2013 Q4 10K

10-K 1 a2013q410k.htm 10-K 2013 Q4 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2013



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



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

FelCor Lodging Trust Incorporated

FelCor Lodging Limited Partnership

(Exact Name of Registrant as Specified in Its Charter)



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



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

(972) 444-4900

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

Name of each exchange

on which registered

FelCor Lodging Trust Incorporated:

Common Stock

New York Stock Exchange

$1.95 Series A Cumulative Convertible Preferred Stock

New York Stock Exchange

Depositary Shares representing 8% Series C Cumulative Redeemable Preferred Stock

New York Stock Exchange

FelCor Lodging Limited Partnership:

None

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.



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



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



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

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



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



Indicate by check mark 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. ¨

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



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



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

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



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

The aggregate market value of shares of common stock held by non-affiliates of FelCor Lodging Trust Incorporated as of June 30, 2013, computed by reference to the price at which its common stock was last sold at June 30, 2013, was approximately $707 million.

As of February 21, 2014, the registrant had issued and outstanding 124,185,690 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of FelCor Lodging Trust Incorporated’s definitive Proxy Statement pertaining to its 2014 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

This annual report on Form 10-K for the fiscal year ended December 31, 2013, combines the filings for FelCor Lodging Trust Incorporated, or FelCor, and FelCor Lodging Limited Partnership, or FelCor LP. Where it is important to distinguish between the two, we either refer specifically to FelCor or FelCor LP. Otherwise we use the terms “we” or “our” to refer to FelCor and FelCor LP, collectively (including their consolidated subsidiaries), unless the context indicates otherwise.

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

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


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


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


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

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

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

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

FELCOR LODGING TRUST INCORPORATED and

FELCOR LODGING LIMITED PARTNERSHIP

INDEX



		Form 10-K
		Report
Item No.			Page

PART I
Item 1.	Business		4
Item 1A.	Risk Factors		11
Item 1B.	Unresolved Staff Comments		21
Item 2.	Properties		22
Item 3.	Legal Proceedings		30
Item 4.	Mine Safety Disclosures		30

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		31
Item 6.	Selected Financial Data		33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		53
Item 8.	Financial Statements and Supplementary Data		54
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		113
Item 9A.	Controls and Procedures		113

PART III
Item 10.	Directors, Executive Officers of the Registrant and Corporate Governance		115
Item 11.	Executive Compensation		115
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		115
Item 13.	Certain Relationships, Related Transactions and Director Independence		115
Item 14.	Principal Accountant Fees and Services		115

PART IV
Item 15.	Exhibits and Financial Statement Schedules		116

This Annual Report contains registered trademarks and service marks owned or licensed by companies other than us, including (but not limited to) Doubletree, Doubletree Guest Suites, Embassy Suites Hotels, Fairmont, Hilton, Holiday Inn, Marriott, Morgans, Renaissance, Royalton, Sheraton, Sheraton Suites, Walt Disney World, Westin, Wyndham and Wyndham Grande.

Disclosure Regarding Forward Looking Statements

Our disclosure and analysis in this Annual Report and in FelCor’s 2013 Annual Report to Stockholders may contain forward-looking statements that set forth anticipated results based on management’s plans and assumptions. From time to time, we may also provide forward-looking statements in other materials we release to the public. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have tried, wherever possible, to identify each such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “target,” “forecast,” “continue” or similar expressions. In particular, these forward-looking statements may include those relating to future actions (including future acquisitions or dispositions and future capital expenditure plans) and future performance or expenses.

We cannot guarantee that any future results discussed in any forward-looking statements will be realized, although we believe that we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions, including those discussed in Item 1A “Risk Factors.” Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those results anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make or related subjects in our quarterly reports on Form 10-Q and Current Reports on Form 8-K that we file with the Securities and Exchange Commission, or the SEC. Also note that, in our risk factors, we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business. These are factors that, individually or in the aggregate, we believe could cause our actual results to differ materially from past results and those results anticipated, estimated or projected. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such risk factors. Consequently, you should not consider the risk factor discussion to be a complete discussion of all of the potential risks or uncertainties that could affect our business.

The prospective financial information related to anticipated operating performance included in this report has been prepared by, and is the responsibility of, our management. PricewaterhouseCoopers LLP, or PwC, has neither examined nor compiled the accompanying prospective financial information and, accordingly, PwC does not express an opinion or any other form of assurance with respect thereto. The PwC reports included in this report relate to our historical financial information. They do not extend to the prospective financial information and should not be read to do so.

PART I

Item 1. Business

About FelCor and FelCor LP

FelCor Lodging Trust Incorporated (NYSE:FCH), or FelCor, is a Maryland corporation operating as a real estate investment trust, or REIT. FelCor is the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in 60 hotels with 17,583 rooms at December 31, 2013. At December 31, 2013, we had an aggregate of 124,668,210 shares and units outstanding, consisting of 124,050,668 shares of FelCor common stock and 617,542 units of FelCor LP limited partnership interest not owned by FelCor.

Business Strategy

Strategy and Objectives. We seek to provide superior stockholder returns by assembling a diversified portfolio of high-growth hotels, combined with a sound and flexible balance sheet reflecting low cost debt, an extended maturity profile and substantial liquidity. Our long-term strategy has five critical components:


•	Portfolio Quality and Diversity - we are investing in our core portfolio of high-growth hotels located in gateway and resort markets with high barriers-to-entry with limited supply growth, while we sell hotels that do not meet our criteria for continued investment (non-strategic hotels).


•	Long-Term Leverage - we are steadily reducing our outstanding debt to achieve leverage levels that are readily managed through economic and industry cycles.


•	Cost of Debt; Staggered and Extended Maturities - we opportunistically refinance higher-cost debt to lower our weighted average interest rates as well as stagger and extend maturities well into the future.


•	Organic Growth - we invest in our core portfolio to enhance our assets’ long-term performance and achieve favorable returns on invested capital.


•	Acquisitions - we look to acquire hotels in targeted markets that meet our strict underwriting criteria, such as those that provide returns in excess of our weighted average cost of capital, are located in markets with high barriers-to-entry with limited supply growth, and contain redevelopment opportunities that leverage our expertise to achieve superior returns on redevelopment capital.

Recent Achievements. We have made significant progress toward achieving the objectives of our strategic plan.


•	Since December 2010, we have sold 25 hotels (including five hotels sold in 2013 and one sold in January 2014), for total gross proceeds of $549 million (our pro rata share was $504 million).

•

We successfully rebranded eight Wyndham hotels from Holiday Inns on March 1, 2013. The management agreement includes a $100 million performance guaranty from Wyndham Worldwide Corporation over the initial 10-year term (which can be extended for an additional five years), with an annual performance guaranty of up to $21.5 million that ensures minimum annual NOI for the eight hotels. Rebranding and repositioning these hotels demonstrates our efforts to execute our long-term value creation strategy, which includes moving more of our portfolio into the upper-upscale segment.

•

Our Board of Directors reinstated a quarterly common dividend in October 2013 in recognition of our ongoing and successful portfolio repositioning and balance sheet restructuring, as well as our positive funds available for distribution (“FAD”) during 2013. At that time, we declared a $0.02 per share fourth quarter common stock dividend, which was paid in January. Future quarterly dividends will be based on estimates of FAD, reinvestment opportunities within our portfolio and taxable income, among other things.

•

In 2013, we spent $101.4 million on capital expenditures, primarily for renovation and redevelopment of our hotels. During this time, we redeveloped Morgans by adding three new guest rooms, building a new fitness facility, relocating the lounge and reconcepting the food and beverage areas. We also completed significant renovations at four of our Wyndham properties. Of the remaining four Wyndham properties, two were recently renovated in 2012, and the remaining two will be renovated in 2014.

•

We have spent $65.3 million (excluding the initial acquisition costs and capitalized interest) through December 31, 2013 to redevelop the 4+ star Knickerbocker Hotel, located in the heart of Times Square in Manhattan. Our total project cost is expected to be $240 million (net of historic tax credits), which is within 5% of our original estimate. We expect the hotel to open in early fall, as winter weather delays have slightly disrupted the schedule. The hotel’s executive team is in place and fully engaged in the sales and marketing efforts to ensure a successful and strong opening. In early 2014, we finalized an agreement with one of the nation’s most recognized Master Chefs, Charlie Palmer, to manage the food and beverage operations. Mr. Palmer’s flagship restaurant, the Michelin-starred Aureole, is located adjacent to the hotel, which will create sales and marketing synergies.


•	Our Knickerbocker Hotel venture raised $45 million through the sale of 3.5% preferred equity under the EB-5 immigrant investor program. The venture received $40 million in proceeds in February 2014, and the remaining $5 million will be received as investors’ visas are approved by the government. We are using our 95% share of the proceeds to repay borrowings under our line of credit.

Balance Sheet Strategy. A healthy balance sheet provides the necessary flexibility and capacity to thrive throughout lodging industry cycles. We are committed to strengthening our balance sheet by reducing leverage, lowering our cost of debt and extending debt maturities.


•	We expect to continue to reduce our leverage by selling additional non-strategic hotels, increasing our cash flow (driven by growth in revenue per available rooms, or RevPAR, on our core and recently acquired and redeveloped hotels), opening the Knickerbocker Hotel and moving it to stabilization.


•	We have successfully extended our weighted-average debt maturity to 2020 and reduced our weighted-average interest rate to 6.3%, significantly lower than our historical levels.

Portfolio Management. Our core portfolio consists primarily of upper-upscale hotels and resorts located in major markets and resort locations that have dynamic demand generators and high barriers-to-entry to entry. Most of our hotels are operated under well-recognized brands, such as Fairmont, Doubletree, Embassy Suites, Hilton, Marriott, Renaissance, Sheraton, Westin, Wyndham and Holiday Inn. Royalton and Morgans, in midtown Manhattan, are operated independent of any brand. We sell, acquire and rebrand hotels to increase our return on invested capital, improve overall portfolio quality, enhance diversification and improve growth rates.


•	Hotel Sales. On an ongoing basis, we review our hotels in terms of projected performance, future capital expenditure requirements, market dynamics and concentration risk. We believe selling non-strategic hotels enhances our long-term growth, increases our return on capital and enables management to focus on “core” long-term investments.

•

We expect to dispose of our interests in 45 hotels, of which we have already sold 25 hotels since December 2010 for total gross proceeds of $549 million (our pro rata share was $504 million). We have 20 remaining non-strategic hotels, including the one hotel that is under contract. Of the remaining hotels, we are currently marketing six and expect to begin marketing three more later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We are working diligently to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.


•	We continually review opportunities to sell additional non-strategic hotels in the future and reinvest proceeds to earn a higher return on our investments.


•	Hotel Acquisitions. We consider purchasing hotels that meet or exceed our strict investment criteria.


•	We target properties that are accretive to long-term stockholder value and will provide for investment returns that exceed our weighted average cost of capital and can provide attractive long-term yields.


•	We seek high-quality hotels in major urban and resort markets with high barriers-to-entry and high growth potential, as typified by the iconic Fairmont Copley Plaza, Royalton, Morgans and (at stabilization) the Knickerbocker.


•	We focus on properties that will improve the overall quality and diversity of our portfolio.


•	We also consider hotels that offer redevelopment and/or revenue repositioning opportunities that can further enhance returns on our investment.

Asset Management. We seek to maximize revenue, market share, hotel operating margins and cash flow at every hotel. FelCor’s asset management is aggressive and hands-on. All of our asset managers have extensive hotel operating experience and thorough knowledge of the markets and overall demand dynamics where our hotels operate. Because of their experience, their interaction with our hotel managers is very effective. With our long-standing brand relationships, we have significant influence over how their policies and procedures (most notably, brand strategy for marketing and revenue enhancement programs) affect us as hotel owners. In addition to working with our hotel managers to maximize hotel operating performance, we routinely evaluate value-adding opportunities at our hotels, such as use of public areas, new restaurant concepts and improved management of food and beverage operations.

Renovation and Redevelopment. We take a prudent approach to spending capital. Our strategy involves efficiently maintaining our properties, and limiting future fluctuations of expenditures, while maximizing return on investment. We generally renovate between six to eight core hotels each year to maintain the competitive position and value of our hotels. In addition, we consider expansion and redevelopment opportunities at our properties that offer attractive risk-adjusted returns. Most recently, we redeveloped the Fairmont Copley Plaza in Boston. From 2009 (prior to redevelopment) to 2013, RevPAR and EBITDA at that hotel increased 31% to $211 and 81% to $7.8 million, respectively. We also recently completed successful redevelopment projects at the Embassy Suites Myrtle Beach Oceanfront Resort and Morgans in New York. We are currently evaluating additional projects at several hotels.

The Lodging Industry

The United States lodging industry is diverse and fragmented. Hotels are owned by both public and private companies and partnerships, some of which also operate those hotels. Often, hotels are operated on behalf of their owners by independent management companies. Some hotels are operated and marketed under familiar brands, or “flags,” such as Hilton, Marriott, Sheraton, Wyndham, Embassy Suites and Holiday Inn, among others. Other hotels are operated independent of any flag, often because the flag would not enhance the hotel’s performance and, in some cases, because operating as an independent “boutique” hotel may actually enhance a hotel’s appeal to a targeted segment of travelers. We do not operate our hotels. All of our hotels are operated on our behalf by independent managers, most of which are affiliated with national and international brands.

The industry caters to a diverse customer base, including transient customers (both leisure and corporate), groups (both leisure and corporate) and long-term, or contract, customers. Average rates charged by the hotels are dependent on multiple factors including the customer mix and supply and demand in the market.

Industry Performance. The industry fundamentals have remained strong. Broadly, lodging demand continued to grow throughout 2013 and supply growth remained below historic levels. As such, the favorable demand/supply imbalance continues, which has increased operator confidence to continue increasing average rates. Consequently, the industry set several new records in 2013, including most rooms sold.

For 2013, Smith Travel Research, or STR, a leading provider of hospitality industry data, reported:


•	RevPAR increased 5.4%, which was above the long-term historical average;


•	Occupancy increased 1.5% to 62.3%, as improving demand growth outpaced supply growth;


•	Industry performance improved on a widespread basis, with all but three of the largest 25 markets (as defined by STR) experiencing higher RevPAR in 2013; and


•	Average daily rate (ADR) increased 3.9%, as operators raised rates in the face of strong demand growth, led by increases in corporate travel, and re-mixed their business in favor of premium corporate guests.

Average occupancy for the industry is nearing 2007 (pre-recession) levels. While future demand trends remain difficult to discern, as businesses continue to conserve cash and gross domestic product (GDP) growth remains sluggish, the industry continues to experience strong demand growth. During the recent recession, lodging demand fell quicker than GDP, providing room for a more robust recovery in the lodging industry than the slower recovery for the overall U.S. economy might indicate. Travel industry consultants expect continued growth and favorable operating dynamics in 2014, reflecting higher demand levels, improved pricing and below-historical-average supply growth, which remains constrained by limited construction financing. STR reported that rooms under construction fell 57% to approximately 91,000 in December 2013, compared to 212,000 rooms in December 2007. PKF Hospitality Research, or PKF, another leading provider of hospitality industry data, projects that lodging fundamentals will continue to improve in 2014, with demand increasing 3.0% and supply growing only 1.2%. As a result, according to PKF, hotel occupancy in 2014 should increase 1.8%, compared to 2013. As occupancy increases, hotels should have the opportunity to improve ADR further by remixing their business in favor of premium corporate guests, and ADR growth should be a more significant factor in RevPAR growth. PKF projects 2014 industry ADR will increase by 4.8%, contributing to a projected 6.6% RevPAR increase. PKF projects that pricing power will strengthen through 2015, as occupancies return to previous peak levels, contributing to a projected 7.5% gain in industry RevPAR in 2015.

Hotel Classifications. STR classifies hotel chains into seven distinct segments: luxury, upper-upscale, upscale, upper-midscale, midscale, economy and independent. We own luxury (Fairmont), upper-upscale (Embassy Suites, Hilton, Marriott, Renaissance, Sheraton, Westin, and Wyndham), upscale (Doubletree), upper-midscale (Holiday Inn) and independent (Royalton and Morgans) hotels. STR also categorizes hotels based upon their relative market positions, as measured by ADR, as luxury, upscale, midprice, economy and budget. The following table contains information with respect to average occupancy (determined by dividing occupied rooms by available rooms), ADR and RevPAR for our 59 Consolidated Hotels, all luxury U.S. hotels, all upscale U.S. hotels, all midprice U.S. hotels and all U.S. hotels, as reported by STR, for the periods indicated:



	Year Ended December 31,
	2013			2012			2011			2010			2009
Number of FelCor Hotels	59			65			73			80			83
Occupancy:
FelCor hotels^(a)	72.6		%	72.2		%	72.0		%	70.5		%	66.2		%
All Luxury U.S. hotels^(b)	70.6			69.7			68.1			65.4			61.6
All Upscale U.S. hotels^(c)	66.1			65.5			61.4			58.9			56.4
All Midprice U.S. hotels^(d)	63.1			62.1			56.3			53.8			51.9
All U.S. hotels	62.3			61.4			60.1			57.6			55.1
ADR:
FelCor hotels^(a)	$	149.92		$	142.46		$	128.68		$	121.47		$	123.23
All Luxury U.S. hotels^(b)	181.98			173.50			151.37			146.54			146.85
All Upscale U.S. hotels^(c)	133.43			129.09			109.52			106.44			106.66
All Midprice U.S. hotels^(d)	104.91			100.30			81.00			78.33			78.12
All U.S. hotels	110.35			106.10			101.64			98.08			97.51
RevPAR:
FelCor hotels^(a)	$	108.83		$	102.80		$	92.68		$	85.58		$	81.62
All Luxury U.S. hotels^(b)	128.52			120.86			103.16			95.84			90.53
All Upscale U.S. hotels^(c)	88.16			84.51			67.22			62.71			60.12
All Midprice U.S. hotels^(d)	66.24			62.27			45.57			42.16			40.58
All U.S. hotels	68.69			65.17			61.06			56.47			53.71


(a)	This information is based on historical hotel presentations.


(b)	This category includes “luxury” hotels (hotels with ADRs in the 85th to 100th percentiles in their respective markets).


(c)	This category includes “upscale” hotels (hotels with ADRs in the 70th to 85th percentiles in their respective markets).


(d)	This category includes “midprice” hotels (hotels with ADRs in the 40th to 70th percentiles in their respective markets).

Competition

The lodging industry is highly competitive. Customers can choose from a variety of brands and products. The relationship between the supply of and demand for hotel rooms is cyclical and affects our industry significantly. Certain markets have low barriers-to-entry (e.g., inexpensive land, favorable zoning, etc.), making it easier to build new hotels and increase the supply of modern, high-quality hotel rooms. Lodging demand growth typically moves in tandem with the overall economy, in addition to local market factors that stimulate travel to specific destinations. Economic indicators, such as GDP, business investment and employment levels, are common indicators of lodging demand. Each of our hotels competes for guests, primarily with other full service and limited service hotels in the immediate vicinity and secondarily, with other hotels in its geographic market. Location, brand recognition, hotel quality, service levels and prices are the principal competitive factors affecting our hotels.

Environmental Matters

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in a property. These laws may impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, certain environmental laws and common law principles could be used to impose liability for release of asbestos-containing materials, and third parties may seek recovery from owners or operators of real property for personal injury associated with exposure to related asbestos-containing materials. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require corrective or other expenditures. In connection with our current or prior ownership or operation of hotels or other real estate, we may be potentially liable for various environmental costs or liabilities.

We customarily obtain a Phase I environmental survey from an independent environmental consultant before acquiring a hotel. The principal purpose of a Phase I survey is to identify indications of potential environmental contamination and, secondarily, to assess, to a limited extent, the potential for environmental regulatory compliance liabilities. The Phase I surveys of our hotels were designed to meet the requirements of the then current industry standards governing Phase I surveys, and consistent with those requirements, none of the surveys involved testing of groundwater, soil or air. Accordingly, they do not represent evaluations of conditions at the studied sites that would be revealed only through such testing. In addition, Phase I assessments of environmental regulatory compliance issues is general in scope and not a detailed determination of a hotel’s environmental compliance. Similarly, Phase I reports do not involve comprehensive analysis of potential offsite liability. Our Phase I reports have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets or results of operations, nor are we aware of any such liability. Nevertheless, it is possible that these reports do not reveal or accurately assess all material environmental conditions and that there are material environmental conditions of which we are unaware.

We believe that our hotels are in compliance, in all material respects, with all federal, state, local and foreign laws and regulations regarding hazardous substances and other environmental matters, to the extent violation of such laws and regulations have a material adverse effect on us. We have not been notified by any governmental authority or private party of any noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of our current or former properties that we believe would have a material adverse effect on our business, assets or results of operations. However, obligations for compliance with environmental laws that arise or are discovered in the future may adversely affect our financial condition.

Tax Status

FelCor LP is a partnership for federal income tax purposes, and is not subject to federal income tax. However, under its partnership agreement, it is required to reimburse FelCor for any tax payments it is required to make. Accordingly, the tax information herein represents disclosures regarding FelCor and its taxable subsidiaries.

will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) for such taxable year and may not qualify as a REIT for four subsequent years. In connection with FelCor’s election to be treated as a REIT, its charter imposes restrictions on the ownership and transfer of shares of its common stock. FelCor LP expects to make distributions on its units sufficient to enable FelCor to meet its distribution obligations as a REIT. At December 31, 2013, FelCor had a federal income tax loss carryforward of $499.4 million, and its TRSs had a federal income tax loss carryforward of $314.2 million.

Employees

At December 31, 2013, we had 62 full-time employees, none of whom is involved in the day-to-day operation of our hotels.

Ownership of our Hotels

Of the 60 hotels in which we had an ownership interest at December 31, 2013, we owned a 100% interest in 43 hotels, a 90% interest in entities owning two hotels, an 82% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and 50% interests in entities owning 13 hotels. We consolidate our real estate interests in the 47 hotels in which we held majority interests, and we record the real estate interests of the 13 hotels in which we held 50% interests using the equity method. We leased 59 of our 60 hotels to our TRSs, of which we own a controlling interest. One 50%-owned hotel was operated without a lease. Because we own controlling interests in these lessees, we consolidate our interests in these 59 hotels (which we refer to as our Consolidated Hotels) and reflect operating revenues and expenses in our statements of operations. Our Consolidated Hotels are located in the United States (58 hotels in 21 states) and Canada (one hotel in Ontario), with concentrations in major markets and resort areas.

Segment Reporting

Our business is conducted in one operating segment because of the similar economic characteristics of our hotels. Additional segment information may be found in the footnotes to our consolidated financial statements elsewhere in this report.

Additional Information

Additional information relating to our hotels and our business, including the charters of our Executive Committee, Corporate Governance and Nominating Committee, Compensation Committee and Audit Committee; our corporate governance guidelines; and our code of business conduct and ethics can be found on our Web site at www.felcor.com. Information relating to our hotels and our business can also be found in the Notes to Consolidated Financial Statements located elsewhere in this report. Our annual, quarterly and current reports, and amendments to these reports, filed with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, or Exchange Act, are made available on our Web site, free of charge, under the “SEC Filings” tab on our “Investor Relations” page, as soon as practicable following their filing. The public may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Item 1A. Risk Factors

The risk factors described in this section describe the major risks to our business and should be considered carefully. In addition, these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995.

