FelCor Lodging Trust 10K/A 2006 Annual report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K/A

Amendment No. 1

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006


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 1-14236

FelCor Lodging Trust Incorporated

(Exact name of registrant as specified in its charter)


Maryland		75-2541756
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

545 E. John Carpenter Frwy., Suite 1300, Irving, Texas (Address of principal executive offices)		75062 (Zip Code)

(972) 444-4900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered

Common Stock $1.95 Series A Cumulative Convertible Preferred Stock Depositary Shares representing 8% Series C Cumulative Redeemable Preferred Stock		New York Stock Exchange, Inc. New York Stock Exchange, Inc. New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.þ Yeso No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.o Yesþ No

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.þ Yeso No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)o Yesþ No

The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant, computed by reference to the price at which registrant’s common stock was last sold at February 22, 2007, was approximately $1.5 billion.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Check one:

Large accelerated filerþ Accelerated filero Non-accelerated filero

As of February 22, 2007, the registrant had issued and outstanding 62,040,221 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s definitive Proxy Statement pertaining to the 2007 Annual Meeting of Stockholders (the “Proxy Statement”), filed or to be filed not later than 120 days after the end of the fiscal year pursuant to Regulation 14A, is incorporated herein by reference into Part III.

Explanatory Note

FelCor Lodging Trust Incorporated is filing this Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, originally filed with the Securities and Exchange Commission on March 1, 2007, for the purpose of including the conformed signatures of PricewaterhouseCoopers LLP, which were inadvertently omitted in the originally filed 10-K, on the Report of Independent Registered Public Accounting Firm, in Part II, Item 8., and on the Consent of PricewaterhouseCoopers LLP, filed as exhibit 23 in Part IV, Item 15.

Other than as set forth above, we have not modified in any way the information in our Form 10-K for the fiscal year ended December 31, 2006.

FELCOR LODGING TRUST INCORPORATED

INDEX


Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm			4
Consolidated Balance Sheets — December 31, 2006 and 2005			6
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004			7
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2006, 2005 and 2004			8
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004			9
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004			10
Notes to Consolidated Financial Statements			11
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2006			37
Item 15. Exhibits and Financial Statement Schedules			40
Consent of PricewaterhouseCoopers LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of FelCor Lodging Trust Incorporated:

We have completed integrated audits of FelCor Lodging Trust Incorporated’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of FelCor Lodging Trust Incorporated and its subsidiaries, or the Company, at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying indexpresents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing in Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas
March 1, 2007

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED BALANCE SHEETS

December 31, 2006 and 2005
(in thousands)


	2006			2005
ASSETS

Investment in hotels, net of accumulated depreciation of $612,286 in 2006 and $1,019,123 in 2005	$	2,044,285		$	2,584,379
Investment in unconsolidated entities		111,716			109,262
Hotels held for sale		133,801			—
Cash and cash equivalents		124,179			94,564
Restricted cash		22,753			18,298
Accounts receivable, net of allowance for doubtful accounts of $962 in 2006 and $2,203 in 2005		33,395			54,815
Deferred expenses, net of accumulated amortization of $8,841 in 2006 and $12,150 in 2005		9,480			12,423
Condominium development project		70,661			16,051
Other assets		32,979			30,471

Total assets	$	2,583,249		$	2,920,263


LIABILITIES AND STOCKHOLDERS’ EQUITY

Debt, net of discount of $1,089 in 2006 and $2,982 in 2005	$	1,369,153		$	1,675,280
Distributions payable		24,078			8,596
Accrued expenses and other liabilities		139,277			139,187

Total liabilities		1,532,508			1,823,063


Commitments and contingencies

Minority interest in FelCor LP 1,355 and 2,763 units issued and outstanding at December 31, 2006 and 2005, respectively		11,638			25,393

Minority interest in other partnerships		28,172			40,014

Stockholders’ equity:
Preferred stock, $.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,011 issued and outstanding at December 31, 2006 and December 31, 2005		309,362			309,362
Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950 issued and outstanding at December 31, 2006		169,412			169,412
Common stock, $.01 par value, 200,000 shares authorized and 69,438 and 69,440 shares issued, including shares in treasury, at December 31, 2006 and 2005, respectively		694			694
Additional paid-in capital		2,066,694			2,081,869
Accumulated other comprehensive income		15,839			19,602
Accumulated deficit		(1,409,790	)		(1,372,720	)
Less: Common stock in treasury, at cost, of 7,386 and 9,231 shares at December 31, 2006 and 2005, respectively		(141,280	)		(176,426	)


Total stockholders’ equity		1,010,931			1,031,793


Total liabilities and stockholders’ equity	$	2,583,249		$	2,920,263

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except per share data)


	2006			2005			2004
Revenues:
Hotel operating revenue	$	990,959		$	913,149		$	840,416
Retail space rental and other revenue		79			1,506			2,196


Total revenues		991,038			914,655			842,612


Expenses:
Hotel departmental expenses		319,731			303,454			290,619
Other property operating costs		270,301			255,626			235,204
Management and franchise fees		51,237			45,215			42,664
Taxes, insurance and lease expense		112,052			104,852			92,256
Abandoned projects		33			265			—
Corporate expenses		23,308			19,025			17,033
Depreciation		94,579			84,448			78,116


Total operating expenses		871,241			812,885			755,892


Operating income		119,797			101,770			86,720
Interest expense, net		110,867			121,668			136,144
Hurricane loss		—			6,481			2,125
Charge-off of deferred financing costs		3,562			1,448			6,960
Loss on early extinguishment of debt		12,471			4,037			44,216
Gain on swap termination		(1,715	)		—			(1,005	)


Loss before equity in income of unconsolidated entities, minority interests and gain on sale of assets		(5,388	)		(31,864	)		(101,720	)
Equity in income from unconsolidated entities		11,537			10,169			17,121
Gain (loss) on sale of assets		(92	)		469			—
Minority interests		2,508			4,310			6,223


Income (loss) from continuing operations		8,565			(16,916	)		(78,376	)
Discontinued operations		42,480			(234,699	)		(21,751	)


Net income (loss)		51,045			(251,615	)		(100,127	)
Preferred dividends		(38,713	)		(39,408	)		(35,130	)
Issuance costs of redeemed preferred stock		—			(6,522	)		—


Net income (loss) applicable to common stockholders	$	12,332		$	(297,545	)	$	(135,257	)


Income (loss) per common share data:
Basic and diluted:
Loss from continuing operations	$	(0.50	)	$	(1.06	)	$	(1.92	)

Net income (loss)	$	0.20		$	(5.01	)	$	(2.29	)

Weighted average common shares outstanding		60,734			59,436			59,045


Cash dividends declared on common stock	$	0.80		$	0.15		$	—

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the years ended December 31, 2006, 2005 and 2004
(in thousands)


	2006			2005			2004
Net income (loss)	$	51,045		$	(251,615	)	$	(100,127	)
Unrealized holding gains (loss) from interest rate swaps		(507	)		2,074			147
Realized gain from interest rate swaps		(1,715	)		—			—
Foreign currency translation adjustment		(1,541	)		1,748			6,155

Comprehensive income (loss)	$	47,282		$	(247,793	)	$	(93,825	)

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the years ended December 31, 2006, 2005, and 2004
(in thousands)


	Preferred Stock						Common Stock								Accumulated
	Number						Number					Additional			Other									Total
	of						of					Paid-in			Comprehensive			Accumulated			Treasury			Stockholders’
	Shares			Amount			Shares			Amount		Capital			Income			Deficit			Stock			Equity
Balance at December 31, 2003		6,048		$	318,907			69,429		$	694	$	2,095,356		$	9,478		$	(930,886	)	$	(197,277	)	$	1,296,272
Foreign exchange translation		—			—			—			—		—			6,155			—			—			6,155
Issuance of Series A preferred stock		6,900			159,850			—			—		(3,850	)		—			—			—			156,000
Issuance of stock awards		—			—			7			—		(9,067	)		—			—			9,092			25
Amortization of stock awards		—			—			—			—		3,179			—			—			—			3,179
Unrealized gain on hedging transaction		—			—			—			—		—			147			—			—			147
Conversion of operating partnership units into common shares		—			—			—			—		(1,999	)		—			—			4,692			2,693
Allocation from minority units		—			—			—			—		1,109			—			—			—			1,109
Forfeitures of stock awards		—			—			—			—		461			—			—			(461	)		—
Dividends declared:
$1.95 per Series A preferred share		—			—			—			—		—			—			(19,884	)		—			(19,884	)
$2.25 per Series B depositary preferred share		—			—			—			—		—			—			(15,246	)		—			(15,246	)
Net loss		—			—			—			—		—			—			(100,127	)		—			(100,127	)

Balance at December 31, 2004		12,948			478,757			69,436			694		2,085,189			15,780			(1,066,143	)		(183,954	)		1,330,323
Foreign exchange translation		—			—			—			—		—			1,748			—			—			1,748
Issuance of Series C preferred stock		68			169,412			—			—		(5,492	)		—			—			—			163,920
Retirement of Series B preferred stock		(68	)		(169,395	)		—			—		6,522			—			(6,522	)					(169,395	)
Issuance of stock awards		—			—			4			—		(7,285	)		—			—			7,022			(263	)
Amortization of stock awards		—			—			—			—		3,265			—			—			—			3,265
Unrealized gain on hedging transaction		—			—			—			—		—			2,074			—			—			2,074
Conversion of operating partnership units into common shares		—			—			—			—		(118	)		—			—			506			388
Allocation from minority units		—			—			—			—		(212	)		—			—			—			(212	)
Dividends declared:		—
$0.15 per common share					—			—			—		—			—			(9,032	)		—			(9,032	)
$1.95 per Series A preferred share		—			—			—			—		—			—			(25,117	)		—			(25,117	)
$1.125 per Series B depositary preferred share		—			—			—			—		—			—			(5,432	)		—			(5,432	)
$1.63 per Series C depositary preferred share		—			—			—			—		—			—			(8,859	)		—			(8,859	)
Net loss		—			—			—			—		—			—			(251,615	)		—			(251,615	)

Balance at December 31, 2005		12,948			478,774			69,440			694		2,081,869			19,602			(1,372,720	)		(176,426	)		1,031,793
Foreign exchange translation		—			—			—			—		—			(1,541	)		—			—			(1,541	)
Issuance of stock awards		—			—			19			—		(6,371	)		—			—			6,933			562
Exercise of stock options		—			—						—		(482	)		—			—			2,670			2,188
Amortization of stock awards		—			—			—			—		5,169			—			—			—			5,169
Forfeiture of stock awards		—			—						—		579			—			—			(866	)		(287	)
Repurchase of common shares		—			—						—		—			—			—			(818	)		(818	)
Common stock exchanged for treasury shares		—			—			(21	)		—		(357	)		—			—			357			—
Unrealized loss on hedging transaction		—			—			—			—		—			(507	)		—			—			(507	)
Realized gain on hedging transaction		—			—						—		—			(1,715	)		—			—			(1,715	)
Conversion of operating partnership units into common shares		—			—			—			—		(26,870	)		—			—			26,870			—
Allocation from minority units		—			—			—			—		13,157			—			—			—			13,157
Dividends declared:
$0.80 per common share		—			—			—			—		—			—			(49,402	)		—			(49,402	)
$1.95 per Series A preferred share		—			—			—			—		—			—			(25,117	)		—			(25,117	)
$2.00 per Series C depositary preferred share		—			—			—			—		—			—			(13,596	)		—			(13,596	)
Net income		—			—			—			—		—			—			51,045			—			51,045

Balance at December 31, 2006		12,948		$	478,774			69,438		$	694	$	2,066,694		$	15,839		$	(1,409,790	)	$	(141,280	)	$	1,010,931

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2006, 2005 and 2004
(in thousands)


	2006			2005			2004
Cash flows from operating activities:
Net income (loss)	$	51,045		$	(251,615	)	$	(100,127	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		110,274			122,535			122,653
Gain on sale of assets		(48,802	)		(12,522	)		(20,589	)
Amortization of deferred financing fees		3,351			3,399			4,161
Accretion amortization of debt		1,105			1,167			510
Amortization of unearned officers’ and directors’ compensation		5,080			2,904			2,945
Equity in income from unconsolidated entities		(11,537	)		(10,169	)		(17,121	)
Distributions of income from unconsolidated entities		3,632			1,062			11,932
Charge-off of deferred financing costs		3,643			2,659			6,960
Loss on early extinguishment of debt		13,701			8,641			44,216
Impairment loss hotels		16,474			266,751			38,289
Minority interests		(789	)		(23,295	)		(7,375	)
Changes in assets and liabilities:
Accounts receivable		12,571			(6,178	)		(2,213	)
Restricted cash-operations		(2,687	)		(6,941	)		(23,467	)
Other assets		(9,076	)		(6,057	)		(957	)
Accrued expenses and other liabilities		(285	)		19,141			(26,536	)

Net cash flow provided by operating activities		147,700			111,482			33,281

Cash flows provided by (used in) investing activities:
Acquisition of hotels		—			—			(27,759	)
Improvements and additions to hotels		(168,525	)		(111,664	)		(95,599	)
Additions to condominium project		(51,200	)		(11,546	)		—
Acquisition of joint venture		—			(1,197	)		—
Cash from consolidation of venture		—			3,204			—
Proceeds from asset dispositions		346,332			73,502			152,686
Proceeds received from property damage insurance		7,535			3,131			—
Decrease in restricted cash-investing		1,008			10,804			8,155
Cash distributions from unconsolidated entities		5,700			6,578			10,899
Capital contributions to unconsolidated entities		(250	)		(1,350	)		—

Net cash flow provided by (used in) investing activities		140,600			(28,538	)		48,382

Cash flows provided by (used in) financing activities:
Proceeds from borrowings		540,494			233,911			523,802
Repayment of borrowings		(716,006	)		(292,990	)		(838,891	)
Payment of debt issuance costs		(3,985	)		(659	)		(5,517	)
Decrease in restricted cash-financing		2,825			4,401			—
Net proceeds from sale of preferred stock		—			164,147			158,990
Redemption of preferred stock		—			(169,395	)		—
Exercise of stock options		2,188			—			—
Distributions paid to other partnerships’ minority holders		(13,167	)		—			(4,000	)
Contribution from minority interest holders		2,519			2,200			3,247
Distributions paid to FelCor LP limited partners		(878	)		(414	)		—
Distributions paid to preferred stockholders		(38,713	)		(39,905	)		(34,757	)
Distributions paid to common stockholders		(33,951	)		(9,032	)		—

Net cash flow used in financing activities		(258,674	)		(107,736	)		(197,126	)

Effect of exchange rate changes on cash		(11	)		46			2,888
Net change in cash and cash equivalents		29,615			(24,746	)		(112,575	)
Cash and cash equivalents at beginning of periods		94,564			119,310			231,885

Cash and cash equivalents at end of periods	$	124,179		$	94,564		$	119,310

Supplemental cash flow information — Interest paid	$	118,502		$	132,091		$	162,324

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

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

In 1994, FelCor Lodging Trust Incorporated, or FelCor, went public as a real estate investment trust, or REIT, with six hotels and a market capitalization of $120 million. At December 31, 2006, we held ownership interests in 99 hotels and were the owner of the largest number of Embassy Suites Hotels and independently owned Doubletree-branded hotels in North America.

