FelCor Lodging Trust (FCH) 10-Q 2015 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, 2015

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	o	Yes	þ	No

Note: As a voluntary filer not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act, the registrant has filed all reports pursuant to Section 13 or 15(d) as if the registrant were subject to such filing requirements.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 24, 2015, FelCor Lodging Trust Incorporated had issued and outstanding 143,276,171 shares of common stock.

EXPLANATORY NOTE

This quarterly report on Form 10-Q for the quarter ended March 31, 2015, 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, 2015 and December 31, 2014 (unaudited)	1
		Consolidated Statements of Operations – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	2
		Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	3
		Consolidated Statements of Changes in Equity – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	4
		Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	5
	FelCor Lodging Limited Partnership:
		Consolidated Balance Sheets - March 31, 2015 and December 31, 2014 (unaudited)	6
		Consolidated Statements of Operations – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	7
		Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	8
		Consolidated Statements of Partners’ Capital – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	9
		Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2015 and 2014 (unaudited)	10
	Notes to Consolidated Financial Statements		11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
		General	30
		Results of Operations	30
		Non-GAAP Financial Measures	31
		Pro Rata Share of Rooms Owned	38
		Hotel Portfolio Composition	39
		Hotel Operating Statistics	40
		Hotel Portfolio	42
		Liquidity and Capital Resources	44
		Inflation and Competition	46
		Seasonality	46
		Disclosure Regarding Forward-Looking Statements	46
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		47
Item 4.	Controls and Procedures		47
		PART II – OTHER INFORMATION
Item 6.	Exhibits		48
SIGNATURES			50

ii

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

	March 31, 2015			December 31, 2014
Assets
Investment in hotels, net of accumulated depreciation of $861,796 and $850,687 at March 31, 2015 and December 31, 2014, respectively	$	1,714,000		$	1,599,791
Hotel development	143,779			297,466
Investment in unconsolidated entities	14,633			15,095
Hotels held for sale	16,618			47,145
Cash and cash equivalents	58,930			47,147
Restricted cash	22,172			20,496
Accounts receivable, net of allowance for doubtful accounts of $185 and $241 at March 31, 2015 and December 31, 2014, respectively	33,794			27,805
Deferred expenses, net of accumulated amortization of $18,802 and $17,111 at March 31, 2015 and December 31, 2014, respectively	24,119			25,827
Other assets	21,505			23,886
Total assets	$	2,049,550		$	2,104,658
Liabilities and Equity
Debt	$	1,543,439		$	1,585,867
Distributions payable	13,867			13,827
Accrued expenses and other liabilities	138,095			135,481
Total liabilities	1,695,401			1,735,175
Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 611 units issued and outstanding at March 31, 2015 and December 31, 2014	7,026			6,616
Equity:
Preferred stock, $0.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred Stock, 12,879 shares, liquidation value of $321,987, issued and outstanding at March 31, 2015 and December 31, 2014	309,337			309,337
Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at March 31, 2015 and December 31, 2014	169,412			169,412
Common stock, $0.01 par value, 200,000 shares authorized; 124,872 and 124,605 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	1,249			1,246
Additional paid-in capital	2,354,800			2,353,666
Accumulated deficit	(2,538,643		)	(2,530,671		)
Total FelCor stockholders’ equity	296,155			302,990
Noncontrolling interests in other partnerships	8,278			18,435
Preferred equity in consolidated joint venture, liquidation value of $43,371 and $42,094 at March 31, 2015 and December 31, 2014, respectively	42,690			41,442
Total equity	347,123			362,867
Total liabilities and equity	$	2,049,550		$	2,104,658

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, 2015 and 2014

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

	Three Months Ended March 31,
	2015			2014
Revenues:
Hotel operating revenue	$	213,285		$	221,022
Other revenue	410			327
Total revenues	213,695			221,349
Expenses:
Hotel departmental expenses	77,656			83,523
Other property-related costs	56,895			61,578
Management and franchise fees	9,085			9,013
Taxes, insurance and lease expense	14,976			23,633
Corporate expenses	8,573			7,825
Depreciation and amortization	27,772			29,601
Other expenses	4,228			2,014
Total operating expenses	199,185			217,187
Operating income	14,510			4,162
Interest expense, net	(19,481		)	(25,227		)
Debt extinguishment	(73		)	(6		)
Loss before equity in income from unconsolidated entities	(5,044		)	(21,071		)
Equity in income from unconsolidated entities	149			643
Loss from continuing operations	(4,895		)	(20,428		)
Income from discontinued operations	4			135
Loss before gain on sale of hotels	(4,891		)	(20,293		)
Gain on sale of hotels, net	16,887			5,457
Net income (loss)	11,996			(14,836		)
Net loss (income) attributable to noncontrolling interests in other partnerships	(4,879		)	78
Net loss attributable to redeemable noncontrolling interests in FelCor LP	14			121
Preferred distributions - consolidated joint venture	(348		)	(181		)
Net income (loss) attributable to FelCor	6,783			(14,818		)
Preferred dividends	(9,678		)	(9,678		)
Net loss attributable to FelCor common stockholders	$	(2,895	)	$	(24,496	)
Basic and diluted per common share data:
Loss from continuing operations	$	(0.02	)	$	(0.20	)
Net loss	$	(0.02	)	$	(0.20	)
Basic and diluted weighted average common shares outstanding	124,519			124,146

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

2

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended March 31, 2015 and 2014

(unaudited, in thousands)

	Three Months Ended
	March 31,
	2015			2014
Net income (loss)	$	11,996		$	(14,836	)
Foreign currency translation adjustment	—			(620		)
Comprehensive income (loss)	11,996			(15,456		)
Comprehensive loss (income) attributable to noncontrolling interests in other partnerships	(4,879		)	78
Comprehensive loss attributable to redeemable noncontrolling interests in FelCor LP	14			124
Preferred distributions - consolidated joint venture	(348		)	—
Comprehensive income (loss) attributable to FelCor	$	6,783		$	(15,254	)

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, 2015 and 2014

(unaudited, in thousands)

	Preferred Stock				Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Noncontrolling Interests in Other Partnerships			Preferred Equity in Consolidated Joint Venture			Comprehensive Income (Loss)			Total Equity
	Number of Shares	Amount			Number of Shares		Amount
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
Balance at December 31, 2014	12,947	$	478,749		124,605		$	1,246		$	2,353,666		$	—		$	(2,530,671	)	$	18,435		$	41,442					$	362,867
Issuance of stock awards	—	—			267		3			(3		)	—			—			—			—						—
Stock awards - amortization	—	—			—		—			1,584			—			—			—			—						1,584
Forfeiture of stock awards	—	—			—		—			—			—			(8		)	—			—						(8		)
Allocation to redeemable noncontrolling interests	—	—			—		—			(447		)	—			—			—			—						(447		)
Contribution from noncontrolling interests	—	—			—		—			—			—			—			790			—						790
Distribution to noncontrolling interests	—	—			—		—			—			—			—			(15,826		)	—						(15,826		)
Dividends declared:
$0.04 per common share	—	—			—		—			—			—			(5,069		)	—			—						(5,069		)
$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	—	—			—		—			—			—			—			—			(348		)				(348		)
Issuance of preferred equity - consolidated joint venture	—	—			—		—			—			—			—			—			1,248						1,248
Comprehensive income (attributable to FelCor and noncontrolling interests in other partnerships):
Net income	—	—			—		—			—			—			6,783			4,879			348			12,010
Comprehensive income																									$	12,010		12,010
Balance at March 31, 2015	12,947	$	478,749		124,872		$	1,249		$	2,354,800		$	—		$	(2,538,643	)	$	8,278		$	42,690					$	347,123