Our revenues, expenses and the value of our hotels are subject to conditions affecting both the real estate and the lodging industries.

Real estate investments are subject to numerous risks. Our investment in hotels is subject to numerous risks generally associated with owning real estate, including among others:


•	general economic conditions, including unemployment rates, major bank failures, unsettled capital markets and sovereign debt uncertainty;


•	changes in international, national, regional and local economic climate and real estate market conditions;


•	changes in zoning laws;


•	changes in traffic patterns and neighborhood characteristics;


•	increases in assessed property taxes from changes in valuation and real estate tax rates;


•	increases in the cost of property insurance;


•	potential for uninsured or underinsured property losses;


•	costly governmental regulations and fiscal policies;


•	changes in tax laws; and


•	other circumstances beyond our control.

Moreover, real estate investments are substantially illiquid, and we may not be able to adjust our portfolio in a timely manner to respond to changes in economic and other conditions.

Investing in hotel assets involves special risks. We have invested in hotel-related assets, and our hotels are subject to all the risks common to the hotel industry. These risks could adversely affect hotel occupancy and rates that can be charged for hotel rooms, and generally include:


•	changes in business and leisure travel patterns;


•	decreases in demand for hotel rooms;


•	increases in lodging supply or competition, which may adversely affect demand at our hotels;


•	the effect of geopolitical disturbances, including terrorist attacks and terror alerts, that reduce business and leisure travel;


•	the attractiveness of our hotels to consumers relative to competing hotels;


•	fluctuations in our revenue caused by the seasonal nature of the hotel industry;


•	a downturn in the hotel industry;


•	unionization of the labor force at our hotels;


•	the threat or outbreak of a pandemic disease affecting the travel industry;


•	increasing fuel costs and other travel expenses resulting in reductions of travel; and


•	increased transportation security precautions affecting the travel industry.

We could face increased competition. Each of our hotels competes with other hotels in its geographic area. A number of additional hotel rooms have been, or may be, built in a number of the geographic areas in which our hotels are located, which could adversely affect both occupancy and rates in those markets. A significant increase in the supply of upscale and upper upscale hotel rooms, or if demand fails to increase at least proportionately, could have a material adverse effect on our business, financial condition and results of operations.

The lodging business is seasonal in nature. Generally, hotel revenues for our hotel portfolio are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas are generally substantially greater during tourist season than other times of the year. We expect that seasonal variations in revenue at our hotels will cause quarterly fluctuations in our revenues.

We are subject to risks inherent to hotel operations. We have ownership interest in the operating lessees of our hotels; consequently, we are subject to the risk of fluctuating hotel operating expenses at our hotels, including but not limited to:


•	increases in operating expenses due to inflation;


•	wage and benefit costs, including hotels that employ unionized labor;


•	repair and maintenance expenses;


•	gas and electricity costs;


•	insurance costs including health, general liability and workers compensation; and


•	other operating expenses.

Compliance with environmental laws may adversely affect our financial condition. Owners of real estate are subject to numerous federal, state, local and foreign environmental laws and regulations. Under these laws and regulations, a current or former owner of real estate may be liable for the costs of remediating hazardous substances found on its property, whether or not they were responsible for its presence. In addition, if an owner of real property arranges for the disposal of hazardous substances at another site, it may also be liable for the costs of remediating the disposal site, even if it did not own or operate the disposal site. Such liability may be imposed without regard to fault or the legality of a party’s conduct and may, in certain circumstances, be joint and several. A property owner may also be liable to third parties for personal injuries or property damage sustained as a result of its release of hazardous or toxic substances, including asbestos-containing materials, into the environment. Environmental laws and regulations may require us to incur substantial expenses and limit the use of our properties. We could have substantial liability for a failure to comply with applicable environmental laws and regulations, which may be enforced by the government or, in certain instances, by private parties. The existence of hazardous substances on a property can also adversely affect the value of, and the owner’s ability to use, sell or borrow against the property.

We cannot provide assurances that future or amended laws or regulations, or more stringent interpretations or enforcement of existing environmental requirements, will not impose any material environmental liability, or that the environmental condition or liability relating to our hotels will not be affected by new information or changed circumstances, by the condition of properties in the vicinity of such hotels, such as the presence of leaking underground storage tanks, or by the actions of unrelated third parties.

Compliance with the Americans with Disabilities Act may adversely affect our financial condition. Under the Americans with Disabilities Act of 1990 (the “ADA”), all public accommodations, including hotels, are required to meet certain federal requirements for access and use by disabled persons. Various state and local jurisdictions have also adopted requirements relating to the accessibility of buildings to disabled persons. We make every reasonable effort to ensure that our hotels substantially comply with the requirements of the ADA and other applicable laws. However, we could be liable for both governmental fines and payments to private parties if it were determined that our hotels are not in compliance with these laws. If we were required to make unanticipated major modifications to our hotels to comply with the requirements of the ADA and similar laws, it could materially adversely affect our ability to make distributions to our stockholders and to satisfy our other obligations.

We face reduced insurance coverages and increasing premiums. Our property insurance has a $100,000 “all‑risk” deductible, as well as a 5% deductible (insured value) for named windstorm and California earthquake coverage. Substantial uninsured or not fully-insured losses would have a material adverse impact on our operating results, cash flows and financial condition. Catastrophic losses, such as the losses caused by hurricanes in 2005, could make the cost of insuring against these types of losses prohibitively expensive or difficult to find. In an effort to limit the cost of insurance, we purchase catastrophic insurance coverage based on probable maximum losses based on 250-year events and have only purchased terrorism insurance to the extent required by our lenders or franchisors. We have established a self-insured retention of $250,000 per occurrence for general liability insurance with regard to 47 of our hotels. The remainder of our hotels participate in general liability programs sponsored by our managers, with no deductible.

We could have uninsured or under-insured property losses. Our property policies provide that all of the claims from each of our properties resulting from a particular insurable event must be combined together for purposes of evaluating whether the aggregate limits and sub-limits contained in our policies have been exceeded. Therefore, if an insurable event occurs that affects more than one of our hotels, the claims from each affected hotel will be added together to determine whether the aggregate limit or sub-limits, depending on the type of claim, have been reached, and each affected hotel may only receive a proportional share of the amount of insurance proceeds provided for under the policy if the total value of the loss exceeds the aggregate limits available. We may incur losses in excess of insured limits, and as a result, we may be even less likely to receive sufficient coverage for risks that affect multiple properties such as earthquakes or catastrophic terrorist acts. Risks such as war, catastrophic terrorist acts, nuclear, biological, chemical, or radiological attacks, and some environmental hazards may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or may be too expensive to justify insuring against.

We may also encounter disputes concerning whether an insurance provider will pay a particular claim that we believe is covered under our policy. Should a loss in excess of insured limits or an uninsured loss occur or should we be unsuccessful in obtaining coverage from an insurance carrier, we could lose all, or a portion of, the capital we have invested in a property, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.

We obtain terrorism insurance to the extent required by lenders or franchisors as a part of our all-risk property insurance program, as well as our general liability and directors’ and officers’ policies. However, our all-risk policies have limitations, such as per occurrence limits and sub-limits, that might have to be shared proportionally across participating hotels under certain loss scenarios. Also, all-risk insurers only have to provide terrorism coverage to the extent mandated by the Terrorism Risk Insurance Act, or TRIA, for “certified” acts of terrorism - namely those that are committed on behalf of non-United States persons or interests. Furthermore, we do not have full replacement coverage at all of our hotels for acts of terrorism committed on behalf of United States persons or interests (“non-certified” events) as our coverage for such incidents is subject to sub-limits and/or annual aggregate limits. In addition, property damage related to war and to nuclear, biological and chemical incidents is excluded under our policies. While TRIA will reimburse insurers for losses resulting from nuclear, biological and chemical perils, TRIA does not require insurers to offer coverage for these perils and, to date, insurers are not willing to provide this coverage, even with government reinsurance. Additionally, there is a possibility that Congress will not renew TRIA in the future, which would eliminate the federal subsidy for terrorism losses. As a result of the above, there remains uncertainty regarding the extent and adequacy of terrorism coverage that will be available to protect our interests in the event of future terrorist attacks that impact our properties.

We have geographic concentrations that may create risks from regional or local economic, seismic or weather conditions. At December 31, 2013, approximately 52% of our hotel rooms were located in, and 54% of our 2013 Hotel EBITDA was generated from, three states: California (29% of our hotel rooms and 31% of our Hotel EBITDA); Florida (12% of our hotel rooms and 12% of our Hotel EBITDA); and Texas (11% of our hotel rooms and 11% of our Hotel EBITDA). Additionally, at December 31, 2013, we had concentrations in five major metropolitan areas which together represented approximately 39% of our Hotel EBITDA for the year ended December 31, 2013 (the San Francisco Bay area (15%), Boston (8%), South Florida (6%), Los Angeles area (6%), and Myrtle Beach (4%)). Therefore, adverse economic, seismic or weather conditions in these states or metropolitan areas may have a greater adverse effect on us than on the industry as a whole.

Transfers and/or termination of franchise licenses and management agreements may be prohibited or restricted. Hotel managers and franchise licensors may have the right to terminate their agreements or suspend their services in the event of default under such agreements or other third party agreements such as ground leases and mortgages, upon the loss of liquor licenses, or in the event of the sale or transfer of the hotel. Franchise licenses may expire by their terms, and we may not be able to obtain replacement franchise license agreements.

If a management agreement or franchise license were terminated, under certain circumstances (such as the sale of a hotel), we could be liable for liquidated damages (which may be guaranteed by us or certain of our subsidiaries). In addition, we may need to obtain a different franchise and/or engage a different manager, and the costs and disruption associated with those changes could be significant (and materially adverse to the value of the affected hotel) because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchise licensor or operations management provided by the manager. Additionally, most of our management agreements restrict our ability to encumber our interests in the applicable hotels under certain circumstances without the managers’ consent, which can make it more difficult to obtain secured financing on acceptable terms.

We are subject to possible adverse effects of management, franchise and license agreement requirements. All of our hotels are operated under existing management, franchise or license agreements with nationally recognized hotel companies. Each agreement requires that the licensed hotel be maintained and operated in accordance with specific brand standards and restrictions. Compliance with these standards, and changes in these standards, could require us to incur significant expenses or capital expenditures, which could adversely affect our results of operations and ability to pay dividends to our stockholders and service on our debt.

We are subject to the risks of brand concentration. We are subject to the potential risks associated with the concentration of our hotels under a limited number of brands. A negative public image or other adverse event that becomes associated with the brand could adversely affect hotels operated under that brand. If any brands under which we operate hotels suffer a significant decline in appeal to the traveling public, the revenues and profitability of our branded hotels could be adversely affected. At December 31, 2013, approximately 32 hotels comprising 48% of our aggregate rooms were flagged as Embassy Suites, and we derived 52% of our 2013 Hotel EBITDA from those hotels.

If revenue declines faster than operating expenses, our margins may shrink materially. We are subject to the risks of a decline in Hotel EBITDA margins, which occur when hotel operating expenses increase disproportionately to revenues or fail to shrink at least as fast as revenues decline. These operating expenses and Hotel EBITDA margins are controlled by our third-party managers over whom we have limited control.

If we (or our managers) fail to comply with applicable privacy laws and regulations, we could be subject to payment of fines, damages or face restrictions on our use of guest data. Our managers collect information relating to our guests for various business purposes, including marketing and promotional purposes. Collecting and using personal data is governed by U.S. and other privacy laws and regulations. Privacy regulations continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our manager’s ability to market our products, properties and services to our guests. In addition, non-compliance (or in some circumstances non-compliance by third parties engaged by us (including our managers)), or a breach of security on systems storing privacy data, may result in fines, payment of damages or restrictions on our (or our managers’) use or transfer of data.

The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability. Some of our hotel rooms may be booked through Internet travel intermediaries. As these Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us and our management companies. Moreover, some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. These agencies hope that consumers will eventually develop brand loyalties to their reservations system rather than to the brands under which our hotels are franchised. If the amount of sales made through Internet intermediaries increases significantly, room revenues may flatten or decrease and our profitability may be adversely affected.

System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or service provided to guests at our hotels, and any such disruption could reduce our expected revenue, increase our expenses, damage the reputation of our hotels and adversely affect our stock price. Experienced computer programmers and hackers may be able to penetrate our network security or the network security of our third-party managers and franchisors, and misappropriate or compromise our confidential information or that of our hotel guests, create system disruptions or cause the shutdown of our hotels. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our computer systems or the computer systems operated by our third-party managers and franchisors, or otherwise exploit any security vulnerabilities of our respective networks. In addition, sophisticated hardware and operating system software and applications that we and our third-party managers or franchisors may procure from outside companies may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with our internal operations or the operations at our hotels. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential business at our hotels.

Portions of our information technology infrastructure or the information technology infrastructure of our third-party managers and franchisors also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We or our third-party managers and franchisors may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive. Such disruptions could adversely impact the ability of our third-party managers and franchisors to fulfill reservations for guestrooms and other services offered at our hotels. Delayed sales or bookings, lower margins or lost guest reservations resulting from these disruptions could adversely affect our financial results, stock price and the reputation of our hotels.

We seek to minimize the impact of these attacks through various technologies, processes and practices designed to protect our networks, systems, computers and data from attack, damage or unauthorized access. However, there are no guarantees that our cyber-security practices will be sufficient

to thwart all attacks. While we carry property and business operation interruption insurance, we may not be sufficiently compensated for all losses we may incur. These losses include not only a loss of revenues but also potential litigation, fines or regulatory action against us. Furthermore, the Company may also incur substantial remediation costs to repair system damage as well as satisfy liabilities for stolen assets or information that may further reduce our profits.

Future terrorist activities and political instability may adversely affect, and create uncertainty in, our business. Terrorism in the United States or elsewhere could have an adverse effect on our business, although the degree of impact will depend on a number of factors, including the U.S. and global economies and global financial markets. Previous terrorist attacks in the United States and subsequent terrorism alerts have adversely affected the travel and hospitality industries in the past. Such attacks, or the threat of such attacks, could have a material adverse effect on our business, our ability to finance our business, our ability to insure our properties, and/or our results of operations and financial condition, as a whole.

We have substantial financial leverage.

At December 31, 2013, our consolidated debt ($1.7 billion) represented approximately 57.5% of our total enterprise value. Declining revenues and cash flow may adversely affect our public debt ratings and may limit our access to additional debt. Historically, we have incurred debt for acquisitions and to fund our renovation, redevelopment and rebranding programs. If our access to additional debt financing is limited, our ability to fund these programs or acquire hotels in the future could be adversely affected.

Financial leverage, while efficient and useful, could have negative consequences. For example, it could:


•	limit our ability to obtain additional financing for working capital, renovation, redevelopment and rebranding plans, acquisitions, debt service requirements and other purposes;


•	limit our ability to refinance existing debt;


•	limit our ability to pay dividends, invest in unconsolidated joint ventures, etc.;


•	require us to agree to additional restrictions and limitations on our business operations and capital structure to obtain financing;


•	increase our vulnerability to adverse economic and industry conditions, and to interest rate fluctuations;


•	require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for capital expenditures, future business opportunities, paying dividends or other purposes;


•	limit our flexibility to make, or react to, changes in our business and our industry; and


•	place us at a competitive disadvantage, compared to our competitors that have less leverage.

Compliance with, or failure to comply with, our financial covenants may adversely affect our financial position and results of operations.

The agreements governing our senior secured notes require that we satisfy total leverage, secured leverage and interest coverage tests in order, among other things, to: (i) incur certain additional indebtedness except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends other than to maintain FelCor’s REIT status; (iii) repurchase FelCor’s capital stock; or (iv) merge. These restrictions may adversely affect our ability to finance our operations or engage in other business activities that may be in our best interest.

Various political, economic, social or business risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and financial thresholds. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default could permit

lenders to accelerate the maturity of obligations under these agreements and to foreclose upon any collateral securing those obligations. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions could significantly impair our ability to obtain other financing. We cannot assure you that we will be granted waivers or amendments if for any reason we are unable to comply with these agreements or that we will be able to refinance our debt on terms acceptable to us, or at all.

Certain of our subsidiaries have been formed as special purpose entities, or SPEs. These SPEs have incurred mortgage debt secured by the assets of those SPEs, which debt is non-recourse to us, except in connection with certain customary recourse “carve-outs,” including fraud, misapplication of funds, etc., in which case this debt could become fully recourse to us.

Our ability to pay dividends may be limited or prohibited by the terms of our debt or preferred stock.

We are currently party to agreements and instruments that can restrict or prevent the payment of dividends on our common and preferred stock (except as necessary to retain REIT status). Under the agreements governing our senior secured notes, dividend payments are permitted only to the extent that, at the time of the distribution, we can satisfy certain financial thresholds (concerning leverage and fixed charges) and meet other requirements. Under the terms of our outstanding preferred stock, we are not permitted to pay dividends on our common stock unless all accrued preferred dividends then payable have been paid. While our preferred dividends are current, if we fail to pay future dividends on our preferred stock for any reason, including to comply with the terms of our senior secured notes, our preferred dividends will accrue, and we will be prohibited from paying any common dividends until all such accrued but unpaid preferred dividends have been paid.

Our debt agreements will allow us to incur additional debt that, if incurred, could exacerbate the other risks described herein.

We may incur substantial debt in the future. Although the instruments governing our debt contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial. If we add incremental debt, the leverage-related risks described above would intensify.

We may be unable to execute our deleveraging strategy successfully if we are unable to sell non-strategic hotels when anticipated, or at all, or sell them for satisfactory pricing or if we are unable to grow our cash flow.

Our ability to sell hotels is at least partially dependent on potential buyers obtaining financing. If adequate financing is not available or is only available at undesirable terms, we may be unable to sell hotels or sell them for desired pricing. If we are unable to sell non-strategic hotels or sell them for desired pricing, it could affect our ability to repay and refinance debt and slow the execution of our strategic plan. If we sell a mortgaged hotel for less than its outstanding debt balance, we would be required to use cash to make up the shortfall or substitute an unencumbered hotel as collateral, which would restrict future flexibility when refinancing debt or restrict us from using cash for other purposes. Similarly if we are unsuccessful in growing the cash flow at our core hotels our deleveraging strategy could be frustrated.

We depend on external sources of capital for future growth, and we may be unable to access capital when necessary.

As a REIT, our ability to reduce our debt and finance our growth must largely be funded by external sources of capital because we are required to distribute to our stockholders at least 90% of our

taxable income (other than net capital gains) including, in some cases, taxable income we recognize for federal income tax purposes but with regard to which we do not receive corresponding cash. Our ability to obtain the external capital we require could be limited by a number of factors, many of which are outside our control, including general market conditions, unfavorable market perception of our future prospects, lower current and/or estimated future earnings, excessive cash distributions or a lower market price for our common stock.

Our ability to access additional capital also may be limited by the terms of our existing debt, which, under certain circumstances, restrict our incurrence of debt and the payment of distributions. Any of these factors, individually or in combination, could prevent us from being able to obtain the external capital we require on terms that are acceptable to us, or at all. If our future cash flow from operations and external sources of capital are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to reduce or delay our business activities and capital expenditures, sell assets, obtain additional equity capital or restructure or refinance all or a portion of our debt on or before maturity. We cannot assure you that we will be able to refinance any of our debt on a timely basis or on satisfactory terms, if at all. Failing to obtain necessary external capital could have a material adverse effect on our ability to finance our future growth and reduce our debt. We may have only a limited number of unencumbered hotels and limited resources to raise additional capital.

Departure of key personnel would deprive us of the institutional knowledge, expertise and leadership they provide.

Our executive management team includes our President and Chief Executive Officer, three Executive Vice Presidents, and a Senior Vice President. In addition, we have several other long-tenured senior officers. These executives and officers generally possess institutional knowledge about our organization and the hospitality or real estate industries, have significant expertise in their fields, and possess leadership skills that are important to our operations. The loss of any of our executives or other long-serving officers could adversely affect our ability to execute our business strategy.

As a REIT, we are subject to specific tax laws and regulations, the violation of which could subject us to significant tax liabilities.

The federal income tax laws governing REITs are complex. We have operated, and intend to continue to operate, in a manner that is intended to enable us to qualify as a REIT under the federal income tax laws. The REIT qualification requirements are extremely complicated, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we have been, or will continue to be, successful in operating so as to qualify as a REIT.

The federal income tax laws governing REITs are subject to change. At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. These new laws, interpretations, or court decisions may change the federal income tax laws relating to, or the federal income tax consequences of, qualification as a REIT. Any of these new laws or interpretations may take effect retroactively and could adversely affect us, or you as a stockholder.

Failure to make required distributions would subject us to tax. Each year, a REIT must pay out to its stockholders at least 90% of its taxable income, other than any net capital gain. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible tax if the actual amount we pay out to our stockholders in a calendar year is less than the minimum amount specified under federal tax laws. Our only source of funds to make such distributions comes from distributions from FelCor LP. Accordingly, we may be required to borrow

money or sell assets to enable us to pay out enough of our taxable income to satisfy the distribution requirements and to avoid corporate income tax and the 4% tax in a particular year.

Failure to qualify as a REIT would subject us to federal income tax. If we fail to qualify as a REIT in any taxable year for which the statute of limitations remains open we would be subject to federal income tax at regular corporate rates (including any applicable alternative minimum tax) for such taxable year and may not qualify as a REIT for four subsequent years. We might need to borrow money or sell hotels in order to obtain the funds necessary to pay any such tax. If we cease to be a REIT, we no longer would be required to distribute most of our taxable income to our stockholders. Unless our failure to qualify as a REIT was excused under federal income tax laws, we could not re-elect REIT status until the fifth calendar year following the year in which we failed to qualify.

We lack control over the management and operations of our hotels. Because federal income tax laws restrict REITs and their subsidiaries from operating hotels, we do not manage our hotels. Instead, we are dependent on the ability of third-party managers to operate our hotels pursuant to management agreements. As a result, we are unable to directly implement strategic business decisions for the operation and marketing of our hotels, such as decisions with respect to the setting of room rates, the salary and benefits provided to hotel employees, the conduct of food and beverage operations and similar matters. While our taxable REIT subsidiaries monitor the third-party manager’s performance, we have limited specific recourse under our management agreements if we believe the third-party managers are not performing adequately. Failure by our third-party managers to fully perform the duties agreed to in our management agreements could adversely affect our results of operations. In addition, our third-party managers or their affiliates manage hotels that compete with our hotels, which may result in conflicts of interest. As a result, our third-party managers may have in the past made, and may in the future make, decisions regarding competing lodging facilities that are not or would not be in our best interests.

Complying with REIT requirements may cause us to forgo attractive opportunities that could otherwise generate strong risk-adjusted returns and instead pursue less attractive opportunities, or none at all.

To continue to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature of our assets, the amounts we distribute to our stockholders and the ownership of our stock. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of generating strong risk-adjusted returns on invested capital for our stockholders.

Complying with REIT requirements may force us to liquidate otherwise attractive investments, which could result in an overall loss on our investments.

