FelCor Lodging Trust (FCH) 10-Q 2014 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2014

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission file number: 001-14236	(FelCor Lodging Trust Incorporated)
Commission file number: 333-39595-01	(FelCor Lodging Limited Partnership)

FelCor Lodging Trust Incorporated

FelCor Lodging Limited Partnership

(Exact Name of Registrant as Specified in Its Charter)

Maryland	(FelCor Lodging Trust Incorporated)	75-2541756
Delaware	(FelCor Lodging Limited Partnership)	75-2544994
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

545 E. John Carpenter Freeway, Suite 1300, Irving, Texas	75062
(Address of Principal Executive Offices)	(Zip Code)

(972) 444-4900

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

FelCor Lodging Trust Incorporated	þ	Yes	¨	No
FelCor Lodging Limited Partnership	þ	Yes	¨	No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

FelCor Lodging Trust Incorporated	þ	Yes	¨	No
FelCor Lodging Limited Partnership	þ	Yes	¨	No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

FelCor Lodging Trust Incorporated:
Large accelerated filer  þ	Accelerated filer o
Non-accelerated filer     o (Do not check if a smaller reporting company)	Smaller reporting company o

FelCor Lodging Limited Partnership:
Large accelerated filer  o	Accelerated filer ¨
Non-accelerated filer     þ (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

FelCor Lodging Trust Incorporated	¨	Yes	þ	No
FelCor Lodging Limited Partnership	¨	Yes	þ	No

At April 28, 2014, FelCor Lodging Trust Incorporated had issued and outstanding 124,186,686 shares of common stock.

EXPLANATORY NOTE

This quarterly report on Form 10-Q for the quarter ended March 31, 2014, combines the filings for FelCor Lodging Trust Incorporated, or FelCor, and FelCor Lodging Limited Partnership, or FelCor LP. Where it is important to distinguish between the two, we either refer specifically to FelCor or FelCor LP. Otherwise we use the terms “we” or “our” to refer to FelCor and FelCor LP, collectively (including their consolidated subsidiaries), unless the context indicates otherwise.

FelCor is a Maryland corporation operating as a real estate investment trust, or REIT, and is the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor LP. Through FelCor LP, FelCor owns hotels and conducts business. As the sole general partner of FelCor LP, FelCor has exclusive and complete control of FelCor LP’s day-to-day management.

We believe combining periodic reports for FelCor and FelCor LP into single combined reports results in the following benefits:

• presents our business as a whole (the same way management views and operates the business);

• eliminates duplicative disclosure and provides a more streamlined presentation (a substantial portion of our disclosure applies to both FelCor and FelCor LP); and

• saves time and cost by preparing combined reports instead of separate reports.

We operate the company as one enterprise. The employees of FelCor direct the management and operation of FelCor LP. With sole control of FelCor LP, FelCor consolidates FelCor LP for financial reporting purposes. FelCor has no assets other than its investment in FelCor LP and no liabilities separate from FelCor LP. Therefore, the reported assets and liabilities for FelCor and FelCor LP are substantially identical.

The substantive difference between FelCor and FelCor LP filings is that FelCor is a REIT with publicly-traded equity, while FelCor LP is a partnership with no publicly-traded equity. This difference is reflected in the financial statements in the equity (or partners’ capital) section of the consolidated balance sheets and in the consolidated statements of equity (or partners’ capital). Apart from the different equity treatment, the consolidated financial statements for FelCor and FelCor LP are nearly identical, except the net income (loss) attributable to redeemable noncontrolling interests in FelCor LP is deducted from FelCor’s net income (loss) in order to arrive at net income (loss) attributable to FelCor common stockholders. The noncontrolling interest is included in net income (loss) attributable to FelCor LP common unitholders. The holders of noncontrolling interests in FelCor LP are unaffiliated with FelCor, and in aggregate, hold less than 1% of the operating partnership units.

We present the sections in this report combined unless separate disclosure is required for clarity.

i

FELCOR LODGING TRUST INCORPORATED and

FELCOR LODGING LIMITED PARTNERSHIP

INDEX

			Page
		PART I − FINANCIAL INFORMATION
Item 1.	Financial Statements		1
	FelCor Lodging Trust Incorporated:
		Consolidated Balance Sheets - March 31, 2014 and December 31, 2013 (unaudited)	1
		Consolidated Statements of Operations – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	2
		Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	3
		Consolidated Statements of Changes in Equity – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	4
		Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	5
	FelCor Lodging Limited Partnership:
		Consolidated Balance Sheets - March 31, 2014 and December 31, 2013 (unaudited)	6
		Consolidated Statements of Operations – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	7
		Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	8
		Consolidated Statements of Partners’ Capital – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	9
		Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2014 and 2013 (unaudited)	10
	Notes to Consolidated Financial Statements		11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
		General	29
		Results of Operations	29
		Non-GAAP Financial Measures	30
		Pro Rata Share of Rooms Owned	37
		Hotel Portfolio Composition	38
		Hotel Operating Statistics	39
		Hotel Portfolio	41
		Liquidity and Capital Resources	43
		Inflation	44
		Seasonality	44
		Disclosure Regarding Forward-Looking Statements	45
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		46
Item 4.	Controls and Procedures		46
		PART II − OTHER INFORMATION
Item 6.	Exhibits		47
SIGNATURES			49

ii

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

	March 31, 2014			December 31, 2013
Assets
Investment in hotels, net of accumulated depreciation of $915,561 and $929,801 at March 31, 2014 and December 31, 2013, respectively	$	1,611,247		$	1,653,267
Hotel development	236,729			216,747
Investment in unconsolidated entities	44,634			46,943
Hotel held for sale	19,137			16,319
Cash and cash equivalents	73,526			45,645
Restricted cash	67,047			77,227
Accounts receivable, net of allowance for doubtful accounts of $179 and $262 at March 31, 2014 and December 31, 2013, respectively	34,486			35,747
Deferred expenses, net of accumulated amortization of $21,360 and $20,362 at March 31, 2014 and December 31, 2013, respectively	27,635			29,325
Other assets	22,828			23,060
Total assets	$	2,137,269		$	2,144,280
Liabilities and Equity
Debt, net of discount of $3,190 and $4,714 at March 31, 2014 and December 31, 2013, respectively	$	1,640,628		$	1,663,226
Distributions payable	11,195			11,047
Accrued expenses and other liabilities	152,103			150,738
Total liabilities	1,803,926			1,825,011
Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 618 units issued and outstanding at March 31, 2014 and December 31, 2013	5,583			5,039
Equity:
Preferred stock, $0.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,004 and $322,011, issued and outstanding at March 31, 2014 and December 31, 2013, respectively	309,354			309,362
Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at March 31, 2014 and December 31, 2013	169,412			169,412
Common stock, $0.01 par value, 200,000 shares authorized; 124,186 and 124,051 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively	1,242			1,240
Additional paid-in capital	2,354,613			2,354,328
Accumulated other comprehensive income	24,320			24,937
Accumulated deficit	(2,596,294		)	(2,568,350		)
Total FelCor stockholders’ equity	262,647			290,929
Noncontrolling interests in other partnerships	24,204			23,301
Preferred equity in consolidated joint venture, liquidation value of $41,464	40,909			—
Total equity	327,760			314,230
Total liabilities and equity	$	2,137,269		$	2,144,280

The accompanying notes are an integral part of these consolidated financial statements.

1

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands, except for per share data)

	Three Months Ended March 31,
	2014			2013
Revenues:
Hotel operating revenue	$	221,022		$	208,538
Other revenue	327			399
Total revenues	221,349			208,937
Expenses:
Hotel departmental expenses	83,523			80,405
Other property-related costs	61,578			59,428
Management and franchise fees	9,013			9,163
Taxes, insurance and lease expense	23,633			22,164
Corporate expenses	7,825			7,832
Depreciation and amortization	29,601			29,755
Conversion expenses	—			628
Other expenses	2,014			821
Total operating expenses	217,187			210,196
Operating income (loss)	4,162			(1,259		)
Interest expense, net	(25,227		)	(26,285		)
Debt extinguishment	(6		)	—
Loss before equity in income from unconsolidated entities	(21,071		)	(27,544		)
Equity in income from unconsolidated entities	643			89
Loss from continuing operations	(20,428		)	(27,455		)
Income from discontinued operations	135			850
Loss before gain on sale of property	(20,293		)	(26,605		)
Gain on sale of property, net	5,457			—
Net loss	(14,836		)	(26,605		)
Net loss attributable to noncontrolling interests in other partnerships	78			240
Net loss attributable to redeemable noncontrolling interests in FelCor LP	121			180
Preferred distributions - consolidated joint venture	(181		)	—
Net loss attributable to FelCor	(14,818		)	(26,185		)
Preferred dividends	(9,678		)	(9,678		)
Net loss attributable to FelCor common stockholders	$	(24,496	)	$	(35,863	)
Basic and diluted per common share data:
Loss from continuing operations	$	(0.20	)	$	(0.30	)
Net loss	$	(0.20	)	$	(0.29	)
Basic and diluted weighted average common shares outstanding	124,146			123,814

The accompanying notes are an integral part of these consolidated financial statements.

2

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands)

	Three Months Ended
	March 31,
	2014			2013
Net loss	$	(14,836	)	$	(26,605	)
Foreign currency translation adjustment	(620		)	(357		)
Comprehensive loss	(15,456		)	(26,962		)
Comprehensive loss attributable to noncontrolling interests in other partnerships	78			240
Comprehensive loss attributable to redeemable noncontrolling interests in FelCor LP	124			182
Comprehensive loss attributable to FelCor	$	(15,254	)	$	(26,540	)

The accompanying notes are an integral part of these consolidated financial statements. 

3

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands)

	Preferred Stock				Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income						Noncontrolling Interests in Other Partnerships			Preferred Equity in Consolidated Joint Venture
	Number of Shares	Amount			Number of Shares		Amount									Accumulated Deficit									Comprehensive Loss			Total Equity
Balance at December 31, 2012	12,948	$	478,774		124,117		$	1,241		$	2,353,581		$	26,039		$	(2,464,968	)	$	27,352		$	—					$	422,019
Issuance of stock awards	—	—			5		—			—			—			—			—			—						—
Stock awards - amortization	—	—			—		—			671			—			—			—			—						671
Allocation to redeemable noncontrolling interests	—	—			—		—			(977		)	—			—			—			—						(977		)
Contribution from noncontrolling interests	—	—			—		—			—			—			—			602			—						602
Distribution to noncontrolling interests	—	—			—		—			—			—			—			(284		)	—						(284		)
Preferred dividends:
$0.4875 per Series A preferred share	—	—			—		—			—			—			(6,279		)	—			—						(6,279		)
$0.50 per Series C depositary preferred share	—	—			—		—			—			—			(3,399		)	—			—						(3,399		)
Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
Foreign exchange translation	—	—			—		—			—			(355		)	—			—			—			$	(355	)
Net loss	—	—			—		—			—			—			(26,185		)	(240		)	—			(26,425		)
Comprehensive loss																									$	(26,780	)	(26,780		)
Balance at March 31, 2013	12,948	$	478,774		124,122		$	1,241		$	2,353,275		$	25,684		$	(2,500,831	)	$	27,430		$	—					$	385,573
Balance at December 31, 2013	12,948	$	478,774		124,051		$	1,240		$	2,354,328		$	24,937		$	(2,568,350	)	$	23,301		—						$	314,230
Conversion of preferred stock into common stock	—	(8		)	—		—			8			—			—			—			—						—
Issuance of stock awards	—	—			250		3			(3		)	—			—			—			—						—
Stock awards - amortization	—	—			—		—			959			—			—			—			—						959
Forfeiture of stock awards	—	—			(115	)	(1		)	—			—			(931		)	—			—						(932		)
Allocation to redeemable noncontrolling interests	—	—			—		—			(679		)	—			—			—			—						(679		)
Contribution from noncontrolling interests	—	—			—		—			—			—			—			1,568			—						1,568
Distribution to noncontrolling interests	—	—			—		—			—			—			—			(587		)	—						(587		)
Dividends declared:
$0.02 per common share	—	—			—		—			—			—			(2,517		)	—			—						(2,517		)
$0.4875 per Series A preferred share	—	—			—		—			—			—			(6,279		)	—			—						(6,279		)
$0.50 per Series C depositary preferred share	—	—			—		—			—			—			(3,399		)	—			—						(3,399		)
Preferred distributions - consolidated joint venture	—	—			—		—			—			—			—			—			(181		)				(181		)
Issuance of preferred equity - consolidated joint venture	—	—			—		—			—			—			—			—			40,909						40,909
Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
Foreign exchange translation	—	—			—		—			—			(617		)	—			—			—			$	(617	)
Net loss	—	—			—		—			—			—			(14,818		)	(78		)	181			(14,715		)
Comprehensive loss																									$	(15,332	)	(15,332		)
Balance at March 31, 2014	12,948	$	478,766		124,186		$	1,242		$	2,354,613		$	24,320		$	(2,596,294	)	$	24,204		$	40,909					$	327,760

The accompanying notes are an integral part of these consolidated financial statements.