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, 2015 and 2014

(unaudited, in thousands)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	11,996		$	(14,836	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	27,772			29,601
Gain on sale of hotels, net	(16,887		)	(5,848		)
Amortization of deferred financing fees and debt discount	1,477			2,929
Amortization of fixed stock and directors’ compensation	1,862			1,446
Equity in income from unconsolidated entities	(149		)	(643		)
Distributions of income from unconsolidated entities	580			824
Debt extinguishment	73			251
Changes in assets and liabilities:
Accounts receivable	(6,216		)	152
Other assets	(225		)	(2,572		)
Accrued expenses and other liabilities	(3,438		)	11,098
Net cash flow provided by operating activities	16,845			22,402
Cash flows from investing activities:
Improvements and additions to hotels	(13,483		)	(28,617		)
Hotel development	(10,108		)	(23,622		)
Net proceeds from asset sales	91,328			39,896
Change in restricted cash – investing	(1,676		)	10,180
Insurance proceeds	274			255
Distributions from unconsolidated entities	31			2,128
Net cash flow provided by investing activities	66,366			220
Cash flows from financing activities:
Proceeds from borrowings	36,000			81,000
Repayment of borrowings	(78,428		)	(105,353		)
Payment of deferred financing fees	(81		)	(5		)
Distributions paid to noncontrolling interests	(15,826		)	(587		)
Contributions from noncontrolling interests	790			1,568
Distributions paid to FelCor LP limited partners	(23		)	(7		)
Distributions paid to preferred stockholders	(9,678		)	(9,678		)
Preferred distributions - consolidated joint venture	(345		)	(65		)
Distributions paid to common stockholders	(5,034		)	(2,484		)
Net proceeds from issuance of preferred equity - consolidated joint venture	1,248			40,909
Net cash flow provided by (used in) financing activities	(71,377		)	5,298
Effect of exchange rate changes on cash	(51		)	(39		)
Net change in cash and cash equivalents	11,783			27,881
Cash and cash equivalents at beginning of periods	47,147			45,645
Cash and cash equivalents at end of periods	$	58,930		$	73,526
Supplemental cash flow information – interest paid, net of capitalized interest	$	16,244		$	14,511

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,
	2015			2014
Assets
Investment in hotels, net of accumulated depreciation of $861,796 and $850,687 at March 31, 2015 and December 31, 2014, respectively	$	1,714,000		$	1,599,791
Hotel development	143,779			297,466
Investment in unconsolidated entities	14,633			15,095
Hotels held for sale	16,618			47,145
Cash and cash equivalents	58,930			47,147
Restricted cash	22,172			20,496
Accounts receivable, net of allowance for doubtful accounts of $185 and $241 at March 31, 2015 and December 31, 2014, respectively	33,794			27,805
Deferred expenses, net of accumulated amortization of $18,802 and $17,111 at March 31, 2015 and December 31, 2014, respectively	24,119			25,827
Other assets	21,505			23,886
Total assets	$	2,049,550		$	2,104,658
Liabilities and Partners’ Capital
Debt	$	1,543,439		$	1,585,867
Distributions payable	13,867			13,827
Accrued expenses and other liabilities	138,095			135,481
Total liabilities	1,695,401			1,735,175
Commitments and contingencies
Redeemable units, 611 units issued and outstanding at March 31, 2015 and December 31, 2014, respectively	7,026			6,616
Capital:
Preferred units:
Series A Cumulative Convertible Preferred Units, 12,879 units issued and outstanding at March 31, 2015 and December 31, 2014	309,337			309,337
Series C Cumulative Redeemable Preferred Units, 68 units issued and outstanding at March 31, 2015 and December 31, 2014	169,412			169,412
Common units, 124,872 and 124,605 units issued and outstanding at March 31, 2015 and December 31, 2014, respectively	(182,594		)	(175,759		)
Total FelCor LP partners’ capital	296,155			302,990
Noncontrolling interests	8,278			18,435
Preferred capital in consolidated joint venture	42,690			41,442
Total partners’ capital	347,123			362,867
Total liabilities and partners’ capital	$	2,049,550		$	2,104,658

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, 2015 and 2014

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

	Three Months Ended
	March 31,
	2015			2014
Revenues:
Hotel operating revenue	$	213,285		$	221,022
Other revenue	410			327
Total revenues	213,695			221,349
Expenses:
Hotel departmental expenses	77,656			83,523
Other property-related costs	56,895			61,578
Management and franchise fees	9,085			9,013
Taxes, insurance and lease expense	14,976			23,633
Corporate expenses	8,573			7,825
Depreciation and amortization	27,772			29,601
Other expenses	4,228			2,014
Total operating expenses	199,185			217,187
Operating income	14,510			4,162
Interest expense, net	(19,481		)	(25,227		)
Debt extinguishment	(73		)	(6		)
Loss before equity in income from unconsolidated entities	(5,044		)	(21,071		)
Equity in income from unconsolidated entities	149			643
Loss from continuing operations	(4,895		)	(20,428		)
Income from discontinued operations	4			135
Loss before gain on sale of hotels	(4,891		)	(20,293		)
Gain on sale of hotels, net	16,887			5,457
Net income (loss)	11,996			(14,836		)
Net loss (income) attributable to noncontrolling interests	(4,879		)	78
Preferred distributions - consolidated joint venture	(348		)	(181		)
Net income (loss) attributable to FelCor LP	6,769			(14,939		)
Preferred distributions	(9,678		)	(9,678		)
Net loss attributable to FelCor LP common unitholders	$	(2,909	)	$	(24,617	)
Basic and diluted per common unit data:
Loss from continuing operations	$	(0.02	)	$	(0.20	)
Net loss	$	(0.02	)	$	(0.20	)
Basic and diluted weighted average common units outstanding	125,130			124,764

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

7

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended March 31, 2015 and 2014

(unaudited, in thousands)

	Three Months Ended
	March 31,
	2015			2014
Net income (loss)	$	11,996		$	(14,836	)
Foreign currency translation adjustment	—			(620		)
Comprehensive income (loss)	11,996			(15,456		)
Comprehensive loss (income) attributable to noncontrolling interests	(4,879		)	78
Preferred distributions - consolidated joint venture	(348		)	—
Comprehensive income (loss) attributable to FelCor LP	$	6,769		$	(15,378	)

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, 2015 and 2014

(unaudited, in thousands)

	Preferred Units			Common Units			Accumulated Other Comprehensive Income			Noncontrolling Interests			Preferred Capital in Consolidated Joint Venture			Comprehensive Income (Loss)			Total Partners’ Capital
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
Balance at December 31, 2014	$	478,749		$	(175,759	)	$	—		$	18,435		$	41,442					$	362,867
FelCor restricted stock compensation	—			1,576			—			—			—						1,576
Contributions	—			—			—			790			—						790
Distributions	—			(14,770		)	—			(15,826		)	(348		)				(30,944		)
Allocation to redeemable units	—			(410		)	—			—			—						(410		)
Issuance of preferred capital - consolidated joint venture	—			—			—			—			1,248						1,248
Comprehensive income:
Net income				6,769						4,879			348			11,996
Comprehensive income																$	11,996		11,996
Balance at March 31, 2015	$	478,749		$	(182,594	)	$	—		$	8,278		$	42,690					$	347,123

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, 2015 and 2014

(unaudited, in thousands)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	11,996		$	(14,836	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	27,772			29,601
Gain on sale of hotels, net	(16,887		)	(5,848		)
Amortization of deferred financing fees and debt discount	1,477			2,929
Amortization of fixed stock and directors’ compensation	1,862			1,446
Equity in income from unconsolidated entities	(149		)	(643		)
Distributions of income from unconsolidated entities	580			824
Debt extinguishment	73			251
Changes in assets and liabilities:
Accounts receivable	(6,216		)	152
Other assets	(225		)	(2,572		)
Accrued expenses and other liabilities	(3,438		)	11,098
Net cash flow provided by operating activities	16,845			22,402
Cash flows from investing activities:
Improvements and additions to hotels	(13,483		)	(28,617		)
Hotel development	(10,108		)	(23,622		)
Net proceeds from asset sales	91,328			39,896
Change in restricted cash – investing	(1,676		)	10,180
Insurance proceeds	274			255
Distributions from unconsolidated entities	31			2,128
Net cash flow provided by investing activities	66,366			220
Cash flows from financing activities:
Proceeds from borrowings	36,000			81,000
Repayment of borrowings	(78,428		)	(105,353		)
Payment of deferred financing fees	(81		)	(5		)
Distributions paid to noncontrolling interests	(15,826		)	(587		)
Contributions from noncontrolling interests	790			1,568
Distributions paid to FelCor LP limited partners	(23		)	(7		)
Distributions paid to preferred unitholders	(9,678		)	(9,678		)
Preferred distributions - consolidated joint venture	(345		)	(65		)
Distributions paid to common unitholders	(5,034		)	(2,484		)
Net proceeds from issuance of preferred capital - consolidated joint venture	1,248			40,909
Net cash flow provided by (used in) financing activities	(71,377		)	5,298
Effect of exchange rate changes on cash	(51		)	(39		)
Net change in cash and cash equivalents	11,783			27,881
Cash and cash equivalents at beginning of periods	47,147			45,645
Cash and cash equivalents at end of periods	$	58,930		$	73,526
Supplemental cash flow information – interest paid, net of capitalized interest	$	16,244		$	14,511

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

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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 46 hotels as of March 31, 2015, one of which was held for sale. At March 31, 2015, we had an aggregate of 125,483,273 shares and units outstanding, consisting of 124,871,811 shares of FelCor common stock and 611,462 FelCor LP units not owned by FelCor.