To continue to qualify as a REIT, we must also ensure that at the end of each calendar quarter at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, the REIT statutes provide a means to cure the exception. If we are unable to cure the exception we may be subject to an additional tax. As a result, we may be required to liquidate otherwise attractive investments.

We may become subject to a 100% excise tax if our TRSs pay us excessive rent.

The Internal Revenue Service, or IRS, could challenge the rents paid to us by our taxable REIT subsidiaries, or TRSs, as excessive, and a court could reach a similar conclusion. In either event, we could be taxed at 100% of the amount of rents determined to be excessive. There can be no assurance that we will not be subjected to that excise tax. If we are, and if the amount is material, our liquidity and ability to service our debt and pay dividends could be materially and adversely affected.

We own, and may acquire, interests in hotel joint ventures with third parties that expose us to some risk of additional liabilities or capital requirements.

Through our subsidiaries, we own interests in several real estate joint ventures. Our unconsolidated joint ventures owned 13 hotels, in which we had a $46.9 million aggregate investment at December 31, 2013. We include the lessee operations of 12 of these 13 hotels in our consolidated results of operations because we own majority interests in the lessees. All of our joint venture partners are unaffiliated with us. The joint ventures owned hotels that secured $146.4 million of non-recourse loans at December 31, 2013.

Our subsidiaries’ personal liability for existing non-recourse loans secured by our joint venture hotels is generally limited to guarantying the lender’s losses caused by misconduct, fraud or misappropriation of funds by the borrowers and other customary “bad boy” exceptions from the non-recourse covenants in the loans, (e.g., environmental liabilities). We may invest in other joint ventures in the future that own hotels and have recourse or non-recourse debt financing. If a joint venture defaults under a loan, the lender may accelerate the loan and demand payment in full before taking action to foreclose on the hotel. As a joint venturer, our subsidiary may be liable for claims asserted against the joint venture (including lenders’ claims for repayment), and the joint venture may have insufficient assets or insurance to cover the liability.

Our subsidiaries may be unable to control decisions unilaterally regarding these joint venture hotels. In addition, joint venture hotels may perform at levels below expectations, raising concerns about joint venture liquidity and solvency unless the joint venturers provide additional funds. In some cases, the joint venturers may elect to forgo additional capital contributions. We may be confronted with the choice of losing our investment or investing additional capital with no guaranty of any return on that investment.

Our charter limits ownership and transferring shares of our stock, which could adversely affect attempted transfers of our capital stock.

To maintain our status as a REIT, no more than 50% in value of our outstanding stock may be owned, actually or constructively, under the applicable tax rules, by five or fewer persons during the last half of any taxable year. Our charter prohibits, subject to some exceptions, any person from owning more than 9.9% of the number of outstanding shares of any class of our stock. Our charter also prohibits any transfer of our stock that would result in a violation of the 9.9% ownership limit, reduce the number of stockholders below 100 or otherwise result in our failure to qualify as a REIT. Any attempted transfer of shares in violation of the charter prohibitions is void, and the intended transferee acquires no right to those shares. We have the right to take any lawful action that we believe is necessary or advisable to ensure compliance with these ownership and transfer restrictions and to preserve our status as a REIT, including refusing to recognize any transfer of stock in violation of our charter.

Some provisions in our charter and bylaws and Maryland law make a takeover more difficult.

Ownership Limit. The ownership and transfer restrictions of our charter may have the effect of discouraging or preventing a third party from attempting to gain control of us without the approval of our board of directors. Accordingly, it is less likely that a change in control, even if beneficial to stockholders, could be effected without the approval of our board.

Staggered Board. Our charter provides that our board is divided into three classes. Directors in each class are elected for terms of three years. As a result, the ability of stockholders to effect a change in control of us through the election of new directors is limited by the inability of stockholders to elect a majority of our board at any particular meeting.

Authority to Issue Additional Shares. Under our charter, our board may issue up to an aggregate of 20 million shares of preferred stock without stockholder action. The preferred stock may be issued, in one or more series, with the preferences and other terms designated by our board that may delay or prevent a change in control of us, even if the change is in the best interests of stockholders. At December 31, 2013, we had outstanding 12,880,475 shares of our Series A preferred stock and 67,980 shares, represented by 6,798,000 depositary shares, of our Series C preferred stock.

Maryland Takeover Statutes. As a Maryland corporation, we are subject to various provisions under the Maryland General Corporation Law, including the Maryland Business Combination Act, that may have the effect of delaying or preventing a transaction or a change in control that might involve a premium price for the stock or otherwise be in the best interests of stockholders. Under the Maryland business combination statute, some “business combinations,” including some issuances of equity securities, between a Maryland corporation and an “interested stockholder,” which is any person who beneficially owns 10% or more of the voting power of the corporation’s shares, or an affiliate of that stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Any of these business combinations must be approved by a stockholder vote meeting two separate super majority requirements, unless, among other conditions, the corporation’s common stockholders receive a minimum price, as defined in the statute, for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its common shares. Our charter currently provides that the Maryland Control Share Acquisition Act will not apply to any of our existing or future stock. That statute may deny voting rights to shares involved in an acquisition of one-tenth or more of the voting stock of a Maryland corporation. To the extent these or other laws are applicable to us, they may have the effect of delaying or preventing a change in control of us even though beneficial to our stockholders.

Our directors may have interests that may conflict with our interests.

A director who has a conflict of interest with respect to an issue presented to our board will have no inherent legal obligation to abstain from voting upon that issue. We do not have provisions in our bylaws or charter that require an interested director to abstain from voting upon an issue, and we do not expect to add provisions in our charter and bylaws to this effect. Although each director has a duty of loyalty to us, there is a risk that, should an interested director vote upon an issue in which a director or one of his or her affiliates has an interest, his or her vote may reflect a bias that could be contrary to our best interests. In addition, even if an interested director abstains from voting, that director’s participation in the meeting and discussion of an issue in which they have, or companies with which he or she is associated have, an interest could influence the votes of other directors regarding the issue.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We own a diversified portfolio of hotels managed by Hilton, Starwood, Marriott, Fairmont, Morgans, Wyndham, Intercontinental Hotels Group and one independent management company. Our hotels are high-quality lodging properties with respect to desirability of location, size, facilities, physical condition, quality and variety of services offered in the markets in which they are located. Our hotels are designed to appeal to a broad range of hotel customers, including frequent business travelers, groups and conventions, as well as leisure travelers. They generally feature comfortable, modern guest rooms, meeting facilities and full-service restaurant and catering facilities. At December 31, 2013, our Consolidated Hotels were located in the United States (58 hotels in 21 states) and Canada (one hotel in Ontario), with concentrations in major gateway cities and resort areas. Our hotels average 295 rooms. The following table sets forth the distribution of our 59 Consolidated Hotels at December 31, 2013.



Brand	Hotels	Rooms	2013 Hotel Operating Revenue (in thousands)		2013 Hotel EBITDA^(a) (in thousands)
Embassy Suites Hotels	18	4,982	$	255,744	$	81,074
Wyndham and Wyndham Grand^(b)	8	2,526	103,931		35,050
Renaissance and Marriott	3	1,321	119,838		21,344
DoubleTree by Hilton and Hilton	3	802	41,106		12,623
Sheraton and Westin	2	673	37,996		10,176
Fairmont	1	383	49,104		7,846
Holiday Inn	2	968	46,403		6,406
Morgans and Royalton	2	285	34,340		3,514
Core hotels	39	11,940	688,462		178,033
Non-strategic hotels	20	5,472	201,544		51,479
Same-store hotels	59	17,412	$	890,006	$	229,512
Market
San Francisco area	5	1,903	$	124,825	$	31,592
Boston	3	916	76,510		17,796
South Florida	3	923	50,011		14,307
Los Angeles area	2	481	23,760		10,452
Myrtle Beach	2	640	37,955		10,121
Tampa	1	361	46,423		7,436
New York area	3	546	48,045		6,762
Philadelphia	2	728	34,271		7,568
Austin	1	188	13,126		5,681
Atlanta	1	316	14,016		5,491
Other markets	16	4,938	219,520		60,827
Core hotels	39	11,940	688,462		178,033
Non-strategic hotels	20	5,472	201,544		51,479
Same-store hotels	59	17,412	$	890,006	$	229,512
Location
Urban	17	5,308	$	323,304	$	81,361
Resort	9	2,733	185,264		41,300
Airport	8	2,621	122,734		37,369
Suburban	5	1,278	57,160		18,003
Core hotels	39	11,940	688,462		178,033
Non-strategic hotels	20	5,472	201,544		51,479
Same-store hotels	59	17,412	$	890,006	$	229,512


(a)	Hotel EBITDA is a non-GAAP financial measure. A detailed reconciliation and further discussion of Hotel EBITDA is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report.


(b)	These hotels converted brand and management from Holiday Inn on March 1, 2013.

We are committed to maintaining high quality standards at our hotels. In 2008, we completed the last phase of a multi-year, portfolio-wide renovation program costing more than $450 million. The program was designed to upgrade, modernize and renovate all of our hotels to enhance or maintain their competitive position. For 2013, we spent $101.4 million on capital expenditures, including renovations and redevelopments, on our operating hotels. We also spent 5.1% of our consolidated hotel revenue on maintenance and repair expense.

Hotel Operating Statistics

The following tables set forth 2013 and 2012 occupancy, ADR and RevPAR and the year over year percentage changes to those statistics for our 59 Consolidated Hotels.

Hotel Operating Statistics by Brand



	Occupancy (%)
	Year Ended December 31,
	2013	2012	%Variance
Embassy Suites Hotels	76.7	75.3	1.9
Renaissance and Marriott	70.2	69.0	1.7
Doubletree by Hilton and Hilton	68.3	67.5	1.2
Sheraton and Westin	68.0	65.6	3.6
Fairmont	74.2	63.5	16.8
Holiday Inn	78.0	72.8	7.2
Morgans and Royalton	87.6	83.7	4.7
Comparable core hotels (31)	74.8	72.6	3.1
Non-strategic hotels (20)	72.0	70.2	2.6
Comparable hotels (51)	73.8	71.7	2.9
Wyndham and Wyndham Grand^(a)	65.7	76.1	(13.7	)
Same-store hotels (59)	72.6	72.3	0.4
	ADR ($)
	Year Ended December 31,
	2013	2012	%Variance
Embassy Suites Hotels	153.17	147.46	3.9
Renaissance and Marriott	209.58	192.43	8.9
DoubleTree by Hilton and Hilton	148.99	140.79	5.8
Sheraton and Westin	145.71	143.07	1.8
Fairmont	285.06	282.00	1.1
Holiday Inn	144.29	133.78	7.9
Morgans and Royalton	315.50	308.14	2.4
Comparable core hotels (31)	169.91	161.56	5.2
Non-strategic hotels (20)	116.46	114.96	1.3
Comparable hotels (51)	150.75	144.78	4.1
Wyndham and Wyndham Grand^(a)	144.37	145.80	(1.0	)
Same-store hotels (59)	149.92	144.94	3.4
	RevPAR ($)
	Year Ended December 31,
	2013	2012	%Variance
Embassy Suites Hotels	117.55	111.08	5.8
Renaissance and Marriott	147.11	132.76	10.8
DoubleTree by Hilton and Hilton	101.71	94.97	7.1
Sheraton and Westin	99.09	93.92	5.5
Fairmont	211.41	179.11	18.0
Holiday Inn	112.52	97.35	15.6
Morgans and Royalton	276.27	257.83	7.2
Comparable core hotels (31)	127.13	117.26	8.4
Non-strategic hotels (20)	83.82	80.67	3.9
Comparable hotels (51)	111.22	103.80	7.1
Wyndham and Wyndham Grand^(a)	94.79	110.98	(14.6	)
Same-store hotels (59)	108.83	104.84	3.8

(a) These hotels were converted from Holiday Inn (brand and management) on March 1, 2013.

Hotel Operating Statistics by Market for Comparable Core Hotels



	Occupancy (%)
	Year Ended December 31,
	2013	2012	%Variance
San Francisco area	81.4	79.4	2.5
Boston	73.5	66.2	11.1
South Florida	81.4	77.4	5.1
Los Angeles area	82.2	79.7	3.2
Myrtle Beach	62.3	59.7	4.3
Tampa	80.5	81.0	(0.7	)
New York area	83.2	81.4	2.2
Philadelphia	66.3	61.9	7.0
Austin	78.9	75.5	4.6
Atlanta	75.4	77.7	(3.0	)
Other markets	69.6	68.3	1.9
Comparable core hotels (31)	74.8	72.6	3.1
	ADR ($)
	Year Ended December 31,
	2013	2012	%Variance
San Francisco area	187.91	169.89	10.6
Boston	234.97	227.10	3.5
South Florida	147.49	145.67	1.2
Los Angeles area	136.89	132.45	3.3
Myrtle Beach	147.36	145.27	1.4
Tampa	183.55	174.57	5.1
New York area	250.72	242.16	3.5
Philadelphia	166.52	163.91	1.6
Austin	200.90	185.35	8.4
Atlanta	140.41	135.12	3.9
Other markets	143.47	138.62	3.5
Comparable core hotels (31)	169.91	161.56	5.2
	RevPAR ($)
	Year Ended December 31,
	2013	2012	%Variance
San Francisco area	152.91	134.84	13.4
Boston	172.68	150.25	14.9
South Florida	120.00	112.77	6.4
Los Angeles area	112.54	105.55	6.6
Myrtle Beach	91.75	86.70	5.8
Tampa	147.71	141.44	4.4
New York area	208.57	197.14	5.8
Philadelphia	110.32	101.51	8.7
Austin	158.59	139.92	13.3
Atlanta	105.87	105.01	0.8
Other markets	99.88	94.66	5.5
Comparable core hotels (31)	127.13	117.26	8.4

Hotel Portfolio

The following table sets forth certain descriptive information regarding our hotels at December 31, 2013.



Core Hotels	Brand	State	Rooms	% Owned		^(a)
Birmingham	Embassy Suites Hotel	AL	242
Phoenix – Biltmore	Embassy Suites Hotel	AZ	232
Indian Wells – Esmeralda Resort & Spa	Renaissance	CA	560
Los Angeles – International Airport/South	Embassy Suites Hotel	CA	349
Mandalay Beach – Hotel & Resort	Embassy Suites Hotel	CA	250
Milpitas – Silicon Valley	Embassy Suites Hotel	CA	266
Napa Valley	Embassy Suites Hotel	CA	205
San Diego Bayside	Wyndham	CA	600
San Francisco – Airport/Waterfront	Embassy Suites Hotel	CA	340
San Francisco – Airport/South San Francisco	Embassy Suites Hotel	CA	312
San Francisco – Fisherman’s Wharf	Holiday Inn	CA	585
San Francisco – Union Square	Marriott	CA	400
Santa Monica	Wyndham	CA	132
Deerfield Beach – Resort & Spa	Embassy Suites Hotel	FL	244
Ft. Lauderdale – 17th Street	Embassy Suites Hotel	FL	361
Miami – International Airport	Embassy Suites Hotel	FL	318
Orlando – International Drive South/Convention	Embassy Suites Hotel	FL	244
Orlando – Walt Disney World Resort	DoubleTree Suites by Hilton	FL	229
St. Petersburg – Vinoy Resort & Golf Club	Renaissance	FL	361
Atlanta – Buckhead	Embassy Suites Hotel	GA	316
New Orleans – French Quarter	Wyndham	LA	374
Boston – at Beacon Hill	Wyndham	MA	304
Boston – Copley Plaza	Fairmont	MA	383
Boston – Marlborough	Embassy Suites Hotel	MA	229
Minneapolis – Airport	Embassy Suites Hotel	MN	310
Secaucus – Meadowlands	Embassy Suites Hotel	NJ	261	50	%
New York – Morgans	Independent	NY	117
New York – Royalton	Independent	NY	168
Philadelphia – Historic District	Wyndham	PA	364
Philadelphia – Society Hill	Sheraton	PA	364
Pittsburgh – at University Center (Oakland)	Wyndham	PA	251
Charleston – The Mills House	Wyndham Grand	SC	214
Myrtle Beach – Oceanfront Resort	Embassy Suites Hotel	SC	255
Myrtle Beach Resort	Hilton	SC	385
Nashville – Opryland – Airport (Briley Parkway)	Holiday Inn	TN	383

Hotel Portfolio Listing (continued)



Core Hotels	Brand	State	Rooms	% Owned		^(a)
Austin	DoubleTree Suites by Hilton	TX	188	90	%
Dallas – Love Field	Embassy Suites Hotel	TX	248
Houston – Medical Center	Wyndham	TX	287
Burlington Hotel & Conference Center	Sheraton	VT	309

Non-strategic Hotels
Dana Point – Doheny Beach	DoubleTree Suites by Hilton	CA	196
San Rafael – Marin County	Embassy Suites Hotel	CA	235	50	%
Orlando – International Airport	Holiday Inn	FL	288
Atlanta – Gateway – Atlanta Airport	Sheraton	GA	395
Atlanta – Perimeter Center	Embassy Suites Hotel	GA	241	50	%
Chicago – Lombard/Oak Brook	Embassy Suites Hotel	IL	262	50	%
Indianapolis – North	Embassy Suites Hotel	IN	221	82	%
Kansas City – Overland Park	Embassy Suites Hotel	KS	199	50	%
Baltimore – at BWI Airport	Embassy Suites Hotel	MD	251	90	%
Bloomington	Embassy Suites Hotel	MN	218
Kansas City – Plaza	Embassy Suites Hotel	MO	266	50	%
Charlotte	Embassy Suites Hotel	NC	274	50	%
Charlotte – SouthPark	DoubleTree Suites by Hilton	NC	208
Raleigh – Crabtree	Embassy Suites Hotel	NC	225	50	%
Parsippany	Embassy Suites Hotel	NJ	274	50	%
Toronto – International Airport	Holiday Inn	Ontario	446
Austin – Central	Embassy Suites Hotel	TX	260	50	%
Dallas – Park Central	Westin	TX	536	60	%
San Antonio – International Airport	Embassy Suites Hotel	TX	261	50	%
San Antonio – NW I-10	Embassy Suites Hotel	TX	216	50	%

Non-strategic Hotel Held for Sale (included in discontinued operations)
Atlanta – Airport^(b)	Embassy Suites Hotel	GA	232

Unconsolidated Hotel
New Orleans – French Quarter – Chateau LeMoyne	Holiday Inn	LA	171	50	%

Hotel under Development
New York – Knickerbocker	Independent	NY	330	95	%


(a)	We own 100% of the real estate interests unless otherwise noted.


(b)	This hotel was sold in January 2014.

Management Agreements

At December 31, 2013, of our 59 Consolidated Hotels, (i) Hilton subsidiaries managed 36 hotels, (ii) IHG subsidiaries managed four hotels, (iii) Wyndham managed eight hotels, (iv) Starwood subsidiaries managed four hotels, (v) Marriott subsidiaries managed three hotels, (vi) a Fairmont subsidiary managed one hotel, (vii) a subsidiary of Morgans managed two hotels, and (viii) an independent management company managed one hotel.

The management agreements relating to 27 Consolidated Hotels contain the right and license to operate the hotels under specified brands. No separate franchise agreements exist, and no separate franchise fee is required, for these hotels. These hotels are managed by (i) Wyndham, under the Wyndham brand, (ii) IHG, under the Holiday Inn brand, (iii) Starwood, under the Sheraton and Westin brands, (iv) Hilton, under the Doubletree and Hilton brands, (v) Marriott, under the Renaissance and Marriott brands, (vi) Fairmont, under the Fairmont brand, and (vii) Morgans.

Management Fees. Minimum base management fees generally range from 1 to 3% of total revenue, with the exception of our IHG-managed hotels, where base management fees are 2% of total revenue plus 5% of room revenue. The performance of our Wyndham-managed hotels is subject to a $100 million guaranty from Wyndham Worldwide Corporation over the initial 10-year term (which can be extended for an additional five years), with an annual performance guaranty of up to $21.5 million, which ensures minimum annual NOI for those hotels.

Most of our management agreements also provide for incentive management fees that are subordinated to our return on investment. Incentive management fees are generally capped at 2 to 3% of total revenue, except that incentive management fees payable to Wyndham and Marriott are not limited.

We paid the following management fees (in thousands) with respect to our Consolidated Hotels during each of the past three years:



	Year Ended December 31,
	2013		2012		2011
Base fees	$	19,527	$	24,699	$	23,266
Incentive fees	2,667		2,265		1,818
Total management fees	$	22,194	$	26,964	$	25,084

The Wyndham management agreements were effective on March 1, 2013. Wyndham’s guaranty of a minimum level of net operating income has reduced Wyndham’s contractual management fees during 2013, which more than offset increases in managements fees resulting from higher revenues.

Term and Termination. The management agreements with Wyndham terminate in 2022 but may be extended by Wyndham subject to certain conditions. The management agreements with IHG terminate in 2018 for one hotel and 2025 for three hotels. The management agreements with Marriott terminate in 2026 for our Renaissance hotels and 2029 for our Marriott hotel, and these agreements may be extended to 2056 and 2039, respectively, at Marriott’s option. The management agreement with Fairmont terminates in 2030 and may be extended to 2040 and 2050 at Fairmont’s option. The management agreements with Morgans terminate in 2026 and may be extended to 2036 at Morgans’s option. The management agreements with our other managers generally have initial terms of between five and 20 years, and these agreements are generally renewable beyond the initial term only upon the mutual written agreement of the parties. The management agreements covering our 59 Consolidated Hotels expire after 2013, subject to any renewal rights, as follows:



	Number of Management Agreements Expiring
Manager	2014	2015	Thereafter
Hilton	2	4	30
IHG	—	—	4
Wyndham	—	—	8
Starwood	—	—	4
Marriott	—	—	3
Morgans	—	—	2
Fairmont	—	—	1
Other	—	1	—
Total	2	5	52

Management agreements are generally terminable upon the occurrence of customary events of default or if the subject hotel fails to meet certain performance hurdles. Upon termination for any reason, we are generally required to pay all amounts due and owing under the management agreement through the effective date of termination. If an agreement is terminated as a result of our default, or by us other than for cause, we may also be liable for damages suffered by the manager.

Assignment. Generally, neither party to a management agreement may sell, assign or transfer the agreement to an unaffiliated third party without the prior written consent of the other party, which consent shall not be unreasonably withheld. A change in control of FelCor will require manager or franchisor consent under most of our management and franchise agreements.

Franchise Agreements

Thirty-two of our Consolidated Hotels operate under franchise or license agreements with Embassy Suites that are separate from our management agreements.

Our Embassy Suites franchise agreements grant us the right to the use of the Embassy Suites Hotels name, system and marks with respect to specified hotels and establish various management, operational, record-keeping, accounting, reporting and marketing standards and procedures with which the licensed hotel must comply. In addition, the franchisor establishes requirements for the quality and condition of the hotel and its furniture, fixtures and equipment, and we are obligated to expend such funds as may be required to maintain the hotel in compliance with those requirements. Typically, our Embassy Suites franchise agreements provide for a license fee, or royalty, of 4% to 5% of room revenues. In addition, we pay approximately 3.5% to 4% of room revenues as marketing and reservation system contributions for the systemwide benefit of Embassy Suites Hotels. We incurred marketing and reservation systems fees of $12.7 million, $12.3 million and $10.7 million in 2013, 2012 and 2011, respectively. We incurred license fees with respect to our Consolidated Hotels operated as Embassy Suites of $13.4 million, $12.8 million and $12.3 million in 2013, 2012 and 2011, respectively.