4

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands)

	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(14,836	)	$	(26,605	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	29,601			31,570
Gain on sale of properties, net	(5,848		)	—
Amortization of deferred financing fees and debt discount	2,929			2,694
Amortization of fixed stock and directors’ compensation	1,446			1,578
Equity in income from unconsolidated entities	(643		)	(89		)
Distributions of income from unconsolidated entities	824			619
Debt extinguishment	251			—
Changes in assets and liabilities:
Accounts receivable	152			(8,903		)
Other assets	(2,572		)	(3,162		)
Accrued expenses and other liabilities	11,098			7,177
Net cash flow provided by operating activities	22,402			4,879
Cash flows from investing activities:
Improvements and additions to hotels	(28,617		)	(23,342		)
Hotel development	(23,622		)	(8,260		)
Net proceeds from asset dispositions	39,896			(232		)
Change in restricted cash – investing	10,180			825
Insurance proceeds	255			—
Distributions from unconsolidated entities	2,128			1,685
Net cash flow provided by (used in) investing activities	220			(29,324		)
Cash flows from financing activities:
Proceeds from borrowings	81,000			84,245
Repayment of borrowings	(105,353		)	(32,346		)
Payment of deferred financing fees	(5		)	(2,022		)
Distributions paid to noncontrolling interests	(587		)	(284		)
Contributions from noncontrolling interests	1,568			602
Distributions paid to FelCor LP limited partners	(7		)	—
Distributions paid to preferred stockholders	(9,678		)	(9,678		)
Preferred distributions - consolidated joint venture	(65		)	—
Distributions paid to common stockholders	(2,484		)	—
Net proceeds from issuance of preferred equity - consolidated joint venture	40,909			—
Net cash flow provided by financing activities	5,298			40,517
Effect of exchange rate changes on cash	(39		)	(21		)
Net change in cash and cash equivalents	27,881			16,051
Cash and cash equivalents at beginning of periods	45,645			45,745
Cash and cash equivalents at end of periods	$	73,526		$	61,796
Supplemental cash flow information – interest paid, net of capitalized interest	$	14,511		$	7,013

The accompanying notes are an integral part of these consolidated financial statements.

5

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

	March 31,			December 31,
	2014			2013
Assets
Investment in hotels, net of accumulated depreciation of $915,561 and $929,801 at March 31, 2014 and December 31, 2013, respectively	$	1,611,247		$	1,653,267
Hotel development	236,729			216,747
Investment in unconsolidated entities	44,634			46,943
Hotel held for sale	19,137			16,319
Cash and cash equivalents	73,526			45,645
Restricted cash	67,047			77,227
Accounts receivable, net of allowance for doubtful accounts of $179 and $262 at March 31, 2014 and December 31, 2013, respectively	34,486			35,747
Deferred expenses, net of accumulated amortization of $21,360 and $20,362 at March 31, 2014 and December 31, 2013, respectively	27,635			29,325
Other assets	22,828			23,060
Total assets	$	2,137,269		$	2,144,280
Liabilities and Partners’ Capital
Debt, net of discount of $3,190 and $4,714 at March 31, 2014 and December 31, 2013, respectively	$	1,640,628		$	1,663,226
Distributions payable	11,195			11,047
Accrued expenses and other liabilities	152,103			150,738
Total liabilities	1,803,926			1,825,011
Commitments and contingencies
Redeemable units, 618 units issued and outstanding at March 31, 2014 and December 31, 2013	5,583			5,039
Capital:
Preferred units:
Series A Cumulative Convertible Preferred Units, 12,880 units issued and outstanding at March 31, 2014 and December 31, 2013	309,354			309,362
Series C Cumulative Redeemable Preferred Units, 68 units issued and outstanding at March 31, 2014 and December 31, 2013	169,412			169,412
Common units, 124,186 and 124,051 units issued and outstanding at March 31, 2014 and December 31, 2013, respectively	(240,542		)	(212,888		)
Accumulated other comprehensive income	24,423			25,043
Total FelCor LP partners’ capital	262,647			290,929
Noncontrolling interests	24,204			23,301
Preferred capital in consolidated joint venture	40,909			—
Total partners’ capital	327,760			314,230
Total liabilities and partners’ capital	$	2,137,269		$	2,144,280

The accompanying notes are an integral part of these consolidated financial statements.

6

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands, except for per unit data)

	Three Months Ended
	March 31,
	2014			2013
Revenues:
Hotel operating revenue	$	221,022		$	208,538
Other revenue	327			399
Total revenues	221,349			208,937
Expenses:
Hotel departmental expenses	83,523			80,405
Other property-related costs	61,578			59,428
Management and franchise fees	9,013			9,163
Taxes, insurance and lease expense	23,633			22,164
Corporate expenses	7,825			7,832
Depreciation and amortization	29,601			29,755
Conversion expenses	—			628
Other expenses	2,014			821
Total operating expenses	217,187			210,196
Operating income (loss)	4,162			(1,259		)
Interest expense, net	(25,227		)	(26,285		)
Debt extinguishment	(6		)	—
Loss before equity in income from unconsolidated entities	(21,071		)	(27,544		)
Equity in income from unconsolidated entities	643			89
Loss from continuing operations	(20,428		)	(27,455		)
Income from discontinued operations	135			850
Loss before gain on sale of property	(20,293		)	(26,605		)
Gain on sale of property, net	5,457			—
Net loss	(14,836		)	(26,605		)
Net loss attributable to noncontrolling interests	78			240
Preferred distributions - consolidated joint venture	(181		)	—
Net loss attributable to FelCor LP	(14,939		)	(26,365		)
Preferred distributions	(9,678		)	(9,678		)
Net loss attributable to FelCor LP common unitholders	$	(24,617	)	$	(36,043	)
Basic and diluted per common unit data:
Loss from continuing operations	$	(0.20	)	$	(0.30	)
Net loss	$	(0.20	)	$	(0.29	)
Basic and diluted weighted average common units outstanding	124,764			124,435

The accompanying notes are an integral part of these consolidated financial statements.

7

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands)

	Three Months Ended
	March 31,
	2014			2013
Net loss	$	(14,836	)	$	(26,605	)
Foreign currency translation adjustment	(620		)	(357		)
Comprehensive loss	(15,456		)	(26,962		)
Comprehensive loss attributable to noncontrolling interests	78			240
Comprehensive loss attributable to FelCor LP	$	(15,378	)	$	(26,722	)

The accompanying notes are an integral part of these consolidated financial statements.

8

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands)

	Preferred Units			Common Units			Accumulated Other Comprehensive Income			Noncontrolling Interests			Preferred Capital in Consolidated Joint Venture			Comprehensive Loss			Total Partners’ Capital
Balance at December 31, 2012	$	478,774		$	(110,258	)	$	26,151		$	27,352		$	—					$	422,019
FelCor restricted stock compensation	—			671			—			—			—						671
Contributions	—			—			—			602			—						602
Distributions	—			(9,678		)	—			(284		)	—						(9,962		)
Allocation to redeemable units	—			(795		)	—			—			—						(795		)
Comprehensive loss:
Foreign exchange translation							(357		)				—			$	(357	)
Net loss				(26,365		)				(240		)	—			(26,605		)
Comprehensive loss																$	(26,962	)	(26,962		)
Balance at March 31, 2013	$	478,774		$	(146,425	)	$	25,794		$	27,430		$	—					$	385,573
Balance at December 31, 2013	$	478,774		$	(212,888	)	$	25,043		$	23,301		—						$	314,230
Conversion of preferred units into common units	(8		)	8			—			—			—						—
FelCor restricted stock compensation	—			27			—			—			—						27
Contributions	—			—			—			1,568			—						1,568
Distributions	—			(12,195		)	—			(587		)	(181		)				(12,963		)
Allocation to redeemable units	—			(555		)	—			—			—						(555		)
Issuance of preferred capital - consolidated joint venture	—			—			—			—			40,909						40,909
Comprehensive loss:
Foreign exchange translation							(620		)				—			$	(620	)
Net loss				(14,939		)				(78		)	181			(14,836		)
Comprehensive loss																$	(15,456	)	(15,456		)
Balance at March 31, 2014	$	478,766		$	(240,542	)	$	24,423		$	24,204		$	40,909					$	327,760

The accompanying notes are an integral part of these consolidated financial statements.

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FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2014 and 2013

(unaudited, in thousands)

	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(14,836	)	$	(26,605	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	29,601			31,570
Gain on sale of properties, net	(5,848		)	—
Amortization of deferred financing fees and debt discount	2,929			2,694
Amortization of fixed stock and directors’ compensation	1,446			1,578
Equity in income from unconsolidated entities	(643		)	(89		)
Distributions of income from unconsolidated entities	824			619
Debt extinguishment	251			—
Changes in assets and liabilities:
Accounts receivable	152			(8,903		)
Other assets	(2,572		)	(3,162		)
Accrued expenses and other liabilities	11,098			7,177
Net cash flow provided by operating activities	22,402			4,879
Cash flows from investing activities:
Improvements and additions to hotels	(28,617		)	(23,342		)
Hotel development	(23,622		)	(8,260		)
Net proceeds from asset dispositions	39,896			(232		)
Change in restricted cash – investing	10,180			825
Insurance proceeds	255			—
Distributions from unconsolidated entities	2,128			1,685
Net cash flow provided by (used in) investing activities	220			(29,324		)
Cash flows from financing activities:
Proceeds from borrowings	81,000			84,245
Repayment of borrowings	(105,353		)	(32,346		)
Payment of deferred financing fees	(5		)	(2,022		)
Distributions paid to noncontrolling interests	(587		)	(284		)
Contributions from noncontrolling interests	1,568			602
Distributions paid to FelCor LP limited partners	(7		)	—
Distributions paid to preferred unitholders	(9,678		)	(9,678		)
Preferred distributions - consolidated joint venture	(65		)	—
Distributions paid to common unitholders	(2,484		)	—
Net proceeds from issuance of preferred capital - consolidated joint venture	40,909			—
Net cash flow provided by financing activities	5,298			40,517
Effect of exchange rate changes on cash	(39		)	(21		)
Net change in cash and cash equivalents	27,881			16,051
Cash and cash equivalents at beginning of periods	45,645			45,745
Cash and cash equivalents at end of periods	$	73,526		$	61,796
Supplemental cash flow information – interest paid, net of capitalized interest	$	14,511		$	7,013

The accompanying notes are an integral part of these consolidated financial statements.