FelCor is the sole general partner of, and the owner of an approximately 98% limited partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP. All of our operations are conducted solely through FelCor LP, or its subsidiaries.

At December 31, 2006, we owned a 100% real estate interest in 72 hotels, a 90% or greater interest in entities owning five hotels, a 75% interest in an entity owning one hotel, a 60% interest in an entity owning two hotels, and 50% interests in unconsolidated entities owning 19 hotels. As a result of our ownership interests in the operating lessees of 94 of these hotels, we reflect their operating revenues and expenses in our consolidated statements of operations. The operations of 83 of these consolidated hotels were included in continuing operations at December 31, 2006, and 11 hotels were held for sale and included in discontinued operations. The operating revenues and expenses of the remaining five hotels were reported on the equity method, four hotels were operated by 50% owned lessees and one hotel, in which we had a 50% ownership interest, was operated without a lease.

At December 31, 2006, we had an aggregate of 63,407,199 shares and unit outstanding, consisting of 62,052,183 shares of FelCor common stock and 1,355,016 units of FelCor LP limited partnership interest not owned by FelCor.

The following table reflects the distribution, by brand, of the 83 hotels included in our consolidated hotel continuing operations at December 31, 2006:


Brand	Hotels		Rooms
Embassy Suites Hotels		47		12,130
Holiday Inn-branded		17		6,301
Starwood-branded		9		3,217
Doubletree-branded		7		1,471
Hilton-branded		2		559
Other brands		1		403

Total hotels		83

The hotels shown in the above table are located in the United States (23 states) and Canada (two hotels), with concentrations in California (14 hotels), Florida (13 hotels) and Texas (11 hotels). Approximately 48% of our hotel room revenues were generated from hotels in these three states during 2006.

At December 31, 2006, of the 83 consolidated hotels included in continuing operations, (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 54, (ii) subsidiaries of InterContinental Hotels Group, or IHG, managed 18, (iii) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed nine, and

(iv) independent management companies managed two.

Certain reclassifications have been made to prior period financial information to conform to the current period’s presentation with no effect to previously reported net loss or stockholders’ equity.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies

Principles of Consolidation— Our accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation. Investments in unconsolidated entities (consisting entirely of 50 percent owned ventures) are accounted for by the equity method.

Use of Estimates— The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America, requires that management make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment in Hotels— Our hotels are stated at cost and are depreciated using the straight-line method over estimated useful lives of 40 years for buildings, 15 to 20 years for improvements and three to seven years for furniture, fixtures, and equipment.

We periodically review the carrying value of each of our hotels to determine if circumstances exist indicating an impairment in the carrying value of the investment in the hotel or modification of depreciation periods. If facts or circumstances support the possibility of impairment of a hotel, we prepare a projection of the undiscounted future cash flows, without interest charges, over the shorter of the hotel’s estimated useful life or the expected hold period, and determine if the investment in such hotel is recoverable based on the undiscounted future cash flows. If impairment is indicated, we make an adjustment to reduce carrying value of the hotel to its then fair value. We use recent operating results and current market information to arrive at our estimates of fair value.

Maintenance and repairs are expensed and major renewals and improvements are capitalized. Upon the sale or disposition of a fixed asset, the asset and related accumulated depreciation are removed from our accounts and the related gain or loss is included in operations.

Acquisition of Hotels— Our hotel acquisitions consist almost exclusively of land, building, furniture, fixtures and equipment, and inventory. We allocate the purchase price among these asset classes based upon their respective values determined in accordance with Statement of Financial Accounting Standards, or SFAS, 141, “Business Combinations.” When we acquire properties, we acquire them for use. The only intangible assets typically acquired consist of miscellaneous operating agreements all of which are of short duration and at market rates. We do not generally acquire any significant in-place leases or other intangible assets (e.g., management agreements, franchise agreements or trademarks) when we acquire hotels. In conjunction with the acquisition of a hotel, we typically enter into new franchise and management agreements with the selected brand owner and manager.

Investment in Unconsolidated Entities— We own a 50% interest in various real estate ventures in which the partners or members jointly make all material decisions concerning the business affairs and operations. Additionally, we also own a preferred equity interest in one of these real estate ventures. Because we do not control these entities, we carry our investment in unconsolidated entities at cost, plus our equity in net earnings or losses, less distributions received since the date of acquisition and any adjustment for impairment. Our equity in net earnings or losses is adjusted for the straight-line depreciation, over the lower of 40 years or the remaining life of the venture, of the difference between our cost and our proportionate share of the underlying net assets at the date of acquisition. We periodically review our investment in unconsolidated entities for other than temporary declines in fair value. Any decline that is not expected to be recovered in the next 12 months is considered other than temporary and an impairment is recorded as a reduction in the carrying value of the investment. Estimated fair values are based on our projections of cash flows and market capitalization rates.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies — (continued)

Hotels Held for Sale —We consider each individual hotel to be an identifiable component of our business. In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we do not consider hotels as “held for sale” until it is probable that the sale will be completed within one year. Once a hotel is “held for sale” the operations related to the hotel are included in discontinued operations. In the last three years we have disposed of 68 non-strategic hotels. We had 11 remaining non-strategic hotels at December 31, 2006, that we intend to sell within the next twelve months. Based on our recent experience in the hospitality real estate market and the current contract and offer activity on these 11 non-strategic hotels, we consider it probable that they will be sold prior to December 31, 2007. As such, these hotels have been classified as “held for sale” as of December 31, 2006.

We do not depreciate hotel assets that are classified as “held for sale.” Upon designating a hotel as “held for sale,” and quarterly thereafter, we review the carrying value of the hotel and, as appropriate, adjust its carrying value to the lesser of depreciated cost or fair value, less cost to sell, in accordance with SFAS 144. Any adjustment in the carrying value of a hotel classified as “held for sale” is reflected in discontinued operations. We include in discontinued operations the operating results of hotels classified as “held for sale” or that have been sold.

Cash and Cash Equivalents— All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

We place cash deposits at major banks. Our bank account balances may exceed the Federal Depository Insurance Limits of $100,000; however, management believes the credit risk related to these deposits is minimal.

Restricted Cash—Restricted cash includes reserves for capital expenditures, real estate taxes, and insurance, as well as cash collateral deposits for mortgage debt agreement provisions and capital expenditure obligations on sold hotels.

Deferred Expenses— Deferred expenses, consisting primarily of loan costs, are recorded at cost. Amortization is computed using a method that approximates the interest method over the maturity of the related debt.

Other Assets —Other assets consist primarily of hotel operating inventories, prepaid expenses and deposits.

Revenue Recognition— Approximately 99.7% to 100.0% of our revenue is comprised of hotel operating revenues, such as room revenue, food and beverage revenue, and revenue from other hotel operating departments (such as telephone, parking and business centers). 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 and are recorded as a bad debt expense. The remaining 0.1% to 0.3% of our revenue is from retail space rental revenue and other sources.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies — (continued)

We do not have any time-share arrangements and do not sponsor any frequent guest programs for which we would have any contingent liability. We participate in frequent guest programs sponsored by the brand owners of our hotels and we expense the charges associated with those programs (typically consisting of a percentage of the total guest charges incurred by a participating guest), as incurred. When a guest redeems accumulated frequent guest points at one of our hotels, the hotel bills the sponsor for the services provided in redemption of such points and records revenue in the amount of the charges billed to the sponsor. Associated with the frequent guest programs, we have no loss contingencies or ongoing obligation beyond what is paid to the brand owner at the time of the guest’s stay.

We recognize revenue from the sale of condominium units using the completed contract method.

Foreign Currency Translation— Results of operations for our Canadian hotels are maintained in Canadian dollars and translated using the average exchange rates during the period. Assets and liabilities are translated to U.S. dollars using the exchange rate in effect at the balance sheet date. Resulting translation adjustments are reflected in accumulated other comprehensive income and were $15.8 million and $17.4 million as of December 31, 2006 and 2005, respectively.

Capitalized Cost— We capitalize interest and certain other costs, such as property taxes, land leases, and property insurance and employee costs relating to hotels undergoing major renovations and redevelopments. Such costs capitalized in 2006, 2005, and 2004, were $10.6 million, $8.4 million and $5.6 million, respectively.

Net Income (Loss) Per Common Share— We compute basic earnings per share by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. We compute diluted earnings per share by dividing net income (loss) available to common stockholders by the weighted average number of common shares and equivalents outstanding. Common stock equivalents represent shares issuable upon exercise of stock options and unvested officers’ restricted stock grants.

For all years presented, our Series A Cumulative Preferred Stock, or Series A preferred stock, if converted to common shares, would be antidilutive; accordingly we do not assume conversion of the Series A preferred stock in the computation of diluted earnings per share.

Stock Compensation¾ In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123(R), Share-Based Payment. This statement replaces SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires companies to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees and to record compensation cost for (i) all stock awards granted after the required date of adoption and to (ii) awards modified, repurchased, or cancelled after that date. In addition, we are required to record compensation expense for the unvested portion of previously granted awards that remain outstanding at the date of adoption as such previous awards continue to vest. We adopted SFAS No. 123(R) on January 1, 2006 using the modified prospective application. The adoption of this standard did not have a material impact on our consolidated financial statements.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies¾ (continued)

Prior to January 1, 2006, we applied Accounting Principles Board Opinion 25, or APB 25, and related interpretations in accounting for our stock based compensation plans for stock based compensation issued prior to January 1, 2003. Had the compensation cost for these stock-based compensation plans been determined in accordance with SFAS No. 123 our net loss from continuing operations and net loss from continuing operations per common share for the years ended December 31, 2005 and 2004, would approximate the pro forma amounts below (in thousands, except per share data):


	2005			2004
Loss from continuing operations, as reported	$	(16,916	)	$	(78,376	)
Add stock based compensation included in the net loss, as reported		2,904			2,945
Less stock based compensation expense that would have been included in the determination of net loss if the fair value method had been applied to all awards		(2,914	)		(3,001	)

Loss from continuing operations, pro forma	$	(16,926	)	$	(78,432	)


Basic and diluted net loss from continuing operations per common share:
As reported	$	(1.06	)	$	(1.92	)
Pro forma	$	(1.06	)	$	(1.92	)

The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts.

Derivatives¾ We record derivatives in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.” SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments. Specifically, SFAS 133 requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders’ equity or net income, depending on whether the derivative instrument qualifies as a hedge for accounting purposes and the nature of the hedging activity.

Segment Information¾ SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,” requires the disclosure of selected information about operating segments. Based on the guidance provided in the standard, we have determined that our business is conducted in one operating segment.

Distributions and Dividends— We and FelCor LP resumed paying a common dividend with the fourth quarter 2005 payment of $0.15 per share. In 2006, we declared common dividends of $0.80 per share. Additionally, we have paid regular quarterly dividends on our preferred stock in accordance with our preferred stock dividend requirements. Our ability to make distributions is dependent on our receipt of quarterly distributions from FelCor LP, and FelCor LP’s ability to make distributions is dependent upon the results of operations of our hotels.

Minority Interests— Minority interests in FelCor LP and other consolidated subsidiaries represent the proportionate share of the equity in FelCor LP and other consolidated subsidiaries not owned by us. We allocate income and loss to minority interest based on the weighted average percentage ownership throughout the year.

Income Taxes— We have elected to be treated as a REIT under Sections 856 to 860 of the Internal Revenue Code. We generally lease our hotels to wholly-owned taxable REIT subsidiaries, or TRSs, that are subject to federal and state income taxes. Through these lessees we record room revenue, food and beverage revenue and other revenue related to the operations of our hotels. We account for income taxes in accordance with the provisions of SFAS 109. Under SFAS 109, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Investment in Hotels

Investment in hotels at December 31, 2006 and 2005 consisted of the following (in thousands):


	2006			2005
Building and improvements	$	2,058,563		$	2,710,465
Furniture, fixtures and equipment		308,838			567,330
Land		203,791			291,074
Construction in progress		85,379			34,633

		2,656,571			3,603,502
Accumulated depreciation		(612,286	)		(1,019,123	)

	$	2,044,285		$	2,584,379

In 2006, we wrote off fully depreciated furniture, fixtures and equipment aggregating $264.6 million.

Discussions of hotel dispositions are included in our Discontinued Operations footnote.

We invested $169 million and $112 million in additions and improvements to our consolidated hotels during the years ended December 31, 2006 and 2005, respectively.

4. Impairment Charges

Our hotels are comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the remainder of our operations. Accordingly, we consider our hotels to be components as defined by SFAS 144 for purposes of determining impairment charges and reporting discontinued operations.

A hotel held for investment is tested for impairment whenever changes in circumstances indicate its carrying value may not be recoverable. The test is conducted using the undiscounted cash flows for the shorter of the estimated remaining holding periods or the useful life of the hotel. When testing for recoverability of hotels held for investment, we use projected cash flows over the expected hold period. Those hotels held for investment that fail the impairment test described in SFAS 144 were written down to their then current estimated fair value, before any selling expenses. These hotels continue to be depreciated over their remaining useful lives.

Hotels held for sale are tested for impairment each reporting period and are recorded at the lower of their carrying amounts or fair value less costs to sell. These hotels are not depreciated after they have been designated as held for sale.

When determining fair value for purposes of determining impairment we use a combination of historical and projected cash flows and other available market information, such as recent sales prices for similar assets in specific markets. The cash flows used for determining fair values are discounted using a reasonable capitalization rate, or as earlier noted based on the local market conditions using recent sales of similar assets. In some cases we are able to establish fair value based on credible offers received from prospective buyers.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Impairment Charges – (continued)

In 2006, we recorded impairment charges of $16.5 million under the provisions of SFAS 144. Of the 2006 charges, $9.3 million were related to our decision to designate seven additional hotels held for investment as non-strategic, $5.9 million related to a change in fair value estimates of held for investment hotels previously designated as non-strategic, and $1.3 million related to charges necessary to record two non- strategic hotels as of December 31, 2006 as held for sale at the lower of their carrying amount or fair value less costs to sell. In February 2007, we sold two non-strategic hotels for gross proceeds of $42.7 million.