Our typical Embassy Suites franchises extend 10 to 20 years. The agreements provide no renewal or extension rights and are not assignable. If we breach a franchise agreement, we may lose the right to use the Embassy Suites name for the applicable hotel and be liable, under certain circumstances, for liquidated damages (generally equal to the fees paid to the franchisor with respect to that hotel during the three immediately preceding years). Of our Embassy Suites franchise agreements, one expires in 2014, four expire in 2015, and the remainder expire later.

Item 3. Legal Proceedings

At December 31, 2013, no litigation was 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 that otherwise are not considered to be material. Furthermore, most of these ordinary course of business 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.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange under the symbol “FCH.” The following table sets forth the high and low sale prices for our common stock for the indicated periods, as traded on that exchange, and dividends declared per share.



	High		Low		Dividends Declared Per Share
2013
First quarter	$	6.03	$	4.71	$	—
Second quarter	6.47		5.38		—
Third quarter	6.33		5.49		—
Fourth quarter	8.23		5.83		0.02

2012
First quarter	$	4.44	$	3.00	$	—
Second quarter	4.75		3.59		—
Third quarter	5.43		4.35		—
Fourth quarter	4.82		3.90		—

Stockholder Information

At February 21, 2014, we had approximately 167 record holders of our common stock and 22 record holders of our Series A preferred stock (which is convertible into common stock). However, because many of the shares of our common stock and Series A preferred stock are held by brokers and other institutions on behalf of stockholders, we believe there are substantially more beneficial holders of our common stock and Series A preferred stock than record holders. At February 21, 2014, there were 23 holders (other than FelCor) of FelCor LP units. FelCor LP units are redeemable for cash, or, at our election, for shares of FelCor common stock.

IN ORDER TO COMPLY WITH CERTAIN REQUIREMENTS RELATED TO OUR QUALIFICATION AS A REIT, OUR CHARTER LIMITS, SUBJECT TO CERTAIN EXCEPTIONS, THE NUMBER OF SHARES OF ANY CLASS OR SERIES OF OUR CAPITAL STOCK THAT MAY BE OWNED BY ANY SINGLE PERSON OR AFFILIATED GROUP TO 9.9% OF THE OUTSTANDING SHARES OF THAT CLASS OR SERIES.

Distribution Information

In order to maintain our qualification as a REIT, we must make annual distributions to our stockholders of at least 90% of our taxable income (other than net capital gains). We had no taxable income and made no common distributions for 2012 and 2013. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet REIT distribution requirements. In that event, we expect to borrow funds or sell assets for cash to the extent necessary to obtain cash sufficient to make the distributions required to retain our qualification as a REIT for federal income tax purposes.

Our senior notes indentures limit our ability to pay dividends and make other payments based on our ability to satisfy certain financial requirements (except as necessary to retain REIT status). The terms of our outstanding preferred stock prohibit us from paying dividends on our common stock unless all accrued preferred dividends then payable have been paid. None of these restrictions prevent us from paying dividends under current circumstances. We discuss these limitations further in “Liquidity and Capital Resources” in Item 7 and “Risk Factors” in Item 1A.

Equity Compensation Plan Information

The following table sets forth, as of December 31, 2013, information concerning our equity compensation plan, including the number of shares to be issued upon exercise of outstanding options, warrants and rights; weighted average exercise price of outstanding options, warrants and rights; and the number of securities remaining available for future issuance.

Equity Compensation Plan Information



Plan category	Number of shares to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of shares remaining available for future issuance
Equity compensation plan approved by security holders	1,250,000	$	—	2,073,587

Item 6. Selected Financial Data

The following tables set forth selected financial data derived from our audited consolidated financial statements and the related notes. This data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and our audited consolidated financial statements and the related notes.

SELECTED FINANCIAL DATA

(in millions, except per share/unit data)



	Year Ended December 31,
	2013			2012			2011			2010			2009
Statement of Operations Data:^(a)
Total revenues	$	893		$	862		$	808		$	730		$	683
Loss from continuing operations^(b)	(84		)	(187		)	(134		)	(100		)	(89		)

Diluted earnings per share/unit:
FelCor - loss from continuing operations	$	(0.95	)	$	(1.81	)	$	(1.46	)	$	(1.70	)	$	(2.01	)
FelCor LP - loss from continuing operations	(0.95		)	(1.81		)	(1.46		)	(1.70		)	(2.01		)

Other Data:
Cash distributions declared per common share/unit^(c)	$	0.02		$	—		$	—		$	—		$	—
Adjusted FFO per share/unit^(d)	$	0.39		$	0.23		$	0.14		$	(0.09	)	$	0.39
Adjusted EBITDA^(d)	200			203			203			188			179
Cash flows provided by operating activities	68			47			46			59			73

Balance Sheet Data (at end of period):
Total assets	$	2,144		$	2,202		$	2,403		$	2,359		$	2,626
Total debt, net of discount	1,663			1,631			1,596			1,548			1,773
FelCor’s redeemable noncontrolling interests in FelCor LP, at redemption value	5			3			3			2			1


(a)	Hotels that we no longer own are included in discontinued operations.


(b)	We include the following amounts in loss from continuing operations (in millions):



	Year Ended December 31,
	2013			2012			2011			2010			2009
Impairment loss	$	(24	)	$	—		$	(4	)	$	(41	)	$	—
Impairment loss on unconsolidated hotels	—			—			—			—			(2		)
Hurricane loss	—			(1		)	—			—			—
Debt extinguishment	—			(72		)	(28		)	45			(2		)
Conversion expenses	(1		)	(31		)	—			—			—
Pre-opening expenses	(2		)	—			—			—			—
Severance expenses	(3		)	(1		)	—			—			—

(c)


(d)	We include a more detailed description and computation of Adjusted FFO per share and Adjusted EBITDA in “Non-GAAP Financial Measures,” which is found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Strong demand and tepid supply growth has created a favorable dynamic to improve average daily rate, or ADR, driving 2013 growth in revenue per available room, or RevPAR. In 2013, our RevPAR improved 3.8%, compared to the prior year, and ADR grew 3.4%, while occupancy increased 30 basis points as we continued to remix our customer base in favor of higher-rated segments. The RevPAR for our 51 comparable hotels (our Consolidated Hotels excluding the Wyndham portfolio) increased 7.1% in 2013 compared to the same period last year. Sustained ADR growth has allowed our hotels to improve Hotel EBITDA margins (up 99 basis points, compared to the prior year).

We have made continued progress toward achieving our strategic objectives:


•	Since December 2010, we have sold 25 hotels (including 5 hotels sold in 2013 and one sold in January 2014), for total gross proceeds of $549 million (our pro rata share was $504 million).

•

The eight Wyndham hotels were successfully rebranded from Holiday Inn to Wyndham on March 1, 2013. RevPAR for the Wyndham portfolio declined 14.6% in 2013 compared to the same period last year, which reflects the impact of transitioning brands and management companies, particularly related renovations. Revenues at these hotels should improve meaningfully as transition-related disruption subsides. As previously disclosed, Wyndham Worldwide Corporation has provided a 10-year $100 million performance guaranty (which can be extended for an additional five years), including an annual performance guaranty of up to $21.5 million, that ensures minimum annual NOI for the eight hotels through the term of the management agreements.

•

In 2013, we spent $101.4 million on capital expenditures, primarily for renovation and redevelopment of our hotels. During this time, we redeveloped Morgans by adding three new guest rooms, building a brand new fitness facility, relocating the lounge and reconcepting the food and beverage areas. We also completed significant renovations at four of our Wyndham properties. Of the remaining four Wyndham properties, two were recently renovated in 2012, and the remaining two will be renovated in 2014.

•


•	Our Knickerbocker Hotel venture raised $45 million through the sale of 3.5% preferred equity under the EB-5 immigrant investor program. The venture received $40 million in proceeds in February 2014, and the remaining $5 million will be received as investors’ visas are approved by the government. We are using our 95% share of the proceeds to repay borrowings under our line of credit.

Financial Comparison (Hotel EBITDA and Loss from continuing operations, in millions)



	Year Ended December 31,
	2013			2012			% Change 2013-12		2011			% Change 2012-11
RevPAR^(a)	$	108.83		$	104.84		3.8	%	$	99.54		5.3	%
Hotel EBITDA^(a)(b)	230			213			7.7	%	199			7.2	%
Hotel EBITDA margin^(a)(b)	25.8		%	24.8		%	4.0	%	24.3		%	2.0	%
Loss from continuing operations^(c)	(84		)	(187		)	55.3	%	(134		)	(40.2	)%


(a)	All years presented are for our 59 same-store Consolidated Hotels.


(b)	Hotel EBITDA and Hotel EBITDA margin are non-GAAP financial measures. A discussion of the use, limitations and importance of these non-GAAP financial measures and detailed reconciliations to the most comparable GAAP measure are found below in “Non-GAAP Financial Measures.”


(c)	We included the following amounts in loss from continuing operations (in millions):



	Year Ended December 31,
	2013		2012		2011
Impairment loss	(24	)	—		(4	)
Hurricane loss	—		(1	)	—
Debt extinguishment	—		(72	)	(28	)
Conversion expenses	(1	)	(31	)	—
Pre-opening expenses	(2	)	—		—
Severance expenses	(3	)	(1	)	—

Results of Operations

Comparison of the Years Ended December 31, 2013 and 2012

For the year ended December 31, 2013, we recorded a $65.8 million net loss compared to a $129.4 million net loss in 2012. Our 2013 net loss included $28.8 million of impairment charges (including $4.4 million in discontinued operations), offset by a $19.4 million net gain on sale of hotels included in discontinued operations (primarily from the sale of five hotels). Our 2012 net loss included $31.2 million of conversion costs related to re-branding and re-positioning eight hotels, a $75.1 million loss from the extinguishment of debt (including $2.8 million in discontinued operations), $1.3 million in hurricane-related charges (including $478,000 in discontinued operations), and $1.3 million of impairment charges included in discontinued operations. These 2012 charges were partially offset by a $54.5 million net gain on sale of hotels included in discontinued operations.

In 2013:


•	Total revenue was $893.4 million, 3.6% more than 2012. The increase was driven by 3.8% same-store RevPAR growth, reflecting a 3.4% increase in ADR and a 30 basis point increase in occupancy.


•	Hotel departmental expenses increased $11.0 million. As a percentage of total revenue, hotel departmental expenses decreased slightly from 36.7% in 2012 to 36.6% in 2013.


•	Other property-related costs increased $6.2 million. As a percentage of total revenue, other property-related costs decreased from 26.9% in 2012 to 26.7% in 2013. This improvement primarily reflects revenue increases driven by ADR, rather than occupancy.

•

Management and franchise fees decreased $4.1 million. As a percentage of total revenue, these costs decreased from 4.6% in 2012 to 4.0% in 2013. We converted eight hotels to Wyndham brands and management on March 1, 2013. Wyndham earns lower management fees than the prior management company. In addition, Wyndham’s guaranty of a minimum level of net operating income reduced Wyndham’s management fees in 2013. These arrangements with Wyndham more than offset increases in fees resulting from higher revenue.

•

Taxes, insurance and lease expense increased $4.0 million and increased slightly as a percentage of total revenue from 10.7% in 2012 to 10.8% in 2013. The increase in expense reflects higher percentage lease expense (computed as a percentage of hotel revenues in excess of base rent; as revenue increases, percentage rent increases at a faster rate than other expenses), higher property taxes (in 2012 we achieved significant reductions after appeals), and higher general liability insurance (due to a more favorable claims experience in 2012).


•	Corporate expenses increased $868,000 and remained relatively flat as a percentage of total revenue compared to 2012. This increase primarily reflects additional fixed and variable stock compensation expense associated with our incentive compensation awards.


•	Depreciation and amortization expense increased $3.2 million, primarily reflecting additional depreciation after investing $101.4 million in our hotels in 2013 and $121.5 million in 2012.


•	Impairment loss. For the year ended December 31, 2013, we recorded $24.4 million of impairment charges for two hotels included in continuing operations after we reduced their estimated hold periods. No impairment charges were included in continuing operations for 2012.


•	Conversion expenses. We classified expenses related to converting eight Holiday Inn hotels to Wyndham brands and management as conversion expense in 2013 and 2012. The expenses incurred in 2012 include $30.7 million of termination fees related to terminating the management agreements with IHG.


•	Other expenses increased $4.1 million compared to 2012, primarily related to severance costs for certain employees and pre-opening costs for the Knickerbocker Hotel, which were partially offset by non-recurring hurricane-related charges incurred in 2012.


•	Net interest expense decreased $17.8 million, primarily reflecting our lower average interest rate. Lower interest rates in 2013 were partially offset by an increase in average debt for the year, as well as less capitalized interest attributable to renovation and redevelopment projects.

•

Debt extinguishment. For the year ended December 31, 2013, we had no debt extinguishment charges in continuing operations, while continuing operations for 2012 included $72.4 million in debt extinguishment charges. These charges included $17.4 million of prepayment penalties and the write-off of deferred loan costs recorded when we repaid $315.1 million of loans secured by properties in continuing operations. In addition, when we redeemed $258.0 million of our 10% senior notes, we recognized a $55.0 million debt extinguishment charge for prepayment penalties, as well as a pro rata portion of the original issue discount and deferred loan costs.

•

Discontinued operations include the results of operations for one hotel designated as held for sale at December 31, 2013, five hotels sold in 2013, and ten hotels sold in 2012. Discontinued operations in 2013 included a $19.4 million net gain on sale (primarily related to the sale of five hotels), offset by a$4.4 million impairment charge for one hotel sold in 2013 and one hotel designated as held for sale at December 31, 2013. Discontinued operations in 2012 included a $54.5 million net gain on the sale of hotels, offset by $2.8 million in debt extinguishment charges and a $1.3 million impairment charge.

Comparison of the Years Ended December 31, 2012 and 2011

For the year ended December 31, 2012, we recorded a $129.4 million net loss compared to a $130.9 million net loss in 2011. Our 2012 net loss included $31.2 million of conversion costs related to re-branding and re-positioning eight hotels, a $75.1 million loss from the extinguishment of debt (including $2.8 million in discontinued operations), $1.3 million in hurricane-related charges (including $478,000 in discontinued operations), and $1.3 million of impairment charges included in discontinued operations. These losses are partially offset by $54.5 million of net gains from hotel dispositions included in discontinued operations. Our 2011 net loss included $13.2 million of impairment charges (including $8.9 million in discontinued operations) and $24.3 million of net losses from debt extinguishment ($27.6 million in continuing operations offset by a $3.3 million gain on debt extinguishment in discontinued operations), partially offset by $4.7 million of net gains from hotel dispositions included in discontinued operations.

In 2012:

•

Total revenue was $862.1 million, 6.6% more than 2011. This increase was primarily driven by a 5.3% increase in same-store RevPAR reflecting a 6.1% increase in ADR (partially offset by a 51 basis point decrease in occupancy), as well as $11.5 million in incremental revenue from Royalton and Morgans, acquired in May 2011. Several of our core hotels were under significant renovation or redevelopment during 2012.


•	Hotel departmental expenses increased $18.8 million (including $6.8 million of incremental hotel departmental expenses at Royalton and Morgans). As a percentage of total revenue, hotel departmental expenses decreased slightly from 36.8% in 2011 to 36.7% in 2012. Margin improvement from ADR was offset, in part, by decreasing food and beverage margins.

•

Other property-related costs increased $11.0 million due to a combination of higher costs (such as marketing programs) and $3.5 million of incremental other property-related costs at Royalton and Morgans. As a percentage of total revenue, other property-related costs decreased from 27.3% to 26.9% compared to 2011. This improvement primarily reflects revenue increases driven by ADR as opposed to occupancy.


•	Management and franchise fees increased $2.4 million compared to 2011, primarily reflecting higher revenues (which serve as the basis for determining such fees). As a percentage of total revenue, these costs remained essentially unchanged from the same period in 2011.


•	Taxes, insurance and lease expense increased $9.0 million (including $999,000 of incremental taxes, insurance, and lease expenses at Royalton and Morgans) and increased as a percentage of total revenue from 10.3% to 10.7% compared to 2011. The higher percentage of revenue reflects more favorable liability claims in 2011 in addition to lower estimated Canadian taxes in 2011.

•

Corporate expenses decreased $3.0 million (decreasing as a percentage of total revenue from 3.6% to 3.0%), which reflects: (i) lower restricted stock amortization in 2012, as a significant amount of restricted stock vested in 2011, and (ii) lower payroll tax withholding with respect to restricted cash awards, which were lower in 2012 than in 2011. We recognize payroll tax withholding on these awards as an expense when awarded rather than amortizing that expense over the three-year vesting periods (as is the case with the remainder of the awards).


•	Depreciation and amortization expense increased $5.9 million compared to 2011, including $1.3 million of incremental depreciation expense related to Royalton and Morgans. The remainder of the increase primarily reflects depreciation associated with hotel capital expenditures of $89.0 million in 2011 and $121.5 million in 2012.


•	Impairment loss. In 2012, no impairment charges were included in continuing operations, while 2011 continuing operations included a $4.3 million charge for one hotel. That charge was based on a revised estimated fair value obtained through the marketing process that was lower than the net book value for that hotel.


•	Conversion expenses. In the fourth quarter of 2012, we decided to convert eight Holiday Inn hotels to the Wyndham brand and management effective March 1, 2013. The expenses incurred related to converting these hotels were classified as conversion expenses in our statements of operations and include $30.7 million of IHG termination fees for the year ended December 31, 2012.


•	Other expenses increased $609,000 compared to 2011 because of 2012 hurricane-related charges and other expenses, partially offset by lower acquisition costs.


•	Net interest expense decreased $4.5 million compared to 2011, which primarily reflects increased capitalized interest related to the Knickerbocker Hotel development partially offset by an increase in our average effective interest rate.

•

Debt extinguishment charges in continuing operatons during the year ended December 31, 2012 were $72.4 million. These charges include $17.4 million of prepayment penalties and the write-off of deferred loan costs primarily related to repaying $315.1 million in mortgage debt secured by properties in continuing operations. In addition, we redeemed $258.0 million of our 10% senior notes and recognized a $55.0 million debt extinguishment charge related to prepayment penalties, as well as a pro rata portion of the original issue discount and deferred loan costs. During the year ended December 31, 2011, we redeemed $144.0 million of our 10% senior notes and recognized a $27.4 million debt extinguishment charge related to prepayment penalties, and the write-off of a pro rata portion of the original issue discount and deferred loan costs.

•

Discontinued operations include the results of operations for one hotel designated as held for sale at December 31, 2013, five hotels sold in 2013, ten hotels sold in 2012, and eight hotels sold in 2011. Discontinued operations in 2012 included a $54.5 million net gain on the sale of hotels, offset by $2.8 million in debt extinguishment charges and a $1.3 million impairment charge. Discontinued operations in 2011 reflects a $4.7 million net gain on the sale of hotels, $3.3 million in net gains from debt extinguishment and $8.9 million in impairment charges.

Non-GAAP Financial Measures

We refer in this Annual Report to certain “non-GAAP financial measures.” These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles, or GAAP. The following tables reconcile these non-GAAP measures to FelCor’s most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and of the limitations upon such measures.

The following tables detail our computation of FFO and Adjusted FFO (in thousands, except for per share data):

Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)



	Year Ended December 31,
	2013								2012							2011
	Dollars			Shares		Per Share Amount			Dollars			Shares	Per Share Amount			Dollars			Shares	Per Share Amount
Net loss	$	(65,783	)						$	(129,414	)					$	(130,895	)
Noncontrolling interests	4,279								1,407							1,041
Preferred dividends	(38,713		)						(38,713		)					(38,713		)
Numerator for basic and diluted loss attributable to common stockholders	(100,217		)	123,818	123,648	$	(0.81	)	(166,720		)	123,634	$	(1.35	)	(168,567		)	117,068	$	(1.44	)
Depreciation and amortization	119,624			—		0.97			116,384			—	0.94			110,498			—	0.94
Depreciation, discontinued operations and unconsolidated entities	15,996			—		0.13			24,216			—	0.20			40,870			—	0.35
Gain on involuntary conversion, net of noncontrolling interests in other partnerships	(37		)	—		—			—			—	—			(295		)	—	—
Loss (gain) on involuntary conversion, discontinued operations, net of noncontrolling interests in other partnerships	(59		)	—		—			—			—	—			15			—	—
Impairment loss, net of noncontrolling interests in other partnerships	20,382			—		0.16			—			—	—			4,315			—	0.04
Impairment loss, discontinued operations	4,354			—		0.04			1,335			—	0.01			8,935			—	0.08
Gain on sale of hotels, net of noncontrolling interests in other partnerships	(18,590		)	—		(0.15		)	(54,459		)	—	(0.44		)	(4,714		)	—	(0.04		)
Noncontrolling interests in FelCor LP	(497		)	619		(0.01		)	(842		)	628	—			(689		)	499	(0.01		)
Conversion of unvested restricted stock	—			547		—			—			—	—			—			—	—
FFO	40,956			124,984		0.33			(80,086		)	124,262	(0.64		)	(9,632		)	117,567	(0.08		)
Acquisition costs	23			—		—			132			—	—			1,479			—	0.01
Hurricane loss	—			—		—			792			—	0.01			—			—	—
Hurricane loss, discontinued operations and unconsolidated entities	—			—		—			482			—	—			—			—	—
Debt extinguishment, including discontinued operations	—			—		—			75,117			—	0.60			24,381			—	0.21
Conversion expenses	1,134			—		0.01			31,197			—	0.25			—			—	—
Variable stock compensation	963			—		0.01			—			—	—			—			—	—
Severance costs	3,268			—		0.02			553			—	—			—			—	—
Abandoned projects	—			—		—			219			—	—			—			—	—
Pre-opening costs, net of noncontrolling interests	2,314			—		0.02			398			—	—			—			—	—
Conversion of unvested restricted stock	—			—		—			—			11	0.01			—			175	—
Adjusted FFO	$	48,658		124,984		$	0.39		$	28,804		124,273	$	0.23		$	16,228		117,742	$	0.14

Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)



	Year Ended December 31,
	2010								2009
	Dollars			Shares		Per Share Amount			Dollars			Shares	Per Share Amount
Net loss	$	(225,837	)						$	(109,091	)
Noncontrolling interests	2,796								969
Preferred dividends	(38,713		)						(38,713		)
Numerator for basic and diluted loss attributable to common stockholders	(261,754		)	80,611		$	(3.25	)	(146,835		)	63,114	$	(2.33	)
Depreciation and amortization	108,226			—		1.34			106,015			—	1.68
Depreciation, discontinued operations and unconsolidated entities	54,000			—		0.67			58,634			—	0.93
Impairment loss	41,214			—		0.51			—			—	—
Impairment loss, discontinued operations and unconsolidated entities	131,762			—		1.63			5,516			—	0.09
Gain on sale of hotels	—			—		—			(910		)	—	(0.01		)
Gain on sale of unconsolidated entities	(21,103		)	—		(0.26		)	—			—	—
Noncontrolling interests in FelCor LP	(881		)	294		(0.01		)	(672		)	296	(0.02		)
Conversion of unvested restricted stock	—			505		—			—			331	—
FFO	51,464			81,410		0.63			21,748			63,741	0.34
Acquisition costs	449			—		0.01			—			—	—
Debt extinguishment, including discontinued operations	(59,465		)	—		(0.73		)	1,721			—	0.02
Conversion expenses	—			—		—			447			—	0.01
Severance costs	—			—		—			612			—	0.01
Lease termination costs	—			—		—			469			—	0.01
Conversion of unvested restricted stock	—			(505	)	—			—			—	—
Adjusted FFO	$	(7,552	)	80,905		$	(0.09	)	$	24,997		63,741	$	0.39

The following table details our computation of EBITDA and Adjusted EBITDA:

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

(in thousands)



	Year Ended December 31,
	2013			2012			2011			2010			2009
Net loss	$	(65,783	)	$	(129,414	)	$	(130,895	)	$	(225,837	)	$	(109,091	)
Depreciation and amortization	119,624			116,384			110,498			108,226			106,015
Depreciation, discontinued operations and unconsolidated entities	15,996			24,216			40,870			54,000			58,634
Interest expense	103,865			121,690			126,278			127,145			87,675
Interest expense, discontinued operations and unconsolidated entities	3,496			8,586			14,272			22,364			22,386
Noncontrolling interests in other partnerships	3,782			565			352			1,915			297
EBITDA	180,980			142,027			161,375			87,813			165,916
Impairment loss, net of noncontrolling interests in other partnerships	20,382			—			4,315			41,214			—
Impairment loss, discontinued operations and unconsolidated entities	4,354			1,335			8,935			131,762			5,516
Hurricane loss	—			792			—			—			—
Hurricane loss, discontinued operations and unconsolidated entities	—			482			—			—			—
Debt extinguishment, including discontinued operations	—			75,117			24,381			(59,465		)	1,721
Acquisition costs	23			132			1,479			449			—
Amortization of fixed stock and directors’ compensation	5,570			5,003			7,170			7,445			5,165
Severance costs	3,268			553			—			—			612
Lease termination costs	—			—			—			—			469
Abandoned projects	—			219			—			—			—
Conversion expenses	1,134			31,197			—			—			447
Variable stock compensation	963			—			—			—			—
Pre-opening costs, net of noncontrolling interests	2,314			398			—			—			—
Gain on sale of hotels, net of noncontrolling interests in other partnerships	(18,590		)	(54,459		)	(4,714		)	—			(910		)
Gain on involuntary conversion, net of noncontrolling interests in other partnerships	(37		)	—			(295		)	—			—
Loss (gain) on involuntary conversion, discontinued operations, net of noncontrolling interests in other partnerships	(59		)	—			15			—			—
Gain on sale of unconsolidated entities	—			—			—			(21,103		)	—
Adjusted EBITDA	$	200,302		$	202,796		$	202,661		$	188,115		$	178,936

The following tables for our 59 same-store Consolidated Hotels detail our computation of Hotel EBITDA, Hotel EBITDA margin, same-store operating revenue and expenses, and includes the reconciliation of same-store operating revenue and same-store operating expense to total revenue, total operating expenses and operating income for the years presented.

Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)



	Year Ended December 31,
	2013			2012			2011
Same-store operating revenue:
Room	$	692,016		$	667,708		$	632,317
Food and beverage	151,233			142,962			135,129
Other operating departments	46,757			48,271			49,550
Same-store operating revenue^(a)	890,006			858,941			816,996
Same-store operating expense:
Room	184,840			179,602			172,362
Food and beverage	120,287			114,815			108,538
Other operating departments	21,954			21,682			22,748
Other property related costs	238,115			231,929			224,438
Management and franchise fees	35,735			39,785			37,719
Taxes, insurance and lease expense	59,563			58,080			52,455
Same-store operating expense^(a)	660,494			645,893			618,260
Hotel EBITDA	$	229,512		$	213,048		$	198,736
Hotel EBITDA Margin	25.8		%	24.8		%	24.3		%

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

Total Operating Expenses and Operating Income

(dollars in thousands)



	Year Ended December 31,
	2013			2012			2011
Same-store operating revenue^(a)	$	890,006		$	858,941		$	816,996
Other revenue	3,430			3,185			2,949
Revenue from acquired hotels	—			—			(11,455		)
Total revenue	893,436			862,126			808,490
Same-store operating expense^(a)	660,494			645,893			618,260
Consolidated hotel lease expense^(b)	44,087			41,342			38,759
Unconsolidated taxes, insurance and lease expense	(7,456		)	(7,256		)	(6,987		)
Corporate expenses	26,996			26,128			29,080
Depreciation and amortization	119,624			116,384			110,498
Impairment loss	24,441			—			4,315
Expenses from acquired hotels	—			—			(11,290		)
Conversion expenses	1,134			31,197			—
Other expenses	8,749			4,626			4,017
Total operating expenses	878,069			858,314			786,652
Operating income	$	15,367		$	3,812		$	21,838


(a)	For same-store metrics, we have included the two hotels acquired in May 2011 as if they were acquired at the beginning of 2011.


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

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

FFO and EBITDA

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

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

Adjustments to FFO and EBITDA

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

•

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

•

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


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


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

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

Hotel EBITDA and Hotel EBITDA Margin

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

Use and Limitations of Non-GAAP Measures

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

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

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

Liquidity and Capital Resources

Operating Activities

During 2013, our operations generated $68.5 million of cash, a $21.2 million increase compared to 2012. This primarily reflects $32 million less in interest payments, due to a lower average borrowing rate, partially offset by a receivable for Wyndham’s $8 million guaranty, which was not paid until January 2014. Our consolidated statements of cash flows combine cash flow from continuing and discontinued operations. We had $7.8 million, $20.6 million and $23.6 million of operating cash flow from discontinued operations for the years ended December 31, 2013, 2012 and 2011, respectively. The absence of these cash flows should not have a material impact on our business, as these hotels would not provide an acceptable return on future capital expenditure required for these hotels.

At December 31, 2013, we had $45.6 million of cash, including approximately $33.1 million held by our third-party management companies.

RevPAR for the lodging industry continues to be strong. RevPAR at our 51 comparable hotels for 2013 grew 7.1%, driven by a 4.1% increase in ADR and 2.9% higher occupancy. The industry is enjoying a favorable supply/demand imbalance, as supply growth remains well below the long-term average. Occupancy continues to grow and is approaching prior-peak levels, allowing hotels to raise rates. We expect our RevPAR for our comparable hotels to increase 6.25% to 7.25% during 2014, primarily from higher ADR. We expect our operations will generate $97.8 million to $106.8 million of cash flow in 2014.

We are subject to increases in hotel operating expenses, including wage and benefit costs, repair and maintenance expenses, utilities and insurance expenses that can fluctuate disproportionately to revenues. Some operating expenses are difficult to predict and control, which lends volatility to our operating results. Our hotels have extensive cost containment initiatives, including reducing headcount and improving productivity and energy efficiency. If RevPAR decreases, or fails to grow in line with or better than occupancy, and/or Hotel EBITDA margins shrink, our operations, earnings and/or cash flow could be materially adversely affected.

Investing Activities

During 2013, we used $53.9 million of cash in investing activities compared to $71.1 million of cash provided by investing activities during the same period in 2012. In 2013, we sold hotels for $98.8 million in net proceeds, which was more than offset by $101.4 million of capital expenditures (primarily for renovations and redevelopment at 12 hotels) and $60.6 million invested in redeveloping the Knickerbocker Hotel. In 2012, we spent $121.5 million in capital expenditures and invested $24.8 million on the Knickerbocker Hotel, all of which was more than offset by $197.6 million of net proceeds from hotel sales. For renovations and redevelopment in 2014, we expect to spend approximately $85 million which will be funded from operating cash flow, cash on hand and borrowings under our line of credit. In addition, for the Knickerbocker Hotel we expect to invest approximately $81 million in 2014, which will be funded primarily by draws on the Knickerbocker construction loan and additional capital that is currently being raised through the EB-5 immigrant investment program.

Our strategic plan contemplates that we will sell 45 non-strategic hotels that do not meet our investment criteria, thereby freeing our capital for redeployment (e.g., repay debt and invest in our core properties that generate a higher return on invested capital). We have sold 25 of these 45 hotels to date, including five in 2013 and one in January 2014. We have 20 remaining non-strategic hotels, including the one hotel that is under contract. Of the remaining hotels, we are currently marketing six and expect to begin marketing three more later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We are working diligently to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.

Financing Activities

During 2013, cash used in financing activities decreased by $151.9 million compared to 2012. In 2013, we had $27.1 million of proceeds from net borrowings which was more than offset by $38.7 million in preferred dividend payments. In 2012, we had $625.8 million of net borrowings (including repaying $258 million in face amount of our senior notes), and paid $106.5 million in preferred dividends, partially offset by $56 million of net borrowings under our line of credit and $525 million in proceeds from our 5.625% senior secured notes due 2023. In 2014, we expect to make approximately $4 million of normally-occurring principal payments, $39 million of preferred dividends and $10 million in common dividends, all of which will be funded from operating cash flow and cash on hand. During 2014, we intend to sell most of our 20 remaining non-strategic hotels and repay our 2014 maturities.

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

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

Most of our secured debt (other than our senior notes and line of credit) includes “lock-box” arrangements under certain circumstances. Under these arrangements, the borrower is permitted to incur and pay budgeted hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves, even if revenues are flowing through a lock-box in cases where a specified debt service coverage ratio is not met. Except for loans secured by two properties, all of our consolidated loans subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.

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

Interest Rate Caps. To fulfill requirements under certain loans, we owned interest rate caps with aggregate notional amounts of $202.4 million as of December 31, 2012. These interest rate caps were not designated as hedges and had insignificant fair values at December 31, 2012, resulting in no significant net earnings impact. We did not have any interest rate caps outstanding as of December 31, 2013.

Consolidated debt consisted of the following (in thousands):



	Encumbered Hotels		Interest Rate (%)		December 31,
	Encumbered Hotels		Interest Rate (%)	Maturity Date	2013		2012
Line of credit		9	LIBOR + 3.375	June 2016^(a)	$	88,000	$	56,000
Hotel mortgage debt
Mortgage debt^(b)		5	6.66	June - August 2014	63,337		65,431
Mortgage debt		1	5.81	July 2016	9,904		10,405
Mortgage debt^(b)		4	4.95	October 2022	126,220		128,066
Mortgage debt		1	4.94	October 2022	31,714		32,176
Senior notes
Senior secured notes^(c)		11	10.00	October 2014	229,190		223,586
Senior secured notes		6	6.75	June 2019	525,000		525,000
Senior secured notes		9	5.625	March 2023	525,000		525,000
Other^(d)		—	LIBOR + 1.25	May 2016	64,861		64,861
Total		46			$	1,663,226	$	1,630,525


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


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


(c)	We originally issued $636 million (face amount) of these notes. After redemptions in 2011 and 2012, $234 million (face amount) of these notes were outstanding at December 31, 2013. These notes were initially sold at a discount that provided an effective yield of 12.875% before transaction costs.


(d)	This loan is related to our Knickerbocker development project and is fully secured by restricted cash and a mortgage. Because we were able to assume an existing loan when we purchased this hotel, we were not required to pay any local mortgage recording tax. This loan, which allows us to borrow up to $85 million, can be extended for one year subject to satisfying certain conditions.

Contractual Obligations

We have obligations and commitments to make certain future payments under debt agreements and various contracts. The following schedule details these obligations at December 31, 2013 (in thousands):



	Total		Less Than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Debt^(a)	$	2,231,822	$	398,597	$	322,977	$	150,854	$	1,359,394
Operating leases	340,937		23,001		38,799		13,505		265,632
Purchase obligations	52,563		52,563		—		—		—
Total contractual obligations	$	2,625,322	$	474,161	$	361,776	$	164,359	$	1,625,026


(a)	This includes both principal and interest. Interest expense for variable rate debt was calculated using interest rates at December 31, 2013.

Off-Balance Sheet Arrangements

At December 31, 2013, we had unconsolidated 50% interests in entities that owned 13 hotels (which we refer to as hotel joint ventures). We own more than 50% of the operating lessees operating 12 of these hotels and one hotel is operated without a lease. We also owned 50% interests in entities that provide condominium management services and own real estate in Myrtle Beach, South Carolina. None of our directors, officers or employees owns any interest in any of these joint ventures or entities. The hotel joint ventures had $146.4 million of non-recourse mortgage debt relating to these 10 hotels, of which our pro rata portion was $73.2 million, none of which is reflected as a liability on our consolidated balance sheet. Our liabilities with regard to non-recourse debt and the liabilities of our subsidiaries that are members or partners in joint ventures are generally limited to guarantees of the borrowing entity’s obligations to pay for the lender’s losses caused by misconduct, fraud or misappropriation of funds by the venture and other typical exceptions from the non-recourse provisions in the mortgages, such as for environmental liabilities.

We have recorded equity in income from unconsolidated entities of $4.6 million, $2.8 million, and a loss

of $2.1 million for 2013, 2012 and 2011, respectively. We received $14.2 million of distributions (of which $4.4 million came from operations), $17.7 million (of which $4.2 million came from operations), and $3.8 million (of which $2.3 million came from operations) in 2013, 2012 and 2011, respectively. The principal source of income for our hotel joint ventures is percentage lease revenue from the operating lessees.

Capital expenditures at the hotels owned by hotel joint ventures are generally funded from operating income at its hotels. However, if a joint venture has insufficient cash flow to meet operating expenses or make necessary capital improvements, it may call capital from the investors. In the event of a capital call, the other joint investors may be unwilling or unable to make the necessary capital contributions. Under such circumstances, we may elect to make up the difference as a loan to the joint venture or as an additional capital contribution by us. Under certain circumstances, a capital contribution by us may increase our equity investment to greater than 50% and may require that we consolidate the joint venture, including all of its assets and liabilities, into our consolidated financial statements. We may be confronted with the choice of losing our investment in a venture or investing additional capital with no guaranty of any return on that investment.

Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in hotel operating expenses disproportionately to revenues.

Seasonality

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

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate our estimates, including those related to bad debts, the carrying value of investments in hotels, litigation, and other contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

•

We record an impairment charge when we believe that an investment in one or more of our hotels held for investment has been impaired, such that future undiscounted cash flows would not recover the book basis, or net book value, of the investment. We test for impairment charge when certain events occur, including one or more of the following: projected cash flows are significantly less than recent historical cash flows; significant changes in legal factors or actions by a regulator that could affect the value of our hotels; events that could cause changes or uncertainty in travel patterns; and a current expectation that, more likely than not, a hotel will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. In the evaluation of impairment of our hotels, and in establishing impairment charges, we make many assumptions and estimates on a hotel by hotel basis, which include the following:


◦	Annual cash flow growth rates for revenues and expenses;


◦	Holding periods;


◦	Expected remaining useful lives of assets;


◦	Estimates in fair values taking into consideration future cash flows, capitalization rates, discount rates and comparable selling prices; and


◦	Future capital expenditures.

•

We record an impairment charge when one or more of our investments in unconsolidated subsidiaries experiences an other-than-temporary decline in fair value. Any decline in fair value that is not expected to be recovered in the next 12 months is considered other-than-temporary. We record an impairment in our equity-based investments as a reduction in the carrying value of the investment. Our estimates of fair values are based on future cash flow estimates, capitalization rates, discount rates and comparable selling prices.

Changes in these estimates, future adverse changes in market conditions or poor operating results of underlying hotels could result in an inability to recover the carrying value of our hotels or investments in unconsolidated entities, thereby requiring future impairment charges.

•

We capitalize interest and certain other costs, such as property taxes, land leases, property insurance and employee costs related to hotels undergoing major renovations and redevelopments. In 2013, 2012 and 2011, we capitalized $23.6 million, $22.2 million and $8.5 million, respectively, of such costs. We make estimates with regard to when components of the renovated asset or redevelopment project are taken out of service or placed in service when determining the appropriate amount and time to capitalize these costs. If these estimates are inaccurate, we could capitalize too much or too little with regard to a particular project.

•

Depreciation expense is based on the estimated useful life of our assets, and amortization expense for leasehold improvements is the shorter of the lease term or the estimated useful life of the related assets. The lives of the assets are based on a number of assumptions including cost and timing of capital expenditures to maintain and refurbish the assets, as well as specific market and economic conditions. While we believe our estimates are reasonable, a change in the estimated lives could affect depreciation and amortization expense and net income (loss) or the gain or loss on the sale of any of our hotels.

•

Investments in hotel properties are based on purchase price and allocated to land, property and equipment, identifiable intangible assets and assumed debt and other liabilities at fair value. Any remaining unallocated purchase price, if any, is treated as goodwill. Property and equipment are recorded at fair value, based on current replacement cost for similar capacity, and allocated to buildings, improvements, furniture, fixtures and equipment using appraisals and valuations prepared by management and/or independent third parties. Identifiable intangible assets (typically contracts including ground and retail leases and management and franchise agreements) are recorded at fair value, although no value is generally allocated to contracts which are at market terms. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts acquired and our estimate of the fair value of contract rates for corresponding contracts measured over the period equal to the remaining non-cancelable term of the contract. Intangible assets are amortized using the straight-line method over the remaining non-cancelable term of the related agreements. In making estimates of fair values for purposes of allocating purchase price, we may utilize a number of sources such as those obtained in connection with the acquisition or financing of a property and other market data, including third-party appraisals and valuations.

•

We make estimates with respect to contingent liabilities for losses covered by insurance. We record liabilities for self-insured losses under our insurance programs when it becomes probable that an asset has been impaired or a liability has been incurred at the date of our financial statements and the amount of the loss can be reasonably estimated. We are self-insured for the first $250,000, per occurrence, of our general liability claims with regard to 47 of our hotels. We review the adequacy of our reserves for our self-insured claims on a regular basis. Our reserves are intended to cover the estimated ultimate uninsured liability for losses with respect to reported and unreported claims incurred at the end of each accounting period. These reserves represent estimates at a given date, generally utilizing projections based on claims, historical settlement of claims and estimates of future costs to settle claims. Estimates are also required since there may be delays in reporting. Because establishment of insurance reserves is an inherently uncertain process involving estimates, currently established reserves may not be sufficient. If our insurance reserves of $3.7 million, at December 31, 2013, for general liability losses are insufficient, we will record an additional expense in future periods. Property and catastrophic losses are event-driven losses and, as such, until a loss occurs and the amount of loss can be reasonably estimated, no liability is recorded. We recorded no contingent liabilities with regard to property or catastrophic losses at December 31, 2013.

•

Our taxable REIT subsidiaries, or TRSs, have cumulative potential future tax deductions totaling $346.9 million. The deferred income tax asset associated with these potential future tax deductions was $131.8 million at December 31, 2013. We recorded a 100% valuation allowance related to our TRSs net deferred tax asset, because of the uncertainty of realizing the asset’s benefit. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. In the event we were to determine that we would be able to realize all or a portion of our deferred tax assets in the future, an adjustment to the deferred tax asset would increase operating income in the period such determination was made.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

At December 31, 2013, approximately 91% of our consolidated debt had fixed interest rates. In some cases, market rates of interest are below the rates we are obligated to pay on our fixed-rate debt.

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



December 31, 2013
	Expected Maturity Date
	2014			2015			2016			2017			2018			Thereafter			Total			Fair Value
Liabilities	(dollars in thousands)
Fixed rate:
Debt	$	300,045		$	3,107		$	11,461		$	2,810		$	2,954		$	1,194,702		$	1,515,079		$	1,565,211
Average interest rate	9.25		%	5.11		%	5.61		%	4.95		%	4.95		%	6.04		%	6.66		%
Floating rate:
Debt	—			—			152,861			—			—			—			152,861			153,032
Average interest rate^(a)	—			—			5.28		%	—			—			—			5.28		%
Total debt	$	300,045		$	3,107		$	164,322		$	2,810		$	2,954		$	1,194,702		$	1,667,940
Average interest rate	9.25		%	5.11		%	5.31		%	4.95		%	4.95		%	6.04		%	6.54		%
Net discount																			(4,714		)
																			$	1,663,226


(a)	The average floating rate represents the implied forward rates in the yield curve at December 31, 2013.



December 31, 2012
	Expected Maturity Date
	2013			2014			2015			2016			2017			Thereafter			Total			Fair Value
Liabilities	(dollars in thousands)
Fixed rate:
Debt	$	4,752		$	300,192		$	3,107		$	11,465		$	2,810		$	1,197,656		$	1,519,982		$	1,596,596
Average interest rate	5.79		%	9.25		%	5.11		%	5.61		%	4.95		%	6.03		%	6.66		%
Floating rate:
Debt	—			—			—			120,861			—			—			120,861			120,969
Average interest rate^(a)	—			—			—			3.37		%	—			—			3.37		%
Total debt	$	4,752		$	300,192		$	3,107		$	132,326		$	2,810		$	1,197,656		$	1,640,843
Average interest rate	5.79		%	9.25		%	5.11		%	3.57		%	4.95		%	6.03		%	6.42		%
Net discount																			(10,318		)
Total debt																			$	1,630,525


(a)	The average floating rate represents the implied forward rates in the yield curve at December 31, 2012.

We had no interest rate swap agreements at December 31, 2013 or 2012.