10

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

FelCor Lodging Trust Incorporated (NYSE:FCH), or FelCor, is a Maryland corporation, operating as a real estate investment trust, or REIT. FelCor is the sole general partner of, and the owner of a greater than 99.5% partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in 59 hotels as of March 31, 2014, one of which was held for sale. At March 31, 2014, we had an aggregate of 124,803,232 shares and units outstanding, consisting of 124,185,690 shares of FelCor common stock and 617,542 FelCor LP units not owned by FelCor.

Of the 58 hotels not held for sale as of March 31, 2014, we owned a 100% interest in 41 hotels, a 90% interest in entities owning two hotels, an 82% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and a 50% interest in entities owning 13 hotels. We consolidate our real estate interests in the 45 hotels in which we held majority interests, and we record the real estate interests of the 13 hotels in which we held 50% interests using the equity method. We leased 57 of the 58 hotels in continuing operations to our taxable REIT subsidiaries, of which we own a controlling interest. One50% owned hotel was operated without a lease. Because we owned controlling interests in these lessees, we consolidated our interests in these 57 hotels (which we refer to as our Consolidated Hotels) and reflect those hotels’ operating revenues and expenses in our statements of operations.  Of our Consolidated Hotels, we owned 50% of the real estate interests in each of 12 hotels (we accounted for the ownership in our real estate interests of these hotels by the equity method) and majority real estate interests in each of the remaining 45 hotels (we consolidate our real estate interest in these hotels).

The following table illustrates the distribution of our 57 Consolidated Hotels at March 31, 2014:

Brand	Hotels	Rooms
Embassy Suites Hotels®	31	8,167
Wyndham®and Wyndham Grand®	8	2,528
Holiday Inn®	4	1,702
Sheraton® and Westin®	4	1,604
Marriott® and Renaissance®	3	1,321
DoubleTreeby Hilton® and Hilton®	4	998
Fairmont®	1	383
Morgans and Royalton	2	285
Total	57	16,988

At March 31, 2014, our Consolidated Hotels were located in the United States (56 hotels in 21 states) and Canada (one hotel in Ontario), with concentrations in California (13 hotels), Florida (7 hotels) and Texas (7 hotels). Approximately 58% of our revenue was generated from hotels in these three states during the first three months of 2014.

At March 31, 2014, of our 57 Consolidated Hotels: (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 34 hotels, (ii) subsidiaries of Wyndham Hotel Group, or Wyndham, managed eight hotels, (iii) subsidiaries of InterContinental Hotels Group, or IHG, managed four hotels, (iv) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed four hotels, (v) subsidiaries of Marriott International Inc., or Marriott, managed three hotels, (vi) a subsidiary of Fairmont Hotels and Resorts, or Fairmont, managed one hotel, (vii) a subsidiary of Morgans Hotel Group Corporation managed two hotels, and (viii) an independent management company managed one hotel.

11

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization — (continued)

In addition to the above hotels, we own a 95% interest in a consolidated joint venture that owns the Knickerbocker Hotel, a former hotel and office building that is being redeveloped as a 4+ star hotel in midtown Manhattan and is expected to open in early fall 2014.

The information in our consolidated financial statements for the three months ended March 31, 2014 and 2013 is unaudited. Preparing financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying financial statements for the three months ended March 31, 2014 and 2013, include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair presentation of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013, included in our Annual Report on Form 10-K. Operating results for the three months ended March 31, 2014 are not necessarily indicative of actual operating results for the entire year.

2. Investment in Unconsolidated Entities

At March 31, 2014 and December 31, 2013, we owned 50% interests in joint ventures that owned 13 hotels. We also own 50% interests in entities that own real estate in Myrtle Beach, South Carolina and provide condominium management services there. We account for our investments in these unconsolidated entities under the equity method. We do not have any majority-owned subsidiaries that are not consolidated in our financial statements. We make adjustments to our equity in income from unconsolidated entities related to the difference between our basis in investment in unconsolidated entities compared to the historical basis of the assets recorded by the joint ventures.

The following table summarizes combined balance sheet information for our unconsolidated entities (in thousands):

	March 31,		December 31,
	2014		2013
Investment in hotels and other properties, net of accumulated depreciation	$	136,484	$	140,145
Total assets	$	150,837	$	155,848
Debt	$	146,921	$	146,358
Total liabilities	$	150,745	$	152,068
Equity	$	92	$	3,780

Our unconsolidated entities’ debt at March 31, 2014 and December 31, 2013 consisted entirely of non-recourse mortgage debt.  In March 2014, one of our unconsolidated joint ventures refinanced $128 million of debt and extended the maturity until 2017.

12

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Investment in Unconsolidated Entities — (continued)

The following table sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):

	Three Months Ended March 31,
	2014			2013
Total revenues	$	14,617		$	13,608
Net income	$	2,216		$	1,108
Net income attributable to FelCor	$	1,108		$	554
Depreciation of cost in excess of book value	(465		)	(465		)
Equity in income from unconsolidated entities	$	643		$	89

The following table summarizes the components of our investment in unconsolidated entities (in thousands):

	March 31,			December 31,
	2014			2013
Hotel-related investments	$	(7,564	)	$	(6,349	)
Cost in excess of book value of hotel investments	44,588			45,053
Land and condominium investments	7,610			8,239
Investment in unconsolidated entities	$	44,634		$	46,943

The following table summarizes the components of our equity in income from unconsolidated entities (in thousands):

	Three Months Ended
	March 31,
	2014			2013
Hotel investments	$	1,272		$	708
Other investments	(629		)	(619		)
Equity in income from unconsolidated entities	$	643		$	89

13

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Debt

Consolidated debt consisted of the following (dollars in thousands):

	Encumbered	Interest	Maturity	March 31,		December 31,
	Hotels	Rate (%)	Date	2014		2013
Line of credit	9	LIBOR + 3.375	June 2016(a)	$	93,000	$	88,000
Hotel mortgage debt
Mortgage debt(b)	3	6.58	July - August 2014	34,821		35,133
Mortgage debt	1	5.81	July 2016	9,772		9,904
Mortgage debt(b)	4	4.95	October 2022	125,871		126,220
Mortgage debt	1	4.94	October 2022	31,589		31,714
Senior notes
Senior secured notes	11	10.00	October 2014	230,714		229,190
Senior secured notes	6	6.75	June 2019	525,000		525,000
Senior secured notes	9	5.625	March 2023	525,000		525,000
Knickerbocker loan(c)			��
Construction tranche	—	LIBOR + 4.00	May 2016	12,994		—
Cash collateralized tranche	—	LIBOR + 1.25	May 2016	51,867		64,861
Retired debt	—	—	—	—		28,204
Total	44			$	1,640,628	$	1,663,226

(a) Our $225 million line of credit can be extended for one year (to 2017), subject to satisfying certain conditions.

(b) This debt is comprised of separate non-cross-collateralized loans each secured by a mortgage of a different hotel.

(c) In November 2012, we obtained an $85.0 million construction loan to finance the redevelopment of the Knickerbocker Hotel. This loan can be extended for one year subject to satisfying certain conditions. In January 2014, we drew $13.0 million of the cash collateral to fund construction costs, leaving $51.9 million of cash collateral to be drawn before drawing on the remaining $20.1 million available under the construction loan.

In January 2014, we repaid $10.9 million of secured loan debt, scheduled to mature in July 2014, when we sold a hotel. In March 2014, we repaid an additional $17.1 million of debt, secured by a hotel, scheduled to mature in June 2014. We incurred $251,000 of debt extinguishment costs with these repayments.

We reported $25.2 million and $26.3 million of interest expense for the three months ended March 31, 2014 and 2013, respectively, which is net of: (i) interest income of $15,000 and $22,000 and (ii) capitalized interest of $4.0 million and $2.8 million, respectively.

14

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs

Hotel operating revenue from continuing operations was comprised of the following (in thousands):

	Three Months Ended
	March 31,
	2014		2013
Room revenue	$	169,829	$	160,507
Food and beverage revenue	39,785		36,943
Other operating departments	11,408		11,088
Total hotel operating revenue	$	221,022	$	208,538

Nearly all of our revenue is comprised of hotel operating revenue. These revenues are recorded net of any sales or occupancy taxes collected from our guests. All rebates or discounts are recorded, when allowed, as a reduction in revenue, and there are no material contingent obligations with respect to rebates or discounts offered by us. All revenues are recorded on an accrual basis, as earned. Appropriate allowances are made for doubtful accounts, which are recorded as a bad debt expense.

Hotel departmental expenses from continuing operations were comprised of the following (in thousands):

	Three Months Ended March 31,
	2014				2013
	Amount		% of Total Hotel Operating Revenue		Amount		% of Total Hotel Operating Revenue
Room	$	46,733	21.1	%	$	44,870	21.5	%
Food and beverage	31,187		14.1		30,246		14.5
Other operating departments	5,603		2.6		5,289		2.6
Total hotel departmental expenses	$	83,523	37.8	%	$	80,405	38.6	%

Other property-related costs from continuing operations were comprised of the following amounts (in thousands):

	Three Months Ended March 31,
	2014				2013
	Amount		% of Total Hotel Operating Revenue		Amount		% of Total Hotel Operating Revenue
Hotel general and administrative expense	$	19,834	9.0	%	$	20,047	9.6	%
Marketing	20,071		9.1		19,010		9.1
Repair and maintenance	11,687		5.3		11,561		5.5
Utilities	9,986		4.5		8,810		4.3
Total other property-related costs	$	61,578	27.9	%	$	59,428	28.5	%

15

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs— (continued)

In March 2013, we rebranded and transitioned management at eight core hotels located in strategic markets to Wyndham brands. Wyndham's parent guaranteed a minimum level of net operating income for each year of the initial ten-year term, subject to an aggregate $100 million limit over the term and an annual $21.5 million limit. Amounts recorded under the guaranty will be accounted for, to the extent available, as a reduction in contractual management and other fees paid and payable to Wyndham. Any amounts in excess of those fees will be recorded as revenue when earned. For the three months ended March 31, 2014 and 2013, we have recorded a $136,000 and $464,000, respectively, pro rata portion of the projected full-year guaranty as a reduction of Wyndham's contractual management and other fees.

5. Taxes, Insurance and Lease Expense

Taxes, insurance and lease expense from continuing operations were comprised of the following (in thousands):

	Three Months Ended
	March 31,
	2014		2013
Hotel lease expense(a)	$	10,391	$	9,558
Land lease expense(b)	2,462		2,394
Real estate and other taxes	8,109		7,594
Property insurance, general liability insurance and other	2,671		2,618
Total taxes, insurance and lease expense	$	23,633	$	22,164

(a) Hotel lease expense is recorded by the consolidated operating lessees of 12 hotels owned by unconsolidated entities and is partially (generally 49%) offset through noncontrolling interests in other partnerships. Our 50% share of the corresponding lease income is recorded through equity in income from unconsolidated entities.  Hotel lease expense includes percentage rent of $4.9 million and $4.1 million for the three months ended March 31, 2014 and 2013, respectively.

(b) Land lease expense includes percentage rent of $1.0 million and $968,000 for the three months ended March 31, 2014 and 2013, respectively.