Of the 45 hotels not held for sale as of March 31, 2015, we owned a 100% interest in 41 hotels, a 95% interest in one hotel (The Knickerbocker) and 50% interests in entities owning three hotels. The Knickerbocker opened in February 2015 and, based on its partial completion as of March 31, 2015, $172 million of this development was reclassified to investment in hotels. We consolidate our real estate interests in the 42 hotels in which we held majority interests, and we record the real estate interests of the three hotels in which we held 50% interests using the equity method. We lease 44 of the 45 hotels to our taxable REIT subsidiaries, of which we own a controlling interest. We operate one50% owned hotel without a lease. Because we own controlling interests in these lessees, we consolidate our interests in these 44 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 own 50% of the real estate interests in each of two hotels (we account for the ownership in our real estate interests of these hotels by the equity method) and majority real estate interests in the remaining 42 hotels (we consolidate our real estate interest in these hotels).

The following table illustrates the distribution of our 44 Consolidated Hotels at March 31, 2015:

Brand	Hotels	Rooms
Embassy Suites Hotels®	21	5,778
Wyndham®and Wyndham Grand®	8	2,528
Marriott® and Renaissance®	3	1,321
Holiday Inn®	3	1,256
DoubleTreeby Hilton® and Hilton®	3	802
Sheraton®	2	673
Fairmont®	1	383
The Knickerbocker	1	330
Morgans and Royalton	2	285
Total	44	13,356

At March 31, 2015, our Consolidated Hotels were located in 17 states, with concentrations in California (11 hotels), Florida (seven hotels) and Texas (four hotels). Approximately 65% of our revenue was generated from hotels in these three states during the first three months of 2015.

At March 31, 2015, of our 44 Consolidated Hotels: (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 23 hotels, (ii) subsidiaries of Wyndham Hotel Group, or Wyndham, managed eight hotels, (iii) subsidiaries of Marriott International Inc., or Marriott, managed three hotels, (iv) subsidiaries of InterContinental Hotels Group, or IHG, managed three hotels, (v) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed two hotels, (vi) a subsidiary of Fairmont Hotels and Resorts, or Fairmont, managed one hotel, (vii) a subsidiary of Highgate Hotels, or Highgate, managed one hotel, (viii) a subsidiary of Morgans Hotel Group Corporation managed two hotels, and (ix) an independent management company managed one hotel.

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FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization — (continued)

The information in our consolidated financial statements for the threemonths ended March 31, 2015 and 2014 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, 2015 and 2014, include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair statement 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, 2014, included in our Annual Report on Form 10-K. Operating results for the threemonths ended March 31, 2015 are not necessarily indicative of actual operating results for the entire year.

2. Investment in Unconsolidated Entities

At March 31, 2015 and December 31, 2014, we owned 50% interests in joint ventures that owned three 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,
	2015		2014
Investment in hotels and other properties, net of accumulated depreciation	$	29,489	$	30,288
Total assets	$	43,440	$	45,374
Debt	$	33,902	$	34,192
Total liabilities	$	35,710	$	36,974
Equity	$	7,730	$	8,400

Our unconsolidated entities’ debt at March 31, 2015 and December 31, 2014 consisted entirely of non-recourse mortgage debt.

12

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.    Investment in Unconsolidated Entities -- (continued)

The following table (which reflects decreases attributable to the unwinding of our 10-hotel unconsolidated joint ventures in July 2014) sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):

	Three Months Ended March 31,
	2015			2014
Total revenues	$	6,569		$	14,617
Net income	$	551		$	2,216
Net income attributable to FelCor	$	276		$	1,108
Depreciation of cost in excess of book value	(127		)	(465		)
Equity in income from unconsolidated entities	$	149		$	643

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

	March 31,			December 31,
	2015			2014
Hotel-related investments	$	(3,000	)	$	(3,265	)
Cost in excess of book value of hotel investments	10,768			10,895
Land and condominium investments	6,865			7,465
Investment in unconsolidated entities	$	14,633		$	15,095

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

	Three Months Ended
	March 31,
	2015			2014
Hotel investments	$	748		$	1,272
Other investments	(599		)	(629		)
Equity in income from unconsolidated entities	$	149		$	643

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	2015		2014
Line of credit	8	LIBOR + 3.375	June 2016(a)	$	84,500	$	111,500
Term loan	3	LIBOR + 2.50	July 2017(b)	140,000		140,000
Mortgage debt	3	LIBOR + 3.00	March 2017	49,067		51,008
Mortgage debt(c)	4	4.95	October 2022	123,914		124,278
Mortgage debt	1	4.94	October 2022	31,097		31,228
Senior secured notes	6	6.75	June 2019	525,000		525,000
Senior secured notes	9	5.625	March 2023	525,000		525,000
The Knickerbocker loan(d)
Construction tranche	1	LIBOR + 4.00	May 2016	58,562		58,562
Cash collateralized tranche	—	LIBOR + 1.25	May 2016	6,299		6,299
Retired debt	—	—	—	—		12,992
Total	35			$	1,543,439	$	1,585,867

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

(b) This debt can be extended up to two years, subject to satisfying certain conditions.

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

(d) This construction loan (total capacity of $85.0 million) was obtained to finance the redevelopment of The Knickerbocker and can be extended for one year, subject to satisfying certain conditions.

In February 2015, we repaid $13.0 million of secured loan debt, scheduled to mature in March 2017, when we sold a hotel.

We reported $19.5 million and $25.2 million of interest expense for the three months ended March 31, 2015 and 2014, respectively, which is net of: (i) interest income of $5,000 and $15,000 and (ii) capitalized interest of $3.5 million and $4.0 million, respectively.

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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,
	2015		2014
Room revenue	$	162,306	$	169,829
Food and beverage revenue	39,844		39,785
Other operating departments	11,135		11,408
Total hotel operating revenue	$	213,285	$	221,022

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,
	2015				2014
	Amount		% of Total Hotel Operating Revenue		Amount		% of Total Hotel Operating Revenue
Room	$	42,511	19.9	%	$	46,733	21.1	%
Food and beverage	30,696		14.4		31,187		14.1
Other operating departments	4,449		2.1		5,603		2.6
Total hotel departmental expenses	$	77,656	36.4	%	$	83,523	37.8	%

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

	Three Months Ended March 31,
	2015				2014
	Amount		% of Total Hotel Operating Revenue		Amount		% of Total Hotel Operating Revenue
Hotel general and administrative expense	$	19,363	9.1	%	$	19,834	9.0	%
Marketing	19,303		9.1		20,071		9.1
Repair and maintenance	10,350		4.9		11,687		5.3
Utilities	7,879		3.6		9,986		4.5
Total other property-related costs	$	56,895	26.7	%	$	61,578	27.9	%

15

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with Wyndham’s guaranty of achieving a minimum level of annual net operating income, we have recorded $411,000 and $136,000 for the pro rata portion of the projected full-year guaranty for the three months ended March 31, 2015 and 2014, respectively. These amounts are recorded, to the extent available, as a reduction of Wyndham's contractual management and other fees. Any amounts in excess of those fees will be recorded as revenue when earned.

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,
	2015		2014
Hotel lease expense(a)	$	2,104	$	10,391
Land lease expense(b)	3,059		2,462
Real estate and other taxes	7,860		8,109
Property insurance, general liability insurance and other	1,953		2,671
Total taxes, insurance and lease expense	$	14,976	$	23,633

(a) Hotel lease expense is recorded by the consolidated operating lessees of 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 $936,000 and $4.9 million for the three months ended March 31, 2015 and 2014, respectively, and reflects a decrease attributable to the unwinding of our 10-hotel unconsolidated joint ventures in July 2014.