Item 8. Financial Statements and Supplementary Data

FELCOR LODGING TRUST INCORPORATED and

FELCOR LODGING LIMITED PARTNERSHIP

INDEX TO FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm (FelCor Lodging Trust Incorporated)	55
Report of Independent Registered Public Accounting Firm (FelCor Lodging Limited Partnership)	57
FelCor Lodging Trust Incorporated Financial Statements:
Consolidated Balance Sheets — December 2013 and 2012	59
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011	60
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2013, 2012 and 2011	61
Consolidated Statements of Equity for the years ended December 31, 2013, 2012 and 2011	62
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	65
FelCor Lodging Limited Partnership Financial Statements:
Consolidated Balance Sheets — December 2013 and 2012	66
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011	67
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2013, 2012 and 2011	68
Consolidated Statements of Partners’ Capital for the years ended December 31, 2013, 2012 and 2011	69
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	70
Notes to Consolidated Financial Statements	71
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2013	109

All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

FelCor Lodging Trust Incorporated

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive loss, of equity, and of cash flows present fairly, in all material respects, the financial position of FelCor Lodging Trust Incorporated and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 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 index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide 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

February 28, 2014

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

FelCor Lodging Trust Incorporated

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive loss, of partners’ capital, and of cash flows present fairly, in all material respects, the financial position of FelCor Lodging Limited Partnership and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 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 index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas

February 28, 2014

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED BALANCE SHEETS

December 31, 2013 and 2012

(in thousands)



	2013			2012
Assets
Investment in hotels, net of accumulated depreciation of $929,801 and $929,298 at December 31, 2013 and 2012, respectively	$	1,653,267		$	1,794,564
Hotel development	216,747			146,079
Investment in unconsolidated entities	46,943			55,082
Hotel held for sale	16,319			—
Cash and cash equivalents	45,645			45,745
Restricted cash	77,227			77,927
Accounts receivable, net of allowance for doubtful accounts of $262 and $469 at December 31, 2013 and 2012, respectively	35,747			25,383
Deferred expenses, net of accumulated amortization of $20,362 and $13,820 at December 31, 2013 and 2012, respectively	29,325			34,262
Other assets	23,060			23,391
Total assets	$	2,144,280		$	2,202,433
Liabilities and Equity
Debt, net of discount of $4,714 and $10,318 at December 31, 2013 and 2012, respectively	$	1,663,226		$	1,630,525
Distributions payable	11,047			8,545
Accrued expenses and other liabilities	150,738			138,442
Total liabilities	1,825,011			1,777,512
Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 618 and 621 units issued and outstanding at December 31, 2013 and 2012, respectively	5,039			2,902
Equity:
Preferred stock, $0.01 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, 2013 and 2012	309,362			309,362
Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at December 31, 2013 and 2012	169,412			169,412
Common stock, $0.01 par value, 200,000 shares authorized and 124,051 and 124,117 shares issued and outstanding at December 31, 2013 and 2012	1,240			1,241
Additional paid-in capital	2,354,328			2,353,581
Accumulated other comprehensive income	24,937			26,039
Accumulated deficit	(2,568,350		)	(2,464,968		)
Total FelCor stockholders’ equity	290,929			394,667
Noncontrolling interests in other partnerships	23,301			27,352
Total equity	314,230			422,019
Total liabilities and equity	$	2,144,280		$	2,202,433

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, 2013, 2012 and 2011

(in thousands, except per share data)



	2013			2012			2011
Revenues:
Hotel operating revenue	$	890,006		$	858,941		$	805,541
Other revenue	3,430			3,185			2,949
Total revenues	893,436			862,126			808,490
Expenses:
Hotel departmental expenses	327,081			316,099			297,260
Other property-related costs	238,115			231,929			220,979
Management and franchise fees	35,735			39,785			37,376
Taxes, insurance and lease expense	96,194			92,166			83,127
Corporate expenses	26,996			26,128			29,080
Depreciation and amortization	119,624			116,384			110,498
Impairment loss	24,441			—			4,315
Conversion expenses	1,134			31,197			—
Other expenses	8,749			4,626			4,017
Total operating expenses	878,069			858,314			786,652
Operating income	15,367			3,812			21,838
Interest expense, net	(103,787		)	(121,552		)	(126,044		)
Debt extinguishment	—			(72,350		)	(27,640		)
Gain on involuntary conversion, net	41			—			295
Loss before equity in income (loss) from unconsolidated entities	(88,379		)	(190,090		)	(131,551		)
Equity in income (loss) from unconsolidated entities	4,586			2,779			(2,068		)
Loss from continuing operations	(83,793		)	(187,311		)	(133,619		)
Income from discontinued operations	18,010			57,897			2,724
Net loss	(65,783		)	(129,414		)	(130,895		)
Net loss attributable to noncontrolling interests in other partnerships	3,782			565			352
Net loss attributable to redeemable noncontrolling interests in FelCor LP	497			842			689
Net loss attributable to FelCor	(61,504		)	(128,007		)	(129,854		)
Preferred dividends	(38,713		)	(38,713		)	(38,713		)
Net loss attributable to FelCor common stockholders	$	(100,217	)	$	(166,720	)	$	(168,567	)
Basic and diluted per common share data:
Loss from continuing operations	$	(0.95	)	$	(1.81	)	$	(1.46	)
Net loss	$	(0.81	)	$	(1.35	)	$	(1.44	)
Basic and diluted weighted average common shares outstanding	123,818			123,634			117,068

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	2013			2012			2011
Net loss	$	(65,783	)	$	(129,414	)	$	(130,895	)
Foreign currency translation adjustment	(1,108		)	303			(726		)
Comprehensive loss	(66,891		)	(129,111		)	(131,621		)
Comprehensive loss attributable to noncontrolling interests in other partnerships	3,782			565			352
Comprehensive loss attributable to redeemable noncontrolling interests in FelCor LP	503			840			696
Comprehensive loss attributable to FelCor	$	(62,606	)	$	(127,706	)	$	(130,573	)

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	Preferred Stock			Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)									Noncontrolling Interests in Other Partnerships			Comprehensive Income (Loss)
	Number of Shares	Amount		Number of Shares		Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Treasury Stock			Noncontrolling Interests in Other Partnerships			Comprehensive Income (Loss)			Total Equity
Balance at December 31, 2010	12,948	$	478,774	101,038		$	1,010		$	2,190,308		$	26,457		$	(2,054,625	)	$	(73,341	)	$	19,795					$	588,378
Issuance of common stock	—	—		27,600		276			158,200			—			—			—			—						158,476
Retirement of treasury stock	—	—		(4,156	)	(41		)	—			—			(73,300		)	73,341			—						—
Issuance of stock awards	—	—		95		1			554			—			—			—			—						555
Stock awards - amortization	—	—		—		—			3,475			—			—			—			—						3,475
Forfeiture of stock awards	—	—		(312	)	(3		)	—			—			(958		)	—			—						(961		)
Conversion of operating partnership units into common shares	—	—		16		—			97			—			—			—			—						97
Allocation to redeemable noncontrolling interests	—	—		—		—			685			—			—			—			—						685
Contribution from noncontrolling interests	—	—		—		—			—			—			—			—			6,967						6,967
Distribution to noncontrolling interests	—	—		—		—			—			—			—			—			(1,053		)				(1,053		)
Other	—	—		—		—			(68		)	—			(18		)	—			—						(86		)
Preferred dividends:
$1.95 per Series A preferred share	—	—		—		—			—			—			(25,117		)	—			—						(25,117		)
$2.00 per Series C depositary preferred share	—	—		—		—			—			—			(13,596		)	—			—						(13,596		)
Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
Foreign exchange translation	—	—		—		—			—			(719		)	—			—			—			$	(719	)
Net loss	—	—		—		—			—			—			(129,854		)	—			(352		)	(130,206		)
Comprehensive loss																								$	(130,925	)	(130,925		)
Balance at December 31, 2011	12,948	$	478,774	124,281		$	1,243		$	2,353,251		$	25,738		$	(2,297,468	)	$	—		$	25,357					$	586,895

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY – (continued)

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	Preferred Stock				Common Stock								Accumulated Other Comprehensive Income (Loss)					Noncontrolling Interests in Other Partnerships
	Number of Shares	Amount			Number of Shares		Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Noncontrolling Interests in Other Partnerships			Comprehensive Income (Loss)			Total Equity
Balance at December 31, 2011	12,948	$	478,774		124,281		$	1,243		$	2,353,251		$	25,738	$	(2,297,468	)	$	25,357					$	586,895
Issuance of stock awards	—	—			10		—			—			—		—			—						—
Stock awards - amortization	—	—			—		—			827			—		—			—						827
Forfeiture of stock awards	—	—			(185	)	(2		)	234			—		(776		)	—						(544		)
Conversion of operating partnership units into common shares	—	—			11		—			45			—		—			—						45
Allocation to redeemable noncontrolling interests	—	—			—		—			(776		)	—		—			—						(776		)
Contribution from noncontrolling interests	—	—			—		—			—			—		—			3,616						3,616
Distribution to noncontrolling interests	—	—			—		—			—			—		—			(1,056		)				(1,056		)
Other	—	—			—		—			—			—		(4		)	—						(4		)
Preferred dividends:
$1.95 per Series A preferred share	—	—			—		—			—			—		(25,117		)	—						(25,117		)
$2.00 per Series C depositary preferred share	—	—			—		—			—			—		(13,596		)	—						(13,596		)
Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
Foreign exchange translation	—	—			—		—			—			301		—			—			$	301
Net loss	—	—			—		—			—			—		(128,007		)	(565		)	(128,572		)
Comprehensive loss																					$	(128,271	)	(128,271		)
Balance at December 31, 2012	12,948	$	478,774	—	124,117		$	1,241		$	2,353,581		$	26,039	$	(2,464,968	)	$	27,352					$	422,019

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

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY – (continued)

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	Preferred Stock			Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)						Noncontrolling Interests in Other Partnerships			Comprehensive Income (Loss)
	Number of Shares	Amount		Number of Shares		Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interests in Other Partnerships			Comprehensive Income (Loss)			Total Equity
Balance at December 31, 2012	12,948	$	478,774	124,117		$	1,241		$	2,353,581		$	26,039		$	(2,464,968	)	$	27,352					$	422,019
Issuance of stock awards	—	—		15		—			—			—			—			—						—
Stock awards - amortization and severance	—	—		—		—			3,387			—			—			—						3,387
Forfeiture of stock awards	—	—		(85	)	(1		)	—			—			(663		)	—						(664		)
Conversion of operating partnership units into common shares	—	—		4		—			23			—			—			—						23
Allocation to redeemable noncontrolling interests	—	—		—		—			(2,663		)	—			—			—						(2,663		)
Contribution from noncontrolling interests	—	—		—		—			—			—			—			3,990						3,990
Distribution to noncontrolling interests	—	—		—		—			—			—			—			(4,259		)				(4,259		)
Dividends declared:
$0.02 per common share	—	—		—		—			—			—			(2,502		)	—						(2,502		)
$1.95 per Series A preferred share	—	—		—		—			—			—			(25,117		)	—						(25,117		)
$2.00 per Series C depositary preferred share	—	—		—		—			—			—			(13,596		)	—						(13,596		)
Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
Foreign exchange translation	—	—		—		—			—			(1,102		)	—			—			$	(1,102	)
Net loss	—	—		—		—			—			—			(61,504		)	(3,782		)	(65,286		)
Comprehensive loss																					$	(66,388	)	(66,388		)
Balance at December 31, 2013	12,948	$	478,774	124,051		$	1,240		$	2,354,328		$	24,937		$	(2,568,350	)	$	23,301					$	314,230

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, 2013, 2012 and 2011

(in thousands)



	2013			2012				2011
Cash flows from operating activities:
Net loss	$	(65,783	)	$	(129,414	)		$	(130,895	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	124,547			129,486				138,892
Gain on sale of hotels, net	(19,441		)	(54,459		)		(4,714		)
Gain on involuntary conversion, net	(107		)	—				(280		)
Amortization of deferred financing fees and debt discount	11,082			18,053				17,496
Amortization of fixed stock and directors’ compensation	5,869			5,002				7,170
Equity based severance	1,051			—				—
Equity in (income) loss from unconsolidated entities	(4,586		)	(2,779		)		2,068
Distributions of income from unconsolidated entities	4,440			4,160				2,261
Debt extinguishment	—			75,117				24,380
Impairment loss	28,795			1,335				13,250
Changes in assets and liabilities:
Accounts receivable	(10,858		)	1,253				(344		)
Other assets	(6,061		)	(5,029		)		(6,101		)
Accrued expenses and other liabilities	(487		)	4,584				(17,318		)
Net cash flow provided by operating activities	68,461			47,309			—	45,865
Cash flows from investing activities:
Acquisition of hotels	—			—				(137,985		)
Improvements and additions to hotels	(101,357		)	(121,475		)		(89,042		)
Hotel development	(60,553		)	(24,849		)		(119,611		)
Additions to condominium project	—			—				(359		)
Net proceeds from asset dispositions	98,820			197,613				132,774
Change in restricted cash	700			6,313				(176		)
Insurance proceeds	238			—				391
Distributions from unconsolidated entities	9,784			13,539				1,588
Contributions to unconsolidated entities	(1,500		)	—				—
Net cash flow provided by (used in) investing activities	(53,868		)	71,141				(212,420		)
Cash flows from financing activities:
Proceeds from borrowings	164,000			998,611				1,087,285
Repayment of borrowings	(136,902		)	(1,043,365		)		(1,135,822		)
Payment of deferred financing costs	(2,744		)	(17,870		)		(20,233		)
Distributions paid to noncontrolling interests	(4,259		)	(1,056		)		(1,053		)
Contribution from noncontrolling interests	3,990			3,616				6,967
Distributions paid to preferred stockholders	(38,713		)	(106,461		)		(38,713		)
Net proceeds from common stock issuance	—			—				158,476
Proceeds from FelCor LP unit issuance	—			—				2,500
Net cash flow provided by (used in) financing activities	(14,628		)	(166,525		)		59,407
Effect of exchange rate changes on cash	(65		)	62				(66		)
Net change in cash and cash equivalents	(100		)	(48,013		)		(107,214		)
Cash and cash equivalents at beginning of periods	45,745			93,758				200,972
Cash and cash equivalents at end of periods	$	45,645		$	45,745			$	93,758

Supplemental cash flow information — interest paid, net of capitalized interest	$	84,839		$	116,789			$	119,732

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

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

December 31, 2013 and 2012

(in thousands)



	2013			2012
Assets
Investment in hotels, net of accumulated depreciation of $929,801 and $929,298 at December 31, 2013 and 2012, respectively	$	1,653,267		$	1,794,564
Hotel development	216,747			146,079
Investment in unconsolidated entities	46,943			55,082
Hotel held for sale	16,319			—
Cash and cash equivalents	45,645			45,745
Restricted cash	77,227			77,927
Accounts receivable, net of allowance for doubtful accounts of $262 and $469 at December 31, 2013 and 2012, respectively	35,747			25,383
Deferred expenses, net of accumulated amortization of $20,362 and $13,820 at December 31, 2013 and 2012, respectively	29,325			34,262
Other assets	23,060			23,391
Total assets	$	2,144,280		$	2,202,433
Liabilities and Partners’ Capital
Debt, net of discount of $4,714 and $10,318 at December 31, 2013 and 2012, respectively	$	1,663,226		$	1,630,525
Distributions payable	11,047			8,545
Accrued expenses and other liabilities	150,738			138,442
Total liabilities	1,825,011			1,777,512
Commitments and contingencies
Redeemable units, 618 and 621 units issued and outstanding at December 31, 2013 and 2012, respectively	5,039			2,902
Capital:
Preferred units:
Series A Cumulative Convertible Preferred Units, 12,880 units issued and outstanding at December 31, 2013 and 2012	309,362			309,362
Series C Cumulative Redeemable Preferred Units, 68 units issued and outstanding at December 31, 2013 and 2012	169,412			169,412
Common units, 124,051 and 124,117 units issued at December 31, 2013 and 2012, respectively	(212,888		)	(110,258		)
Accumulated other comprehensive income	25,043			26,151
Total FelCor LP partners’ capital	290,929			394,667
Noncontrolling interests	23,301			27,352
Total partners’ capital	314,230			422,019
Total liabilities and partners’ capital	$	2,144,280		$	2,202,433

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

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands, except for per unit data)



	2013			2012			2011
Revenues:
Hotel operating revenue	$	890,006		$	858,941		$	805,541
Other revenue	3,430			3,185			2,949
Total revenues	893,436			862,126			808,490
Expenses:
Hotel departmental expenses	327,081			316,099			297,260
Other property-related costs	238,115			231,929			220,979
Management and franchise fees	35,735			39,785			37,376
Taxes, insurance and lease expense	96,194			92,166			83,127
Corporate expenses	26,996			26,128			29,080
Depreciation and amortization	119,624			116,384			110,498
Impairment loss	24,441			—			4,315
Conversion expenses	1,134			31,197			—
Other expenses	8,749			4,626			4,017
Total operating expenses	878,069			858,314			786,652
Operating income	15,367			3,812			21,838
Interest expense, net	(103,787		)	(121,552		)	(126,044		)
Debt extinguishment	—			(72,350		)	(27,640		)
Gain on involuntary conversion, net	41			—			295
Loss before equity in income (loss) from unconsolidated entities	(88,379		)	(190,090		)	(131,551		)
Equity in income (loss) from unconsolidated entities	4,586			2,779			(2,068		)
Loss from continuing operations	(83,793		)	(187,311		)	(133,619		)
Income from discontinued operations	18,010			57,897			2,724
Net loss	(65,783		)	(129,414		)	(130,895		)
Net loss attributable to noncontrolling interests	3,782			565			352
Net loss attributable to FelCor LP	(62,001		)	(128,849		)	(130,543		)
Preferred distributions	(38,713		)	(38,713		)	(38,713		)
Net loss attributable to FelCor LP common unitholders	$	(100,714	)	$	(167,562	)	$	(169,256	)
Basic and diluted per common unit data:
Loss from continuing operations	$	(0.95	)	$	(1.81	)	$	(1.46	)
Net loss	$	(0.81	)	$	(1.35	)	$	(1.44	)
Basic and diluted weighted average common units outstanding	124,437			124,262			117,567

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

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	2013			2012			2011
Net loss	$	(65,783	)	$	(129,414	)	$	(130,895	)
Foreign currency translation adjustment	(1,108		)	303			(726		)
Comprehensive loss	(66,891		)	(129,111		)	(131,621		)
Comprehensive loss attributable to noncontrolling interests	3,782			565			352
Comprehensive loss attributable to FelCor LP	$	(63,109	)	$	(128,546	)	$	(131,269	)

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

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	Preferred Units		Common Units			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Comprehensive Income (Loss)			Total Partners’ Capital
Balance at December 31, 2010	$	478,774	$	63,235		$	26,574		$	19,795					$	588,378
Issuance of common units			158,476			—			—						158,476
FelCor restricted stock compensation	—		3,069			—			—						3,069
Contributions	—		—			—			6,967						6,967
Distributions	—		(38,713		)	—			(1,053		)				(39,766		)
Allocation to redeemable units	—		1,478			—			—						1,478
Other	—		(86		)	—			—						(86		)
Comprehensive loss:
Foreign exchange translation						(726		)				$	(726	)
Net loss			(130,543		)				(352		)	(130,895		)
Comprehensive loss												$	(131,621	)	(131,621		)
Balance at December 31, 2011	478,774		56,916			25,848			25,357						586,895
FelCor restricted stock compensation	—		283			—			—						283
Contributions	—		—			—			3,616						3,616
Distributions	—		(38,713		)	—			(1,056		)				(39,769		)
Allocation to redeemable units	—		109			—			—						109
Other	—		(4		)	—			—						(4		)
Comprehensive loss:
Foreign exchange translation						303						$	303
Net loss			(128,849		)				(565		)	(129,414		)
Comprehensive loss												$	(129,111	)	(129,111		)
Balance at December 31, 2012	$	478,774	$	(110,258	)	$	26,151		$	27,352					$	422,019
FelCor restricted stock compensation	—		2,723			—			—						2,723
Contributions	—		—			—			3,990						3,990
Distributions	—		(41,215		)	—			(4,259		)				(45,474		)
Allocation to redeemable units	—		(2,137		)	—			—						(2,137		)
Comprehensive loss:															—
Foreign exchange translation						(1,108		)				$	(1,108	)
Net loss			(62,001		)				(3,782		)	(65,783		)
Comprehensive loss												$	(66,891	)	(66,891		)
Balance at December 31, 2013	$	478,774	$	(212,888	)	$	25,043		$	23,301					$	314,230

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

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2013, 2012 and 2011

(in thousands)



	2013			2012			2011
Cash flows from operating activities:
Net loss	$	(65,783	)	$	(129,414	)	$	(130,895	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	124,547			129,486			138,892
Gain on sale of hotels, net	(19,441		)	(54,459		)	(4,714		)
Gain on involuntary conversion, net	(107		)	—			(280		)
Amortization of deferred financing fees and debt discount	11,082			18,053			17,496
Amortization of fixed stock and directors’ compensation	5,869			5,002			7,170
Equity based severance	1,051			—			—
Equity in (income) loss from unconsolidated entities	(4,586		)	(2,779		)	2,068
Distributions of income from unconsolidated entities	4,440			4,160			2,261
Debt extinguishment	—			75,117			24,380
Impairment loss	28,795			1,335			13,250
Changes in assets and liabilities:
Accounts receivable	(10,858		)	1,253			(344		)
Other assets	(6,061		)	(5,029		)	(6,101		)
Accrued expenses and other liabilities	(487		)	4,584			(17,318		)
Net cash flow provided by operating activities	68,461			47,309			45,865
Cash flows from investing activities:
Acquisition of hotels	—			—			(137,985		)
Improvements and additions to hotels	(101,357		)	(121,475		)	(89,042		)
Hotel development	(60,553		)	(24,849		)	(119,611		)
Additions to condominium project	—			—			(359		)
Net proceeds from asset dispositions	98,820			197,613			132,774
Change in restricted cash	700			6,313			(176		)
Insurance proceeds	238			—			391
Distributions from unconsolidated entities	9,784			13,539			1,588
Contributions to unconsolidated entities	(1,500		)	—			—
Net cash flow provided by (used in) investing activities	(53,868		)	71,141			(212,420		)
Cash flows from financing activities:
Proceeds from borrowings	164,000			998,611			1,087,285
Repayment of borrowings	(136,902		)	(1,043,365		)	(1,135,822		)
Payment of deferred financing costs	(2,744		)	(17,870		)	(20,233		)
Distributions paid to noncontrolling interests	(4,259		)	(1,056		)	(1,053		)
Contributions from noncontrolling interests	3,990			3,616			6,967
Distributions paid to preferred unitholders	(38,713		)	(106,461		)	(38,713		)
Net proceeds from common unit issuance	—			—			158,476
Proceeds from FelCor LP unit issuance	—			—			2,500
Net cash flow provided by (used in) financing activities	(14,628		)	(166,525		)	59,407
Effect of exchange rate changes on cash	(65		)	62			(66		)
Net change in cash and cash equivalents	(100		)	(48,013		)	(107,214		)
Cash and cash equivalents at beginning of periods	45,745			93,758			200,972
Cash and cash equivalents at end of periods	$	45,645		$	45,745		$	93,758

Supplemental cash flow information – interest paid, net of capitalized interest	$	84,839		$	116,789		$	119,732

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

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Organization

FelCor Lodging Trust Incorporated (NYSE:FCH), or FelCor, is a Maryland corporation operating as a real estate investment trust, or REIT. We are the sole general partner of, and the owner of a greater than 99.5% partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in 60 hotels in continuing operations with approximately 17,583 rooms at December 31, 2013. At December 31, 2013, we had an aggregate of 124,668,210 shares and units outstanding, consisting of 124,050,668 shares of FelCor common stock and 617,542 units of FelCor LP units not owned by FelCor.

Of the 60 hotels in which we had an ownership interest at December 31, 2013, we owned a 100% interest in 43 hotels, a 90% interest in entities owning two hotels, an 82% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and 50% interests in entities owning 13 hotels. We consolidate our real estate interests in the 47 hotels in which we held majority interests, and we record the real estate interests of the 13 hotels in which we held 50% interests using the equity method. We leased 59 of our 60 hotels to our taxable REIT subsidiaries, of which we own a controlling interest. One 50%-owned hotel was operated without an operating lease. Because we own controlling interests in these lessees, we consolidate our interests in these 59 hotels (which we refer to as our Consolidated Hotels) and reflect those hotels’ operating revenues and expenses in our statements of operations. Of our Consolidated Hotels, we owned 50% of the real estate interests in 12 hotels (we accounted for the ownership in our real estate interests of these hotels by the equity method) and majority real estate interests in the remaining 47 hotels (we consolidate our real estate interest in these hotels).

