$	3,600		$	4,168			(13.6	)%

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	Fiscal Fourth Quarter									Full Year
	2005			2004			Change			2005			2004			Change
ORLANDO AIRPORT MARRIOTT
(This property was managed by a third-party manager as a Marriott franchise until DiamondRock purchased in mid-December 2005. Upon purchase, Marriott International became the manager of the hotel.)
Average Occupancy		77.9	%		84.3	%		(6.4 pts	)		78.1	%		83.8	%		(5.7 pts	)
ADR	$	108.11		$	95.89			12.7	%	$	103.46		$	88.42			17.0	%
RevPAR	$	84.27		$	80.88			4.2	%	$	80.79		$	74.05			9.1	%
Total Revenues	$	5,003		$	5,916			(15.4	)%	$	22,485		$	20,701			8.6	%
Net Income / (Loss)	$	1,053		$	1,163					$	3,175		$	2,459
Plus: Depreciation	$	555		$	555					$	2,405		$	2,405
Hotel Adjusted EBITDA	$	1,608		$	1,718			(6.4	)%	$	5,580		$	4,864			14.7	%
SALT LAKE CITY MARRIOTT DOWNTOWN
Average Occupancy		69.6	%		66.0	%		3.6 pts			71.4	%		67.9	%		3.5 pts
ADR	$	118.86		$	113.76			4.5	%	$	118.68		$	115.51			2.7	%
RevPAR	$	82.68		$	75.08			10.1	%	$	84.76		$	78.49			8.0	%
Total Revenues	$	7,861		$	6,599			19.1	%	$	24,087		$	22,073			9.1	%
Net Income / (Loss)	$	596		$	62					$	1,763		$	955
Plus: Depreciation	$	809		$	741					$	2,498		$	2,407
Plus: Interest Expense	$	665		$	666					$	2,162		$	2,164
Hotel Adjusted EBITDA	$	2,070		$	1,469			41.0	%	$	6,423		$	5,527			16.2	%
THE LODGE AT SONOMA, A RENAISSANCE RESORT & SPA
Average Occupancy		68.4	%		65.2	%		3.1 pts			70.4	%		65.1	%		5.3 pts
ADR	$	215.92		$	192.88			11.9	%	$	204.03		$	187.34			8.9	%
RevPAR	$	147.59		$	125.82			17.3	%	$	143.65		$	122.03			17.7	%
Total Revenues	$	5,423		$	4,702			15.3	%	$	16,656		$	14,529			14.6	%
Net Income / (Loss)	$	607		$	360					$	452		$	497
Plus: Depreciation	$	557		$	544					$	1,787		$	1,768
Plus: Interest Expense	$	—		$	—					$	728		$	—
Hotel Adjusted EBITDA	$	1,164		$	904			28.8	%	$	2,967		$	2,265			31.0	%

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	Fiscal Fourth Quarter									Year-to-Date
	2005			2004			Change			2005			2004			Change
TORRANCE MARRIOTT
Average Occupancy		78.0	%		76.5	%		1.5 pts			80.9	%		77.4	%		3.4 pts
ADR	$	104.36		$	100.98			3.4	%	$	103.23		$	99.63			3.6	%
RevPAR	$	81.40		$	77.23			5.4	%	$	83.49		$	77.16			8.2	%
Total Revenues	$	5,967		$	6,481			(7.9	)%	$	21,125		$	20,564			2.7	%
Net Income / (Loss)	$	(417	)	$	83					$	(1,611	)	$	72
Plus: Depreciation	$	1,533		$	1,445					$	4,834		$	4,697
Plus: Interest Expense	$	—		$	—					$	1,594		$	—
Hotel Adjusted EBITDA	$	1,116		$	1,528			(27.0	)%	$	4,818		$	4,769			1.0	%
VAIL MARRIOTT MOUNTAIN RESORT & SPA
Average Occupancy		48.4	%		47.3	%		1.1 pts			58.7	%		60.0	%		(1.4 pts	)
ADR	$	171.22		$	160.37			6.8	%	$	192.06		$	178.90			7.4	%
RevPAR	$	82.89		$	75.85			9.3	%	$	112.66		$	107.42			4.9	%
Total Revenues	$	5,338		$	5,332			0.1	%	$	21,373		$	21,374			(0.0	)%
Net Income / (Loss)	$	(632	)	$	(493	)				$	2,416		$	2,203
Plus: Depreciation	$	716		$	771					$	2,319		$	2,312
Hotel Adjusted EBITDA	$	84		$	277			(69.7	)%	$	4,735		$	4,515			4.9	%
RENAISSANCE WORTHINGTON
Average Occupancy		73.7	%		67.7	%		6 pts			76.9	%		73.0	%		3.9 pts
ADR	$	157.95		$	143.94			9.7	%	$	151.48		$	138.55			9.3	%
RevPAR	$	116.35		$	97.43			19.4	%	$	116.45		$	101.15			15.1	%
Total Revenues	$	11,399		$	10,039			13.6	%	$	35,648		$	32,697			9.0	%
Net Income / (Loss)	$	1,247		$	244					$	3,054		$	1,201
Plus: Depreciation	$	673		$	850					$	2,371		$	2,762
Plus: Interest Expense	$	991		$	953					$	3,143		$	3,096
Hotel Adjusted EBITDA	$	2,911		$	2,047			42.2	%	$	8,568		$	7,058			21.4	%