(b) Land lease expense includes percentage rent of$1.5 million and $1.0 million for the three months ended March 31, 2015 and 2014, respectively.

16

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Hotel Dispositions

Effective January 1, 2014, we 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 2015, we sold three hotels and had one hotel held for sale at March 31, 2015. In 2014, we sold one hotel not previously held for sale during the three months ended March 31, 2014 and had one hotel held for sale at March 31, 2014. 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. We included operations for the sold hotels, and those hotels designated as held for sale, in income (loss) from continuing operations as shown in the statements of operations for the three months ended March 31, 2015 and 2014, as disposition of these hotels does not represent a strategic shift in our business.

The following table includes condensed financial information primarily related to 12 of 13 hotels sold in 2014, three hotels sold during the three months ended March 31, 2015, and one hotel held for sale at March 31, 2015 (in thousands):

	Three Months Ended
	March 31,
	2015			2014
Hotel operating revenue	$	7,205		$	40,277
Operating expenses	(5,594		)	(39,817		)
Operating income	1,611			460
Interest expense, net	(160		)	(665		)
Debt extinguishment	(73		)	—
Equity in income (loss) from unconsolidated entities	(15		)	490
Income from continuing operations	1,363			285
Gain on sale of hotels, net	16,887			5,457
Net income	18,250			5,742
Net income attributable to noncontrolling interests in other partnerships	(5,253		)	(129		)
Net income attributable to redeemable noncontrolling interests in FelCor LP	(62		)	(28		)
Net income attributable to FelCor	$	12,935		$	5,585

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,
	2015			2014
Numerator:
Net income (loss) attributable to FelCor	$	6,783		$	(14,818	)
Discontinued operations attributable to FelCor	(4		)	(134		)
Income (loss) from continuing operations attributable to FelCor	6,779			(14,952		)
Less: Preferred dividends	(9,678		)	(9,678		)
Less: Dividends declared on unvested restricted stock	(13		)	—
Numerator for continuing operations attributable to FelCor common stockholders	(2,912		)	(24,630		)
Discontinued operations attributable to FelCor	4			134
Numerator for basic and diluted loss attributable to FelCor common stockholders	$	(2,908	)	$	(24,496	)
Denominator:
Denominator for basic and diluted loss per share	124,519			124,146
Basic and diluted loss per share data:
Loss from continuing operations	$	(0.02	)	$	(0.20	)
Discontinued operations	$	—		$	—
Net loss	$	(0.02	)	$	(0.20	)

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,
	2015			2014
Numerator:
Net income (loss) attributable to FelCor LP	$	6,769		$	(14,939	)
Discontinued operations attributable to FelCor LP	(4		)	(135		)
Income (loss) from continuing operations attributable to FelCor LP	6,765			(15,074		)
Less: Preferred distributions	(9,678		)	(9,678		)
Less: Distributions declared on FelCor unvested restricted stock	(13		)	—
Numerator for continuing operations attributable to FelCor LP common unitholders	(2,926		)	(24,752		)
Discontinued operations attributable to FelCor LP	4			135
Numerator for basic and diluted loss attributable to FelCor common unitholders	$	(2,922	)	$	(24,617	)
Denominator:
Denominator for basic and diluted loss per unit	125,130			124,764
Basic and diluted loss per unit data:
Loss from continuing operations	$	(0.02	)	$	(0.20	)
Discontinued operations	$	—		$	—
Net loss	$	(0.02	)	$	(0.20	)

The income (loss) from continuing operations attributable to FelCor/FelCor LP share/unit calculations includes the gain on sale of hotels 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,
	2015	2014
Series A convertible preferred shares/units	9,984	9,985
FelCor restricted stock units	1,194	850

19

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Loss Per Share/Unit — (continued)

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, 2015 and 2014.

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.

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, 2015 and December 31, 2014. 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 $1.1 billion at March 31, 2015 and December 31, 2014; 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 $505.0 million and $548.2 million at March 31, 2015 and December 31, 2014, respectively. The estimated fair value of all our debt was $1.6 billion at March 31, 2015 and December 31, 2014. The carrying value of our debt was $1.5 billion and $1.6 billion at March 31, 2015 and December 31, 2014, 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.

20

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units — (continued)

At March 31, 2015, we had 611,462 limited partnership units outstanding carried at $7.0 million. The value of these outstanding units is based on the closing price of FelCor’s common stock at March 31, 2015 ($11.49 per share).

Changes in redeemable noncontrolling interests (or redeemable units) for the three months ended March 31, 2015 and 2014 are shown below (in thousands):

	Three Months Ended
	March 31,
	2015			2014
Balance at beginning of period	$	6,616		$	5,039
Redemption value allocation	447			679
Distributions paid to unitholders	(23		)	(11		)
Comprehensive loss:
Foreign exchange translation	—			(3		)
Net loss	(14		)	(121		)
Balance at end of period	$	7,026		$	5,583

10.    Consolidated Joint Venture Preferred Equity/Capital

Our joint venture that is redeveloping The Knickerbocker raised $45 million through the sale of 3.5% preferred equity/capital under the EB-5 immigrant investor program. The purchasers receive a 3.25% current annual return, plus a 0.25% non-compounding annual return paid at redemption. Our joint venture may, at its option, redeem this equity interest. If it is not redeemed within five years, the current annual return increases to 8%. The venture received $42.0 million in gross proceeds ($41.4 million net of issuance costs) during the year ended 2014 and $1.3 million during the three months ended March 31, 2015. The remaining $1.7 million will be received as investors’ visas are approved. We used our 95% share of the proceeds to repay borrowings under our line of credit.

11.    Contingency

One of our consolidated subsidiaries is currently engaged in a commercial dispute with a third party. Under generally accepted accounting principles, we recorded $5.9 million in other expenses during the third quarter of 2014 to establish a provision for our current estimate of our maximum exposure for this contingency. While we paid the contingent fees to the third party in January 2015, we will continue asserting our rights under the contract. We believe these negotiations, when complete, will result in a substantial recovery of this amount, which will be recorded when realized. Because negotiations are ongoing, the outcome of those negotiations and the net amount for which our subsidiary will ultimately be liable are uncertain.

12.    Subsequent Events

In April 2015, FelCor sold 18.4 million shares of its common stock at $11.25 per share in a public

offering. The net proceeds from the offering were $199 million and were contributed to FelCor LP in exchange for a like number of common units. Net proceeds from this offering are being used to redeem $170 million of our 8% Series C Cumulative Redeemable preferred stock (units) in May 2015.

21

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.    Recently Issued Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is not permitted. We are in the process of evaluating the impact the adoption of ASU 2014-09 will have on the our financial position or results of operations.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Under ASU 2015-03, debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. ASU 2015-03 is effective for the first interim period within annual reporting periods beginning after December 15, 2015, and early adoption is permitted. We are in the process of evaluating what impact the adoption of ASU 2015-03 will have on our financial position or results of operations.

14. 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 (i) 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, if, in each case, as a result of such sale or disposition, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (ii) 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, (iii) a legal defeasance or covenant defeasance of the indenture, (iv) the unconditional and complete release of such Subsidiary Guarantor in accordance with the modification and waiver provisions of the indenture, or (v) the designation of a restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary under and in compliance with the indenture.