The following table illustrates the distribution of our 59 Consolidated Hotels at December 31, 2013:



Brand	Hotels	Rooms
Embassy Suites Hotels	32	8,385
Holiday Inn	4	1,702
Sheraton and Westin	4	1,604
DoubleTree by Hilton and Hilton	5	1,206
Marriott and Renaissance	3	1,321
Fairmont	1	383
Morgans and Royalton	2	285
Wyndham and Wyndham Grand	8	2,526
Total	59	17,412

At December 31, 2013, our Consolidated Hotels were located in the United States (58 hotels in 21 states) and Canada (one hotel in Ontario), with concentrations in California (13 hotels), Florida (7 hotels) and Texas (7 hotels). In 2013, approximately 51% of our revenue was generated from hotels in these three states.

At December 31, 2013, of our 59 Consolidated Hotels (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 36 hotels, (ii) subsidiaries of Wyndham Hotel Group, or Wyndham, managed eight hotels, (iii) subsidiaries of InterContinental Hotels Group, or IHG, managed four hotels, (iv) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed four hotels, (v) subsidiaries of Marriott International Inc., or Marriott, managed three hotels, (vi) a subsidiary of Fairmont Hotels & Resorts, or Fairmont, managed one hotel, (vii) a subsidiary of Morgans Hotel Group Corporation managed two hotels, and (viii) an independent management company managed one hotel.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Organization – (continued)

Effective January 1, 2013, our hotels managed by Marriott are accounted for on a 12-month calendar year basis as compared to a fiscal year comprised of 52 or 53 weeks ending on the Friday closest to December 31, as reported in 2012 and prior years. Our 12-month period ending December 31, 2013 is reported on a calendar year basis for our Marriott-managed hotels, which is consistent with the reporting periods for our other managed hotels. However, our 12-month periods ending December 31, 2012 and 2011 include the results of operations for the Marriott-managed hotels for the 52-week periods ending on December 28, 2012 and December 30, 2011, respectively. Prior year results have not been restated to reflect the reporting period transition as we do not believe the change in periods would result in a material difference for comparison of results year over year.


2.	Summary of Significant Accounting Policies

Principles of Consolidation — Our 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% owned ventures) are accounted for by the equity method. None of our less than wholly-owned subsidiaries are considered variable interest entities. We follow the voting interest model and consolidate entities in which we have greater than 50% ownership interest and report entities in which we have 50% or less ownership interest under 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 30 years for improvements and 3 to 10 years for furniture, fixtures, and equipment.

We capitalize certain inventory (such as china, glass, silver, linen) at the time of a hotel opening or acquisition, or when significant inventory is purchased (in conjunction with a major rooms renovation or when the number of rooms or meeting space at a hotel is expanded). These amounts are then amortized over the estimated useful life of three years. Subsequent replacement purchases are expensed when placed in service.

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 the 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.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.	Summary of Significant Accounting Policies — (continued)

Acquisition of Hotels — Investments in hotels are based on purchase price and allocated to land, property and equipment, identifiable intangible assets and assumed debt and other liabilities at fair value. Any remaining unallocated purchase price, if any, is treated as goodwill. Property and equipment are recorded at fair value based on current replacement cost for similar capacity and allocated to buildings, improvements, furniture, fixtures and equipment using appraisals and valuations prepared by management and/or independent third parties. Identifiable intangible assets (typically contracts including ground and retail leases and management and franchise agreements) are recorded at fair value, although no value is generally allocated to contracts which are at market terms. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts acquired and our estimate of the fair value of contract rates for corresponding contracts measured over the period equal to the remaining non-cancelable term of the contract. Intangible assets are amortized using the straight-line method over the remaining non-cancelable term of the related agreements. In making estimates of fair values for purposes of allocating purchase price, we may utilize a number of sources such as those obtained in connection with the acquisition or financing of a property and other market data, including third-party appraisals and valuations.

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. 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, market capitalization rates and sales prices of comparable assets.

We track inception-to-date contributions, distributions and earnings for each of our unconsolidated investments. We determine the character of cash distributions from our unconsolidated investments for purposes of our consolidated statements of cash flows as follows:


•	Cash distributions up to the aggregate historical earnings of the unconsolidated entity are recorded as an operating activity (i.e., a distribution of earnings); and


•	Cash distributions in excess of aggregate historical earnings are recorded as an investing activity (i.e., a distribution of contributed capital).

Hotels Held for Sale — We consider each individual hotel to be an identifiable component of our business. We do not consider hotels held for sale until it is probable that the sale will be completed within twelve months.

We consider a sale to be probable within the next twelve months (for purposes of determining whether a hotel is held for sale) in the period the buyer completes its due diligence review of the asset, we have an executed contract for sale, and we have received a substantial non-refundable deposit. We test hotels held for sale for impairment each reporting period and record them at the lower of their carrying amounts or fair value less costs to sell. Once we designate a hotel as held for sale it is not depreciated and it is included in discontinued operations. We had one hotel held for sale at December 31, 2013.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.	Summary of Significant Accounting Policies — (continued)

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; 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.

Deferred Expenses — Deferred expenses, consisting primarily of loan costs, are recorded at cost. Amortization is computed using a method that approximates the effective 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 — Nearly 100% 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 as earned. 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 is from condominium management fee income and other sources.

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. We have no loss contingencies or ongoing obligation associated with frequent guest programs beyond what is paid to the brand owner following a guest’s stay.

Foreign Currency Translation — Results of operations for our Canadian hotel are maintained in Canadian dollars and translated using the weighted 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 $24.9 million and $26.0 million as of December 31, 2013 and 2012, respectively.

Capitalized Costs — We capitalize interest and certain other costs, such as property taxes, land leases, property insurance and employee costs relating to hotels undergoing major renovations and redevelopments. In addition, these costs are being capitalized on our Knickerbocker hotel development. We begin capitalizing these costs when activities necessary to get the asset ready for its intended use are underway and cease capitalizing these costs to projects when construction is substantially complete. Such costs capitalized in 2013, 2012 and 2011, were $23.6 million, $22.2 million and $8.5 million, respectively.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.	Summary of Significant Accounting Policies — (continued)

Net Income (Loss) per Common Share/Unit — We treat unvested share (unit)-based payment awards containing non-forfeitable rights to dividends (distributions) or dividend equivalents (whether paid or unpaid) as participating securities for computation of earnings per share (unit) (pursuant to the two-class method, in accordance with the Accounting Standards Codification, or ASC, 260-10-45-59A through 45-70).

We compute basic earnings per share (unit) by dividing net income (loss) attributable to common stockholders (or unitholders) less dividends (distributions) declared on FelCor’s unvested restricted stock (adjusted for forfeiture assumptions) by the weighted average number of common shares (units) outstanding. We compute diluted earnings per share (unit) by dividing net income (loss) attributable to common stockholders less dividends (distributions) declared on FelCor’s unvested restricted stock (adjusted for forfeiture assumptions) by the weighted average number of common shares (units) and equivalents outstanding.

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

FelCor’s Stock Compensation — We account for stock-based employee compensation using the fair value based method of accounting. We classify share-based payment awards granted in exchange for employee services as either equity awards or liability awards. Equity classified awards are measured based on the fair value on the date of grant. Liability classified awards are remeasured to fair value each reporting period. Awards that are to be settled in cash (i.e. phantom stock) are classified as liability awards. The value of all our share-based awards, less estimated forfeitures, is recognized over the period during which an employee is required to provide services in exchange for the award – the requisite service period (usually the vesting period). No compensation cost is recognized for awards for which employees do not render the requisite services.

Derivatives — We recognize derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. Additionally, the fair value adjustments will affect either 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 Information — We have determined that our business is conducted in one operating segment.

Distributions and Dividends — In 2011, FelCor reinstated the payment of its current quarterly preferred dividends. In July 2012, it paid $30.0 million of accrued unpaid quarterly dividends in arrears, and the remaining $37.7 million in arrears was paid in October 2012. FelCor’s Board of Directors reinstated a quarterly common dividend in October 2013, in recognition of our ongoing and successful portfolio repositioning and balance sheet restructuring. At that time, FelCor’s Board of Directors declared a $0.02 per share fourth quarter common stock dividend, which was paid in January.

FelCor LP distributes funds to FelCor to pay common or preferred dividends. FelCor’s Board of Directors will determine the amount of any future common and preferred dividends based upon various factors including operating results, economic conditions, other operating trends, our financial condition and capital requirements, as well as minimum REIT distribution requirements.

Reacquired Stock — We account for FelCor’s reacquisition of capital stock under a method that is consistent with Maryland law (Maryland is FelCor’s domicile), which does not contemplate treasury stock. Any capital stock reacquired for any purpose is recorded as a reduction of common stock (at $0.01 par value per share) and an increase in accumulated deficit.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies — (continued)

Noncontrolling Interests — Noncontrolling interests in other partnerships represent the proportionate share of the equity in other partnerships not owned by us. Noncontrolling interests in FelCor LP represents FelCor LP units not owned by FelCor. We allocate income and loss to noncontrolling interests in FelCor LP and other partnerships based on the weighted average percentage ownership throughout the year. FelCor characterizes minority interest in FelCor LP as noncontrolling interests, but because of the redemption feature of these units, FelCor includes them in the mezzanine section (between liabilities and equity) on its consolidated balance sheets. These units are redeemable at the option of the holders for a like number of shares of FelCor’s common stock or, at our option, the cash equivalent thereof. We adjust redeemable noncontrolling interests in FelCor LP (or redeemable units) each period to reflect the greater of its carrying value based on the accumulation of historical cost or its redemption value.

Income Taxes — FelCor has elected to be treated as a REIT under Sections 856 to 860 of the Internal Revenue Code and, as such, is not subject to federal income tax, provided that it distributes all of its taxable income annually to its stockholders and complies with certain other requirements. FelCor LP is treated as a partnership for federal income tax purposes and, as such, is not subject to federal income taxes. However, both FelCor and FelCor LP may be subject to state, local and foreign income and franchise taxes in certain jurisdictions. We generally lease our hotels to wholly-owned taxable REIT subsidiaries, or TRSs, that are subject to federal, state and foreign 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 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. A valuation allowance is recorded for net deferred tax assets that are not expected to be realized.

We 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. We apply this policy to all tax positions related to income taxes.


3.	Investment in Hotels

Investment in hotels consisted of the following (in thousands):



	December 31,
	2013			2012
Building and improvements	$	1,833,165		$	1,962,164
Furniture, fixtures and equipment	482,628			488,237
Land	234,447			248,614
Construction in progress	32,828			24,847
	2,583,068			2,723,862
Accumulated depreciation	(929,801		)	(929,298		)
	$	1,653,267		$	1,794,564

In 2013, we retired fully depreciated furniture, fixtures and equipment aggregating approximately $43.0 million.

We invested $101.4 million and $121.5 million in additions and improvements to our consolidated hotels during the years ended December 31, 2013 and 2012, respectively.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.	Hotel Acquisitions

Royalton/Morgans

In May 2011, we acquired two midtown Manhattan hotels, Royalton and Morgans, with a total of 282 guest rooms. The following consolidated unaudited pro forma results of operations for the year ended December 31, 2011 assume these hotels were acquired on January 1, 2011. The pro forma information includes revenues, operating expenses, depreciation and amortization. The unaudited pro forma consolidated results of operations are not necessarily indicative of the results of operations if the acquisition had been completed on the assumed date. The consolidated unaudited pro forma results of operations are as follows (in thousands, except per share/unit data):



	Year Ended December 31,
	(unaudited)
	2011
Total revenues	$	819,836
Net loss	$	(132,087	)
Earnings per share/unit - basic and diluted	$	(1.45	)

For the year ended December 31, 2011, our consolidated statements of operations included $20.4 million of revenues and $1.9 million of net income related to the operations of these hotels.

5. Hotel Development

In December 2011, we acquired a 95% interest in a consolidated joint venture, which acquired the Knickerbocker Hotel in midtown Manhattan, New York, for $115 million. This is a non-operating property that we are developing into a hotel with 330 rooms, and we expect the opening of the hotel to be summer of 2014. In addition to the purchase price, the December 31, 2013 and 2012 book values include all subsequent development expenditures incurred through those respective dates.

Our Knickerbocker Hotel venture raised $45 million through the sale of 3.5% preferred equity under the EB-5 immigrant investor program. The venture received $40 million in proceeds in February 2014, and the remaining $5 million will be received as investors’ visas are approved by the government. We are using our 95% share of the proceeds to repay borrowings under our line of credit.


6.	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 for purposes of determining impairment charges and reporting discontinued operations.

We test for impairment whenever changes in circumstances indicate a hotel’s carrying value may not be recoverable. We conduct the test using undiscounted cash flows for the shorter of the hotel’s estimated hold period or its remaining useful life. When testing for recoverability of hotels held for investment, we use projected cash flows over its expected hold period. Those hotels held for investment that fail the impairment test are written down to their then current estimated fair value, before any selling expense, and we continue to depreciate the hotels over their remaining useful lives.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.	Impairment Charges— (continued)

As part of our long-term strategic plan to enhance stockholder value and achieve or exceed targeted returns on invested capital, we sell and acquire hotels to improve our overall portfolio quality, enhance diversification and improve growth rates. In that regard, we regularly review each hotel in our portfolio in terms of projected performances, future capital expenditure requirements and market dynamics and concentration risk. Based on this analysis, we developed a plan to sell our interests in certain hotels (some of which are owned by unconsolidated joint ventures) that no longer meet our investment criteria. As a consequence, we shortened our estimated hold periods for these hotels, and we tested the consolidated hotels for impairment when they were approved as non-strategic hotels. When the hotels owned by unconsolidated joint ventures are designated by those ventures as non-strategic, the joint ventures will test for impairment based on the reduced estimated hold periods.

In 2011, we recorded impairment charges of $13.2 million related to consolidated non-strategic hotels ($4.3 million related to one hotel included in continuing operations and $8.9 million related to four hotels included in discontinued operations). The impairment charges related to four of the hotels were based on revised estimated fair market values obtained through the marketing process that were lower than the net book values for those hotels. The inputs used to determine the fair values of those hotels were classified as Level 2 under authoritative guidance for fair value measurements. The impairment charge related to the remaining hotel was primarily related to estimated selling costs.

In 2012, we recorded a $1.3 million impairment charge related to one hotel included in discontinued operations. The impairment charge related to this hotel was based on a third-party offer to purchase (a Level 2 input under authoritative guidance for fair value measurements) at a price below our previously estimated fair market value.

In 2013, we recorded a $28.8 million impairment charge ($24.4 million related to two hotels included in continuing operations and $4.4 million related to two hotels included in discontinued operations).

The $4.4 million impairment charge was primarily based on third-party offers to purchase (a Level 2 input under authoritative guidance for fair value measurements) at prices below our previously estimated fair market values for those properties. These are hotels we had identified as sale candidates in prior years, reducing their estimated hold period at that time.

As part of our strategic plan, we may identify hotels that no longer meet our investment criteria. We identified two additional such hotels, thereby significantly reducing their respective estimated hold periods, resulting in impairments on both hotels in 2013. A portion ($24.4 million) of 2013 impairment charges relates to these hotels and was determined using Level 3 inputs, as follows:


•	with respect to one hotel, we used a discounted cash flow analysis with an estimated stabilized growth rate of 3.0%, a discounted cash flow term of five years, a terminal capitalization rate of 8.0%, and a discount rate of 10.0%; and


•	with respect to the other hotel, we used information based on EBITDA multiples ranging from 10 to 12 times.

We may record additional impairment charges if operating results of individual hotels are materially different from our forecasts, the economy and lodging industry weakens, or we shorten our contemplated holding period for additional hotels.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Conversion Expenses

In the fourth quarter of 2012, we decided to convert eight Holiday Inn hotels to the Wyndham Hotels & Resorts brand and management effective March 1, 2013. The expenses incurred related to converting these hotels have been classified as conversion expenses in the accompanying statements of operations. Expenses for the year ended December 31, 2012 included $30.7 million of accrued IHG termination fees, which were paid in the first quarter of 2013, while $1.1 million was incurred in 2013 for additional costs related to the conversion to the Wyndham brand.

8. Discontinued Operations

Discontinued operations primarily include results of operations for one hotel designated as held for sale at December 31, 2013, five hotels sold in 2013, ten hotels sold in 2012, and eight hotels sold in 2011.

Results of operations for the hotels included in discontinued operations are as follows (in thousands):



	Year Ended December 31,
	2013			2012			2011
Hotel operating revenue	$	33,849		$	107,637		$	179,649
Operating expenses^(a)	(34,553		)	(95,600		)	(175,210		)
Operating income (loss) from discontinued operations	(704		)	12,037			4,439
Interest expense, net	(793		)	(5,832		)	(9,674		)
Debt extinguishment	—			(2,767		)	3,260
Gain (loss) on involuntary conversion	66			—			(15		)
Gain on sale, net	19,441			54,459			4,714
Income from discontinued operations	$	18,010		$	57,897		$	2,724


(a)	Includes impairment charges of $4.4 million, $1.3 million and $8.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.


9.	Investment in Unconsolidated Entities

We owned 50% interests in joint ventures that owned 13 hotels at December 31, 2013 and December 31, 2012. We also owned 50% interests in entities that provide condominium management services and own real estate in Myrtle Beach, South Carolina. 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.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.	Investment in Unconsolidated Entities — (continued)

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



	December 31,
	2013		2012
Investment in hotels, net of accumulated depreciation	$	140,145	$	155,888
Total assets	$	155,848	$	170,477
Debt	$	146,358	$	148,395
Total liabilities	$	152,068	$	154,139
Equity	$	3,780	$	16,338

Our unconsolidated entities’ debt at December 31, 2013, consisted entirely of non-recourse mortgage debt.

The following table sets forth summarized combined statement of operations information for our unconsolidated entities and a reconciliation of the net income (loss) attributable to FelCor and our equity in income (loss) from unconsolidated entities (in thousands):



	Year Ended December 31,
	2013			2012			2011
Total revenues	$	70,697		$	67,725		$	62,782
Net income (loss)	$	12,892		$	9,278		$	(416	)

Net income (loss) attributable to FelCor	$	6,446		$	4,639		$	(208	)
Depreciation of cost in excess of book value	(1,860		)	(1,860		)	(1,860		)
Equity in income (loss) from unconsolidated entities	$	4,586		$	2,779		$	(2,068	)

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



	December 31,
	2013			2012
Hotel-related investments	$	(6,349	)	$	246
Cost in excess of book value of hotel investments	45,053			46,913
Land and condominium investments	8,239			7,923
	$	46,943		$	55,082

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



	Year Ended December 31,
	2013			2012			2011
Hotel investments	$	5,270		$	3,434		$	(1,348	)
Other investments	(684		)	(655		)	(720		)
Equity in income (loss) from unconsolidated entities	$	4,586		$	2,779		$	(2,068	)

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.	Debt

Consolidated debt consisted of the following (in thousands):



	Encumbered Hotels		Interest Rate (%)		December 31,
	Encumbered Hotels		Interest Rate (%)	Maturity Date	2013		2012
Line of credit		9	LIBOR + 3.375	June 2016^(a)	$	88,000	$	56,000
Hotel mortgage debt
Mortgage debt^(b)		5	6.66	June - August 2014	63,337		65,431
Mortgage debt		1	5.81	July 2016	9,904		10,405
Mortgage debt^(b)		4	4.95	October 2022	126,220		128,066
Mortgage debt		1	4.94	October 2022	31,714		32,176
Senior notes
Senior secured notes^(c)		11	10.00	October 2014	229,190		223,586
Senior secured notes		6	6.75	June 2019	525,000		525,000
Senior secured notes		9	5.625	March 2023	525,000		525,000
Other^(d)		—	LIBOR + 1.25	May 2016	64,861		64,861
Total		46			$	1,663,226	$	1,630,525


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


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


(c)	We originally issued $636 million (face amount) of these notes. After redemptions in 2011 and 2012, $234 million (face amount) of these notes were outstanding at December 31, 2013. These notes were initially sold at a discount that provided an effective yield of 12.875% before transaction costs.


(d)	This loan is related to our Knickerbocker Hotel development project and is fully secured by restricted cash and a mortgage. Because we were able to assume an existing loan when we purchased this hotel, we were not required to pay any local mortgage recording tax. This loan, which allows us to borrow up to $85 million, can be extended for one year subject to satisfying certain conditions.

In May 2012, we repaid $69.2 million in secured loans when we sold the hotels mortgaged to secure those loans.

In August 2012, we repaid a $24.9 million secured loan when we sold the hotel mortgaged to secure that loan.

In September 2012, we closed five mortgage loans thereby obtaining $160.8 million in aggregate gross proceeds. The 10‑year loans mature in 2022, bear an average fixed interest rate of 4.95% and are neither cross-collateralized nor cross-defaulting. A portion of the proceeds from the new loans was used to repay a 9.02% mortgage loan, of which $107 million was outstanding, that would otherwise mature in 2014. The repaid loan was secured by a pool of seven hotels, including four of the five hotels mortgaged to support the new loans. Also in September 2012, we repaid the remaining $60 million balance of a mortgage loan using excess proceeds from the new loans, as well as asset sale proceeds. This repaid loan, which would have otherwise matured in 2013, was secured by five properties, of which three became unencumbered (two of which were non-strategic). The repayments resulted in $11.6 million in debt extinguishment costs, primarily prepayment penalties.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.	Debt – (continued)

In December 2012, we issued $525.0 million aggregate principal amount of 5.625% senior secured notes due 2023, significantly reducing our cost of borrowing. We used the proceeds to redeem $258.0 million in aggregate face amount of 10% senior notes due 2014 and repay a $186.5 million mortgage loan that bore interest at 8.1% with the remaining proceeds used to repay a portion of the balance on our outstanding line of credit and to pay prepayment costs and other expenses. We incurred $62.1 million of debt extinguishment charges related to these transactions for prepayment premiums, and the write-off of a pro rata portion of the related debt discount on the senior notes and deferred loan costs.

In March 2011, we established a $225.0 million secured line of credit. At the same time, we repaid a $198.3 million secured loan and a $28.8 million secured loan with a combination of $52.1 million of cash on hand and funds drawn under our new line of credit (all of which was subsequently repaid). The repaid loans would have matured in 2013 and 2012 (including extensions), respectively, and were secured by mortgages on 11 hotels. In December 2012, we amended and restated our $225.0 million secured line of credit facility. The facility now matures in June 2017 (extended from August 2015), inclusive of a one-year extension option, subject to satisfaction of certain conditions. Borrowings under the facility bear interest at LIBOR (no floor) plus 3.375% (reduced from LIBOR plus 4.5%). The unused commitment fee decreased 10 basis points to 40 basis points. The facility is secured by mortgages and related security interests on nine hotels

In October 2011, we modified the term of a CMBS mortgage loan scheduled to mature in November 2011, extending its maturity for up to two years. The average interest rate on the modified loan was LIBOR plus 2.2% and was prepayable at any time, in whole or in part, with no penalty. In conjunction with the modification, we repaid $20.0 million of the principal balance, reducing the outstanding balance to $158 million at that time. This loan was repaid in September 2012.

In November 2012, we obtained an $85.0 million construction loan to finance the redevelopment of the Knickerbocker. The balance of the loan assumed when we acquired the Knickerbocker in December 2011 ($64.9 million) was repaid with an initial draw under the construction loan. At December 31, 2013, $64.9 million was outstanding under the construction loan, secured by cash collateral and a mortgage.