16

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Hotel Dispositions

Effective January 1, 2014, we have adopted the provisions of Accounting Standards Update No. 2014-08 (the Update), under which the disposal of components of an entity are reported as discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. These new provisions are applied prospectively only and, as such, hotels that were considered discontinued operations for the year ended December 31, 2013 and prior continue to be reported as discontinued operations in all periods presented.

During the first quarter, we sold two hotels, one of which was not previously held for sale. Additionally, as of March 31, 2014, we had one hotel held for sale. We designate a hotel as held for sale when the sale is probable within the next twelve months. We consider a sale to be probable when a buyer completes its due diligence review, we have an executed contract for sale, and we have received a substantial non-refundable deposit. Operations for these two hotels (the hotel sold not previously held for sale and the hotel held for sale as of March 31, 2014) are included in loss from continuing operations as shown in the Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 as disposition of these hotels does not represent a strategic shift in our business. The operations from these two components included income of $396,000 (of which $394,000 was attributable to FelCor) and a loss of $2,900 for the three months ended March 31, 2014 and 2013, respectively. The gain on the sale of the hotel not previously held for sale is reported in the accompanying statement of operations on a separate line item and is not included in continuing operations.

Discontinued operations include the results of operations for five hotels sold in 2013 and one hotel sold in 2014 (which was held for sale as of December 31, 2013). The following table summarizes the condensed financial information for those hotels (in thousands):

	Three Months Ended
	March 31,
	2014			2013
Hotel operating revenue	$	729		$	11,754
Operating expenses	(674		)	(10,706		)
Operating income from discontinued operations	55			1,048
Interest expense, net	(66		)	(198		)
Debt extinguishment	(245		)	—
Gain on sale of hotels, net	391			—
Income from discontinued operations	$	135		$	850

17

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Loss Per Share/Unit

The following tables set forth the computation of basic and diluted loss per share/unit (in thousands, except per share/unit data):

FelCor Loss Per Share

	Three Months Ended
	March 31,
	2014			2013
Numerator:
Net loss attributable to FelCor	$	(14,818	)	$	(26,185	)
Discontinued operations attributable to FelCor	(134		)	(830		)
Loss from continuing operations attributable to FelCor	(14,952		)	(27,015		)
Less: Preferred dividends	(9,678		)	(9,678		)
Numerator for continuing operations attributable to FelCor common stockholders	(24,630		)	(36,693		)
Discontinued operations attributable to FelCor	134			830
Numerator for basic and diluted loss attributable to FelCor common stockholders	$	(24,496	)	$	(35,863	)
Denominator:
Denominator for basic and diluted loss per share	124,146			123,814
Basic and diluted loss per share data:
Loss from continuing operations	$	(0.20	)	$	(0.30	)
Discontinued operations	$	—		$	0.01
Net loss	$	(0.20	)	$	(0.29	)

18

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Loss Per Share/Unit — (continued)

FelCor LP Loss Per Unit

	Three Months Ended
	March 31,
	2014			2013
Numerator:
Net loss attributable to FelCor LP	$	(14,939	)	$	(26,365	)
Discontinued operations attributable to FelCor LP	(135		)	(834		)
Loss from continuing operations attributable to FelCor LP	(15,074		)	(27,199		)
Less: Preferred distributions	(9,678		)	(9,678		)
Numerator for continuing operations attributable to FelCor LP common unitholders	(24,752		)	(36,877		)
Discontinued operations attributable to FelCor LP	135			834
Numerator for basic and diluted loss attributable to FelCor common unitholders	$	(24,617	)	$	(36,043	)
Denominator:
Denominator for basic and diluted loss per unit	124,764			124,435
Basic and diluted loss per unit data:
Loss from continuing operations	$	(0.20	)	$	(0.30	)
Discontinued operations	$	—		$	0.01
Net loss	$	(0.20	)	$	(0.29	)

The loss from continuing operations attributable to FelCor/FelCor LP share/unit calculations includes the gain on the sale of property attributable to FelCor/FelCor LP.

Securities that could potentially dilute earnings per share/unit in the future that were not included in the computation of diluted loss per share/unit, because they would have been antidilutive for the periods presented, are as follows (in thousands):

	Three Months Ended
	March 31,
	2014	2013
Series A convertible preferred shares/units	9,985	9,985
FelCor restricted stock units	850	167

Series A preferred dividends (distributions) that would be excluded from net loss attributable to FelCor common stockholders (or FelCor LP common unitholders), if these preferred shares/units were dilutive, were $6.3 million for the three months ended March 31, 2014 and 2013.

We grant our executive officers restricted stock units each year, which provides them with the potential to earn shares of our common stock in three increments over four years. The actual number of shares that vest is determined based on total stockholder return relative to a group of 10 lodging REIT peers. We amortize the fixed cost of these grants over the vesting period. We calculate the potential dilutive impact of these awards on our earnings per share using the treasury stock method.

19

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Fair Value of Financial Instruments

Disclosures about fair value of our financial instruments are based on pertinent information available to management as of March 31, 2014 and December 31, 2013. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize on disposition of the financial instruments. Different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

Our estimates of the fair value of (i) cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximate carrying value due to the relatively short maturity of these instruments; (ii) our publicly-traded debt is based on observable market data (a Level 2 input) and has an estimated fair value of $1.3 billion at March 31, 2014 and December 31, 2013; and (iii) our debt that is not publicly-traded is based on a discounted cash flow model using effective borrowing rates for debt with similar terms, loan to estimated fair value of collateral and remaining maturities (a Level 3 input) and has an estimated fair value of $364.3 million and $390.1 million at March 31, 2014 and December 31, 2013, respectively. The estimated fair value of all our debt was $1.7 billion at March 31, 2014 and December 31, 2013. The carrying value of our debt was $1.6 billion and $1.7 billion at March 31, 2014 and December 31, 2013, respectively.

9. Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units

We record redeemable noncontrolling interests in FelCor LP, in the case of FelCor, and redeemable units, in the case of FelCor LP, in the mezzanine section (between liabilities and equity or partners’ capital) of our consolidated balance sheets because of the redemption feature of these units. Additionally, FelCor’s consolidated statements of operations separately present earnings attributable to redeemable noncontrolling interests. We adjust redeemable noncontrolling interests in FelCor LP (or redeemable units) each period to reflect the greater of its carrying value based on the accumulation of historical cost or its redemption value. The historical cost is based on the proportionate relationship between the carrying value of equity associated with FelCor’s common stockholders relative to that of FelCor LP’s unitholders. Redemption value is based on the closing price of FelCor’s common stock at period end. FelCor allocates net income (loss) to FelCor LP’s noncontrolling partners based on their weighted average ownership percentage during the period.

At March 31, 2014, we had 617,542 limited partnership units outstanding carried at $5.6 million. The value of these outstanding units is based on the closing price of FelCor’s common stock at March 31, 2014 ($9.04 per share).

Changes in redeemable noncontrolling interests (or redeemable units) for the three months ended March 31, 2014 and 2013 are shown below (in thousands):

	Three Months Ended
	March 31,
	2014			2013
Balance at beginning of period	$	5,039		$	2,902
Redemption value allocation	679			977
Distributions paid to unitholders	(11		)	—
Comprehensive loss:
Foreign exchange translation	(3		)	(2		)
Net loss	(121		)	(180		)
Balance at end of period	$	5,583		$	3,697

20

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.    Consolidated Joint Venture Preferred Equity/Capital

Our joint venture that is redeveloping the Knickerbocker Hotel raised $45 million through the sale of 3.5% preferred equity/capital under the EB-5 immigrant investor program. The investors in this preferred equity receive a3.25% current annual return, with a 0.25% non-compounding annual return paid at redemption. If the preferred equity is not redeemed within five years, the current return increases to 8.00%. The venture received $41.5 million in gross proceeds ($40.9 million net of issuance costs) in the first quarter of 2014, and the remaining $3.5 million will be received as investors’ visas are approved by the government. We used our 95% share of the proceeds to repay borrowings under our line of credit.

11. FelCor LP’s Consolidating Financial Information

Certain of FelCor LP’s 100% owned subsidiaries (FCH/PSH, L.P.; FelCor Baton Rouge Owner, L.L.C.; FelCor/CMB Buckhead Hotel, L.L.C.; FelCor/CMB Marlborough Hotel, L.L.C.; FelCor/CMB Orsouth Holdings, L.P.; FelCor/CMB SSF Holdings, L.P.; FelCor/CSS Holdings, L.P.; FelCor Dallas Love Field Owner, L.L.C.; FelCor Lodging Holding Company, L.L.C.; FelCor Milpitas Owner, L.L.C.; FelCor TRS Borrower 4, L.L.C.; FelCor TRS Holdings, L.L.C.; FelCor Canada Co.; FelCor Hotel Asset Company, L.L.C.; FelCor Copley Plaza, L.L.C.; FelCor St. Pete (SPE), L.L.C.; FelCor Esmeralda (SPE), L.L.C.; FelCor S-4 Hotels (SPE), L.L.C.; Los Angeles International Airport Hotel Associates, a Texas L.P.; Madison 237 Hotel, L.L.C.; Myrtle Beach Owner, L.L.C.; and Royalton 44 Hotel, L.L.C., collectively, “Subsidiary Guarantors”), together with FelCor, guaranty, fully and unconditionally, except where subject to customary release provisions as described below, and jointly and severally, our senior debt.

The guaranties by the Subsidiary Guarantors may be automatically and unconditionally released upon (1) the sale or other disposition of all of the capital stock of the Subsidiary Guarantor or the sale or disposition of all or substantially all of the assets of the Subsidiary Guarantor, (2) the consolidation or merger of any such Subsidiary Guarantor with any person other than FelCor LP, or a subsidiary of FelCor LP, if, as a result of such consolidation or merger, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (3) a legal defeasance or covenant defeasance of the indenture, (4) the unconditional and complete release of such Subsidiary Guarantor in accordance with the modification and waiver provisions of the indenture, or (5) the designation of a restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary under and in compliance with the indenture.

21

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. FelCor LP’s Consolidating Financial Information – (continued)

The following tables present consolidating information for the Subsidiary Guarantors.