22

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. 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, 2015

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Net investment in hotels	$	—		$	900,920		$	813,080	$	—		$	1,714,000
Hotel development	—			—			143,779		—			143,779
Equity investment in consolidated entities	1,345,992			—			—		(1,345,992		)	—
Investment in unconsolidated entities	7,007			6,327			1,299		—			14,633
Hotel held for sale	—			—			16,618		—			16,618
Cash and cash equivalents	19,810			37,608			1,512		—			58,930
Restricted cash	—			12,678			9,494		—			22,172
Accounts receivable, net	446			32,969			379		—			33,794
Deferred expenses, net	16,575			—			7,544		—			24,119
Other assets	3,510			12,041			5,954		—			21,505
Total assets	$	1,393,340		$	1,002,543		$	999,659	$	(1,345,992	)	$	2,049,550
Debt	$	1,050,000		$	—		$	534,226	$	(40,787	)	$	1,543,439
Distributions payable	13,746			—			121		—			13,867
Accrued expenses and other liabilities	26,413			93,329			18,353		—			138,095
Total liabilities	1,090,159			93,329			552,700		(40,787		)	1,695,401
Redeemable units, at redemption value	7,026			—			—		—			7,026
Preferred units	478,749			—			—		—			478,749
Common units	(182,594		)	909,696			395,509		(1,305,205		)	(182,594		)
Total FelCor LP partners’ capital	296,155			909,696			395,509		(1,305,205		)	296,155
Noncontrolling interests	—			(482		)	8,760		—			8,278
Preferred capital in consolidated joint venture	—			—			42,690		—			42,690
Total partners’ capital	296,155			909,214			446,959		(1,305,205		)	347,123
Total liabilities and partners’ capital	$	1,393,340		$	1,002,543		$	999,659	$	(1,345,992	)	$	2,049,550

23

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2014

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Net investment in hotels	$	—		$	908,796		$	690,995	$	—		$	1,599,791
Hotel development	—			—			297,466		—			297,466
Equity investment in consolidated entities	1,364,470			—			—		(1,364,470		)	—
Investment in unconsolidated entities	7,270			6,514			1,311		—			15,095
Hotels held for sale	—			—			47,145		—			47,145
Cash and cash equivalents	5,717			32,923			8,507		—			47,147
Restricted cash	—			12,199			8,297		—			20,496
Accounts receivable, net	963			26,343			499		—			27,805
Deferred expenses, net	17,203			—			8,624		—			25,827
Other assets	4,866			11,558			7,462		—			23,886
Total assets	$	1,400,489		$	998,333		$	1,070,306	$	(1,364,470	)	$	2,104,658
Debt	$	1,050,000		$	—		$	576,654	$	(40,787	)	$	1,585,867
Distributions payable	13,709			—			118		—			13,827
Accrued expenses and other liabilities	27,174			94,190			14,117		—			135,481
Total liabilities	1,090,883			94,190			590,889		(40,787		)	1,735,175
Redeemable units, at redemption value	6,616			—			—		—			6,616
Preferred units	478,749			—			—		—			478,749
Common units	(175,759		)	904,296			419,387		(1,323,683		)	(175,759		)
Total FelCor LP partners’ capital	302,990			904,296			419,387		(1,323,683		)	302,990
Noncontrolling interests	—			(153		)	18,588		—			18,435
Preferred capital in consolidated joint venture	—			—			41,442		—			41,442
Total partners’ capital	302,990			904,143			479,417		(1,323,683		)	362,867
Total liabilities and partners’ capital	$	1,400,489		$	998,333		$	1,070,306	$	(1,364,470	)	$	2,104,658

24

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2015

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Hotel operating revenue	$	—		$	213,285		$	—		$	—		$	213,285
Percentage lease revenue	—			—			35,615			(35,615		)	—
Other revenue	1			348			61			—			410
Total revenues	1			213,633			35,676			(35,615		)	213,695
Expenses:
Hotel operating expenses	—			143,636			—			—			143,636
Taxes, insurance and lease expense	(153		)	46,421			4,323			(35,615		)	14,976
Corporate expenses	138			4,901			3,534			—			8,573
Depreciation and amortization	41			15,985			11,746			—			27,772
Other expenses	—			4,045			183			—			4,228
Total operating expenses	26			214,988			19,786			(35,615		)	199,185
Operating income	(25		)	(1,355		)	15,890			—			14,510
Interest expense, net	(13,740		)	3			(5,744		)	—			(19,481		)
Debt extinguishment	—			—			(73		)	—			(73		)
Loss before equity in income from unconsolidated entities	(13,765		)	(1,352		)	10,073			—			(5,044		)
Equity in income from consolidated entities	20,359			—			—			(20,359		)	—
Equity in income from unconsolidated entities	346			(186		)	(11		)	—			149
Loss from continuing operations	6,940			(1,538		)	10,062			(20,359		)	(4,895		)
Income from discontinued operations	—			4			—			—			4
Loss before gain on sale of hotels	6,940			(1,534		)	10,062			(20,359		)	(4,891		)
Gain on sale of hotels, net	(171		)	(10		)	17,068			—			16,887
Net income	6,769			(1,544		)	27,130			(20,359		)	11,996
Income attributable to noncontrolling interests	—			258			(5,137		)	—			(4,879		)
Preferred distributions - consolidated joint venture	—			—			(348		)	—			(348		)
Net income attributable to FelCor LP	6,769			(1,286		)	21,645			(20,359		)	6,769
Preferred distributions	(9,678		)	—			—			—			(9,678		)
Net loss attributable to FelCor LP common unitholders	$	(2,909	)	$	(1,286	)	$	21,645		$	(20,359	)	$	(2,909	)

25

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months EndedMarch 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 hotels	(14,530		)	(3,775		)	3,335			(5,323		)	(20,293		)
Gain on sale of hotels, 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	)

26

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2015

(in thousands)

	FelCor LP		Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income	$	6,769	$	(1,544	)	$	27,130		$	(20,359	)	$	11,996
Foreign currency translation adjustment	—		—			—			—			—
Comprehensive income	6,769		(1,544		)	27,130			(20,359		)	11,996
Comprehensive income attributable to noncontrolling interests	—		258			(5,137		)	—			(4,879		)
Preferred distributions - consolidated joint venture	—		—			(348		)	—			(348		)
Comprehensive income attributable to FelCor LP	$	6,769	$	(1,286	)	$	21,645		$	(20,359	)	$	6,769

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	)

27

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2015

(in thousands)

	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Operating activities:
Cash flows from operating activities	$	(13,298	)	$	8,211		$	21,932		$	—		$	16,845
Investing activities:
Improvements and additions to hotels	(473		)	(8,314		)	(4,696		)	—			(13,483		)
Hotel development	—			—			(10,108		)	—			(10,108		)
Net proceeds from asset sales	(98		)	10			91,416			—			91,328
Insurance proceeds	274			—			—			—			274
Change in restricted cash - investing	—			(479		)	(1,197		)	—			(1,676		)
Distributions from unconsolidated entities	31			—			—			—			31
Intercompany financing	42,392			—			—			(42,392		)	—
Cash flows from investing activities	42,126			(8,783		)	75,415			(42,392		)	66,366
Financing activities:
Proceeds from borrowings	—			—			36,000			—			36,000
Repayment of borrowings	—			—			(78,428		)	—			(78,428		)
Payment of deferred financing fees	—			—			(81		)	—			(81		)
Distributions paid to noncontrolling interests	—			(81		)	(15,745		)	—			(15,826		)
Contributions from noncontrolling interests	—			10			780			—			790
Distributions paid to preferred unitholders	(9,678		)	—			—			—			(9,678		)
Distributions paid to common unitholders	(5,034		)	—			—			—			(5,034		)
Net proceeds from issuance of preferred capital - consolidated joint venture	—			—			1,248			—			1,248
Intercompany financing	—			5,379			(47,771		)	42,392			—
Other	(23		)	—			(345		)	—			(368		)
Cash flows from financing activities	(14,735		)	5,308			(104,342		)	42,392			(71,377		)
Effect of exchange rate changes on cash	—			(51		)	—			—			(51		)
Change in cash and cash equivalents	14,093			4,685			(6,995		)	—			11,783
Cash and cash equivalents at beginning of period	5,717			32,923			8,507			—			47,147
Cash and cash equivalents at end of period	$	19,810		$	37,608		$	1,512		$	—		$	58,930

28

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.    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 sales	(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

29

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

General

Revenue per available room, or RevPAR, for our 39 core hotels (same-store hotels, which excludes The Knickerbocker, without four non-strategic hotels) increased 13.5% in the first quarter of 2015 compared to the same period last year. Same-store hotels’ (39 hotels plus four non-strategic hotels) RevPAR grew 13.1% in the first quarter of 2015 compared to the same period last year, driven by a 6.5% increase in average daily rate, or ADR, and a 6.2% increase in occupancy.

The Knickerbocker, located in the heart of Times Square on the corner of 42nd Street and Broadway in New York City, opened on February 12, 2015. The newly redeveloped hotel boasts 330 spacious guest rooms, including 31 suites, a state-of-the-art fitness center, a 2,200 square-foot event space, upscale food and dining options, and a spectacular 7,500 square-foot rooftop bar and terrace with unrivaled views of New York City’s skyline. The 4+ star luxury property is a member of The Leading Hotels of the World.