In 2005, we recorded impairment charges, under the provisions of SFAS 144, of $266.8 million, all of which was included in discontinued operations at December 31, 2006. The 2005 charges primarily related to our decision to designate as non-strategic and sell 28 additional hotels, in connection with the negotiation of the amendment to our IHG management agreements. Under the management agreements entered into with IHG in 2001 and amended in 2004, we were obligated to reinvest the net proceeds from the sale of IHG-managed hotels in other IHG-managed hotels or pay substantial liquidated damages to IHG. This potential exposure to liquidated damages made it impractical to sell IHG-managed hotels. In January 2006, we executed an agreement modifying our management agreements covering our hotels managed by IHG. This agreement eliminated any potential liquidated damages or reinvestment requirement with respect to hotels previously sold, certain IHG-managed hotels identified for sale and one Crowne Plaza hotel to be converted to another brand. We also recorded impairment charges with respect to 11 hotels previously designated as non-strategic principally because of revised estimates of fair value resulting from changes in the market and sales offers. In January 2006, we sold eight non-strategic hotels for gross proceeds of approximately $160 million.

In 2004, we recorded impairment charges, under the provisions of SFAS 144, of $38.3 million, all of which was included in discontinued operations at December 31, 2006. The 2004 charges were related to 17 hotels. With respect to one hotel, we entered into an agreement that would permit the option holder to purchase the hotel for substantially less than its carrying value. The remaining hotels had revised estimates of fair value or reduced estimated holding periods.

We may be subject to additional impairment charges in the event that operating results of individual hotels are materially different from our forecasts, the economy and lodging industry weaken, or if we shorten our contemplated holding period for certain of our hotels.

Of the 51 hotels on which we recorded impairment in 2006, 2005 and 2004, 45 have been sold.

5. Discontinued Operations

The results of operations of the 31 hotels disposed of in 2006, 19 hotels disposed of in 2005 and 18 hotels disposed of in 2004, and 11 hotels held for sale at December 31, 2006 are presented in discontinued operations for the periods presented.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Discontinued Operations – (continued)

Results of operations for the 79 hotels included in discontinued operations are as follows:


	Year Ended December 31,
	2006			2005			2004
Hotel operating revenue	$	204,494		$	343,492		$	418,271
Operating expenses		(200,958	)		(593,211	)		(448,297	)

Operating income (loss)		3,536			(249,719	)		(30,026	)
Direct interest costs, net		(1,206	)		(10,203	)		(13,466	)
Loss on the early extinguishment of debt		(1,311	)		(5,815	)		—
Gain on sale, net of tax		43,180			12,053			20,589
Minority interest		(1,719	)		18,985			1,152

Income (loss) from discontinued operations	$	42,480		$	(234,699	)	$	(21,751	)

Impairment losses of $16.5 million, $266.8 million and $38.3 million are included in the operating expenses from discontinued operations for the years ending December 31, 2006, 2005 and 2004, respectively.

In 2006, we sold 31 hotels for gross proceeds of $514.4 million for a net gain of $43.2 million, which is net of approximately $5.7 million in taxes related to the sale of these hotels.

In 2005, we sold 11 hotels for gross proceeds of $79.2 million. Additionally, in 2005 we relinquished title to the non-recourse mortgage holder of eight limited service hotels, owned by a consolidated joint venture, in exchange for the extinguishment of $49.2 million of debt. Associated with these eight hotels we recorded $1.3 million of asset disposition costs and $3.3 million gain on early extinguishment of debt.

In 2004, we sold 17 hotels for gross proceeds of $157.0 million. We also transferred our interest in a hotel that we leased to the lessor in 2004. In conjunction with the termination of this lease we paid the lessor $5 million, which was recorded as asset disposition costs.

6. Investment in Unconsolidated Entities

We owned 50% interests in joint venture entities that owned 19 hotels at December 31, 2006 and December 31, 2005. We also owned a 50% interest in entities that own real estate in Myrtle Beach, South Carolina, provide condominium management services, and lease four hotels. 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.

Summarized combined financial information for 100% of these unconsolidated entities is as follows (in thousands):


	December 31,
	2006		2005
Balance sheet information:
Investment in hotels, net of accumulated depreciation	$	260,628	$	259,645
Total assets	$	297,712	$	295,065
Debt	$	197,462	$	203,880
Total liabilities	$	203,659	$	211,174
Equity	$	94,053	$	83,891

Debt of our unconsolidated entities at December 31, 2006, consisted entirely of non-recourse mortgage debt.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Investment in Unconsolidated Entities — (continued)

Summarized combined statement of operations information for 100% of our unconsolidated entities is as follows (in thousands):


	2006			2005			2004
Total revenues	$	83,766		$	75,396		$	67,902
Net income	$	26,764		$	21,801		$	33,746	^(a)

Net income attributable to FelCor	$	13,382		$	11,348		$	18,483
Preferred return		—			516			516
Depreciation of cost in excess of book value.		(1,845	)		(1,695	)		(1,878	)

Equity in income from unconsolidated entities	$	11,537		$	10,169		$	17,121


(a)		Includes $17.5 million from the gain on the sale of residential condominium development in Myrtle Beach, South Carolina, which was realized in 2004. Our share of the gain was $8.8 million. We also recorded additional gains of $1.9 million in our equity in income from unconsolidated entities to reflect the differences between our historical basis in the assets sold and the basis recorded by the condominium joint venture.

A summary of the components of our investment in unconsolidated entities as of December 31, 2006 and 2005 are as follows (in thousands):


	2006			2005
Hotel investments	$	48,641		$	43,117
Cost in excess of book value of hotel investments		61,253			63,098
Land and condominium investments		3,513			4,270
Hotel lessee investments		(1,691	)		(1,223	)

	$	111,716		$	109,262

A summary of the components of our equity in income of unconsolidated entities for the years ended December 31, 2006, 2005, and 2004, are as follows (in thousands):


	2006			2005			2004
Hotel investments	$	12,090		$	10,691		$	17,673
Hotel lessee operations		(553	)		(522	)		(552	)

Equity in income from unconsolidated entities	$	11,537		$	10,169		$	17,121

In 2005, we acquired, for $1.2 million, an additional 25% interest in a joint venture owning a single hotel, bringing our interest in this previously unconsolidated venture to 75%. This venture has been included in our consolidated financial statements from the date of acquisition of the remaining interest.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt

Debt at December 31, 2006 and 2005 consisted of the following (in thousands):


								Balance Outstanding
	Encumbered		Interest Rate at			Maturity		December 31,
	Hotels		December 31, 2006			Date		2006		2005
Promissory note		—		—			—	$	—	$	650
Line of credit^(a)	none			L + 1.75		January 2009			—		—
Senior term notes		—		—			—		—		123,358
Senior term notes	none			8.50		June 2011			298,911		298,660
Term loan		—		—			—		—		225,000
Senior term notes		—		—			—		—		290,000
Senior term notes	none			L + 1.875		December 2011			215,000		—

Total line of credit and senior debt^(d)				7.98					513,911		937,668


Mortgage debt^(b)	12 hotels			L + 0.93		November 2008			250,000		—
Mortgage debt	8 hotels			6.56		July 2009-2014			97,553		104,282
Mortgage debt		—		—			—		—		117,913
Mortgage debt	7 hotels			7.32		March 2009			124,263		127,455
Mortgage debt		—		—			—		—		41,912
Mortgage debt	8 hotels			8.70		May 2010			169,438		172,604
Mortgage debt	6 hotels			8.73		May 2010			122,578		133,374
Mortgage debt	1 hotel			L + 2.85		August 2008			15,500		15,500
Mortgage debt	1 hotel			5.81		July 2016			12,861		10,457
Other	1 hotel			9.17		August 2011			4,452		5,204
Construction loan^(c)		—		L + 2.00		October 2007			58,597		8,911

Total mortgage debt^(d)	44 hotels			7.41					855,242		737,612


Total^(d)				7.62	%			$	1,369,153	$	1,675,280


(a)		We have a borrowing capacity of $125 million on our line of credit. The interest on this line can range from 175 to 225 basis points over LIBOR based on our leverage ratio as defined in our line of credit agreement.

(b)		This debt has three, one-year extension options.

(c)		We have a recourse construction loan facility for the development of a 184-unit condominium project in Myrtle Beach, South Carolina. The interest on this facility is being capitalized as part of the cost of the project. We have pre sold approximately 98% of these condominiums and expect to start repaying the construction loan as the unit sales are finalized, beginning in the second quarter of 2007.

(d)		Interest rates are calculated based on the weighted average outstanding debt at December 31, 2006.

We reported interest income of $4.1 million, $4.1 million and $2.8 million for the years ended December 31, 2006, 2005 and 2004, respectively. We capitalized interest of $4.9 million, $1.9 million and $1.5 million, for the years ended December 31, 2006, 2005 and 2004, respectively.

In October 2006, FelCor LP sold $215 million of senior floating rate notes in a private offering to qualified institutional buyers. These notes bear interest at LIBOR plus 1.875% and mature in 2011. In addition, payment of amounts due under these notes is guaranteed by us and certain of our subsidiaries who also guarantee payment of our line of credit and other senior debt (other than mortgage debt) and payment of these notes is secured by a pledge of limited partnership interest in FelCor Lodging LP. In November 2006, we also completed a $250 million non-recourse mortgage facility secured by 12 hotels at LIBOR plus 0.93% maturing in two years with three one year extensions at our option.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt¾ (continued)

During the fourth quarter of 2006, we redeemed all of our outstanding $290 million senior floating rate notes due 2011 and all of our outstanding $125 million 7⁵/₂% senior notes due 2007. In addition, we repaid $137 million of outstanding debt secured by mortgages on certain of our hotels. Proceeds from our October 2006 senior note offering and November 2006 mortgage debt facility, together with cash proceeds from hotel sales were used to fund the redemption of senior notes and the repayment of the mortgage debt.

In connection with the repayment of our $290 million senior floating rate notes, we unwound the floating to fixed interest rate swaps associated with these notes. Termination of these interest rate swaps resulted in gain of approximately $1.7 million, which was recorded in the fourth quarter 2006.

The early retirement of certain indebtedness in 2006, resulted in net charges related to debt extinguishment of approximately $15.6 million. As a result of the foregoing refinancing transactions, our annual interest expense will be reduced by approximately $5 million, our weighted average cost of debt will be reduced by approximately 50 basis points and our next significant debt maturity will not be until 2009.

During 2006, we retired approximately $355.8 million of aggregate debt with proceeds of hotel sales, new debt and cash and we borrowed $49.7 million on our Royale Palms condominium development construction loan. In connection with the early debt retirement, we recorded $17.3 million of expense during 2006.

In the fourth quarter of 2005, we retired $258 million of mortgage debt related to 25 hotels and entered into a $225 million unsecured term loan. In connection with the early retirement of $258 million of mortgage debt we recorded $15 million expense in the fourth quarter of 2005.

On June 9, 2004, we redeemed all $175 million in principal amount of our outstanding 7.375% senior notes due 2004. The redemption price was $1,018 per $1,000 of the principal amount, plus accrued interest. With the retirement of this debt, we recorded a loss on redemption of $3.2 million and wrote off $0.3 million of debt issue costs. We also recorded a $1 million gain on the unwinding of the interest rate swaps tied to this debt.

During 2004, we purchased all $600 million of our 9.5% senior notes due 2008 (which bore interest at 10% as a result of the 2003 downgrade of the credit ratings on our senior notes) through tender offers, redemptions and by purchases in the open market, at an average price of $1,063.55 per $1,000 in principal amount. With the retirement of this debt, we recorded a loss on early extinguishment of debt of $41 million of which $38.2 million related to the premium paid in excess of par and $2.8 million related to the charge off of unamortized discount. We also wrote off debt issue costs of $6.5 million.

In 2004, we also elected to terminate our then existing line of credit and wrote off debt issue costs of $0.2 million.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt¾ (continued)

At December 31, 2006, we had aggregate mortgage indebtedness, of approximately $855.2 million that was secured by 44 of our consolidated hotels with an aggregate book value of approximately $1.0 billion and a $58.6 million construction loan related to our Royale Palms condominium development. Our hotel mortgage debt is recourse solely to the specific assets securing the debt, except in the case of fraud, misapplication of funds and other customary recourse carve-out provisions. Loans secured by two hotels provide for lock-box arrangements under certain circumstances. With respect to these loans, we are permitted to retain 115% of budgeted hotel operating expenses, but the remaining revenues would become subject to a lock-box arrangement if a specified debt service coverage ratio is not met. These hotels currently exceed the minimum debt service coverage ratio, however, under the terms of the loan agreement, the lock-box provisions remain in place until the loan is repaid. Neither of these hotels has ever fallen below the debt service coverage ratio.

Our hotel mortgage debt is non-recourse to us and contains provisions allowing for the substitution of collateral upon satisfaction of certain conditions. Most of our mortgage debt is prepayable, subject to various prepayment, yield maintenance or defeasance obligations.

Our $125 million line of credit contains certain restrictive covenants, including a leverage ratio, fixed charge coverage ratio, unencumbered leverage ratio and a maximum payout ratio. The interest on our line can range from 175 to 225 basis points over LIBOR, based on our leverage ratio as defined in our line of credit agreement. In addition to financial covenants, our line of credit includes certain other affirmative and negative covenants, including restrictions on our ability to create or acquire wholly-owned subsidiaries; restrictions on the operation/ownership of our hotels; limitations on our ability to lease property or guarantee leases of other persons; limitations on our ability to make restricted payments (such as distributions on common and preferred stock, share repurchases and certain investments); limitations on our ability to merge or consolidate with other persons, to issue stock of our subsidiaries and to sell all or substantially all of our assets; restrictions on our ability to make investments in condominium developments; limitations on our ability to change the nature of our business; limitations on our ability to modify certain instruments, to create liens, to enter into transactions with affiliates; and limitations on our ability to enter into joint ventures. At the date of this filing, we were in compliance with all of these covenants. If operating results fall significantly below our current expectations, we may not be able to meet some or all of these covenants in which case we may be unable to borrow under our line of credit.

The breach of any of the covenants and limitations under our line of credit could result in the acceleration of amounts outstanding. Our failure to satisfy any accelerated recourse indebtedness, if in the amount of $10 million or more, could result in the acceleration of our other unsecured recourse indebtedness. We may not be able to refinance or repay our debt in full under those circumstances.

Our other borrowings contain affirmative and negative covenants that are generally equal to or less restrictive than our line of credit. Payment of amounts due under our line of credit is guaranteed by us and certain of our subsidiaries who also guarantee payment of our senior debt and payment is secured by a pledge of our limited partnership interest in FelCor LP.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Debt¾ (continued)

At December 31, 2006, we had no borrowings under our line of credit. Our interest rate on our line of credit has decreased from LIBOR plus 2.25% to LIBOR plus 1.75% during 2006 based on our leverage ratio as defined in our line of credit agreement.