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2014

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Net investment in hotels	$	43,777		$	1,056,263		$	511,207	$	—		$	1,611,247
Hotel development	—			—			236,729		—			236,729
Equity investment in consolidated entities	1,476,856			—			—		(1,476,856		)	—
Investment in unconsolidated entities	32,312			10,977			1,345		—			44,634
Hotel held for sale	—			—			19,137		—			19,137
Cash and cash equivalents	17,625			44,711			11,190		—			73,526
Restricted cash	—			10,019			57,028		—			67,047
Accounts receivable, net	251			33,587			648		—			34,486
Deferred expenses, net	19,660			—			7,975		—			27,635
Other assets	5,380			11,935			18,013		(12,500		)	22,828
Total assets	$	1,595,861		$	1,167,492		$	863,272	$	(1,489,356	)	$	2,137,269
Debt, net	$	1,280,714		$	12,500		$	401,117	$	(53,703	)	$	1,640,628
Distributions payable	11,079			—			116		—			11,195
Accrued expenses and other liabilities	35,838			103,725			12,540		—			152,103
Total liabilities	1,327,631			116,225			413,773		(53,703		)	1,803,926
Redeemable units	5,583			—			—		—			5,583
Preferred units	478,766			—			—		—			478,766
Common units	(240,542		)	1,047,284			363,946		(1,411,230		)	(240,542		)
Accumulated other comprehensive income	24,423			4,486			19,937		(24,423		)	24,423
Total FelCor LP partners’ capital	262,647			1,051,770			383,883		(1,435,653		)	262,647
Noncontrolling interests	—			(503		)	24,707		—			24,204
Preferred capital in consolidated joint venture	—			—			40,909		—			40,909
Total partners’ capital	262,647			1,051,267			449,499		(1,435,653		)	327,760
Total liabilities and partners’ capital	$	1,595,861		$	1,167,492		$	863,272	$	(1,489,356	)	$	2,137,269

22

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2013

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Net investment in hotels	$	48,971		$	1,053,724		$	550,572	$	—		$	1,653,267
Hotel development	—			—			216,747		—			216,747
Equity investment in consolidated entities	1,508,593			—			—		(1,508,593		)	—
Investment in unconsolidated entities	34,090			11,497			1,356		—			46,943
Hotel held for sale	—			—			16,319		—			16,319
Cash and cash equivalents	5,227			33,283			7,135		—			45,645
Restricted cash	—			9,051			68,176		—			77,227
Accounts receivable, net	516			34,366			865		—			35,747
Deferred expenses, net	20,540			—			8,785		—			29,325
Other assets	6,248			10,767			17,998		(11,953		)	23,060
Total assets	$	1,624,185		$	1,152,688		$	887,953	$	(1,520,546	)	$	2,144,280
Debt, net	$	1,279,190		$	11,953		$	464,036	$	(91,953	)	$	1,663,226
Distributions payable	11,047			—			—		—			11,047
Accrued expenses and other liabilities	37,980			96,494			16,264		—			150,738
Total liabilities	1,328,217			108,447			480,300		(91,953		)	1,825,011
Redeemable units	5,039			—			—		—			5,039
Preferred units	478,774			—			—		—			478,774
Common units	(212,888		)	1,039,903			363,647		(1,403,550		)	(212,888		)
Accumulated other comprehensive income	25,043			4,569			20,474		(25,043		)	25,043
Total FelCor LP partners’ capital	290,929			1,044,472			384,121		(1,428,593		)	290,929
Noncontrolling interests	—			(231		)	23,532		—			23,301
Total partners’ capital	290,929			1,044,241			407,653		(1,428,593		)	314,230
Total liabilities and partners’ capital	$	1,624,185		$	1,152,688		$	887,953	$	(1,520,546	)	$	2,144,280

23

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2014

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Hotel operating revenue	$	—		$	221,022		$	—		$	—		$	221,022
Percentage lease revenue	1,399			—			25,609			(27,008		)	—
Other revenue	1			266			60			—			327
Total revenues	1,400			221,288			25,669			(27,008		)	221,349
Expenses:
Hotel operating expenses	—			154,114			—			—			154,114
Taxes, insurance and lease expense	419			46,829			3,393			(27,008		)	23,633
Corporate expenses	123			5,069			2,633			—			7,825
Depreciation and amortization	991			17,767			10,843			—			29,601
Other expenses	35			840			1,139			—			2,014
Total operating expenses	1,568			224,619			18,008			(27,008		)	217,187
Operating income	(168		)	(3,331		)	7,661			—			4,162
Interest expense, net	(20,484		)	(328		)	(4,415		)	—			(25,227		)
Debt extinguishment	—			—			(6		)	—			(6		)
Loss before equity in income from unconsolidated entities	(20,652		)	(3,659		)	3,240			—			(21,071		)
Equity in income from consolidated entities	5,323			—			—			(5,323		)	—
Equity in income from unconsolidated entities	799			(145		)	(11		)	—			643
Loss from continuing operations	(14,530		)	(3,804		)	3,229			(5,323		)	(20,428		)
Income from discontinued operations	—			29			106			—			135
Loss before gain on sale of property	(14,530		)	(3,775		)	3,335			(5,323		)	(20,293		)
Gain on sale of property, net	(228		)	(14		)	5,699			—			5,457
Net loss	(14,758		)	(3,789		)	9,034			(5,323		)	(14,836		)
Loss attributable to noncontrolling interests	—			134			(56		)	—			78
Preferred distributions - consolidated joint venture	—			—			(181		)	—			(181		)
Net loss attributable to FelCor LP	(14,758		)	(3,655		)	8,797			(5,323		)	(14,939		)
Preferred distributions	(9,678		)	—			—			—			(9,678		)
Net loss attributable to FelCor LP common unitholders	$	(24,436	)	$	(3,655	)	$	8,797		$	(5,323	)	$	(24,617	)

24

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months EndedMarch 31, 2013

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Hotel operating revenue	$	—		$	208,538		$	—		$	—		$	208,538
Percentage lease revenue	1,262			—			23,144			(24,406		)	—
Other revenue	3			333			63			—			399
Total revenues	1,265			208,871			23,207			(24,406		)	208,937
Expenses:
Hotel operating expenses	—			148,996			—			—			148,996
Taxes, insurance and lease expense	304			42,993			3,273			(24,406		)	22,164
Corporate expenses	109			5,543			2,180			—			7,832
Depreciation and amortization	1,250			17,596			10,909			—			29,755
Conversion expenses	20			391			217			—			628
Other expenses	23			517			281			—			821
Total operating expenses	1,706			216,036			16,860			(24,406		)	210,196
Operating loss	(441		)	(7,165		)	6,347			—			(1,259		)
Interest expense, net	(21,604		)	(303		)	(4,378		)	—			(26,285		)
Loss before equity in income from unconsolidated entities	(22,045		)	(7,468		)	1,969			—			(27,544		)
Equity in loss from consolidated entities	(4,625		)	—			—			4,625			—
Equity in income from unconsolidated entities	305			(205		)	(11		)	—			89
Loss from continuing operations	(26,365		)	(7,673		)	1,958			4,625			(27,455		)
Income from discontinued operations	—			(415		)	1,265			—			850
Net loss	(26,365		)	(8,088		)	3,223			4,625			(26,605		)
Loss attributable to noncontrolling interests	—			256			(16		)	—			240
Net loss attributable to FelCor LP	(26,365		)	(7,832		)	3,207			4,625			(26,365		)
Preferred distributions	(9,678		)	—			—			—			(9,678		)
Net loss attributable to FelCor LP common unitholders	$	(36,043	)	$	(7,832	)	$	3,207		$	4,625		$	(36,043	)

25

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS

For the Three Months Ended March 31, 2014

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(14,758	)	$	(3,789	)	$	9,034		$	(5,323	)	$	(14,836	)
Foreign currency translation adjustment	(620		)	(83		)	(537		)	620			(620		)
Comprehensive loss	(15,378		)	(3,872		)	8,497			(4,703		)	(15,456		)
Comprehensive loss attributable to noncontrolling interests	—			134			(56		)	—			78
Comprehensive loss attributable to FelCor LP	$	(15,378	)	$	(3,738	)	$	8,441		$	(4,703	)	$	(15,378	)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS

For the Three Months Ended March 31, 2013

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Net loss	$	(26,365	)	$	(8,088	)	$	3,223		$	4,625	$	(26,605	)
Foreign currency translation adjustment	(357		)	(95		)	(262		)	357		(357		)
Comprehensive loss	(26,722		)	(8,183		)	2,961			4,982		(26,962		)
Comprehensive loss attributable to noncontrolling interests	—			256			(16		)	—		240
Comprehensive loss attributable to FelCor LP	$	(26,722	)	$	(7,927	)	$	2,945		$	4,982	$	(26,722	)

26

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2014

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Operating activities:
Cash flows from operating activities	$	(14,116	)	$	21,575		$	14,943		$	—		$	22,402
Investing activities:
Improvements and additions to hotels	(730		)	(20,888		)	(6,999		)	—			(28,617		)
Hotel development	—			—			(23,622		)	—			(23,622		)
Net proceeds from asset dispositions	(167		)	(42		)	40,105			—			39,896
Insurance proceeds	—			255			—			—			255
Change in restricted cash - investing	—			(501		)	10,681			—			10,180
Distributions from unconsolidated entities	1,753			375			—			—			2,128
Intercompany financing	37,827			—			—			(37,827		)	—
Cash flows from investing activities	38,683			(20,801		)	20,165			(37,827		)	220
Financing activities:
Proceeds from borrowings	—			—			81,000			—			81,000
Repayment of borrowings	—			—			(105,353		)	—			(105,353		)
Distributions paid to preferred unitholders	(9,678		)	—			—			—			(9,678		)
Net proceeds from issuance of preferred capital - consolidated joint venture	—			—			40,909			—			40,909
Intercompany financing	—			10,832			(48,659		)	37,827			—
Other	(2,491		)	(139		)	1,050			—			(1,580		)
Cash flows from financing activities	(12,169		)	10,693			(31,053		)	37,827			5,298
Effect of exchange rate changes on cash	—			(39		)	—			—			(39		)
Change in cash and cash equivalents	12,398			11,428			4,055			—			27,881
Cash and cash equivalents at beginning of period	5,227			33,283			7,135			—			45,645
Cash and cash equivalents at end of period	$	17,625		$	44,711		$	11,190		$	—		$	73,526

27

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2013

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Operating activities:
Cash flows from operating activities	$	(3,904	)	$	6,447		$	2,336		$	—		$	4,879
Investing activities:
Improvements and additions to hotels	(142		)	(14,312		)	(8,888		)	—			(23,342		)
Hotel development	—			—			(8,260		)	—			(8,260		)
Payment of selling costs	—			(17		)	(215		)	—			(232		)
Distributions from unconsolidated entities	1,435			250			—			—			1,685
Intercompany financing	19,554			—			—			(19,554		)	—
Other	—			1,746			(921		)	—			825
Cash flows from investing activities	20,847			(12,333		)	(18,284		)	(19,554		)	(29,324		)
Financing activities:
Proceeds from borrowings	—			—			84,245			—			84,245
Repayment of borrowings	—			—			(32,346		)	—			(32,346		)
Distributions paid to preferred unitholders	(9,678		)	—			—			—			(9,678		)
Intercompany financing	—			16,792			(36,346		)	19,554			—
Other	(1,819		)	25			90			—			(1,704		)
Cash flows from financing activities	(11,497		)	16,817			15,643			19,554			40,517
Effect of exchange rate changes on cash	—			(21		)	—			—			(21		)
Change in cash and cash equivalents	5,446			10,910			(305		)	—			16,051
Cash and cash equivalents at beginning of period	8,312			30,425			7,008			—			45,745
Cash and cash equivalents at end of period	$	13,758		$	41,335		$	6,703		$	—		$	61,796

28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Revenue per available room, or RevPAR, for our 49 comparable hotels (our Consolidated Hotels excluding the Wyndham portfolio) increased 7.0% in the first quarter of 2014 compared to the same period last year. Overall, for all of our Consolidated Hotels RevPAR grew 6.4% in the first quarter of 2014 compared to the same period last year, driven primarily by a 4.8% increase in average daily rate, or ADR, and a 1.6% increase in occupancy.

RevPAR for the Wyndham portfolio, which were converted from Holiday Inn on March 1, 2013, increased 2.7% for the first quarter compared to the same period last year. We expect revenues at these hotels to improve meaningfully as transitional disruption subsides. In addition, as previously disclosed, Wyndham’s parent has guaranteed a minimum level of net operating income for each year of the ten-year term. Wyndham’s aggregate payments under this guaranty are limited to $100 million over the term and $21.5 million annually. For the three months ended March 31, 2014 and 2013, we have recorded a $136,000and $464,000, respectively, pro rata portion of the projected full-year guaranty as a reduction of Wyndham's contractual management and other fees.

To date, we have sold 26 hotels as part of our portfolio repositioning plan. We are currently marketing eight non-strategic hotels (of which we have agreed to sell five) and expect to bring another to market later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We have made substantial progress with our partner to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.