During the first quarter, we sold three non-strategic hotels. We have five non-strategic hotels remaining to be sold, of which we have agreed to sell four for total gross proceeds of $104 million (we hold a non-refundable deposit for two of these hotels, one of which was received prior to March 31, 2015). We are currently marketing the remaining hotel.

On April 14, 2015, we sold 18.4 million shares of our common stock for net proceeds (after deducting underwriting discounts and commissions and expenses) of approximately $199 million.

On April 14, 2015, we called for redemption of all of our outstanding shares of 8% Series C Cumulative Redeemable Preferred Stock and all depositary shares representing the Series C Preferred Stock. The shares of Series C Preferred Stock and the depositary shares will be redeemed on May 14, 2015, with proceeds from the equity offering. Including accrued dividends, the total redemption price will be $170.4 million. The remaining net proceeds from the offering, along with cash on hand and proceeds from future asset sales, will be used to fund future redevelopment projects and other growth opportunities.

Results of Operations

Comparison of the Three Months ended March 31, 2015 and 2014

For the three months ended March 31, 2015, we recorded net income of $12.0 million compared to a net loss of $14.8 million for the same period last year. Our 2015 net income includes a net gain on hotel sales of $16.9 million. Our 2014 net loss included a $5.8 million net gain on hotel sales (including $391,000 in discontinued operations).

For the three months ended March 31, 2015:

• Total revenue decreased $7.7 million, net of a $32.5 million net reduction in revenue for hotels that have been disposed of, classified as held for sale or recently opened. Excluding these hotels, revenue increased 13.7% from last year. The increase was driven by a 13.1% increase in same-store RevPAR, reflecting a 6.5% increase in ADR and a 6.2% increase in occupancy. RevPAR for our Wyndham portfolio increased 19.8%, driven by a 9.3% increase in ADR and a 9.6% increase in occupancy. The increased revenue for the Wyndham portfolio compared to the same period in 2014 primarily reflects these properties continuing to benefit from our repositioning them to upper-upscale hotels.

30

• Hotel departmental expenses decreased $5.9 million, net of an $11.0 million net reduction in expense for hotels that have been disposed of, are classified as held for sale or recently opened. Excluding these hotels, hotel departmental expenses decreased as a percentage of total revenue to 36.0% in the current period from 38.1% last year. This reduction is primarily attributable to improved profitability margins for the rooms department, driven by increased ADR. Additionally, we continued experiencing an increase in banquet and catering operations, which typically have higher margins than other food and beverage operations.

• Other property-related costs decreased $4.7 million, net of a $9.3 million net reduction in expense for hotels that have been disposed of, are classified as held for sale or recently opened. Excluding these hotels, other property-related costs decreased as a percentage of total revenue to 26.1% in the current period from 27.1% last year, primarily driven by ADR growth.

• Management and franchise fees increased $72,000, net of a $1.4 million net reduction in expense for hotels that have been disposed of, are classified as held for sale or recently opened. Excluding these hotels, these costs as a percentage of total revenue increased slightly to 4.2% in the current period from 4.0% last year. Base management fees are computed as a percentage of hotel revenues; however, incentive fees generally increase at a higher rate than other hotel expenses as hotel financial performance improves.

• Taxes, insurance and lease expense decreased $8.7 million and decreased as a percentage of total revenue to 7.0% in the current period from 10.7% last year. The decrease primarily reflects a $8.4 million reduction in hotel lease expense resulting from unwinding our 10-hotel unconsolidated joint ventures. Historically, hotel lease expense was recorded by 12 consolidated operating lessees of our hotels that were owned by unconsolidated entities. We recorded the corresponding lease income through equity in income from unconsolidated entities, and the hotel lease expense was not eliminated in consolidation. We unwound the joint ventures in July 2014, as a consequence of which we recorded lower percentage lease expense for the current period.

• Corporate expenses increased $748,000 and increased as a percentage of total revenue from 3.5% to 4.0%. This increase primarily reflects the stock compensation expense associated with our variable stock awards (which increase in value as our stock price increases) and an increase in our corporate bonus expense from the prior year resulting from improved performance.

• Depreciation and amortization expense decreased $1.8 million primarily attributable to selling hotels offset by depreciation resulting from $83.7 million in hotel capital expenditures in 2014.

• Other expenses increased $2.2 million, primarily related to increased pre-opening costs incurred in the current period for The Knickerbocker.

• Net interest expense decreased $5.7 million, primarily reflecting lower average outstanding debt and a lower blended interest rate for the period offset by decreased capitalized interest (attributable to the partial completion of certain renovation and redevelopment projects, including The Knickerbocker).

• Equity in income from unconsolidated entities decreased $494,000. This reduction in income is primarily due to the unwinding of our 10-hotel unconsolidated joint ventures in July 2014 offset slightly by an increase in income for our remaining joint ventures.

31

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.

Reconciliation of Net Income (Loss) to FFO and Adjusted FFO

(in thousands, except per share data)

	Three Months Ended March 31,
	2015							2014
	Dollars			Shares	Per Share Amount			Dollars			Shares	Per Share Amount
Net income (loss)	$	11,996						$	(14,836	)
Noncontrolling interests	(4,865		)					199
Preferred dividends	(9,678		)					(9,678		)
Preferred distributions - consolidated joint venture	(348		)					(181		)
Net loss attributable to FelCor common stockholders	(2,895		)					(24,496		)
Less: Dividends declared on unvested restricted stock	(13		)					—
Basic and diluted earnings per share data	(2,908		)	124,519	$	(0.02	)	(24,496		)	124,146	$	(0.20	)
Depreciation and amortization	27,772			—	0.22			29,601			—	0.24
Depreciation, unconsolidated entities and other partnerships	712			—	0.01			2,675			—	0.02
Loss on sale, unconsolidated entities	—			—	—			33			—	—
Gain on sale of hotels, net of noncontrolling interests in other partnerships	(11,881		)	—	(0.10		)	(5,851		)	—	(0.05		)
Noncontrolling interests in FelCor LP	(14		)	611	—			(121		)	618	—
Dividends declared on unvested restricted stock	13			—	—			—			—	—
Conversion of unvested restricted stock and units	—			1,213	—			—			858	—
FFO	13,694			126,343	0.11			1,841			125,622	0.01
Debt extinguishment, including discontinued operations	73			—	—			251			—	—
Severance costs	—			—	—			400			—	—
Variable stock compensation	997			—	—			564			—	0.01
Pre-opening costs, net of noncontrolling interests	3,524			—	0.03			1,053			—	0.01
Adjusted FFO	$	18,288		126,343	$	0.14		$	4,109		125,622	$	0.03

32

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

(in thousands)

	Three Months Ended
	March 31,
	2015			2014
Net income (loss)	$	11,996		$	(14,836	)
Depreciation and amortization	27,772			29,601
Depreciation, unconsolidated entities and other partnerships	712			2,675
Interest expense	19,486			25,242
Interest expense, discontinued operations and unconsolidated entities	202			744
Noncontrolling interests in other partnerships	(4,879		)	78
EBITDA	55,289			43,504
Debt extinguishment, including discontinued operations	73			251
Gain on sale of hotels, net of noncontrolling interests in other partnerships	(11,881		)	(5,851		)
Loss on sale, unconsolidated entities	—			33
Amortization of fixed stock and directors’ compensation	1,862			1,122
Severance costs	—			400
Variable stock compensation	997			564
Pre-opening costs, net of noncontrolling interests	3,524			1,053
Adjusted EBITDA	49,864			41,076
Adjusted EBITDA from hotels disposed, held for sale and recently opened	(137		)	(4,956		)
Same-store Adjusted EBITDA	$	49,727		$	36,120

33

Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)

	Three Months Ended
	March 31,
	2015			2014
Same-store operating revenue:
Room	$	155,759		$	137,696
Food and beverage	38,847			33,005
Other operating departments	10,894			10,044
Same-store operating revenue	205,500			180,745
Same-store operating expense:
Room	40,347			37,782
Food and beverage	29,407			26,263
Other operating departments	4,326			4,896
Other property related costs	53,817			49,150
Management and franchise fees	8,749			7,278
Taxes, insurance and lease expense	12,946			12,730
Same-store operating expense	149,592			138,099
Hotel EBITDA	$	55,908		$	42,646
Hotel EBITDA Margin	27.2		%	23.6		%

	Three Months Ended
	March 31,
	2015			2014
Hotel EBITDA - Core (39)	$	52,380		$	39,464
Hotel EBITDA - Non-strategic (4)(a)	3,528			3,182
Hotel EBITDA - Same-store (43)	$	55,908		$	42,646
Hotel EBITDA Margin - Core (39)	26.9		%	23.1		%
Hotel EBITDA Margin - Non-strategic (4)(a)	32.6		%	31.2		%
Hotel EBITDA Margin Same-store (43)	27.2		%	23.6		%

(a) Excludes one hotel held for sale as of March 31, 2015.