Future scheduled principal payments on debt obligations at December 31, 2006, are as follows (in thousands):


Year
2007	$	71,336
2008		279,233	^(a)
2009		142,240
2010		274,535
2011		518,030
2012 and thereafter		84,868

		1,370,242
Discount accretion over term		(1,089	)

	$	1,369,153


(a)		Includes $250 million of mortgage debt that has three, one-year extension options.

8. Derivatives

On the date we enter into a derivative contract, we designate the derivative as a hedge to the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (referred to as a fair value hedge), or the exposure to variable cash flows of a forecasted transaction (referred to as a cash flow hedge). For a fair value hedge, the gain or loss is recognized in earnings in the period of change, together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. At December 31, 2006, we did not have any outstanding hedges.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy, relating to our various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or specific firm commitments. We also formally assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows or fair values of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When we determine that a derivative is not (or has ceased to be) highly effective as a hedge, we will discontinue hedge accounting, prospectively.

In the normal course of business, we are exposed to the effect of interest rate changes. We limit these risks by following established risk management policies and procedures including the use of derivatives. It is our objective to use interest rate hedges to manage our fixed and floating interest rate position and not to engage in speculation on interest rates. We manage interest rate risk based on the varying circumstances of anticipated borrowings, and existing floating and fixed rate debt. We will generally seek to pursue interest rate risk mitigation strategies that will result in the least amount of reported earnings volatility under generally accepted accounting principles, while still meeting strategic economic objectives and maintaining adequate liquidity and flexibility. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Derivatives — (continued)

During 2006, we terminated three interest rate swaps with aggregate notional amount of $100 million, maturing in December 2007. These interest rate swaps were designated as cash flow hedges, and were marked to market through other comprehensive income. The unrealized net gain on these interest rate swap agreements was approximately $1.7 million when terminated. Upon termination this gain was realized and reclassified from accumulated other comprehensive income to earnings. The interest rate received on these interest rate swaps was 4.25% plus LIBOR and the interest rate paid was 7.80%. These swaps were 100% effective through this termination date.

In June 2004, we unwound six interest rate swap agreements, designated as fair value hedges, with an aggregate notional amount of $175 million that were matched with the $175 million in senior unsecured notes due 2004 that we redeemed. A $1 million gain was recorded, offsetting the loss on the redemption of the debt. Also during June 2004, five additional swaps with an aggregate amount of $125 million that were matched to the $125 million senior unsecured notes due 2007 were unwound at a cost of $2.3 million. The $2.3 million was applied to the principal balance of these notes and will be amortized to interest expense over the remaining life of the debt. During July 2004, four interest rate swap agreements with a notional value of $100 million, that were matched to mortgage debt maturing in November 2007, were unwound at a cost of $1.3 million.

To determine the fair values of our derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

The amounts paid or received by us under the terms of the interest rate swap agreements are accrued as interest rates change, and we recognize them as an adjustment to interest expense, which will have a corresponding effect on our future cash flows. Our interest rate swaps reduced interest expense by $1.2 million and $4.1 million during the years ended December 31, 2006 and 2004, respectively, and increased interest expense by $0.3 million during the year ended December 31, 2005.

To fulfill requirements under certain loans, we purchased interest rate caps with aggregate notional amounts of $337.3 million and $225.7 million as of December 31, 2006 and December 31, 2005, respectively. We also sold interest rate caps on a portion of these notional amounts with identical terms that had aggregate notional amounts of $225.7 million at December 31, 2005. The purchased interest rate cap agreements as of December 31, 2006 and the purchased and sold interest rate cap agreements at December 31, 2005 were not designated as hedges. The fair value of both the purchased and sold interest rate caps were insignificant at both December 31, 2006 and 2005 and resulted in no significant net earnings impact.

9. Fair Value of Financial Instruments

SFAS 107 requires disclosures about the fair value of all financial instruments, whether or not recognized for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of December 31, 2006. 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. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Fair Value of Financial Instruments — (continued)

Our estimates of the fair value of (i) accounts receivable, accounts payable and accrued expenses approximate carrying value due to the relatively short maturity of these instruments; (ii) debt is based upon effective borrowing rates for issuance of debt with similar terms and remaining maturities; and (iii) our interest rate swaps and the hedged debt are recorded at estimates of fair value, which are based on the amount that we estimate we would currently receive upon termination of these instruments at current market rates and with reasonable assumptions about relevant future market conditions. The estimated fair value of our debt was $1.4 billion at December 31, 2006.

10. Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our taxable income to our stockholders. We currently intend to adhere to these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income taxes on net income we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and to federal income and excise taxes on our undistributed taxable income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries, or TRSs, is subject to federal, state and local taxes.

We generally lease our hotels to wholly-owned TRSs that are subject to federal and state income taxes. In 2005 and 2004, we also contributed certain hotels to our wholly-owned TRSs. We account for income taxes in accordance with the provisions of SFAS 109, “Accounting for Income Taxes.” Under SFAS 109, we account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Reconciliation between TRS’s GAAP net loss and taxable loss:

The following table reconciles the TRS GAAP net loss to taxable loss for the years ended December 31, 2006, 2005, and 2004 (in thousands):


	2006			2005			2004
GAAP net income (loss)	$	51,045		$	(251,615	)	$	(100,127	)
GAAP net loss (income) from REIT operations		(54,894	)		(37,237	)		35,168

GAAP net loss of taxable subsidiaries		(3,849	)		(288,852	)		(64,959	)
Impairment loss not deductible for tax		7,206			231,605			8,509
Tax gain (loss) in excess of book gains on sale of hotels		116,308			(39,842	)		(51,576	)
Depreciation and amortization^(a)		(3,379	)		(1,910	)		(4,948	)
Employee benefits not deductible for tax		(1,537	)		1,708			1,040
Other book/tax differences		(1,653	)		4,779			(3,216	)

Tax gain (loss) of taxable subsidiaries	$	113,096		$	(92,512	)	$	(115,150	)


(a)		The changes in book/tax differences in depreciation and amortization principally result from book and tax basis differences, differences in depreciable lives and accelerated depreciation methods.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes — (continued)

Summary of TRS’s net deferred tax asset:

At December 31, 2006 and 2005, our TRS had a deferred tax asset, prior to any valuation allowance, primarily comprised of the following (in thousands):


	2006			2005
Accumulated net operating losses of our TRS	$	119,850		$	162,827
Tax property basis in excess of book		1,128			—
Accrued employee benefits not deductible for tax		9,111			9,695
Bad debt allowance not deductible for tax		367			837

Gross deferred tax assets		130,456			173,359
Valuation allowance		(130,456	)		(133,138	)

Deferred tax asset after valuation allowance		—			40,221

Gross deferred tax liability — book property basis in excess of tax		—			(40,221	)

Net deferred tax asset	$	—		$	—

We have provided a valuation allowance against our deferred tax asset at December 31, 2006 and 2005, that results in no net deferred tax asset at December 31, 2006 and 2005 due to the uncertainty of realization (because of historical operating losses). Accordingly, no provision or benefit for income taxes is reflected in the accompanying Consolidated Statements of Operations. At December 31, 2006, the TRS had net operating loss carryforwards for federal income tax purposes of $315.4 million, which are available to offset future taxable income, if any, through 2025.

Reconciliation between REIT GAAP net loss and taxable income loss:

The following table reconciles REIT GAAP net income (loss) to taxable income (loss) for the years ended December 31, 2006, 2005 and 2004 (in thousands):


	2006			2005			2004
GAAP net income (loss) from REIT operations	$	54,894		$	37,237		$	(35,168	)
Book/tax differences, net:
Depreciation and amortization^(a)		(2,995	)		4,797			2,386
Minority interests		(19,869	)		(24,204	)		(2,724	)
Tax loss in excess of book gains on sale of hotels		9,268			(21,547	)		(10,893	)
Impairment loss not deductible for tax		(445	)		35,146			29,779
Other		(1,444	)		4,045			1,314

Taxable income (loss) subject to distribution requirement^(b)	$	39,409		$	35,474		$	(15,306	)


(a)		Book/tax differences in depreciation and amortization principally result from differences in depreciable lives and accelerated depreciation methods.

(b)		The dividend distribution requirement is 90%.

If we sell any asset acquired from Bristol Hotel Company, or Bristol, within 10 years after our merger with Bristol in 1998, and we recognize a taxable gain on the sale, we will be taxed at the highest corporate rate on an amount equal to the lesser of the amount of gain that we recognize at the time of the sale, or the amount of gain that we would have recognized if we had sold the asset at the time of the Bristol merger for its then fair market value. Many of the hotels sold in our disposition program were originally acquired at the time of the Bristol merger. In 2006, we recorded $0.9 million of built in gain tax with respect to the sale of one hotel, but have been able to avoid any other substantial built in gain tax on these sales by offsetting built in losses or other tax planning strategies. We believe that we will be able to avoid any additional substantial built in gain tax on future sales through offsetting built in losses, like kind exchanges and other tax planning strategies.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes — (continued)

Characterization of distributions:

For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. For the years ended December 31, 2006, 2005 and 2004, distributions paid per share were characterized as follows:


	2006				2005				2004
	Amount		%		Amount		%		Amount		%
Common Stock
Ordinary income	$	0.188		23.45	$	0.028		18.76	$	—		—
Return of capital		0.612		76.55		0.122		81.24		—		—

	$	0.800		100.00	$	0.150		100.00	$	—		—


Preferred Stock — Series A
Ordinary income	$	1.95		100.00	$	1.95		100.00	$	0.0425		2.18
Return of capital		—		—		—		—		1.9075		97.82

	$	1.95		100.00	$	1.95		100.00	$	1.9500		100.00


Preferred Stock — Series B
Ordinary income	$	—		—	$	1.125		100.00	$	0.0491		2.18
Return of capital		—		—		—		—		2.2009		97.82

	$	—		—	$	1.125		100.00	$	2.2500		100.00


Preferred Stock — Series C
Ordinary income	$	2.00		100.00	$	1.633		100.00	$	—		—
Return of capital		—		—		—		—		—		—

	$	2.00		100.00	$	1.633		100.00	$	—		—

11. Capital Stock

At December 31, 2006, we had $600 million of common stock, preferred stock, debt securities, and/or common stock warrants available for offerings under a shelf registration statement previously declared effective.

Preferred Stock

Our board of directors is authorized to provide for the issuance of up to 20 million shares of preferred stock in one or more series, to establish the number of shares in each series, to fix the designation, powers, preferences and rights of each such series, and the qualifications, limitations or restrictions thereof.

In 1996, we issued 6.1 million shares of our Series A preferred stock at $25 per share. In April 2004, we completed the sale of 4.6 million additional shares of our Series A preferred stock. The shares were sold at a price of $23.79 per share, which included accrued dividends of $0.51 per share through April 5, 2004, resulting in net proceeds of $104 million. In August 2004, we completed the sale of an additional 2.3 million shares of our Series A preferred stock. The shares were sold at a price of $23.22 per share, which included accrued dividends of $0.28 per share through August 22, 2004, resulting in net proceeds of $52 million.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Capital Stock — (continued)

Our Series A preferred stock bears an annual cumulative dividend payable in arrears equal to the greater of $1.95 per share or the cash distributions declared or paid for the corresponding period on the number of shares of common stock into which the Series A preferred stock is then convertible. Each share of the Series A preferred stock is convertible at the stockholder’s option to 0.7752 shares of common stock, subject to certain adjustments. During 2000, holders of 69,400 shares of Series A preferred stock converted their shares to 53,798 common shares, which were issued from treasury shares.

In 1998, we issued 5.75 million depositary shares, representing 57,500 shares of our 9% Series B preferred stock at $25 per depositary share. In 2002, we issued 1,025,800 additional depositary shares, representing 10,258 shares of our Series B preferred stock at $24.37 per depositary share to yield 9.4%. In 2005, we redeemed all of the outstanding Series B preferred stock. The redemption of the Series B preferred shares resulted in a reduction in income available to common shareholders of $6.5 million representing the original issuance cost of the Series B preferred shares redeemed.

On April 8, 2005, we completed the issuance of 5.4 million depositary shares of our 8% Series C Cumulative Redeemable preferred stock, or Series C preferred stock, and an additional 1.4 million depositary shares on August 30, 2005, each representing 1/100 of a share of our Series C preferred stock with gross proceeds of $135 million and $34.4 million, respectively. The gross proceeds were used to redeem all of our 9% Series B preferred stock. We may call the Series C preferred stock and the corresponding depositary shares at $25 per depositary share. These shares have no stated maturity, sinking fund or mandatory redemption, and are not convertible into any of our other securities. The Series C preferred stock has a liquidation preference of $2,500 per share (equivalent to $25 per depositary share) and is entitled to annual cumulative dividends at the rate of 8% of the liquidation preference (equivalent to $2.00 annually per depositary share).

Accrued dividends payable on our common stock, Series A and Series C preferred stock aggregating $24.1 million at December 31, 2006, were paid in January 2007.

FelCor LP Units

We are the sole general partner of FelCor LP and are obligated to contribute the net proceeds from any issuance of our equity securities to FelCor LP in exchange for units of partnership interest, or Units, corresponding in number and terms to the equity securities issued by us. Units of limited partner interest may also be issued by FelCor LP to third parties in exchange for cash or property, and Units so issued to third parties are redeemable at the option of the holders thereof for a like number of shares of our common stock or, at our option, for the cash equivalent thereof. During 2006, 2005 and 2004, 1,407,524 Units, 25,595 Units and 245,398 Units, respectively, were exchanged for a like number of common shares issued from treasury stock.

12. Hotel Operating Revenue, Departmental Expenses, and Other Property Operating Costs

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


	Year Ended December 31,
	2006		2005		2004
Room revenue	$	809,466	$	742,882	$	677,169
Food and beverage revenue		129,200		121,836		116,829
Other operating departments		52,293		48,431		46,418


Total hotel operating revenues	$	990,959	$	913,149	$	840,416

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.		Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs — (continued)

Approximately 99.7% to 100.0% of our revenue in 2006, 2005 and 2004 was comprised of hotel operating revenues, which includes room revenue, food and beverage revenue, and revenue from other operating departments (such as telephone, parking and business centers). 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 and are recorded as a bad debt expense. The remainder of our revenue was from retail space rental revenue and other sources. During 2004, we recorded $1 million of other revenue that we received in development fees from the successful completion of a condominium project.