We have spent $85.6 million (excluding the initial acquisition costs and capitalized interest) through March 31, 2014 to redevelop the 4+ star Knickerbocker Hotel, located in the heart of Times Square in Manhattan. We expect the project will cost $240 million, in the aggregate, net of historic tax credits. We expect the hotel will open in early fall.

Our joint venture that is redeveloping the Knickerbocker Hotel raised $45 million through the sale of 3.5% preferred equity through the EB-5 immigrant investor program. The venture received $41.5 million in proceeds during the first quarter of 2014, and the remaining $3.5 million will be received as investors’ visas are approved by the government. We used our 95% share of the proceeds to repay borrowings under our line of credit.

Results of Operations

Comparison of the Three Months ended March 31, 2014 and 2013

For the three months ended March 31, 2014, we recorded a $14.8 million net loss compared to a $26.6 million net loss for the same period last year. Our 2014 net loss included a $5.8 million net gain on sale primarily related to two hotels (including $391,000 in discontinued operations).

For the three months ended March 31, 2014:

• Total revenue was $221.3 million, 5.9% more than last year. The increase was driven by a 6.4%increase in same-store RevPAR, reflecting a 4.8%increase in ADR and a 100 basis point increase in occupancy.

• Hotel departmental expenses increased $3.1 million. As a percentage of total revenue, hotel departmental expenses decreased from 38.5% last year to 37.7% in the current period. In the

29

current period, we experienced a favorable shift in banquet and catering operations, which typically have higher margins than other food and beverage operations. Hotel departmental operations also recognized a slight improvement in profitability margins for the rooms department, which was driven by a favorable increase in ADR.

• Other property-related costs increased $2.2 million. As a percentage of total revenue, other property-related costs decreased from 28.4% last year to 27.8% in the current period, primarily attributable to growth in ADR and a change in employee benefit plans implemented by one of the management companies during the current period.

• Management and franchise fees decreased $150,000. As a percentage of total revenue, these costs decreased from 4.4% last year to 4.1% in the current period. In March 2013, we converted eight hotels to Wyndham brands and management. Wyndham’s base management fee is lower than the previous management company, resulting in an improved cost structure.

• Taxes, insurance and lease expense increased $1.5 million and increased slightly as a percentage of total revenue from 10.6% last year to 10.7% in the current period. The increase reflects higher percentage lease expense (computed as a percentage of hotel revenues in excess of base rent; as revenue increases, percentage rent increases at a faster rate than other expenses) and higher property and other taxes.

• Conversion expenses. We converted eight hotels to Wyndham brands and management in March 2013. We classified those expenses as conversion expense in our 2013 statements of operations.

• Other expenses increased $1.2 million compared to the same period in 2013, primarily related to severance costs for certain hotel employees and pre-opening costs for the Knickerbocker Hotel.

• Net interest expense decreased $1.1 million, primarily reflecting increased capitalized interest attributable to renovation and redevelopment projects.

• Discontinued operations include the results of operations for one hotel sold in January 2014 and five hotels sold in 2013. Discontinued operations in 2014 included a $391,000 net gain on sale primarily related to one hotel, offset by debt extinguishment charges of $245,000 (related to $10.9 million in repayment of debt for the hotel sold in the current period).

Non-GAAP Financial Measures

We refer in this report to certain “non-GAAP financial measures.” These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with GAAP. The following tables reconcile these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and the limitations of such measures.

30

Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)

	Three Months Ended March 31,
	2014							2013
	Dollars			Shares	Per Share Amount			Dollars			Shares	Per Share Amount
Net loss	$	(14,836	)					$	(26,605	)
Noncontrolling interests	199							420
Preferred distributions - consolidated joint venture	(181		)					—
Preferred dividends	(9,678		)					(9,678		)
Net loss attributable to FelCor common stockholders	(24,496		)	124,146	$	(0.20	)	(35,863		)	123,814	$	(0.29	)
Depreciation and amortization	29,601			—	0.24			29,755			—	0.24
Depreciation, discontinued operations and unconsolidated entities	2,675			—	0.02			4,521			—	0.04
Gain on sale of hotels, net of noncontrolling interests in other partnerships	(5,851		)	—	(0.05		)	—			—	—
Loss on sale, unconsolidated entities	33			—	—			—			—	—
Noncontrolling interests in FelCor LP	(121		)	618	—			(180		)	621	—
Conversion of unvested restricted stock	—			858	—			—			—	—
FFO	1,841			125,622	0.01			(1,767		)	124,435	(0.01		)
Acquisition costs	—			—	—			23			—	—
Debt extinguishment, including discontinued operations	251			—	—			—			—	—
Severance costs	400			—	—			—			—	—
Conversion expenses	—			—	—			628			—	—
Variable stock compensation	564			—	0.01			102			—	—
Pre-opening costs, net of noncontrolling interests	1,053			—	0.01			241			—	—
Adjusted FFO	$	4,109		125,622	$	0.03		$	(773	)	124,435	$	(0.01	)

31

Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Same-store Adjusted EBITDA

(in thousands)

	Three Months Ended
	March 31,
	2014			2013
Net loss	$	(14,836	)	$	(26,605	)
Depreciation and amortization	29,601			29,755
Depreciation, discontinued operations and unconsolidated entities	2,675			4,521
Interest expense	25,242			26,307
Interest expense, discontinued operations and unconsolidated entities	744			870
Noncontrolling interests in other partnerships	78			240
EBITDA	43,504			35,088
Debt extinguishment, including discontinued operations	251			—
Acquisition costs	—			23
Gain on sale of hotels, net of noncontrolling interests in other partnerships	(5,851		)	—
Loss on sale, unconsolidated entities	33			—
Amortization of fixed stock and directors’ compensation	1,122			1,578
Severance costs	400			—
Conversion expenses	—			628
Variable stock compensation	564			102
Pre-opening costs, net of noncontrolling interests	1,053			241
Adjusted EBITDA	41,076			37,660
Adjusted EBITDA from hotels, disposed and held for sale	(1,179		)	(3,852		)
Same-store Adjusted EBITDA	$	39,897		$	33,808

32

Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)

	Three Months Ended
	March 31,
	2014			2013
Same-store operating revenue:
Room	$	166,486		$	157,069
Food and beverage	39,430			36,616
Other operating departments	11,293			10,959
Same-store operating revenue	217,209			204,644
Same-store operating expense:
Room	45,926			44,043
Food and beverage	30,896			29,953
Other operating departments	5,566			5,247
Other property related costs	60,408			58,168
Management and franchise fees	8,865			9,004
Taxes, insurance and lease expense	14,974			14,233
Same-store operating expense	166,635			160,648
Hotel EBITDA	$	50,574		$	43,996
Hotel EBITDA Margin	23.3		%	21.5		%

Hotel EBITDA and Hotel EBITDA Margin (continued)

(dollars in thousands)

	Three Months Ended
	March 31,
	2014			2013
Hotel EBITDA - Comparable core (31)	$	33,413		$	28,581
Hotel EBITDA - Non-strategic (18)	11,111			10,323
Hotel EBITDA - Comparable (49)	44,524			38,904
Hotel EBITDA - Wyndham (8)	6,050			5,092
Hotel EBITDA (57)	$	50,574		$	43,996
Hotel EBITDA Margin - Comparable core (31)	22.9		%	21.0		%
Hotel EBITDA Margin - Non-strategic (18)	23.8		%	23.1		%
Hotel EBITDA Margin - Comparable (49)	23.1		%	21.5		%
Hotel EBITDA Margin - Wyndham (8)	24.6		%	21.2		%
Hotel EBITDA Margin (57)	23.3		%	21.5		%

33

Reconciliation of Same-store Operating Revenue and Same-store Operating Expense to Total Revenue, Total Operating Expense and Operating Income (Loss)

(in thousands)

	Three Months Ended
	March 31,
	2014			2013
Same-store operating revenue	$	217,209		$	204,644
Other revenue	327			399
Revenue from hotels, disposed and held for sale(a)	3,813			3,894
Total revenue	221,349			208,937
Same-store operating expense	166,635			160,648
Consolidated hotel lease expense(b)	10,391			9,558
Unconsolidated taxes, insurance and lease expense	(1,965		)	(1,898		)
Corporate expenses	7,825			7,832
Depreciation and amortization	29,601			29,755
Conversion expenses	—			628
Expenses from hotels, disposed and held for sale(a)	2,686			2,852
Other expenses	2,014			821
Total operating expense	217,187			210,196
Operating income (loss)	$	4,162		$	(1,259	)

(a) In March 2014, we sold a 218-room Embassy Suites hotel in Bloomington, Minnesota, for $24 million. In addition, we have agreed to sell the 208-room DoubleTree Suites in Charlotte, North Carolina, for $37 million. The hotel is held for sale on our March 31, 2014 balance sheet, as the purchaser of the Charlotte hotel paid a non-refundable deposit toward the purchase price. The closing is scheduled for May. Under recently issued GAAP accounting guidance, we included the operating performance for these hotels in continuing operations in our Consolidated Statements of Operations for the first quarter 2014 and 2013. However, for purposes of our Non-GAAP reporting metrics, we have excluded the results of these hotels to provide a meaningful same-store comparison.

(b) Consolidated hotel lease expense represents the percentage lease expense of our 51% owned operating lessees. The offsetting percentage lease revenue is included in equity in income from unconsolidated entities.

Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company’s operations. These supplemental measures are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT’s performance and should be considered along with, but not as an alternative to, net income (loss) attributable to FelCor as a measure of our operating performance.

34

FFO and EBITDA

The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income or loss attributable to parent (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation, amortization and impairment losses. FFO for unconsolidated partnerships and joint ventures are calculated on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss attributable to parent (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Adjustments to FFO and EBITDA

We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional items provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, and Adjusted EBITDA when combined with GAAP net income attributable to FelCor, EBITDA and FFO, is beneficial to an investor’s better understanding of our operating performance.

• Gains and losses related to extinguishment of debt and interest rate swaps - We exclude gains and losses related to extinguishment of debt and interest rate swaps from FFO and EBITDA because we believe that it is not indicative of ongoing operating performance of our hotel assets. This also represents an acceleration of interest expense or a reduction of interest expense, and interest expense is excluded from EBITDA.

• Cumulative effect of a change in accounting principle - Infrequently, the Financial Accounting Standards Board promulgates new accounting standards that require the consolidated statements of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments in computing Adjusted FFO and Adjusted EBITDA because they do not reflect our actual performance for that period.

• Other transaction costs - From time to time, we periodically incur costs that are not indicative of ongoing operating performance. Such costs include, but are not limited to, conversions costs, acquisition costs, pre-opening costs and severance costs. We exclude these costs from the calculation of Adjusted FFO and Adjusted EBITDA.

• Variable stock compensation - We exclude the cost associated with our variable stock compensation. This cost is subject to volatility related to the price and dividends of our common stock that does not necessarily correspond to our operating performance.

In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale of depreciable assets and impairment losses because including them in EBITDA is inconsistent with reporting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets and impairment losses represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA. We also exclude the amortization of our fixed stock compensation. While this amortization is included in corporate expenses and is not separately stated on our statements of operations, excluding this amortization is consistent with the EBITDA definition.

35

Hotel EBITDA and Hotel EBITDA Margin

Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and brand/managers have direct control. We believe that Hotel EBITDA and Hotel EBITDA margin are useful to investors by providing greater transparency with respect to two significant measures that we use in our financial and operational decision-making. Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel EBITDA margin in a manner consistent with Adjusted EBITDA, however, we also eliminate all revenues and expenses from continuing operations not directly associated with hotel operations, including other income and corporate-level and other expenses. We eliminate these additional items because we believe property-level results provide investors with supplemental information into the ongoing operational performance of our hotels and the effectiveness of management on a property-level basis. We also eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by noncontrolling interests and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our Consolidated Hotels. Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis.