34

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

(in thousands)

	Three Months Ended
	March 31,
	2015			2014
Same-store operating revenue	$	205,500		$	180,745
Other revenue	410			327
Revenue from hotels disposed, held for sale and recently opened(a)	7,785			40,277
Total revenue	213,695			221,349
Same-store operating expense	149,592			138,099
Consolidated hotel lease expense(b)	2,104			10,391
Unconsolidated taxes, insurance and lease expense	(572		)	(1,965		)
Corporate expenses	8,573			7,825
Depreciation and amortization	27,772			29,601
Expenses from hotels disposed, held for sale and recently opened(a)	7,488			31,222
Other expenses	4,228			2,014
Total operating expense	199,185			217,187
Operating income	$	14,510		$	4,162

(a) Under GAAP, we include the operating performance for disposed, held for sale and recently opened hotels in continuing operations in our Consolidated Statements of Operations. 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.

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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, conversion 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 and directors’ compensation, which is included in corporate expenses and is not separately stated on our statements of operations. Excluding amortization of our fixed stock and directors’ compensation maintains consistency with the EBITDA definition.

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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 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

We 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. As we present them, these non-GAAP financial measures may not be comparable to similar non-GAAP financial measures as presented 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. We compensate 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. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

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Pro Rata Share of Rooms Owned

The following table sets forth, at March 31, 2015, 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, 2015
Consolidated Hotels(a)	44	13,356
Unconsolidated hotel operations	1	171
Total hotels	45	13,527
50% joint ventures	3	(353	)
95% joint venture	1	(17	)
Pro rata rooms attributed to joint venture partners		(370	)
Pro rata share of rooms owned		13,157

(a) Excludes one hotel held for sale as of March 31, 2015.

38

Hotel Portfolio Composition

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

			Year Ended December 31, 2014
Brand	Hotels	Rooms	Hotel Operating Revenue (in thousands)		Hotel EBITDA (in thousands)(a)
Embassy Suites Hotels	18	4,982	$	282,866	$	94,990
Wyndham and Wyndham Grand	8	2,528	125,354		43,122
Renaissance and Marriott	3	1,321	128,770		26,086
DoubleTree by Hilton and Hilton	3	802	45,383		15,483
Sheraton	2	673	39,639		10,622
Fairmont	1	383	53,451		10,010
Holiday Inn	2	968	51,511		8,966
Morgans and Royalton	2	285	33,895		3,314
Core hotels(b)	39	11,942	760,869		212,593
Non-strategic hotels(c)	4	1,084	40,148		12,428
Same-store hotels	43	13,026	$	801,017	$	225,021
Market
San Francisco area	5	1,903	$	139,692	$	39,466
Boston	3	916	85,670		21,832
South Florida	3	923	55,561		17,007
Los Angeles area	2	481	28,696		12,404
Myrtle Beach	2	640	41,149		12,218
Philadelphia	2	728	38,680		9,630
Tampa	1	361	49,358		9,301
New York area	3	546	48,456		7,259
Other markets	18	5,444	273,607		83,476
Core hotels(b)	39	11,942	760,869		212,593
Non-strategic hotels(c)	4	1,084	40,148		12,428
Same-store hotels	43	13,026	$	801,017	$	225,021
Location
Urban	17	5,310	$	360,177	$	97,584
Resort	9	2,733	203,370		51,679
Airport	8	2,621	136,144		43,204
Suburban	5	1,278	61,178		20,126
Core hotels(b)	39	11,942	760,869		212,593
Non-strategic hotels(c)	4	1,084	40,148		12,428
Same-store hotels	43	13,026	$	801,017	$	225,021

(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 this Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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) Excludes The Knickerbocker which opened in February 2015.

(c) Excludes one hotel held for sale as of March 31, 2015.

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Hotel Operating Statistics

The following tables set forth occupancy, ADR and RevPAR for the three months ended March 31, 2015 and 2014, and the percentage changes therein for the periods presented, for our same-store hotels.

Operating Statistics by Brand

	Occupancy (%)
	Three Months Ended
	March 31,
	2015	2014	%Variance
Embassy Suites Hotels	81.1	76.8	5.6
Wyndham and Wyndham Grand	69.0	62.9	9.6
Renaissance and Marriott	80.8	75.6	6.9
DoubleTree by Hilton and Hilton	69.1	64.4	7.2
Sheraton	58.8	56.4	4.1
Fairmont	61.6	58.6	5.1
Holiday Inn	70.1	64.5	8.6
Morgans and Royalton	73.8	79.4	(7.1	)
Core hotels (39)(a)	74.7	70.2	6.4
Non-strategic hotels (4)(b)	78.7	76.0	3.5
Same-store hotels (43)	75.1	70.7	6.2
	ADR ($)
	Three Months Ended
	March 31,
	2015	2014	%Variance
Embassy Suites Hotels	179.02	166.71	7.4
Wyndham and Wyndham Grand	158.09	144.62	9.3
Renaissance and Marriott	251.96	236.72	6.4
DoubleTree by Hilton and Hilton	162.48	156.22	4.0
Sheraton	125.69	127.91	(1.7	)
Fairmont	250.51	238.07	5.2
Holiday Inn	155.09	131.81	17.7
Morgans and Royalton	234.84	258.62	(9.2	)
Core hotels (39)(a)	181.65	170.25	6.7
Non-strategic hotels (4)(b)	128.02	123.81	3.4
Same-store hotels (43)	176.97	166.09	6.5
	RevPAR ($)
	Three Months Ended
	March 31,
	2015	2014	%Variance
Embassy Suites Hotels	145.25	128.06	13.4
Wyndham and Wyndham Grand	109.03	90.99	19.8
Renaissance and Marriott	203.52	178.95	13.7
DoubleTree by Hilton and Hilton	112.26	100.65	11.5
Sheraton	73.88	72.20	2.3
Fairmont	154.20	139.46	10.6
Holiday Inn	108.67	85.01	27.8
Morgans and Royalton	173.22	205.34	(15.6	)
Core hotels (39)(a)	135.78	119.58	13.5
Non-strategic hotels (4)(b)	100.72	94.12	7.0
Same-store hotels (43)	132.86	117.46	13.1

(a) Excludes The Knickerbocker which opened in February 2015.

(b) Excludes one hotel held for sale as of March 31, 2015.

40

Hotel Operating Statistics by Market

	Occupancy (%)
	Three Months Ended
	March 31,
	2015	2014	%Variance
San Francisco area	82.5	72.0	14.6
Boston	66.5	61.3	8.4
South Florida	93.3	91.2	2.3
Los Angeles area	81.6	82.9	(1.6	)
Myrtle Beach	53.9	45.5	18.7
Philadelphia	49.2	54.5	(9.7	)
Tampa	88.8	86.1	3.1
New York area	70.2	71.7	(2.0	)
Other markets	75.1	70.3	6.8
Core hotels (39)(a)	74.7	70.2	6.4
	ADR ($)
	Three Months Ended
	March 31,
	2015	2014	%Variance
San Francisco area	206.63	188.07	9.9
Boston	197.64	184.06	7.4
South Florida	221.32	205.26	7.8
Los Angeles area	170.33	159.17	7.0
Myrtle Beach	112.76	108.73	3.7
Philadelphia	139.82	130.99	6.7
Tampa	251.81	226.08	11.4
New York area	208.91	229.08	(8.8	)
Other markets	163.82	153.47	6.7
Core hotels (39)(a)	181.65	170.25	6.7
	RevPAR ($)
	Three Months Ended
	March 31,
	2015	2014	%Variance
San Francisco area	170.52	135.42	25.9
Boston	131.40	112.85	16.4
South Florida	206.40	187.18	10.3
Los Angeles area	138.98	131.96	5.3
Myrtle Beach	60.83	49.43	23.1
Philadelphia	68.77	71.38	(3.7	)
Tampa	223.53	194.74	14.8
New York area	146.76	164.18	(10.6	)
Other markets	122.97	107.85	14.0
Core hotels (39)(a)	135.78	119.58	13.5

(a) Excludes The Knickerbocker which opened in February 2015.