We do not have any time-share arrangements and do not sponsor any guest frequency programs for which we would have any contingent liability. We participate in guest frequency programs sponsored by the brand owners of our hotels, and we expense the charges associated with those programs (typically consisting of a percentage of the total guest charges incurred by a participating guest), as incurred. When a guest redeems accumulated guest frequency points at one of our hotels, the hotel bills the sponsor for the services provided in redemption of such points and records revenue in the amount of the charges billed to the sponsor. Associated with the guest frequency programs, we have no loss contingencies or ongoing obligation beyond what is paid to the brand owner at the time of the guest’s stay.

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


	Year Ended December 31,
	2006		2005		2004
Room	$	199,283	$	187,872	$	178,146
Food and beverage		97,012		93,136		90,715
Other operating departments		23,436		22,446		21,758


Total hotel departmental expenses	$	319,731	$	303,454	$	290,619

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


	Year Ended December 31,
	2006		2005		2004
Hotel general and administrative expense	$	87,451	$	82,607	$	76,898
Marketing		81,113		76,151		71,099
Repair and maintenance		52,710		50,011		46,063
Utilities		49,027		46,857		41,144


Total other property operating costs	$	270,301	$	255,626	$	235,204

Included in hotel departmental expenses and other property operating costs were hotel compensation and benefit expenses of $281.7 million, $273.5 million and $259.6 million for the year ended December 31, 2006, 2005 and 2004, respectively.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Taxes, Insurance and Lease Expense

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


	Year Ended December 31,
	2006		2005		2004
Operating lease expense^(a)	$	69,221	$	62,176	$	56,716
Real estate and other taxes		32,790		32,175		26,998
Property, general liability insurance and other		10,041		10,501		8,542

Total taxes, insurance and lease expense	$	112,052	$	104,852	$	92,256


(a)		Includes hotel lease expense of $61.1 million, $54.7 million and $49.4 million, respectively, associated with 13 hotels in 2006 and 2005 and 14 hotels in 2004 owned by unconsolidated entities and leased to our consolidated lessees. Included in lease expense is $36.1 million, $28.4 million and $21.9 million in percentage rent for the year ended December 31, 2006, 2005 and 2004, respectively.

14. Land Leases and Hotel Rent

We lease land occupied by certain hotels from third parties under various operating leases that expire through 2073. Certain land leases contain contingent rent features based on gross revenue at the respective hotels. In addition, we recognize rent expense for 14 hotels that are owned by unconsolidated entities and are leased to our consolidated lessees. These leases expire through 2015 and require the payment of base rents and contingent rent based on revenues at the respective hotels. Future minimum lease payments under our land lease obligations and hotel leases at December 31, 2006, were as follows (in thousands):


Year
2007	$	22,449
2008		14,386
2009		14,361
2010		13,522
2011		11,574
2012 and thereafter		94,115

	$	170,407

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share for the years ended December 31, 2006, 2005 and 2004 (in thousands, except per share data):


	2006			2005			2004
Numerator:
Income (loss) from continuing operations	$	8,565		$	(16,916	)	$	(78,376	)
Less: Preferred dividends		(38,713	)		(39,408	)		(35,130	)
Issuance costs of redeemed preferred stock		—			(6,522	)		—

Loss from continuing operations and applicable to common stockholders		(30,148	)		(62,846	)		(113,506	)
Discontinued operations		42,480			(234,699	)		(21,751	)

Net income (loss) applicable to common stockholders	$	12,332		$	(297,545	)	$	(135,257	)

Denominator:
Denominator for basic and diluted earnings (loss) per share		60,734			59,436			59,045

Earnings (loss) per share data:
Basic:
Income (loss) from continuing operations	$	(0.50	)	$	(1.06	)	$	(1.92	)

Discontinued operations	$	0.70		$	(3.95	)	$	(0.37	)

Net income (loss)	$	0.20		$	(5.01	)	$	(2.29	)


Diluted:
Income (loss) from continuing operations	$	(0.50	)	$	(1.06	)	$	(1.92	)

Discontinued operations	$	0.70		$	(3.95	)	$	(0.37	)

Net income (loss)	$	0.20		$	(5.01	)	$	(2.29	)

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


	2006		2005		2004
Restricted shares granted but not vested		327		648		395
Series A convertible preferred shares		9,985		9,985		9,985

Series A preferred dividends that would be excluded from net income (loss) applicable to common stockholders, if the Series A preferred shares were dilutive, were $25.1 million for both 2006 and 2005, and $19.9 million in 2004.

16. Commitments, Contingencies and Related Party Transactions

We shared the executive offices and certain employees with FelCor, Inc. (controlled by Thomas J. Corcoran, Jr., Chairman of the Board of Directors), and it paid its share of the costs thereof, including an allocated portion of the rent, compensation of certain personnel, office supplies, telephones, and depreciation of office furniture, fixtures, and equipment. Any such allocation of shared expenses must be approved by a majority of our independent directors. FelCor, Inc. had a 10% ownership interest in one hotel and limited other investments. FelCor, Inc. paid approximately $50,000 for shared office costs in 2006, 2005 and 2004.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Commitments, Contingencies and Related Party Transactions — (continued)

In an effort to keep our cost of insurance within reasonable limits, we have only purchased terrorism insurance for those hotels that are secured by mortgage debt, as required by our lenders. Our terrorism insurance has per occurrence and aggregate limits of $50 million. We have established a self-insured retention of $250,000 per occurrence for general liability insurance with regard to 67 of our hotels; the remainder of our hotels participate in general liability programs of our managers, with no deductible. Because of our general liability deductible for the 67 hotels, we maintain reserves to cover the estimated ultimate uninsured liability for losses with respect to reported and unreported claims incurred as of the end of each accounting period. At December 31, 2006 and 2005, our reserve for this self-insured portion of general liability claims was $4.3 million and $5.6 million, respectively. Our property program has a $100,000 all risk deductible, a deductible of 5% of insured value for named windstorm and California quake. Should uninsured or not fully insured losses be substantial, they could have a material adverse impact on our operating results and cash flows.

There is no litigation pending or known to be threatened against us or affecting any of our hotels, other than claims arising in the ordinary course of business or which are not considered to be material. Furthermore, most of these claims are substantially covered by insurance. We do not believe that any claims known to us, individually or in the aggregate, will have a material adverse effect on us.

Our hotels are operated under various management agreements that call for base management fees, which range from 2% to 7% of hotel room revenue and generally have an incentive provision related to the hotel’s profitability. In addition, the management agreements generally require us to invest approximately 3% to 5% of revenues in capital maintenance. The management agreements have terms from 5 to 20 years and generally have renewal options.

With the exception of 35 hotels whose rights to use a brand name are contained in the management agreement governing their operations, each of our hotels operates under a franchise or license agreement. Typically, our franchise or license agreements provide for a royalty fee of 4% of room revenues to be paid to the franchisor.

In the event we breach one of our Embassy Suites Hotels franchise license agreements, in addition to losing the right to use the Embassy Suites Hotels name for the operation of the applicable hotel, we may be liable, under certain circumstances, for liquidated damages equal to the fees paid to the franchisor with respect to that hotel during the three preceding years.

As a part of the amendment to the IHG management agreements, we have agreed to spend, by June 30, 2007, approximately $50.6 million with regard to special capital plans on 11 hotels. We have agreed to spend an additional $17.2 million on capital plans by June 30, 2008, on four hotels, and $5.5 million on capital plans for two hotels that are then to be substantially redeveloped by December 31, 2010.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Supplemental Cash Flow Disclosure

Accrued dividends payable on our common stock, Series A and Series C preferred stock aggregating $24.1 million and $8.6 million at December 31, 2006 and 2005 were paid in January of the following year.

We allocated $26.9 million and $0.1 million of minority interest to additional paid in capital due to the exchange of 1,407,524 units and 25,595 units for common stock in 2006 and 2005, respectively.

Depreciation expense is comprised of the following (in thousands):


	For the Year Ended December 31,
	2006		2005		2004
Depreciation from continuing operations	$	94,579	$	84,448	$	78,116
Depreciation from discontinued operations		15,695		38,087		44,537

Total depreciation expense	$	110,274	$	122,535	$	122,653

In 2006, we sold 31 hotels for gross proceeds of $514 million. These proceeds were used to pay down debt of approximately $356 million ($150 million of which related to sales proceeds paid directly from purchaser to our lender at closing) and invested in capital improvements at many of our core hotels.

In 2006, we borrowed $215 million of debt, that was paid directly to a lender, repaying $215 million of debt.

For the year ended December 31, 2006, repayment of borrowings consisted of early retirement of debt of $687.2 million and normal recurring principal payments of $15.9 million.

For the year ended December 31, 2005, repayment of borrowings of $293.0 million consisted of early retirement of secured debt of $262.0 million and $31.0 million of normal recurring principal payments.

For the year ended December 31, 2004, repayment of borrowings of $838.9 million consisted of $775.0 million in early retirement of senior notes, $18.9 million of normal recurring principal payments, $41.3 million of premium paid in excess of par on the retirement of the senior notes and $3.7 million to retire interest rate swaps.

18. Stock Based Compensation Plans

We sponsor four restricted stock and stock option plans, or the FelCor Plans. In addition, upon completion of the merger with Bristol in 1998, we assumed two stock option plans previously sponsored by Bristol, or the Bristol Plans. We were initially obligated to issue up to 1,237,309 shares of our common stock pursuant to the Bristol Plans. No additional options may be awarded under the Bristol Plans. The FelCor Plans and the Bristol Plans are referred to collectively as the Plans.

We are authorized to issue 4,700,000 shares of common stock under the FelCor Plans pursuant to awards granted in the form of incentive stock options, non-qualified stock options, and restricted stock. All options have 10-year contractual terms and vest either over five equal annual installments (20% per year), beginning in the year following the date of grant or 100% at the end of a four-year vesting term. Stock grants vest either over five equal annual installments or over a four year schedule including time based vesting and performance based vesting. Under the FelCor Plans, there were 797,114 shares remaining available for grant at December 31, 2006.

There were options covering 53,704 shares outstanding under the Bristol Plans at December 31, 2006. These options are fully vested.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Stock Based Compensation Plans – (continued)

Stock Options

A summary of the status of our non-qualified stock options under the Plans as of December 31, 2006, 2005 and 2004, and the changes during these years are presented in the following tables:


	2006					2005					2004
				Weighted					Weighted					Weighted
	No. Shares of			Average		No. Shares of			Average		No. Shares of			Average
	Underlying			Exercise		Underlying			Exercise		Underlying			Exercise
	Options			Prices		Options			Prices		Options			Prices
Outstanding at beginning of the year		1,465,257		$	23.41		1,478,760		$	24.72		1,911,544		$	22.72
Forfeited		(726,891	)	$	25.56		(13,503	)	$	22.30		(432,784	)	$	15.91
Exercised		(140,000	)	$	15.63		—					—

Outstanding at end of year		598,366		$	22.62		1,465,257		$	23.41		1,478,760		$	24.72

Exercisable at end of year		598,366		$	22.62		1,455,257		$	23.46		1,333,760		$	24.24


	Options Exercisable and Outstanding_
	Number		Wgtd. Avg.
Range of	Outstanding		Remaining		Wgtd Avg.
Exercise Prices	at 12/31/06		Life		Exercise Price
$15.62 to $22.56		534,912		1.01	$	21.58
$24.18 to $36.12		63,454		0.88	$	31.41

$15.62 to $36.12		598,366		0.99	$	22.62

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2001 and 2000 when options were granted: dividend yield of 12.44% to 11.28%; risk free interest rates are different for each grant and range from 4.33% to 6.58%; the expected lives of options were six years; and volatility of 21.04% for 2001 grants and 18.22% for 2000 grants. The weighted average fair value of options granted during 2001, was $0.85 per share. We have issued no stock options since 2001.

Restricted Stock

A summary of the status of our restricted stock grants as of December 31, 2006, 2005, and 2004, and the changes during these years are presented below:


	2006					2005				2004
				Weighted				Weighted					Weighted
				Average				Average					Average
				Fair Market				Fair Market					Fair Market
				Value				Value					Value
	No. Shares			at Grant		No. Shares		at Grant		No. Shares			at Grant
Outstanding at beginning of the year		1,549,206		$	13.35		1,187,606	$	17.54		731,431		$	22.03
Granted^(a):
With immediate vesting^(b)		28,500		$	19.78		22,300	$	13.73		26,500		$	10.00
With 4-year pro rata vesting		293,800		$	18.71		319,300	$	12.52		295,040		$	10.00
Vesting within 12 months of grant		—			—		—		—		50,000		$	12.47
With 5-year pro rata vesting		60,000		$	21.64		20,000	$	13.85		110,000		$	12.25
Forfeited		(51,377	)	$	13.23		—		—		(25,365	)	$	18.19

Outstanding at end of year		1,880,129		$	14.56		1,549,206	$	13.35		1,187,606		$	17.54

Vested at end of year		1,108,866		$	17.30		795,738	$	18.49		558,151		$	20.52


(a)		All shares granted are issued out of treasury except for 19,200, 5,200 and 6,300 of the restricted shares issued to directors during the years ended December 31, 2006, 2005 and 2004, respectively.

(b)		Shares awarded to directors.

The unearned compensation cost of granted but unvested restricted stock as of December 31, 2006 was $8.4 million. The weighted average period over which this cost is to be amortized is approximately three years.

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Employee Benefits

We offer a 401(k) plan and health insurance benefits to our employees. Our matching contribution to our 401(k) plan aggregated $0.9 million for 2006, $0.7 million for 2005, and $0.6 million for 2004. The cost of health insurance benefits were $1.2 million during 2006, $0.7 million during 2005 and $0.6 million during 2004.

The employees at our hotels are employees of the respective management companies. Under the management agreements, we reimburse the management companies for the compensation and benefits related to the employees who work at our hotels. We are not, however, the sponsors of their employee benefit plans and have no obligation to fund these plans.

20. Segment Information

SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,” requires the disclosure of selected information about operating segments. Based on the guidance provided in the standard, we have determined that our business is conducted in one operating segment because of the similar economic characteristics of our hotels.

The following table sets forth revenues for continuing operations, and investment in hotel assets represented by, the following geographical areas as of and for the years ended December 31, 2006, 2005 and 2004 (in thousands):


	Revenue						Investment in Hotel Assets
	2006		2005		2004		2006		2005		2004
California	$	195,056	$	178,688	$	161,594	$	413,899	$	517,250	$	546,762
Texas		110,384		98,870		91,046		207,921		363,221		517,933
Florida		150,339		136,882		123,816		344,812		370,863		373,468
Georgia		58,745		54,993		50,138		122,227		208,665		272,010
Other states		447,081		418,445		391,238		905,352		1,072,222		1,197,952
Canada		29,433		26,777		24,780		50,074		52,158		47,641

Total	$	991,038	$	914,655	$	842,612	$	2,044,285	$	2,584,379	$	2,955,766

21. Recently Issued Statements of Financial Accounting Standards

In July 2006, the FASB issued FASB Interpretation Number 48,Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109(“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. The Company must determine whether it is “more-likely-than-not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. FIN 48 applies to all tax positions related to income taxes subject to FASB Statement No. 109,Accounting for Income Taxes. The interpretation clearly scopes out income tax positions related to FASB Statement No. 5,Accounting for Contingencies. We will adopt the provisions of this statement beginning in the first quarter of 2007. We do not expect the cumulative effect of applying the provisions of FIN 48, if any, to be material.