Use and Limitations of Non-GAAP Measures

Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in evaluating hotel-level performance and the operating efficiency of our hotel managers.

The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on a single financial measure.

36

Pro Rata Share of Rooms Owned

The following table sets forth, at March 31, 2014, our pro rata share of hotel rooms, included in continuing operations, after giving consideration to the portion of rooms attributed to our partners in our consolidated and unconsolidated joint ventures:

	Hotels	Room Count at March 31, 2014
Consolidated Hotels(a)	57	16,988
Unconsolidated hotel operations	1	171
Total hotels	58	17,159
50% joint ventures	13	(1,573	)
60% joint venture	1	(214	)
82% joint venture	1	(40	)
90% joint ventures	2	(44	)
Pro rata rooms attributed to joint venture partners		(1,871	)
Pro rata share of rooms owned		15,288

(a)    Excludes hotel held for sale as of March 31, 2014.

37

Hotel Portfolio Composition

The following table illustrates the distribution of Same-store hotels.

			Year Ended December 31, 2013
Brand	Hotels	Rooms	Hotel Operating Revenue (in thousands)		Hotel EBITDA (in thousands)(a)
Embassy Suites Hotels	18	4,982	$	255,744	$	81,062
Wyndham and Wyndham Grand(b)	8	2,528	103,931		35,046
Renaissance and Marriott	3	1,321	119,838		21,341
DoubleTree by Hilton and Hilton	3	802	41,106		12,621
Sheraton and Westin	2	673	37,996		10,174
Fairmont	1	383	49,104		7,845
Holiday Inn	2	968	46,403		6,406
Morgans and Royalton	2	285	34,340		3,514
Core hotels	39	11,942	688,462		178,009
Non-strategic hotels(c)	18	5,046	184,125		45,611
Same-store hotels	57	16,988	$	872,587	$	223,620
Market
San Francisco area	5	1,903	$	124,825	$	31,587
Boston	3	916	76,510		17,794
South Florida	3	923	50,011		14,305
Los Angeles area	2	481	23,760		10,451
Myrtle Beach	2	640	37,955		10,120
New York area	3	546	48,045		6,761
Atlanta	1	316	14,016		5,491
Philadelphia	2	728	34,271		7,567
Tampa	1	361	46,423		7,435
Austin	1	188	13,126		5,680
Other markets	16	4,940	219,520		60,818
Core hotels	39	11,942	688,462		178,009
Non-strategic hotels(c)	18	5,046	184,125		45,611
Same-store hotels	57	16,988	$	872,587	$	223,620
Location
Urban	17	5,310	$	323,304	$	81,351
Resort	9	2,733	185,264		41,294
Airport	8	2,621	122,734		37,364
Suburban	5	1,278	57,160		18,000
Core hotels	39	11,942	688,462		178,009
Non-strategic hotels(c)	18	5,046	184,125		45,611
Same-store hotels	57	16,988	$	872,587	$	223,620

(a) Hotel EBITDA is a non-GAAP financial measure. A detailed reconciliation and further discussion of Hotel EBITDA is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Quarterly Report on Form 10-Q. We consider Hotel Operating Revenue and Hotel EBITDA to be same store metrics for this presentation and hotels disposed or held for sale are excluded.

(b) These hotels converted to Wyndham on March 1, 2013.

(c) Excludes hotel held for sale as of March 31, 2014.

38

Hotel Operating Statistics

The following tables set forth occupancy, ADR and RevPAR for the three months ended March 31, 2014 and 2013, and the percentage changes therein for the periods presented, for our Same-store Consolidated Hotels.

Operating Statistics by Brand

	Occupancy (%)
	Three Months Ended
	March 31,
	2014	2013	%Variance
Embassy Suites Hotels	76.8	74.1	3.7
Renaissance and Marriott	75.6	74.8	1.1
DoubleTree by Hilton and Hilton	64.4	59.8	7.8
Sheraton and Westin	56.4	58.2	(3.0	)
Fairmont	58.6	60.3	(2.9	)
Holiday Inn	64.5	68.4	(5.7	)
Morgans and Royalton	79.4	81.0	(2.0	)
Comparable core hotels (31)	72.2	70.9	1.8
Non-strategic hotels (18)(a)	71.3	69.7	2.3
Comparable hotels (49)	71.9	70.5	2.0
Wyndham and Wyndham Grand(b)	62.9	63.6	(1.0	)
Same-store hotels (57)	70.5	69.5	1.6
	ADR ($)
	Three Months Ended
	March 31,
	2014	2013	%Variance
Embassy Suites Hotels	166.71	157.30	6.0
Renaissance and Marriott	236.72	221.01	7.1
DoubleTree by Hilton and Hilton	156.22	155.48	0.5
Sheraton and Westin	127.91	125.38	2.0
Fairmont	238.07	221.26	7.6
Holiday Inn	131.81	112.44	17.2
Morgans and Royalton	258.62	260.05	(0.5	)
Comparable core hotels (31)	176.24	166.29	6.0
Non-strategic hotels (18)(a)	117.30	114.77	2.2
Comparable hotels (49)	155.85	148.56	4.9
Wyndham and Wyndham Grand(b)	144.62	139.38	3.8
Same-store hotels (57)	154.36	147.30	4.8
	RevPAR ($)
	Three Months Ended
	March 31,
	2014	2013	%Variance
Embassy Suites Hotels	128.06	116.56	9.9
Renaissance and Marriott	178.95	165.32	8.2
DoubleTree by Hilton and Hilton	100.65	92.96	8.3
Sheraton and Westin	72.20	72.93	(1.0	)
Fairmont	139.46	133.52	4.4
Holiday Inn	85.01	76.89	10.6
Morgans and Royalton	205.34	210.76	(2.6	)
Comparable core hotels (31)	127.25	117.93	7.9
Non-strategic hotels (18)(a)	83.62	80.00	4.5
Comparable hotels (49)	112.02	104.73	7.0
Wyndham and Wyndham Grand(b)	90.99	88.60	2.7
Same-store hotels (57)	108.90	102.31	6.4

(a)    Excludes hotel held for sale as of March 31, 2014.

(b)    These hotels converted to Wyndham on March 1, 2013.

39

Hotel Operating Statistics by Market

	Occupancy (%)
	Three Months Ended
	March 31,
	2014	2013	%Variance
San Francisco area	72.0	74.3	(3.2	)
Los Angeles area	82.7	76.9	7.5
South Florida	91.2	90.8	0.4
Boston	60.8	63.0	(3.4	)
New York area	71.7	73.3	(2.2	)
Myrtle Beach	45.5	37.0	22.9
Atlanta	75.5	72.3	4.5
Philadelphia	59.7	53.0	12.7
Tampa	86.1	83.7	2.9
Austin	78.4	80.3	(2.4	)
Other markets	72.5	70.2	3.2
Comparable core hotels (31)	72.2	70.9	1.8
	ADR ($)
	Three Months Ended
	March 31,
	2014	2013	%Variance
San Francisco area	188.07	162.38	15.8
Los Angeles area	137.23	136.12	0.8
South Florida	205.26	190.78	7.6
Boston	203.68	190.57	6.9
New York area	229.08	218.23	5.0
Myrtle Beach	108.73	108.94	(0.2	)
Atlanta	146.50	142.77	2.6
Philadelphia	148.79	152.21	(2.2	)
Tampa	226.08	215.29	5.0
Austin	232.97	221.78	5.0
Other markets	154.15	149.13	3.4
Comparable core hotels (31)	176.24	166.29	6.0
	RevPAR ($)
	Three Months Ended
	March 31,
	2014	2013	%Variance
San Francisco area	135.42	120.73	12.2
Los Angeles area	113.46	104.71	8.4
South Florida	187.18	173.22	8.1
Boston	123.91	120.00	3.3
New York area	164.18	159.99	2.6
Myrtle Beach	49.43	40.30	22.6
Atlanta	110.64	103.18	7.2
Philadelphia	88.84	80.65	10.2
Tampa	194.74	180.26	8.0
Austin	182.67	178.15	2.5
Other markets	111.72	104.74	6.7
Comparable core hotels (31)	127.25	117.93	7.9

40

Hotel Portfolio

The following table sets forth certain descriptive information regarding the hotels in which we held ownership interest at March 31, 2014.

Core Hotels	Brand	State	Rooms	% Owned		(a)
Birmingham	Embassy Suites Hotel	AL	242
Phoenix – Biltmore	Embassy Suites Hotel	AZ	232
Indian Wells – Esmeralda Resort & Spa	Renaissance	CA	560
Los Angeles – International Airport/South	Embassy Suites Hotel	CA	349
Napa Valley	Embassy Suites Hotel	CA	205
Mandalay Beach – Hotel & Resort	Embassy Suites Hotel	CA	250
Milpitas – Silicon Valley	Embassy Suites Hotel	CA	266
San Diego – Bayside	Wyndham	CA	600
San Francisco – Airport/Waterfront	Embassy Suites Hotel	CA	340
San Francisco – Airport/South San Francisco	Embassy Suites Hotel	CA	312
San Francisco – Fisherman’s Wharf	Holiday Inn	CA	585
San Francisco – Union Square	Marriott	CA	400
Santa Monica – at the Pier	Wyndham	CA	132
Deerfield Beach – Resort & Spa	Embassy Suites Hotel	FL	244
Ft. Lauderdale – 17th Street	Embassy Suites Hotel	FL	361
Miami – International Airport	Embassy Suites Hotel	FL	318
Orlando – International Drive South/Convention	Embassy Suites Hotel	FL	244
Orlando – Walt Disney World Resort	DoubleTree Suites by Hilton	FL	229
St. Petersburg – Vinoy Resort & Golf Club	Renaissance	FL	361
Atlanta – Buckhead	Embassy Suites Hotel	GA	316
New Orleans – French Quarter	Wyndham	LA	374
Boston – Beacon Hill	Wyndham	MA	304
Boston – Copley Plaza	Fairmont	MA	383
Boston – Marlborough	Embassy Suites Hotel	MA	229
Minneapolis – Airport	Embassy Suites Hotel	MN	310
Secaucus – Meadowlands	Embassy Suites Hotel	NJ	261	50	%
New York – Morgans	Independent	NY	117
New York – Royalton	Independent	NY	168
Philadelphia – Historic District	Wyndham	PA	364
Philadelphia – Society Hill	Sheraton	PA	364
Pittsburgh – at University Center (Oakland)	Wyndham	PA	251
Charleston – The Mills House	Wyndham Grand	SC	216
Myrtle Beach – Oceanfront Resort	Embassy Suites Hotel	SC	255
Myrtle Beach Resort	Hilton	SC	385
Nashville – Opryland – Airport (Briley    Parkway)	Holiday Inn	TN	383

41

Hotel Portfolio (continued)

Core Hotels	Brand	State	Rooms	% Owned		(a)
Austin	DoubleTree Suites by Hilton	TX	188	90	%
Dallas – Love Field	Embassy Suites Hotel	TX	248
Houston – Medical Center	Wyndham	TX	287
Burlington Hotel & Conference Center	Sheraton	VT	309
Unconsolidated Hotel
New Orleans – French Quarter – Chateau    LeMoyne	Holiday Inn	LA	171	50	%
Hotel under Development
New York – Knickerbocker	Independent	NY	330	95	%
Non-strategic Hotels
Dana Point – Doheny Beach	DoubleTree Suites by Hilton	CA	196
San Rafael – Marin County	Embassy Suites Hotel	CA	235	50	%
Orlando – International Airport	Holiday Inn	FL	288
Atlanta – Gateway – Atlanta Airport	Sheraton	GA	395
Atlanta – Perimeter Center	Embassy Suites Hotel	GA	241	50	%
Chicago – Lombard/Oak Brook	Embassy Suites Hotel	IL	262	50	%
Indianapolis – North	Embassy Suites Hotel	IN	221	82	%
Kansas City – Overland Park	Embassy Suites Hotel	KS	199	50	%
Baltimore – at BWI Airport	Embassy Suites Hotel	MD	251	90	%
Kansas City – Plaza	Embassy Suites Hotel	MO	266	50	%
Charlotte	Embassy Suites Hotel	NC	274	50	%
Raleigh – Crabtree	Embassy Suites Hotel	NC	225	50	%
Parsippany	Embassy Suites Hotel	NJ	274	50	%
Toronto – International Airport	Holiday Inn	Ontario	446
Austin – Central	Embassy Suites Hotel	TX	260	50	%
Dallas – Park Central	Westin	TX	536	60	%
San Antonio – International Airport	Embassy Suites Hotel	TX	261	50	%
San Antonio – NW I-10	Embassy Suites Hotel	TX	216	50	%
Non-strategic Hotel Held for Sale
Charlotte – SouthPark	DoubleTree Suites by Hilton	NC	208

(a) We own 100% of each hotel except where otherwise noted.