41

Hotel Portfolio

The following table sets forth certain descriptive information regarding the hotels in which we held ownership interest at March 31, 2015.

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 – The Knickerbocker	Independent	NY	330	95	%
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

42

Hotel Portfolio (continued)

Core Hotels	Brand	State	Rooms	% Owned(a)
Austin	DoubleTree Suites by Hilton	TX	188
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	%
Non-strategic Hotels
Orlando – International Airport	Holiday Inn	FL	288
Chicago – Lombard/Oak Brook	Embassy Suites Hotel	IL	262
Charlotte	Embassy Suites Hotel	NC	274	50	%
Austin – Central	Embassy Suites Hotel	TX	260
Non-strategic Hotel Held for Sale
San Antonio – NW I-10	Embassy Suites Hotel	TX	216

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

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Liquidity and Capital Resources

Operating Activities

During the first three months of 2015, our operations (primarily hotel operations) provided $16.8 million in cash, $5.6 million less than the same period last year. This decrease is primarily attributable to Wyndham paying $8 million in 2014 (for 2013) compared to $1 million this year (for 2014) under its annual net operating income guaranty, as well as, an approximately $6.0 million payment we made this year in connection with an ongoing commercial dispute and increased interest paid over the same period last year, all of which is offset by improved operations this year. Our consolidated statements of cash flows combines cash flow from continuing and discontinued operations. Hotels in discontinued operations did not generate significant operating cash flow for the three months ended March 31, 2015 and 2014. The hotels reported in discontinued operations would not have provided acceptable future operating cash flow on our investment, and the absence of their operating cash flow has not had a material impact on our business.

At March 31, 2015, we had $58.9 million of cash and cash equivalents, including $37.0 million held by third-party management companies.

RevPAR growth for the lodging industry remains strong. At our core hotels for the first three months, RevPAR increased 13.5%, driven by a 6.7% increase in ADR and a 6.4% increase in occupancy. At our same-store hotels, we expect RevPAR will increase 8.5-9.5% during 2015, primarily from higher ADR, and our operations will generate $144.1 million to $152.7 million of cash flow this year.

Investing Activities

During the first three months of 2015, we had $66.4 million of cash provided by investing activities compared to $220,000 provided during the same period last year. During the first three months of 2015, we sold hotels for $91.3 million in net proceeds, which is $51.4 million more asset sale proceeds compared to this same period last year. Our restricted cash increased $1.7 million during the first three months of 2015 compared to a $10.2 million reduction of restricted cash during the same period last year (the prior year reduction was used primarily to fund our hotel development project). So far this year, compared to the same period last year, we spent $15.1 million less on improvements and additions to hotels and $13.5 million less on hotel development.

Through March 31, 2015, we have spent $143.2 million (excluding initial acquisition costs and capitalized interest) to redevelop The Knickerbocker, a 4+ star hotel which opened in February 2015.

For renovations and redevelopment this year, we expect to spend approximately $45 million, funded from operating cash flow, cash on hand and borrowings under our line of credit. In addition, at The Knickerbocker, we expect to invest approximately $33 million this year, funded primarily by proceeds from the construction loan and additional proceeds from selling preferred joint venture equity through the EB-5 immigrant investment program.

Since December 2010, we have sold 35 non-strategic hotels for total gross proceeds of $728 million (reflects our pro rata share) and have disposed of our 50% interests in five non-strategic hotels by unwinding certain joint ventures. We have five remaining non-strategic hotels, of which four additional non-strategic hotels (two with a non-refundable deposit, one of which was received prior to March 31, 2015) are expected to close in the second quarter.

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Financing Activities

During the first three months of 2015, cash used in financing activities increased by $76.7 million compared to the same period last year. We repaid $26.9 million less in debt and our borrowings were $45.0 million lower this year compared to the same period last year. Our distributions to noncontrolling interests increased because we sold a joint venture property during the first three months of 2015. In the current year, we received $1.2 million in net proceeds from preferred equity issued by The Knickerbocker consolidated joint venture as compared to $40.9 million last year. This year, we expect to pay approximately $2 million of normally occurring principal payments, $32 million of preferred dividends and $22 million in common dividends (assuming no change to our current quarterly dividend rate), all of which will be funded from operating cash flow and cash on hand. We use proceeds from hotel sales to make additional non-recurring principal payments.

FelCor’s Board of Directors declared, and we paid, a $0.04 per share quarterly common stock dividend. FelCor LP, which is our operating partnership, distributes funds to FelCor to pay common or preferred dividends. FelCor's Board of Directors determines the amount of 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.

Common Stock Offering. On April 14, 2015, we sold 18.4 million shares of our common stock for net proceeds (after deducting underwriting discounts and commissions and expenses) of approximately $199 million.

On April 14, 2015, we called for redemption of all of our outstanding shares of 8% Series C Cumulative Redeemable Preferred Stock and all depositary shares representing the Series C Preferred Stock. The shares of Series C Preferred Stock and the depositary shares will be redeemed on May 14, 2015, with proceeds from the equity offering. Including accrued dividends, the total redemption price will be $170.4 million. The remaining net proceeds from the offering, along with cash on hand and proceeds from future asset sales, will be used to fund future redevelopment projects and other growth opportunities.

Secured Debt. Except for our senior notes, line of credit and 2014 term loan, 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 hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves, even if revenues are flowing through a lock-box triggered by a specified debt service coverage ratio not being met. All of our consolidated loans subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.

Senior Notes. Our senior notes, which are guaranteed by FelCor, 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. In addition, our senior notes are secured by a combination of first lien mortgages and related security interests on 15 hotels (six hotels for our 6.75%

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senior notes and nine hotels for our 5.625% senior notes), as well as pledges of equity interests in certain subsidiaries of FelCor LP.

Interest Rate Caps. To fulfill requirements under one of our loans, we entered into an interest rate cap agreement with an aggregate notional amount of $140 million at March 31, 2015 and December 31, 2014. This interest rate cap was not designated as a hedge and had an insignificant fair value at March 31, 2015 and December 31, 2014, resulting in no significant impact on earnings.

Inflation and Competition

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.

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, 2015, approximately 78% 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, 2015

(dollars in thousands)

	Expected Maturity Date
	2015			2016			2017			2018			2019			Thereafter			Total			Fair Value
Liabilities
Fixed-rate:
Debt	$	1,893		$	2,652		$	2,810		$	2,954		$	528,106		$	666,596		$	1,205,011		$	1,259,243
Average   interest rate	4.95		%	4.95		%	4.95		%	4.95		%	6.74		%	5.48		%	6.03		%
Floating-rate:
Debt	—			149,361			189,067			—			—			—			338,428			340,060
Average   interest rate (a)	—			4.49		%	4.26		%	—			—			—			4.36		%
Total debt	$	1,893		$	152,013		$	191,877		$	2,954		$	528,106		$	666,596		$	1,543,439
Average    interest rate	4.95		%	4.50		%	4.27		%	4.95		%	6.74		%	5.48		%	5.66		%
Net discount																			—
Total debt																			$	1,543,439

(a) The average floating interest rate considers the implied forward rates in the yield curve at March 31, 2015.

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.

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, 2015 and December 31, 2014; (ii) FelCor’s Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014; (iii) FelCor’s Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014; (iv) FelCor’s Consolidated Statements of Changes in Equity for the three months ended March 31, 2015 and 2014; (v) FelCor’s Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; (vi) FelCor LP’s Consolidated Balance Sheets at March 31, 2015 and December 31, 2014; (vii) FelCor LP’s Consolidated Statements of

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Operations for the three months ended March 31, 2015 and 2014; (viii) FelCor LP’s Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014; (ix) FelCor LP’s Consolidated Statements of Partners’ Capital for the three months ended March 31, 2015 and 2014; (x) FelCor LP’s Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; 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 1, 2015	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 1, 2015	By:	/s/ Jeffrey D. Symes
		Name:	Jeffrey D. Symes
		Title:	Senior Vice President, Chief Accounting Officer and Controller

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