In September 2006, the FASB issued Statement No. 157,Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. Recently Issued Statements of Financial Accounting Standards – (continued)

whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. We believe that the adoption of this standard on January 1, 2008 will not have a material effect on our consolidated financial statements.

22. Quarterly Operating Results (unaudited)

Our unaudited consolidated quarterly operating data for the years ended December 31, 2006 and 2005, follows (in thousands, except per share data). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of quarterly results have been reflected in the data. It is also management’s opinion, however, that quarterly operating data for hotel enterprises are not indicative of results to be achieved in succeeding quarters or years. In order to obtain a more accurate indication of performance, there should be a review of operating results, changes in stockholders’ equity and cash flows for a period of several years.


	First			Second			Third			Fourth
2006	Quarter			Quarter			Quarter			Quarter
Total revenues	$	251,407		$	259,265		$	247,464		$	232,902
Net income (loss) from continuing operations	$	6,859		$	12,478		$	4,272		$	(15,044	)
Discontinued operations	$	2,993		$	(2,333	)	$	15,790		$	26,030
Net income	$	9,852		$	10,145		$	20,062		$	10,986
Net income (loss) applicable to common stockholders	$	174		$	467		$	10,396		$	1,295
Comprehensive income	$	9,560		$	12,305		$	19,266		$	6,151
Basic and diluted per common share data:
Net income (loss) from continuing operations	$	(0.05	)	$	0.05		$	(0.10	)	$	(0.40	)
Discontinued operations	$	0.05		$	(0.04	)	$	0.27		$	0.42

Net income	$	—		$	0.01		$	0.17		$	0.02

Basic weighted average common shares outstanding		59,660			60,355			61,148			61,268

Diluted weighted average common shares outstanding		59,660			60,626			61,148			61,268


	First			Second			Third			Fourth
2005	Quarter			Quarter			Quarter			Quarter
Total revenues	$	216,900		$	240,777		$	234,323		$	222,655
Net income (loss) from continuing operations	$	(4,284	)	$	6,208		$	(797	)	$	(18,043	)
Discontinued operations	$	(3,730	)	$	4,143		$	12,055		$	(247,167	)
Net income (loss)^(a)	$	(8,014	)	$	10,351		$	11,258		$	(265,210	)
Net loss applicable to common stockholders	$	(18,105	)	$	(4,656	)	$	105		$	(274,889	)
Comprehensive income (loss)	$	(6,631	)	$	8,722		$	15,169		$	(265,053	)
Basic and diluted per common share data:
Net loss from continuing operations	$	(0.24	)	$	(0.15	)	$	(0.20	)	$	(0.47	)
Discontinued operations	$	(0.06	)	$	0.07		$	0.20		$	(4.15	)

Net loss	$	(0.30	)	$	(0.08	)	$	—		$	(4.62	)

Basic weighted average common shares outstanding		59,416			59,404			59,442			59,453

Diluted weighted average common shares outstanding		59,416			59,404			59,442			59,453


(a)		The fourth quarter net loss in 2005 includes an impairment charge of $263 million.

In accordance with SFAS 144, amounts previously reported in continuing operations have been reclassified to discontinued operations upon sale of hotels or the designation of hotels as “held for sale” in subsequent periods.

FELCOR LODGING TRUST INCORPORATED

Schedule III — Real Estate and Accumulated Depreciation

as of December 31, 2006

(in thousands)


							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings				Buildings				Depreciation						Which
					and					and				and				Buildings &		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Birmingham, AL (1)	$	15,657	$	2,843	$	29,286	$	0		$	1,210	$	2,843	$	30,496	$	33,339	$	8,176		1987		1/3/1996	15 - 40 Yrs
Phoenix — Biltmore, AZ (1)		19,517		0		38,998		4,694			1,973		4,694		40,971		45,665		10,964		1985		1/3/1996	15 - 40 Yrs
Phoenix Crescent Hotel, AZ (3)		22,825		3,608		29,583		0			1,490		3,608		31,073		34,681		7,274		1986		6/30/1997	15 - 40 Yrs
Phoenix Tempe, AZ (1)		22,944		3,951		34,371		0			1,048		3,951		35,419		39,370		7,657		1986		5/4/1998	15 - 40 Yrs
Dana Point – Doheny Beach, CA (4)		0		1,787		15,545		0			2,019		1,787		17,564		19,351		4,150		1992		2/21/1997	15 - 40 Yrs
Los Angeles — Anaheim (Located near Disneyland Park), CA (1)		23,595		2,548		14,832		0			1,308		2,548		16,140		18,688		4,297		1987		1/3/1996	15 - 40 Yrs
Los Angeles International Airport — South, CA (1)		0		2,660		17,997		0			1,307		2,660		19,304		21,964		5,702		1985		3/27/1996	15 - 40 Yrs
Milpitas – Silicon Valley, CA (1)		26,965		4,021		23,677		0			2,063		4,021		25,740		29,761		6,847		1987		1/3/1996	15 - 40 Yrs
Napa Valley, CA (1)		14,166		3,287		14,205		0			1,726		3,287		15,931		19,218		4,103		1985		5/8/1996	15 - 40 Yrs
Oxnard — Mandalay Beach Resort & Conference Center, CA (1)		0		2,930		22,125		1			3,921		2,931		26,046		28,977		6,500		1986		5/8/1996	15 - 40 Yrs
San Diego — On the Bay, CA (2)		0		0		68,229		0			4,688		0		72,917		72,917		17,060		1965		7/28/1998	15 - 40 Yrs
San Francisco – Airport – Burlingame, CA (1)		0		0		39,929		0			967		0		40,896		40,896		11,111		1986		11/6/1995	15 - 40 Yrs
San Francisco – Airport — South San Francisco, CA (1)		23,943		3,418		31,737		0			2,156		3,418		33,893		37,311		8,995		1988		1/3/1996	15 - 40 Yrs
San Francisco — Fisherman’s Wharf, CA (2)		0		0		61,883		0			1,847		0		63,730		63,730		20,292		1970		7/28/1998	15 - 40 Yrs
San Francisco — Union Square, CA (5)		0		8,466		73,684		(434	)		4,282		8,032		77,966		85,998		16,344		1970		7/28/1998	15 - 40 Yrs
Santa Barbara, CA (2)		0		1,683		14,647		4			791		1,687		15,438		17,125		3,157		1969		7/28/1998	15 - 40 Yrs
Santa Monica, CA (2)		0		10,200		16,580		0			376		10,200		16,956		27,156		1,199		1967		3/11/2004	15 - 40 Yrs
Toronto — Airport, Canada (7)		0		0		21,041		0			11,140		0		32,181		32,181		7,496		1970		7/28/1998	15 - 40 Yrs
Toronto — Yorkdale, Canada (2)		0		1,566		13,633		477			9,933		2,043		23,566		25,609		6,004		1970		7/28/1998	15 - 40 Yrs
Wilmington, DE (6)		10,047		1,379		12,487		0			10,061		1,379		22,548		23,927		4,825		1972		3/20/1998	15 - 40 Yrs
Boca Raton, FL (1)		5,024		1,868		16,253		0			896		1,868		17,149		19,017		4,538		1989		2/28/1996	15 - 40 Yrs
Cocoa Beach — Oceanfront, FL (2)		0		2,285		19,892		7			13,216		2,292		33,108		35,400		8,259		1960		7/28/1998	15 - 40 Yrs
Deerfield Beach, FL (1)		28,420		4,523		29,443		68			1,479		4,591		30,922		35,513		8,359		1987		1/3/1996	15 - 40 Yrs
Ft. Lauderdale – 17th Street, FL (1)		20,752		5,329		47,850		(163	)		1,919		5,166		49,769		54,935		13,645		1986		1/3/1996	15 - 40 Yrs
Ft. Lauderdale (Cypress Creek), FL (8)		10,990		3,009		26,177		0			968		3,009		27,145		30,154		5,985		1986		5/4/1998	15 - 40 Yrs
Jacksonville — Baymeadows, FL (1)		23,590		1,130		9,608		0			6,528		1,130		16,136		17,266		4,390		1986		7/28/1994	15 - 40 Yrs
Miami International Airport, FL (1)		16,775		4,135		24,950		0			1,620		4,135		26,570		30,705		7,099		1983		7/28/1998	15 - 40 Yrs
Orlando — International Airport, FL (7)		8,949		2,549		22,188		6			2,081		2,555		24,269		26,824		5,337		1984		7/28/1998	15 - 40 Yrs
Orlando — International Drive — Resort, FL (2)		0		5,108		44,460		13			9,629		5,121		54,089		59,210		12,147		1972		7/28/1998	15 - 40 Yrs
Orlando International Drive/Convention Center, FL (1)		23,319		1,632		13,870		0			1,864		1,632		15,734		17,366		4,743		1985		7/28/1994	15 - 40 Yrs
Orlando (North), FL (1)		0		1,673		14,218		6			7,202		1,679		21,420		23,099		6,185		1985		7/28/1994	15 - 40 Yrs
Orlando- Walt Disney WorldResort, FL (4)		0		0		28,092		0			665		0		28,757		28,757		6,313		1987		7/28/1997	15 - 40 Yrs
Tampa – On Tampa Bay, FL (4)		12,950		2,142		18,639		1			2,132		2,143		20,771		22,914		4,917		1986		7/28/1997	15 - 40 Yrs
Atlanta — Airport, GA (1)		12,331		0		22,342		2,568			1,854		2,568		24,196		26,764		5,047		1989		5/4/1998	15 - 40 Yrs

FELCOR LODGING TRUST INCORPORATED
Schedule III — Real Estate and Accumulated Depreciation
as of December 31, 2006
(in thousands)


							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings				Buildings				Depreciation						Which
					and					and				and				Buildings &		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Atlanta — Buckhead, GA (1)		34,864		7,303		38,996		(300	)		1,907		7,003		40,903		47,906		10,236		1988		10/17/1996	15 - 40 Yrs
Atlanta — Galleria, GA (8)		15,217		5,052		28,507		0			1,505		5,052		30,012		35,064		7,045		1990		6/30/1997	15 - 40 Yrs
Atlanta – Gateway-Atlanta Airport, GA (3)		0		5,113		22,857		1			266		5,114		23,123		28,237		5,491		1986		6/30/1997	15 - 40 Yrs
Chicago – Northshore/Deerfield (Northbrook), IL (1)		15,108		2,305		20,054		0			967		2,305		21,021		23,326		5,418		1987		6/20/1996	15 - 40 Yrs
Chicago O’Hare Airport, IL (3)		21,134		8,178		37,043		0			2,297		8,178		39,340		47,518		9,137		1994		6/30/1997	15 - 40 Yrs
Indianapolis North, IN (1)		12,861		0		0		5,125			14,124		5,125		14,124		19,249		6,990		1986		8/1/1996	15 - 40 Yrs
Lexington – Lexington Green, KY (9)		17,721		1,955		13,604		0			431		1,955		14,035		15,990		3,756		1987		1/10/1996	15 - 40 Yrs
Baton Rouge, LA (1)		10,065		2,350		19,092		0			1,202		2,350		20,294		22,644		5,449		1985		1/3/1996	15 - 40 Yrs
New Orleans, LA (1)		29,760		3,647		31,993		0			7,283		3,647		39,276		42,923		12,295		1984		12/1/1994	15 - 40 Yrs
New Orleans — French Quarter, LA (2)		0		0		50,732		14			8,526		14		59,258		59,272		12,173		1969		7/28/1998	15 - 40 Yrs
Boston — Government Center, MA (7)		0		0		45,192		0			6,166		0		51,358		51,358		12,929		1968		7/28/1998	15 - 40 Yrs
Boston — Marlborough, MA (1)		18,685		948		8,143		761			13,440		1,709		21,583		23,292		5,414		1988		6/30/1995	15 - 40 Yrs
Baltimore — BWI Airport, MD (1)		22,031		2,568		22,433		0			1,842		2,568		24,275		26,843		5,933		1987		3/20/1997	15 - 40 Yrs
Minneapolis — Airport, MN (1)		19,882		5,417		36,508		24			1,652		5,441		38,160		43,601		10,122		1986		11/6/1995	15 - 40 Yrs
Minneapolis — Bloomington, MN (1)		18,350		2,038		17,731		0			982		2,038		18,713		20,751		4,545		1980		2/1/1997	15 - 40 Yrs
St Paul- Downtown, MN (1)		4,452		1,156		17,315		0			934		1,156		18,249		19,405		4,802		1983		11/15/1995	15 - 40 Yrs
Charlotte SouthPark, NC (4)		0		1,458		12,681		0			2,264		1,458		14,945		16,403		1,806		N/A		7/12/2002	15 - 40 Yrs
Raleigh, NC (4)		17,290		2,124		18,476		0			1,410		2,124		19,886		22,010		4,612		1987		7/28/1997	15 - 40 Yrs
Piscataway-Somerset, NJ (1)		18,893		1,755		17,563		0			1,590		1,755		19,153		20,908		5,061		1988		1/10/1996	15 - 40 Yrs
Philadelphia –Historic District, PA (2)		0		3,164		27,535		7			6,978		3,171		34,513		37,684		8,120		1972		7/28/1998	15 - 40 Yrs
Philadelphia Society Hill, PA (3)		28,742		4,542		45,121		0			2,568		4,542		47,689		52,231		11,008		1986		10/1/1997	15 - 40 Yrs
Pittsburgh at University Center (Oakland), PA (7)		15,500		0		25,031		0			2,504		0		27,535		27,535		5,934		1988		11/1/1998	15 - 40 Yrs
Charleston -Mills House (Historic Downtown), SC (2)		25,538		3,251		28,295		7			2,145		3,258		30,440		33,698		5,992		1982		7/28/1998	15 - 40 Yrs
Myrtle Beach – At Kingston Plantation, SC (1)		0		2,940		24,988		0			2,479		2,940		27,467		30,407		6,719		1987		12/5/1996	15 - 40 Yrs
Myrtle Beach Resort (12)		0		9,000		17,689		5			6,223		9,005		23,912		32,917		5,846		1974		7/23/2002	15 - 40 Yrs
Nashville- Airport/Opryland Area, TN (1)		0		1,118		9,506		0			774		1,118		10,280		11,398		3,747		1985		7/28/1994	15 - 40 Yrs
Nashville — Opryland/Airport (Briley Parkway), TN (7)		0		0		27,734		0			2,945		0		30,679		30,679		7,591		1981		7/28/1998	15 - 40 Yrs
Austin, TX (4)		8,783		2,508		21,908		0			2,486		2,508		24,394		26,902		5,877		1987		3/20/1997	15 - 40 Yrs
Corpus Christi, TX (1)		4,866		1,113		9,618		51			3,336		1,164		12,954		14,118		3,266		1984		7/19/1995	15 - 40 Yrs
Dallas — DFW International Airport South, TX (1)		19,302		0		35,156		4,041			843		4,041		35,999		40,040		7,721		1985		7/28/1998	15 - 40 Yrs
Dallas — Love Field, TX (1)		16,500		1,934		16,674		0			1,647		1,934		18,321		20,255		5,029		1986		3/29/1995	15 - 40 Yrs
Dallas — Market Center, TX (1)		0		2,560		23,751		0			744		2,560		24,495		27,055		5,801		1980		6/30/1997	15 - 40 Yrs
Dallas — Park Central, TX (11)		0		4,513		43,125		762			5,282		5,275		48,407		53,682		9,821		1983		6/30/1997	15 - 40 Yrs