42

Liquidity and Capital Resources

Operating Activities

During the first three months of 2014, our operations (primarily hotel operations) provided $22.4 million in cash, $17.5 million more than the same period last year. This increase is primarily attributable to the 2014 receipt of Wyndham’s $8 million net operating income guaranty (which we accrued for in 2013), as well as improved operations compared to last year. Our consolidated statements of cash flows combines cash flow from continuing and discontinued operations. Hotels in discontinuing operations did not generate operating cash flow for the three months ended March 31, 2014 and generated $2.7 million of operating cash flow for the three months ended March 31, 2013. The hotels reported in discontinued operations will not provide acceptable future returns of operating cash flow on our investment, and we do not expect the absence of their operating cash flow to have a material impact on our business.

At March 31, 2014, we had $73.5 million of cash and cash equivalents, including $44.4 million held by third-party management companies.

RevPAR growth for the lodging industry remains strong. RevPAR at our comparable hotels for the first three months increased 7.0%, driven by a 4.9% increase in ADR and a 2.0% increase in occupancy. We expect RevPAR at our comparable hotels to increase 6.5-7.5% during 2014, primarily from ADR growth, which is a premium to the industry due to portfolio condition and quality. We expect to generate $112.9 - $118.8 million of operating cash flow in 2014.

Investing Activities

During the first three months of 2014, we had $220,000 of cash provided by investing activities compared to $29.3 million of cash used during the same period last year. So far in 2014, compared to the same period last year, we spent $5.3 million more on improvements and additions to hotels and $15.4 million more on hotel development. These increases in capitalized investments were more than offset by $39.9 million in net proceeds from hotel sales and a $10.2 million reduction of restricted cash (which was primarily used to fund our hotel development).

For renovations and redevelopment in 2014, we expect to spend approximately $85 million which will be funded from operating cash flow, cash on hand and borrowings under our line of credit. In addition, for the Knickerbocker Hotel we expect to invest approximately $81 million in 2014, which will be funded primarily by draws on the Knickerbocker construction loan and additional capital that is currently being raised through the EB-5 immigrant investment program.

To date, we have sold 26 hotels as part of our portfolio repositioning plan. We are currently marketing eight non-strategic hotels (of which we have agreed to sell five) and expect to bring another to market later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We have made substantial progress with our partner to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.

Financing Activities

During the first three months of 2014, cash provided by financing activities decreased by $35.2 million compared to the same period last year. We repaid $73.0 million more of debt in the current year as compared to the same period last year, which was partially offset by $40.9 million in net proceeds

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from issuing preferred equity by our Knickerbocker Hotel consolidated joint venture. In 2014, we expect to pay approximately $3 million of normally occurring principal payments, $39 million of preferred dividends and $10 million in common dividends (assuming the current quarterly dividend per share), all of which will be funded from operating cash flow and cash on hand. We are using proceeds from hotel sales to make additional non-recurring principal payments. To the extent debt matures prior to receiving sufficient proceeds from asset sales, we expect to bridge the shortfall with a low-cost and freely pre-payable loan that would be repaid with subsequent asset sale proceeds.

FelCor’s Board of Directors reinstated a quarterly common dividend in October 2013, in recognition of our ongoing and successful portfolio repositioning and balance sheet restructuring. FelCor’s Board of Directors declared a $0.02 per share first quarter common stock dividend, which was paid in April 2014. FelCor LP, which is our operating partnership, distributes funds to FelCor to pay common or preferred dividends. FelCor's Board of Directors will determine the amount of future common and preferred dividends for each quarter, if any, based upon various factors including operating results, economic conditions, other operating trends, our financial condition and capital requirements, as well as the minimum REIT distribution requirements.

Except for our senior notes and line of credit, our mortgage debt is generally recourse solely to the specific hotels securing the debt, except in case of fraud, misapplication of funds and certain other customary limited recourse carve-out provisions that could extend recourse to us. Much of our secured debt allows us to substitute collateral under certain conditions and is prepayable, subject (in some instances) to various prepayment, yield maintenance or defeasance obligations.

Most of our secured debt (other than our senior notes and line of credit) includes lock-box arrangements under certain circumstances. We are permitted to spend an amount required to cover our budgeted hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves, even if revenues are flowing through a lock-box because a specified debt service coverage ratio is not met. With the exception of a loan secured by one property, all of our consolidated loans subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.

Senior Notes. Our senior notes require that we satisfy total leverage, secured leverage and interest coverage tests in order to: (i) incur additional indebtedness, except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions required to qualify as a REIT; (iii) repurchase capital stock; or (iv) merge. We currently exceed all minimum thresholds. These notes are guaranteed by us, and payment of our 10% notes is secured by a pledge of the limited partner interests in FelCor LP owned by FelCor. In addition, our senior notes are secured by a combination of first lien mortgages and related security interests and/or negative pledges on 26 hotels (11 hotels for our 10% senior notes, six hotels for our 6.75% senior notes and nine hotels for our 5.625% senior notes), as well as pledges of equity interests in certain subsidiaries of FelCor LP.

Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in hotel operating expenses disproportionately to revenues. If competition requires us to reduce room rates or limits our ability to raise room rates in the future, we may not be able to adjust our room rates to reflect the effects of inflation in full, in which case our operating results and liquidity could be adversely affected.

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Seasonality

The lodging business is seasonal in nature. Generally, hotel revenues are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas generally are substantially greater during tourist season than other times of the year. Seasonal variations in revenue at our hotels can be expected to cause quarterly fluctuations in our revenues. Quarterly earnings also may be adversely affected by events beyond our control, such as extreme weather conditions, economic factors and other considerations affecting travel. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, we may utilize cash on hand or borrowings to satisfy our obligations.

Disclosure Regarding Forward-Looking Statements

This report and the documents incorporated by reference in this report include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” or other variations of these terms (including their use in the negative), or by discussions of strategies, plans or intentions. A number of factors could cause actual results to differ materially from those anticipated by these forward-looking statements. Certain of these risks and uncertainties are described in greater detail under “Risk Factors” in our Annual Report on Form 10-K or in our other filings with the Securities and Exchange Commission, or the SEC.

These forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect. Accordingly, while we believe that the plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot assure you that deviations from these plans, intentions or expectations will not be material. The forward-looking statements included in this report, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by the risk factors and cautionary statements discussed in our filings to the SEC. We undertake no obligation to publicly update any forward-looking statements to reflect future circumstances or changes in our expectations.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

At March 31, 2014, approximately 90% of our consolidated debt bears fixed-rate interest.

The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents scheduled maturities and weighted average interest rates, by maturity dates. The fair value of our fixed-rate debt indicates the estimated principal amount of debt having the same debt service requirements that could have been borrowed at the date presented, at then current market interest rates.

Expected Maturity Date

at March 31, 2014

(dollars in thousands)

	Expected Maturity Date
	2014			2015			2016			2017			2018			Thereafter			Total			Fair Value
Liabilities
Fixed-rate:
Debt	$	270,924		$	3,107		$	11,461		$	2,810		$	2,954		$	1,194,701		$	1,485,957		$	1,546,449
Average   interest rate	9.52		%	5.11		%	5.61		%	4.95		%	4.95		%	6.04		%	6.66		%
Floating-rate:
Debt	—			—			157,861			—			—			—			157,861			$	158,351
Average   interest rate (a)	—			—			3.91		%	—			—			—			3.91		%
Total debt	$	270,924		$	3,107		$	169,322		$	2,810		$	2,954		$	1,194,701		$	1,643,818
Average    interest rate	9.52		%	5.11		%	4.03		%	4.95		%	4.95		%	6.04		%	6.40		%
Net discount																			(3,190		)
Total debt																			$	1,640,628

(a) The average floating interest rate considers the implied forward rates in the yield curve at March 31, 2014.

Item 4. Controls and Procedures.

(a)Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were effective, such that the information relating to us required to be disclosed in our reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.

(b)Changes in internal control over financial reporting.

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15 (f) promulgated under the Securities Exchange Act of 1934) during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 6. Exhibits.

The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K:

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor.
31.3	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
31.4	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for FelCor.
32.2	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
101.INS	XBRL Instance Document. Submitted electronically with this report.
101.SCH	XBRL Taxonomy Extension Schema Document. Submitted electronically with this report.
101.CAL	XBRL Taxonomy Calculation Linkbase Document. Submitted electronically with this report.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document. Submitted electronically with this report.
101.LAB	XBRL Taxonomy Label Linkbase Document. Submitted electronically with this report.
101.PRE	XBRL Taxonomy Presentation Linkbase Document. Submitted electronically with this report.

* Previously filed.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) FelCor’s Consolidated Balance Sheets at March 31, 2014 and December 31, 2013; (ii) FelCor’s Consolidated Statements of Operations for the three months ended

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March 31, 2014 and 2013; (iii) FelCor’s Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2014 and 2013; (iv) FelCor’s Consolidated Statements of Changes in Equity for the three months ended March 31, 2014 and 2013; (v) FelCor’s Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013; (vi) FelCor LP’s Consolidated Balance Sheets at March 31, 2014 and December 31, 2013; (vii) FelCor LP’s Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013; (viii) FelCor LP’s Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2014 and 2013; (ix) FelCor LP’s Consolidated Statements of Partners’ Capital for the three months ended March 31, 2014 and 2013; (x) FelCor LP’s Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013; and (xi) the Notes to Consolidated Financial Statements. Users of this data are advised pursuant to Rule 406T of Regulation S‑T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FELCOR LODGING TRUST INCORPORATED
Date:  May 2, 2014	By:	/s/ Jeffrey D. Symes
		Name:	Jeffrey D. Symes
		Title:	Senior Vice President, Chief Accounting Officer and Controller

	FELCOR LODGING LIMITED PARTNERSHIP
	a Delaware limited partnership
	By:	FelCor Lodging Trust Incorporated
		Its General Partner
Date:  May 2, 2014	By:	/s/ Jeffrey D. Symes
		Name:	Jeffrey D. Symes
		Title:	Senior Vice President, Chief Accounting Officer and Controller

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