FELCOR LODGING TRUST INCORPORATED
Schedule III — Real Estate and Accumulated Depreciation — (continued)
as of December 31, 2006
(in thousands)


							Cost Capitalized					Gross Amounts at Which
			Initial Cost				Subsequent to Acquisition					Carried at Close of Period						Accumulated						Life Upon
					Buildings					Buildings		Depreciation		Buildings				Depreciation						Which
					and					and				and				Buildings &		Year		Date		Depreciation
Location	Encumbrances		Land		Improvements		Land			Improvements		Land		Improvements		Total		Improvements		Opened		Acquired		is Computed
Houston — Medical Center, TX (10)		0		0		22,027		5			2,491		5		24,518		24,523		4,980		1984		7/28/1998	15 - 40 Yrs
San Antonio — International Airport, TX (7)		23,800		3,351		29,168		(185	)		2,740		3,166		31,908		35,074		6,950		1981		7/28/1998	15 - 40 Yrs
Burlington Hotel & Conference Center, VT (3)		17,753		3,136		27,283		(2	)		1,251		3,134		28,534		31,668		6,412		1967		12/4/1997	15 - 40 Yrs

	$	779,856	$	186,227	$	1,825,980	$	17,564		$	232,583	$	203,791	$	2,058,563	$	2,262,354	$	503,145


(1)		Embassy Suites

(2)		Holiday Inn

(3)		Sheraton

(4)		Doubletree Guest Suites

(5)		Crowne Plaza

(6)		Doubletree

(7)		Holiday Inn Select

(8)		Sheraton Suites

(9)		Hilton Suites

(10)		Holiday Inn Hotel & Suites

(11)		Westin

(12)		Hilton


	Year Ended December 31,
	2006			2005
Reconciliation of Land and Buildings and Improvements
Balance at beginning of period	$	3,331,708		$	3,513,950
Additions during period:
Acquisitions		—			18,949
Improvements		18,434			21,735
Deductions during period:
Sale of properties		(812,222	)		(140,071	)
Hotels held for sale		(275,566	)		—
Foreclosures		—			(82,855	)

Balance at end of period before impairment charges		2,262,354			3,331,708

Cumulative impairment charges on real estate assets owned at end of period		—			(327,169	)


Balance at end of period	$	2,262,354		$	3,004,539


Reconciliation of Accumulated Depreciation
Balance at beginning of period	$	646,484		$	590,065
Additions during period:
Depreciation for the period		51,318			79,231
Deductions during period:
Sale of properties		(144,686	)		(22,812	)
Hotels held for sale		(49,971	)		—


Balance at end of period	$	503,145		$	646,484

PART IV


Item 15.		Exhibits and Financial Statement Schedules

(a)

The following is a list of documents filed as a part of this report:

(1)

Financial Statements.

Included herein at pages 4 through 36.

(2)

Financial Statement Schedules.

The following financial statement schedule is included herein at pages 37 through 39.

Schedule III — Real Estate and Accumulated Depreciation for FelCor Lodging Trust Incorporated

All other schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions, are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted.

(b)

Exhibits.

The following exhibits are provided pursuant to the provisions of Item 601 of Regulation S-K:


Exhibit
Number		Description of Exhibit

4.1		Articles of Amendment and Restatement dated June 22, 1995, amending and restating the Charter of FelCor Lodging Trust Incorporated (“FelCor”), as amended or supplemented by Articles of Merger dated June 23, 1995, Articles Supplementary dated April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of Amendment dated June 16, 1997, Articles of Amendment dated October 30, 1997, Articles Supplementary filed May 6, 1998, Articles of Merger and Articles of Amendment dated July 27, 1998, Certificate of Correction dated March 11, 1999, Certificate of Correction to the Articles of Merger between FelCor and Bristol Hotel Company, dated August 30, 1999, Articles Supplementary, dated April 1, 2002, Certificate of Correction, dated March 29, 2004, to Articles Supplementary filed May 2, 1996, Articles Supplementary filed April 2, 2004, Articles Supplementary filed August 20, 2004, Articles Supplementary filed April 6, 2005, and Articles Supplementary filed August 29, 2005 (filed as Exhibit 4.1 to FelCor’s Registration Statement on Form S-3 (Registration No. 333-128862) and incorporated herein by reference).

4.2		Bylaws of FelCor, as amended (filed as Exhibit 4.2 to FelCor’s Registration Statement on Form S-3 (Registration File No. 333-128862) and incorporated herein by reference).

4.3		Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to FelCor’s Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference).

4.4		Form of Share Certificate for $1.95 Series A Cumulative Convertible Preferred Stock (filed as Exhibit 4.4 to FelCor’s Form 8-K, dated May 1, 1996, and incorporated herein by reference).

4.5		Form of Share Certificate for 8% Series C Cumulative Redeemable Preferred Stock (filed as Exhibit 4.10.1 to FelCor’s Form 8-K, dated April 6, 2005, and filed on April 11, 2005, and incorporated herein by reference).


Exhibit
Number		Description of Exhibit

4.6		Deposit Agreement, dated April 7, 2005, between FelCor and SunTrust Bank, as preferred share depositary (filed as Exhibit 4.11.1 to FelCor’s Current Report on Form 8-K dated April 6, 2005, and filed on April 11, 2005, and incorporated herein by reference).

4.6.1		Supplement and Amendment to Deposit Agreement, dated August 30, 2005, between the Company and SunTrust Bank, as depositary (filed as Exhibit 4.11.2 to FelCor’s Current Report on Form 8-K dated April 6, 2005, and filed on April 11, 2005, and incorporated herein by reference).

4.7		Form of Depositary Receipt evidencing the Depositary Shares, which represent the 8% Series C Cumulative Redeemable Preferred Stock (filed as Exhibit 4.12.1 to FelCor’s Form 8-K, dated April 6, 2005, and filed on April 11, 2005, and incorporated herein by reference).

4.8		Indenture, dated as of June 4, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.9 to FelCor’s Form 8-K dated as of June 4, 2001, and filed June 14, 2001, and incorporated herein by reference).

4.8.1		First Supplemental Indenture, dated as of July 26, 2001, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.4.1 to the Registration Statement on Form S-4 (Registration File No. 333-63092) of FelCor LP and the other co-registrants named therein and incorporated herein by reference).

4.8.2		Second Supplemental Indenture, dated October 1, 2002, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee (filed as Exhibit 4.9.2 to the 2002 Form 10-K and incorporated herein by reference).

4.8.3		Third Supplemental Indenture, dated as of January 25, 2006, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein, the New Subsidiary Guarantors named therein and SunTrust Bank, as trustee (filed as Exhibit 4.9.3 to the 2005 Form 10-K and incorporated herein by reference).

4.8.4		Fourth Supplemental Indenture, dated as of December 31, 2006, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein, the New Subsidiary Guarantor named therein and U.S. Bank National Association, as successor to SunTrust Bank, as trustee (filed as Exhibit 4.8.4 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the “2006 Form 10-K”) and incorporated herein by reference).

4.9		Indenture dated October 31, 2006 by and among FelCor LP, FelCor, certain subsidiary guarantors named therein, FelCor Holdings Trust, as pledgor, and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to FelCor’s Form 8-K dated October 26, 2006, and filed on November 1, 2006, and incorporated herein by reference).

4.9.1		First Supplemental Indenture, dated as of December 31, 2006, by and among FelCor LP, FelCor, the Subsidiary Guarantors named therein, the New Subsidiary Guarantor named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.9.1 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.1		Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of December 31, 2001 (filed as Exhibit 10.1 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the “2001 Form 10-K”), and incorporated herein by reference.)

10.1.1		First Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated April 1, 2002 (filed as Exhibit 10.1.1 to FelCor’s Form 8-K dated April 1, 2002, and filed on April 4, 2002, and incorporated herein by reference).


Exhibit
Number		Description of Exhibit

10.1.2		Second Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated August 31, 2002 (filed as Exhibit 10.1.2 to the 2002 Form 10-K and incorporated herein by reference).

10.1.3		Third Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated October 1, 2002 (filed as Exhibit 10.1.3 to the 2002 Form 10-K and incorporated herein by reference).

10.1.4		Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of July 1, 2003 (filed as Exhibit 10.1.4 to FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).

10.1.5		Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of April 2, 2004 (filed as Exhibit 10.1.5 to FelCor’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).

10.1.6		Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of August 23, 2004 (filed as Exhibit 10.1.6 to FelCor’s Form 8-K dated as of, and filed on, August 26, 2004, and incorporated herein by reference).

10.1.7		Seventh Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of April 7, 2005, which contains Addendum No. 4 to the Second Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.8 to FelCor’s Form 8-K, dated April 6, 2006, and filed on April 11, 2005, and incorporated herein by reference).

10.1.8		Eighth Amendment to Second Amended and Restated Agreement of Limited Partnership of FelCor LP, dated as of August 30, 2005 (filed as Exhibit 10.1.9 to FelCor’s Form 8-K, dated August 29, 2005, and filed September 2, 2005, and incorporated herein by reference).

10.2.1		Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of InterContinental Hotels, as manager, with respect to FelCor’s InterContinental Hotels branded hotels (included as an exhibit to the Leasehold Acquisition Agreement, which was filed as Exhibit 10.28 to FelCor’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference).

10.2.2		Omnibus Agreement between FelCor and all its various subsidiaries, controlled entities and affiliates, and Six Continents Hotels, Inc. and all its various subsidiaries, controlled entities and affiliates, with respect to FelCor’s InterContinental Hotels branded hotels (filed as Exhibit 10.2.2 to the 2005 Form 10-K and incorporated herein by reference).

10.3.1		Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Embassy Suites Hotels branded hotels, including the form of Embassy Suites Hotels License Agreement attached as an exhibit thereto, effective prior to July 28, 2004 (filed as Exhibit 10.5 to the 2001 Form 10-K and incorporated herein by reference).

10.3.2		Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Embassy Suites Hotels branded hotels, including the form of Embassy Suites Hotels License Agreement attached as an exhibit thereto, effective July 28, 2004 (filed as Exhibit 10.3.2 to FelCor’s Form 10-K for the fiscal year ended December 31, 2004 (the “2004 Form 10-K”) and incorporated herein by reference).

10.4		Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Hilton Hotels Corporation, as manager, with respect to FelCor’s Doubletree and Doubletree Guest Suites branded hotels (filed as Exhibit 10.6 to the 2001 Form 10-K and incorporated herein by reference).


Exhibit
Number		Description of Exhibit

10.5		Form of Management Agreement between subsidiaries of FelCor, as owner, and a subsidiary of Starwood Hotels & Resorts, Inc., as manager, with respect to FelCor’s Sheraton and Westin branded hotels (filed as Exhibit 10.7 to the 2001 Form 10-K and incorporated herein by reference).

10.6		Executive Employment Agreement, dated effective as of February 1, 2006, between FelCor and Thomas J. Corcoran, Jr. (filed as Exhibit 10.36 to FelCor’s Form 8-K, dated February 7, 2006, and filed on February 13, 2006 and incorporated herein by reference).

10.7		Executive Employment Agreement, dated effective as of February 1, 2006, between FelCor and Richard A. Smith (filed as Exhibit 10.37 to FelCor’s Form 8-K, dated February 7, 2006, and filed on February 13, 2006 and incorporated herein by reference).

10.8		Form of Amended and Restated Change in Control and Severance Agreement for executive officers of FelCor (filed as Exhibit 10.8 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.9		Savings and Investment Plan of FelCor (filed as Exhibit 10.10 to the 2001 Form 10-K and incorporated herein by reference).

10.10		1995 Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.9.2 to FelCor’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein by reference).

10.11		Non-Qualified Deferred Compensation Plan, as amended and restated effective January 1, 2005 (filed as Exhibit 10.11 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.12		1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to FelCor’s Registration Statement on Form S-8 (Registration File No. 333-66041) and incorporated herein by reference).

10.13		2001 Restricted Stock and Stock Option Plan of FelCor (filed as Exhibit 10.14 to the 2002 Form 10-K and incorporated herein by reference).

10.14		Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to FelCor’s Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (Registration File No. 333-50509) and incorporated herein by reference).

10.15		Amended and Restated Stock Option Plan for Non-Employee Directors (filed as Exhibit 99.2 to FelCor’s Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (Registration File No. 333-50509) and incorporated herein by reference).

10.16		Form of Nonstatutory Stock Option Contract under Restricted Stock and Stock Option Plans of FelCor (filed as Exhibit 10.16 to the 2004 Form 10-K and incorporated herein by reference).

10.17		Form of Employee Stock Grant Contract under Restricted Stock and Stock Option Plans of FelCor (filed as Exhibit 10.17 to the 2004 Form 10-K and incorporated herein by reference).

10.18		FelCor Lodging Trust Incorporated 2005 Restricted Stock and Stock Option Plan (filed as Exhibit 4.4 to FelCor’s Registration Statement on Form S-8 (Registration File No. 333-126228) and incorporated herein by reference).

10.19		Form of Employee Stock Grant Contract under Restricted Stock and Stock Option Plans of FelCor applicable to grants in 2005 and thereafter (filed as Exhibit 10.33 to FelCor’s Form 8-K dated April 26, 2005, and filed on May 2, 2005, and incorporated herein by reference).


Exhibit
Number		Description of Exhibit

10.20		Summary of Annual Compensation Program for Directors of FelCor (filed as Exhibit 10.18 to the 2004 Form 10-K and incorporated herein by reference).

10.21		Summary of 2006 Performance Criteria for Annual Incentive Bonus Award Program (filed as Exhibit 10.38 to FelCor’s Form 8-K, dated February 17, 2006, and filed on February 22, 2006 and incorporated herein by reference).

10.22		Employment Separation, Consulting and Release Agreement between FelCor and June C. McCutchen dated as of September 7, 2006 (filed as Exhibit 99.1 to FelCor’s Form 8-K, dated November 13, 2006, and filed on November 17, 2006 and incorporated herein by reference).

10.23		Summary of verbal arrangement for retirement benefits for Lawrence D. Robinson (filed as Exhibit 99.1 to FelCor’s Form 8-K, dated January 1, 2007, and filed on January 5, 2007 and incorporated herein by reference).

10.24.1		Form of Mortgage, Security Agreement and Fixture Filing by and between FelCor/CSS Holdings, L.P., as Mortgagor, and The Prudential Insurance Company of America, as Mortgagee (filed as Exhibit 10.23 to the March 1999 10-Q and incorporated herein by reference).

10.24.2		Promissory Note, dated April 1, 1999, in the original principal amount of $100,000,000, made by FelCor/CSS Holdings, Ltd., payable to the order of The Prudential Insurance Company of America (filed as Exhibit 10.23.1 to FelCor’s Form 10-Q for the quarter ended June 30, 1999 (the “June 1999 10-Q”) and incorporated herein by reference).

10.25.1		Form Deed of Trust and Security Agreement and Fixture Filing with Assignment of Leases and Rents, each dated as of April 20, 2000, from FelCor/MM S-7 Holdings, L.P., as Mortgagor, in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, as Mortgagee, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.22.3 (filed as Exhibit 10.24 to FelCor’s Form 10-Q for the quarter ended June 30, 2000 (the “June 2000 10-Q”) and incorporated herein by reference).

10.25.2		Form of Accommodation Cross-Collateralization Mortgage and Security Agreement, each dated as of April 20, 2000, executed by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America (filed as Exhibit 10.24.1 to the June 2000 10-Q and incorporated herein by reference).

10.25.3		Form of fourteen separate Promissory Notes, each dated April 20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each separately payable to the order of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, respectively, in the respective original principal amounts of $13,500,000 (Phoenix (Crescent), Arizona), $13,500,000 (Phoenix (Crescent), Arizona), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia), $12,500,000 (Chicago O’Hare Airport, Illinois), $12,500,000 (Chicago O’Hare Airport, Illinois), $3,500,000 (Lexington, Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000 (Philadelphia Society Hill, Philadelphia), $17,000,000 (Philadelphia Society Hill, Philadelphia), $10,500,000 (South Burlington, Vermont) and $10,500,000 (South Burlington, Vermont) (filed as Exhibit 10.24.2 to the June 2000 10-Q and incorporated herein by reference).

10.26.1		Form Deed of Trust and Security Agreement, each dated as of May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each as Borrower, in favor of The Chase Manhattan Bank, as


Exhibit
Number		Description of Exhibit

		Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.23.2 (filed as Exhibit 10.25 to the June 2000 10-Q and incorporated herein by reference).

10.26.2		Form of eight separate Promissory Notes, each dated May 2, 2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C. and FelCor/CMB SSF Holdings, L.P., each separately payable to the order of The Chase Manhattan Bank in the respective original principal amounts of $38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield, Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000 (Orlando South, Florida), $32,650,000 (New Orleans, Louisiana), $20,728,000 (Piscataway, New Jersey) and $26,268,000 (South San Francisco, California) (filed as Exhibit 10.25.1 to the June 2000 10-Q and incorporated herein by reference).

10.27.1		Form of Loan Agreement, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, between JPMorgan Chase Bank, as lender, and each of FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Wilmington Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., and FelCor/JPM BWI Hotel, L.L.C. and FCH/DT BWI Hotel, L.L.C., as borrowers, and acknowledged and agreed by FelCor LP (filed as Exhibit 10.34 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).

10.27.2		Form of Mortgage, Renewal Mortgage, Deed of Trust, Deed to Secure Debt, Indemnity Deed of Trust and Assignment of Leases and Rents, Security Agreement and Fixture Filing, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, from FelCor/JPM Wilmington Hotel, L.L.C., DJONT/JPM Wilmington Leasing, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., DJONT/JPM Phoenix Leasing, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., DJONT/JPM Boca Raton Leasing, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., DJONT/JPM Atlanta ES Leasing, L.L.C., FelCor/JPM Austin Holdings, L.P., DJONT/JPM Austin Leasing, L.P., FelCor/JPM Orlando Hotel, L.L.C., DJONT/JPM Orlando Leasing, L.L.C., FCH/DT BWI Holdings, L.P., FCH/DT BWI Hotel, L.L.C. and DJONT/JPM BWI Leasing, L.L.C., to, and for the benefit of, JPMorgan Chase Bank, as mortgagee or beneficiary (filed as Exhibit 10.34.1 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).

10.27.3		Form of seven separate Promissory Notes, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor/JPM Wilmington Hotel, L.L.C., FelCor/JPM Phoenix Hotel, L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., FelCor/JPM Atlanta ES Hotel, L.L.C., FelCor/JPM Austin Holdings, L.P., FelCor/JPM Orlando Hotel, L.L.C., and FelCor/JPM BWI Hotel, L.L.C., each separately payable to the order of JPMorgan Chase Bank in the respective original principal amounts of $11,000,000 (Wilmington, Delaware), $21,368,000 (Phoenix, Arizona), $5,500,000 (Boca Raton, Florida), $13,500,000 (Atlanta, Georgia), $9,616,000 (Austin, Texas), $9,798,000 (Orlando, Florida), and $24,120,000 (Linthicum, Maryland) (filed as Exhibit 10.34.2 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).

10.27.4		Form of Guaranty of Recourse Obligations of Borrower, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor LP in favor of JPMorgan Chase Bank (filed as Exhibit 10.34.3 to FelCor’s Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).

10.28.1		Construction Loan Agreement, dated April 27, 2005, among Grande Palms, L.L.C. and Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto, and Bank of America Securities, as Lead Arranger, for a maximum principal loan amount of $69.8 million (filed as Exhibit 10.34.1 of FelCor’s Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).


Exhibit
Number		Description of Exhibit

10.28.2		Guaranty Agreement, dated April 27, 2005, by FelCor Lodging Limited Partnership in favor of Bank of America, N.A. on behalf of the lenders(filed as Exhibit 10.34.2 of FelCor’s Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).

10.28.3		Form of Promissory Note, each dated April 27, 2005, made by Grande Palms, L.L.C., each separately payable to the order of Bank of America, N.A. ($25 million), Bank of Montreal ($20 million) and The Bank of Nova Scotia ($24.8 million)(filed as Exhibit 10.34.3 of FelCor’s Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).

10.28.4		Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated April 27, 2005, made by Grande Palms, L.L.C. for the benefit of Bank of America, N.A., as Administrative Agent under the Construction Loan Agreement referenced in Exhibit 10.34.1 (filed as Exhibit 10.34.4 of FelCor’s Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).

10.29.1		Term Credit Agreement, dated as of October 18, 2005, among FelCor TRS Borrower 1, L.P., as Initial Borrower; FelCor TRS Guarantor, L.P., FelCor LP and the other guarantors named therein as Guarantors; Citigroup North America, Inc., as Initial Lender, as Administrative Agent, and as Collateral Agent, and Citigroup Global Markets, Inc., as Sole Lead Arranger and Sole Book Running Manager, for a maximum principal loan amount of $175 million (filed as Exhibit 10.35 to FelCor’s Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference).

10.29.2		First Amendment to Term Credit Agreement, dated as of December 9, 2005, among FelCor TRS Borrower 1, L.P. and FelCor TRS Borrower 2, L.P., as borrowers; FelCor TRS Guarantor, L.P., FelCor LP, FelCor Lodging Company, L.L.C., FelCor Philadelphia Center, L.L.C., FelCor Marshall Motels, L.L.C. and Center City Hotel Associates, as guarantors; Citicorp North America, Inc., as the initial Lender, the administrative agent for the lenders and the collateral agent for the secured parties; and Citigroup Global Markets Inc., as sole lead arranger and sole book running manager (filed as Exhibit 10.33.1 to the 2005 Form 10-K and incorporated herein by reference).

10.29.3		Second Amendment to Term Credit Agreement, dated as of January 9, 2006, among FelCor TRS Borrower 1, L.P. and FelCor TRS Borrower 2, L.P., as borrowers and certain other borrowers named therein; FelCor TRS Guarantor, L.P., FelCor LP, FelCor Lodging Company, L.L.C., FelCor Philadelphia Center, L.L.C., FelCor Marshall Motels, L.L.C. and Center City Hotel Associates, as guarantors; Citicorp North America, Inc., as the initial Lender, the administrative agent for the lenders and the collateral agent for the secured parties; and Citigroup Global Markets Inc., as sole lead arranger and sole book running manager (filed as Exhibit 10.33.2 to the 2005 Form 10-K and incorporated herein by reference).

10.30.1		Credit Agreement, dated as of December 12, 2005, by and among FelCor, FelCor LP, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and J.P. Morgan Securities, Inc. and Citigroup Global Markets Inc. as joint runners and joint lead arrangers for an initial aggregate amount of $125,000,000 (filed as Exhibit 10.34.1 to the 2005 Form 10-K and incorporated herein by reference).

10.30.1.1		First Amendment to Credit Agreement, dated as of January 12, 2006, by and among FelCor, FelCor LP, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and J.P. Morgan Securities, Inc. and Citigroup Global Markets Inc. as joint runners and joint lead arrangers (filed as Exhibit 10.34.1.1 to the 2005 Form 10-K and incorporated herein by reference).


Exhibit
Number		Description of Exhibit

10.30.1.2		Second Amendment to Credit Agreement, dated as of January 27, 2006, by and among FelCor, FelCor LP, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and J.P. Morgan Securities, Inc. and Citigroup Global Markets Inc. as joint runners and joint lead arrangers (filed as Exhibit 10.34.1.2 to the 2005 Form 10-K and incorporated herein by reference).

10.30.1.3		Amendment No. 3 to Credit Agreement, dated as of March 31, 2006, by and among FelCor, FelCor LP, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.34.1.3 to FelCor’s Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference).

10.30.1.4		Amendment No. 4 to Credit Agreement, dated October 26, 2006, by and among FelCor, FelCor LP, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.3 to FelCor’s Form 8-K dated October 26, 2006, and filed on November 1, 2006, and incorporated herein by reference).

10.30.2		Subsidiary Guaranty, dated as of January 27, 2006, made by FelCor/CSS Holdings, L.P., FelCor Hotel Asset Company, L.L.C., FelCor Pennsylvania Company, L.L.C., FelCor Lodging Holding Company, L.L.C., FHAC Texas Holdings, L.P., FelCor Canada Co., FelCor Omaha Hotel Company, L.L.C., FelCor TRS Holdings, L.P., Myrtle Beach Hotels, L.L.C., FelCor TRS Borrower I, L.P., FelCor TRS Guarantor, L.P., Center City Hotel Associates, FelCor Lodging Company, L.L.C., FelCor TRS Borrower 3, L.P. and FelCor TRS Borrower 4, L.L.C. (filed as Exhibit 10.34.2 to the 2005 Form 10-K and incorporated herein by reference).

10.30.3		Joinder Agreement to Subsidiary Guaranty, dated as of December 31, 2006, made by FelCor/St. Paul Holdings, L.P (filed as Exhibit 10.30.3 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.31		Purchase and Sale Agreement, dated effective as of January 20, 2006, by and between FelCor and Hospitality Properties Trust (filed as Exhibit 10.35 to the 2005 Form 10-K and incorporated herein by reference).

10.32.1		Pledge Agreement dated October 31, 2006 by FelCor Holdings Trust in favor of JPMorgan Chase Bank, N.A., as Collateral Agent (filed as Exhibit 10.1 to FelCor’s Form 8-K dated October 26, 2006, and filed on November 1, 2006, and incorporated herein by reference).

10.32.2		Collateral Agency Agreement dated October 31, 2006 by and among FelCor, FelCor LP, JPMorgan Chase Bank, N.A., as Collateral Agent and/or Administrative Agent, FelCor Holdings Trust and U.S. Bank National Association, as trustee under several indentures (filed as Exhibit 10.2 to FelCor’s Form 8-K dated October 26, 2006, and filed on November 1, 2006, and incorporated herein by reference).

10.33		Registration Rights Agreement dated October 31, 2006 by and among FelCor, FelCor LP, Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (filed as Exhibit 4.4 to FelCor’s Form 8-K dated October 26, 2006, and filed on November 1, 2006, and incorporated herein by reference).

10.34		Form of Indemnification Agreement (filed as Exhibit 10.1 to FelCor’s Form 8-K dated November 9, 2006, and filed on November 13, 2006, and incorporated herein by reference).

10.35.1		Loan Agreement, dated as of November 10, 2006, by and among FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing, L.L.C., as borrowers, and Bank of America, N.A., as lender, relating to a $250 million loan from lender to borrower (filed as Exhibit 10.35.1 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.35.1.1		First Amendment to Loan Agreement and Other Loan Documents, dated as of January 31, 2007, by and among FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing, L.L.C., as


Exhibit
Number		Description of Exhibit

		borrowers, and Bank of America, N.A., as lender (filed as Exhibit 10.35.1.1 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.35.2		Form of Mortgage, Deed of Trust and Security Agreement, each dated as of November 10, 2006, from FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing, L.L.C., as borrowers, in favor of Bank of America, N.A., as lender, each covering a separate hotel and securing the Mortgage Loan (filed as Exhibit 10.35.2 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.35.3		Form of Amended and Restated Promissory Note, each dated as of January 31, 2007, made by FelCor/JPM Hotels, L.L.C. and DJONT/JPM Leasing, L.L.C. payable to the order of either Bank of America, N.A. or JPMorgan Chase Bank, N.A., as lender, in the original aggregate principal amount of $250 million (filed as Exhibit 10.35.3 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

10.35.4		Guaranty of Recourse Obligations of Borrower, dated as of November 10, 2006, made by FelCor LP in favor of Bank of America, N.A (filed as Exhibit 10.35.4 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

21		List of Subsidiaries of FelCor (filed as Exhibit 21 to FelCor’s 2006 Form 10-K and incorporated herein by reference).

23*		Consent of PricewaterhouseCoopers LLP.

31.1*		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.2*		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).


*		Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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
	By:	/s/ Lester C. Johnson
		Lester C. Johnson
		Senior Vice President (Duly Authorized Officer and Principal Accounting Officer)

Date: January 8, 2008

INDEX TO EXHIBITS


Exhibit
Number		Description of Exhibit

23		Consent of PricewaterhouseCoopers LLP.

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

32.2		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

FelCor Lodging Trust (FCH) Inactive 10-K/A2006 FY Annual report (amended)