Our senior notes require that we satisfy total leverage, secured leverage and interest coverage thresholds in order to: (i) incur additional indebtedness except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions required to meet the REIT qualification test; (iii) repurchase capital stock; or (iv) merge. We currently exceed all minimum thresholds. These notes are guaranteed by us, and payment of our 10.00% notes are secured by a pledge of the limited partner interests in FelCor LP owned by FelCor. In addition, our senior notes are secured by a combination of first lien mortgages and related security interests and/or negative pledges on up to 26 hotels, and pledges of equity interests in certain subsidiaries of FelCor LP.

At December 31, 2013, we had consolidated secured debt totaling $1.7 billion, encumbering 46 of our consolidated hotels with a $1.6 billion aggregate net book value. Except in the case of our Senior Notes, our mortgage debt is generally recourse solely to the specific assets securing the debt. However, a violation of any of the recourse carve-out provisions, including fraud, misapplication of funds and other customary recourse carve-out provisions, could cause this debt to become fully recourse to us. Much of our hotel mortgage debt allows us to substitute collateral under certain conditions and is prepayable subject (in some instances) to various prepayment, yield maintenance or defeasance obligations.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.	Debt – (continued)

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

To fulfill requirements under certain loans, we owned interest rate caps with aggregate notional amounts of $202.4 million as of December 31, 2012. These interest rate caps were not designated as hedges and had insignificant fair values at December 31, 2012, resulting in no significant net earnings impact. We did not have any interest rate caps outstanding as of December 31, 2013.

We reported $103.8 million, $121.6 million, and $126.0 million of interest expense for the years ended December 31, 2013, 2012, and 2011, respectively, which is net of: (i) interest income of $78,000, $138,000, and $234,000, and (ii) capitalized interest of $12.8 million, $12.9 million, and $2.2 million, respectively.

Future scheduled principal payments on debt obligations at December 31, 2013 are as follows (in thousands):



Year
2014	$	300,045
2015	3,107
2016	164,322
2017	2,810
2018	2,954
Thereafter	1,194,702
	1,667,940
Discount accretion over term	(4,714		)
	$	1,663,226

11. Fair Value of Financial Instruments

Our estimates of the fair value of (i) cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximate carrying value due to the relatively short maturity of these instruments; (ii) our publicly-traded debt is based on observable market data (a Level 2 input) and has an estimated fair value of $1.3 billion at December 31, 2013 and 2012; and (iii) our debt that is not publicly-traded is based on a discounted cash flow model using effective borrowing rates for debt with similar terms, loan to estimated fair value of collateral and remaining maturities (a Level 3 input) and has an estimated fair value of $390.1 million and $369.6 million at December 31, 2013 and 2012, respectively. The estimated fair value of all our debt was $1.7 billion at December 31, 2013 and 2012 (with a carrying value of $1.7 billion and $1.6 billion at December 31, 2013 and 2012, respectively).

Disclosures about fair value of financial instruments are based on pertinent information available to management as of December 31, 2013. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize on disposition of the financial instruments. 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 AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.	Income Taxes

FelCor LP is a partnership for federal income tax purposes, and is not subject to federal income tax. However, under its partnership agreement, it is required to reimburse FelCor for any tax payments they are required to make. Accordingly, the tax information herein represents disclosures regarding FelCor and its taxable subsidiaries.

FelCor elected to be treated as a REIT under the federal income tax laws. As a REIT, FelCor generally is not subject to federal income taxation at the corporate level on taxable income that is distributed to its stockholders. FelCor may, however, be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income. FelCor’s taxable REIT subsidiaries, or TRSs, formed to lease its hotels are subject to federal, state and local income taxes. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its annual taxable income to its stockholders. If FelCor fails to qualify as a REIT in any taxable year for which the statute of limitations remains open, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) for such taxable year and may not qualify as a REIT for four subsequent years. In connection with FelCor’s election to be treated as a REIT, its charter imposes restrictions on the ownership and transfer of shares of its common stock. FelCor LP expects to make distributions on its units sufficient to enable FelCor to meet its distribution obligations as a REIT.

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.

The following table reconciles our TRSs’ GAAP net income (loss) to taxable income (loss) (in thousands):



	Year Ended December 31,
	2013			2012			2011
GAAP consolidated net loss attributable to FelCor LP	$	(62,001	)	$	(128,849	)	$	(130,543	)
Loss allocated to FelCor LP unitholders	497			842			689
GAAP consolidated net loss attributable to FelCor	(61,504		)	(128,007		)	(129,854		)
GAAP net loss from REIT operations	62,513			125,088			127,709
GAAP net income (loss) of taxable subsidiaries	1,009			(2,919		)	(2,145		)
Impairment loss not deductible for tax	—			—			946
Gain/loss differences from dispositions	—			(407		)	(7,841		)
Depreciation and amortization^(a)	1,646			404			1,389
Employee benefits not deductible for tax	3,914			363			(1,578		)
Management fee recognition	(1,245		)	(1,715		)	(1,717		)
Foreign exchange	—			12,907			—
Capitalized TRS start-up costs	4,981			—			—
Other book/tax differences	2,754			4,884			(552		)
Tax income (loss) of taxable subsidiaries before utilization of net operating losses	13,059			13,517			(11,498		)
Utilization of net operating loss	(13,059		)	(13,517		)	—
Net tax loss of taxable subsidiaries	—			$	—		$	(11,498	)


(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 AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Income Taxes — (continued)

Our TRS had a deferred tax asset, on which we had a 100% valuation allowance, primarily comprised of the following (in thousands):



	December 31,
	2013			2012
Accumulated net operating losses of TRS	$	119,355		$	124,318
Tax property basis in excess of book	1,017			869
Accrued employee benefits not deductible for tax	3,477			2,291
Management fee recognition	464			932
Foreign exchange	4,905			4,905
Capitalized TRS start-up costs	1,893			—
Other	701			914
Gross deferred tax asset	131,812			134,229
Valuation allowance	(131,812		)	(134,229		)
Deferred tax asset after valuation allowance	$	—		$	—

We have provided a valuation allowance against our deferred tax asset at December 31, 2013 and 2012, that results in no net deferred tax asset at December 31, 2013 and 2012 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, 2013, our TRS had net operating loss carryforwards for federal income tax purposes of $314.2 million, which are available to offset future taxable income, if any, and do not begin to expire until 2022.

The following table reconciles REIT GAAP net loss to taxable loss (in thousands):



	Year Ended December 31,
	2013			2012			2011
GAAP net loss from REIT operations	$	(62,513	)	$	(125,088	)	$	(127,709	)
Book/tax differences, net:
Depreciation and amortization^(a)	2,173			2,084			6,183
Noncontrolling interests	(4,017		)	4,112			4,149
Gain/loss differences from dispositions	(2,032		)	(30,747		)	(30,502		)
Impairment loss not deductible for tax	28,795			1,335			12,303
Conversion costs	(2,099		)	31,197			—
Other	8,453			(9,226		)	(1,974		)
Tax loss^(b)	$	(31,240	)	$	(126,333	)	$	(137,550	)


(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% of any taxable income.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Income Taxes — (continued)

At December 31, 2013, FelCor had net operating loss carryforwards for federal income tax purposes of $499.4 million, which it expects to use to offset future distribution requirements.

For income tax purposes, dividends paid consist of ordinary income, capital gains, return of capital or a combination thereof. Dividends paid per share were characterized as follows:




	2013				2012				2011
	Amount			%	Amount			%	Amount			%
Preferred Stock – Series A
Dividend income	$	—		—	$	—		—	$	—		—
Return of capital	1.95		^(c)	100.00	5.3625		^(b)	100.00	1.95		^(a)	100.00
	$	1.95		100.00	$	5.3625		100.00	$	1.95		100.00
Preferred Stock – Series C
Dividend income	$	—		—	$	—		—	$	—		—
Return of capital	2.00		^(c)	100.00	5.50		^(b)	100.00	2.00		^(a)	100.00
	$	2.00		100.00	$	5.50		100.00	$	2.00		100.00


(a)	Fourth quarter 2010 preferred distributions were paid January 31, 2011, and were treated as 2011 distributions for tax purposes.


(b)	Fourth quarter 2011 preferred distributions were paid January 31, 2012, and were treated as 2012 distributions for tax purposes.


(c)	Fourth quarter 2012 preferred distributions were paid January 31, 2013, and were treated as 2013 distributions for tax purposes.

13. FelCor Capital Stock/FelCor LP Partners' Capital

FelCor, as FelCor LP’s general partner, is obligated to contribute the net proceeds from any issuance of its equity securities to FelCor LP in exchange for units, corresponding in number and terms to the equity securities issued.

Preferred Stock/Units

FelCor’s 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.

Our Series A preferred stock (or units) bears an annual cumulative dividend (or distribution) payable in arrears equal to the greater of $1.95 per share (or unit) or the cash distributions declared or paid for the corresponding period on the number of shares of common stock (or units) into which the Series A preferred stock (or units) is then convertible. Each share (or unit) of the Series A preferred stock (or units) is convertible at the holder’s option to 0.7752 shares of common stock (or units), subject to certain adjustments.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. FelCor Capital Stock/FelCor LP Partners' Capital — (continued)

Our 8% Series C Cumulative Redeemable preferred stock (or units), or Series C preferred stock (or units), bears an annual cumulative dividend (or distribution) of 8% of the liquidation preference (equivalent to $2.00 per depositary share (or unit)). We may call the Series C preferred stock (or units) and the corresponding depositary shares (or units) at $25 per depositary share (or unit). These shares (or units) have no stated maturity, sinking fund or mandatory redemption, and are not convertible into any of our other securities. The Series C preferred stock (or units) has a liquidation preference of $2,500 per share (or unit) (equivalent to $25.00 per depositary share, or unit).

FelCor Common Stock Offerings

In April 2011, FelCor sold 27.6 million shares of its common stock at $6.00 per share in a public offering. The net proceeds from the offering were $158 million and were contributed to FelCor LP in exchange for a like number of common units. Net proceeds from this offering (after underwriting discounts and commissions) were used to redeem $144 million of our 10% senior notes.

14. Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units

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

In May 2011, FelCor LP issued 367,647 limited partnership units at $6.80 per unit. At December 31, 2013, we carried these units at $3.0 million and the remaining 249,895 outstanding limited partnership units were carried at $2.0 million. The current value of the outstanding units is based on the closing price of FelCor’s common stock at December 31, 2013 ($8.16/share).

Changes in redeemable noncontrolling interests (or redeemable units) are shown below (in thousands):



	Year Ended December 31,
	2013			2012
Balance at beginning of period	$	2,902		$	3,026
Conversion of units	(23		)	(45		)
Forfeiture of units	—			(15		)
Redemption value allocation	2,663			776
Comprehensive loss:
Foreign exchange translation	(6		)	2
Net loss	(497		)	(842		)
Balance at end of period	$	5,039		$	2,902

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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



	Year Ended December 31,
	2013		2012		2011
Room revenue	$	692,016	$	667,708	$	623,308
Food and beverage revenue	151,233		142,962		133,231
Other operating departments	46,757		48,271		49,002
Total hotel operating revenue	$	890,006	$	858,941	$	805,541

Nearly 100% of our revenue in all periods presented 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 condominium management fee income and other sources.

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



	Year Ended December 31,
	2013		2012		2011
Room	$	184,840	$	179,602	$	168,546
Food and beverage	120,287		114,815		106,131
Other operating departments	21,954		21,682		22,583
Total hotel departmental expenses	$	327,081	$	316,099	$	297,260

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



	Year Ended December 31,
	2013		2012		2011
Hotel general and administrative expense	$	80,715	$	78,280	$	73,903
Marketing	74,770		72,342		66,684
Repair and maintenance	45,057		44,319		41,573
Utilities	37,573		36,988		38,819
Total other property operating costs	$	238,115	$	231,929	$	220,979

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

In March 2013, we rebranded and transitioned management at eight core Holiday Inn hotels located in strategic markets to Wyndham brands. Wyndham's parent guaranteed a minimum level of net operating income for each year of the initial 10-year term, subject to an aggregate $100 million limit over the term and an annual $21.5 million limit. Amounts recorded under the guaranty will be accounted for, to the extent available, as a reduction in contractual management and other fees paid and payable to Wyndham. Any amounts in excess of those fees will be recorded as revenue when earned. For March through December 2013 (the first ten months during which Wyndham managed the hotels for FelCor), we have recorded an $8 million guaranty as a reduction of Wyndham's contractual management and other fees.


16.	Taxes, Insurance and Lease Expenses

Taxes, insurance and lease expenses from continuing operations were comprised of the following

(in thousands):



	Year Ended December 31,
	2013		2012		2011
Hotel lease expense^(a)	$	44,087	$	41,342	$	38,759
Land lease expense^(b)	11,062		11,158		10,582
Real estate and other taxes	30,977		29,974		26,454
Property insurance, general liability insurance and other	10,068		9,692		7,332
Total taxes, insurance and lease expense	$	96,194	$	92,166	$	83,127

(a)

Hotel lease expense is recorded by the consolidated operating lessees of 12 hotels owned by unconsolidated entities, and is partially (generally 49%) offset through noncontrolling interests in other partnerships. Our 50% share of the corresponding lease income is recorded through equity in income from unconsolidated entities. Hotel lease expense includes percentage rent of $22.2 million, $19.6 million and $17.3 million for the year ended December 31, 2013, 2012, and 2011, respectively.


(b)	Land lease expense includes percentage rent of $5.4 million, $5.5 million and $4.7 million for the year ended December 31, 2013, 2012, and 2011, respectively.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Land Leases and Hotel Rent

We lease land occupied by certain hotels from third parties under various operating leases that expire through 2101. Certain land leases contain contingent rent features based on gross revenue at the respective hotels. In addition, we recognize rent expense for 12 hotels that are owned by unconsolidated entities and are leased to our consolidated lessees. These leases 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, 2013, were as follows (in thousands):



Year
2014	$	23,001
2015	20,943
2016	17,856
2017	7,928
2018	5,577
2019 and thereafter	265,632
	$	340,937

18. Loss Per Share/Unit

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

FelCor Loss Per Share



	Year Ended December 31,
	2013			2012			2011
Numerator:
Net loss attributable to FelCor	$	(61,504	)	$	(128,007	)	$	(129,854	)
Discontinued operations attributable to FelCor	(16,963		)	(57,515		)	(2,673		)
Loss from continuing operations attributable to FelCor	(78,467		)	(185,522		)	(132,527		)
Less: Preferred dividends	(38,713		)	(38,713		)	(38,713		)
Loss from continuing operations attributable to FelCor common stockholders	(117,180		)	(224,235		)	(171,240		)
Discontinued operations attributable to FelCor	16,963			57,515			2,673
Numerator for basic and diluted loss attributable to FelCor common stockholders	$	(100,217	)	$	(166,720	)	$	(168,567	)
Denominator:
Denominator for basic and diluted loss per share	123,818			123,634			117,068
Basic and diluted loss per share data:
Loss from continuing operations	$	(0.95	)	$	(1.81	)	$	(1.46	)
Discontinued operations	$	0.14		$	0.47		$	0.02
Net loss	$	(0.81	)	$	(1.35	)	$	(1.44	)

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Loss Per Share/Unit — (continued)

FelCor LP Loss Per Unit

The following table sets forth the computation of basic and diluted loss per unit (in thousands, except per unit data):



	Year Ended December 31,
	2013			2012			2011
Numerator:
Net loss attributable to FelCor LP	$	(62,001	)	$	(128,849	)	$	(130,543	)
Discontinued operations attributable to FelCor LP	(17,047		)	(57,804		)	(2,674		)
Loss from continuing operations attributable to FelCor LP	(79,048		)	(186,653		)	(133,217		)
Less: Preferred distributions	(38,713		)	(38,713		)	(38,713		)
Loss from continuing operations attributable to FelCor LP common unitholders	(117,761		)	(225,366		)	(171,930		)
Discontinued operations attributable to FelCor LP	17,047			57,804			2,674
Numerator for basic and diluted loss attributable to FelCor LP common unitholders	$	(100,714	)	$	(167,562	)	$	(169,256	)
Denominator:
Denominator for basic and diluted loss per unit	124,437			124,262			117,567
Basic and diluted loss per unit data:
Loss from continuing operations	$	(0.95	)	$	(1.81	)	$	(1.46	)
Discontinued operations	$	0.14		$	0.47		$	0.02
Net loss	$	(0.81	)	$	(1.35	)	$	(1.44	)

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



	Year Ended December 31,
	2013	2012	2011
Series A convertible preferred shares/units	9,985	9,985	9,985
FelCor restricted stock units	547	—	—

Series A preferred dividends (or distributions) that would be excluded from net income (loss) available to FelCor common stockholders (or FelCor LP common unitholders), if the Series A preferred shares/units were dilutive, were $25.1 million for all periods presented.

In February 2013, our executive officers were granted restricted stock units providing them with the potential to earn up to 1,250,000 common shares. The potential impact of these restricted stock units on our earnings per share, had they been dilutive, was calculated using the treasury stock method.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Commitments, Contingencies and Related Party Transactions

Our property insurance has a $100,000 “all-risk” deductible and, a 5% deductible (insured value) for named windstorm coverage and for California earthquake coverage. Substantial uninsured or not fully-insured losses would have a material adverse impact on our operating results, cash flows and financial condition. Catastrophic losses, such as the losses caused by hurricanes in 2005, could make the cost of insuring against these types of losses prohibitively expensive or difficult to find. In an effort to limit the cost of insurance, we purchase catastrophic insurance coverage based on probable maximum losses based on 250-year events and have only purchased terrorism insurance to the extent required by our lenders. We have established a self-insured retention of $250,000 per occurrence for general liability insurance with regard to 47 of our hotels. The remainder of our hotels participate in general liability programs sponsored by our managers, with no deductible.

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 minimum base management fees, which generally range from 1 – 3% of total revenue, with the exception of our IHG-managed hotels, whose base management fees are 2% of total revenue plus 5% of room revenue. Most of our management agreements also allow for incentive management fees that are subordinated to our return on investment and are generally capped at 2 to 3% of total revenue. In addition, the management agreements generally require us to invest approximately 3 to 5% of revenues for capital expenditures. The management agreements have terms from 5 to 20 years and generally have renewal options.

The management agreements governing the operations of 27 of our Consolidated Hotels contain the right and license to operate the hotel under the specified brands. The remaining 32 Consolidated Hotels operate under franchise or license agreements that are separate from our management agreements. Typically, our franchise or license agreements provide for a license fee or royalty of 4% to 5% of room revenues. In the event we breach one of these agreements, in addition to losing the right to use the brand 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.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Supplemental Cash Flow Disclosure

In 2013, 2012 and 2011, we allocated $23,000, $44,500 and $97,000 respectively, of noncontrolling interests to additional paid-in capital with regard to the exchange of 3,839, 11,473 and 15,947 units, respectively, for common stock. In addition, in 2012, we received 3,571 units as payment for amounts owed to us by a unit holder.

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



	Year Ended December 31,
	2013		2012		2011
Depreciation and amortization from continuing operations	$	119,624	$	116,384	$	110,498
Depreciation and amortization from discontinued operations	4,923		13,102		28,394
Total depreciation and amortization expense	$	124,547	$	129,486	$	138,892

For the year ended December 31, 2013, our repayment of borrowings consisted of payments on our line of credit of $132.0 million and normal recurring principal payments of $4.9 million.

For the year ended December 31, 2012, our repayment of borrowings consisted of debt retirement of $828.0 million, payments on our line of credit of $192.0 million and normal recurring principal payments of $23.3 million.

For the year ended December 31, 2011, our repayment of borrowings consisted of debt retirement of $983.4 million, payments on our line of credit of $145.0 million and normal recurring principal payments of $7.4 million.

For the years ended December 31, 2013, 2012, and 2011, the changes in accrued expenses and other liabilities related to investment in hotels and hotel development were an increase of $11.0 million, a decrease of $3.1 million, and an increase of $6.1 million, respectively.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. FelCor Stock Based Compensation Plans

FelCor sponsors one restricted stock and stock option plan, or the Plan. FelCor is authorized to issue up to 6,000,000 shares of common stock under the Plan pursuant to awards granted in the form of incentive stock options, non-qualified stock options, and restricted stock. Stock grants vest either over three to five years in equal annual installments or over a four year schedule, subject to time-based and performance-based vesting. There were 2,073,587 shares available for grant under the Plan at December 31, 2013.

FelCor Restricted Stock and Restricted Stock Units

A summary of the status of FelCor’s restricted stock and restricted stock unit grants as of December 31, 2013, 2012 and 2011, and the changes during these years is presented below:



	2013				2012				2011
	Shares		Weighted Average Fair Market Value at Grant		Shares		Weighted Average Fair Market Value at Grant		Shares		Weighted Average Fair Market Value at Grant
Outstanding at beginning of the year	4,239,825		$	10.45	4,290,318		$	10.58	4,200,089		$	10.69
Granted:
With immediate vesting^(a)	—		$	—	—		$	—	95,000		$	5.85
With 5-year pro rata vesting	15,000		$	6.13	10,000		$	4.40	—		$	—
With up to 4-year pro rata vesting	1,250,000		$	4.09	—		$	—	—		$	—
Forfeited	—				(60,493	)	$	18.60	(4,771	)	$	12.20
Outstanding at end of year	5,504,825		$	9.00	4,239,825		$	10.45	4,290,318		$	10.58
Vested at end of year	(4,234,825	)	$	10.46	(3,936,492	)	$	10.97	(3,632,564	)	$	11.54
Unvested at end of year	1,270,000		$	4.12	303,333		$	3.71	657,754		$	5.30


(a)	Shares awarded to directors.

The unearned compensation cost of FelCor’s granted but unvested restricted stock and units as of December 31, 2013 was $2.6 million. The weighted average period over which this cost is to be amortized is approximately one year.

In February 2013, our executive officers were granted restricted stock units providing them with the potential to earn up to 1,250,000 common shares, collectively, vesting in three increments over four years, based on total stockholder return relative to a group of 10 lodging REIT peers. The fixed cost of these grants is amortized over the vesting period. The February 2013 grant also provides that to the extent any of these executive officers earn more than 250,000 shares upon vesting of this grant, the excess is settled in cash. To the extent there is excess likely to settle in cash, these awards are accounted for as liability awards, the fair value of which is remeasured at the end of each reporting period. The liability accrued for these awards as of December 31, 2013 was $1.0 million. Fair estimates are based on a Monte Carlo simulation.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. Employee Benefits

FelCor offers a 401(k) retirement savings plan and health insurance benefits to its employees. FelCor’s matching contribution to its 401(k) plan totaled $943,000 during 2013, $956,000 during 2012 and $1.0 million for 2011. Health insurance benefits cost $1.1 million for fiscal years ended December 31, 2013, 2012 and 2011.

FelCor LP has no employees, and FelCor, as FelCor LP’s sole general partner, performs FelCor LP’s management functions.

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.

23. Segment Information

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 from continuing operations and investment in hotel assets represented by the following geographical areas (in thousands):



	Revenue For the Year Ended December 31,						Investment in Hotel Assets as of December 31,
	2013		2012		2011		2013		2012		2011
California	$	257,418	$	241,892	$	224,117	$	468,033	$	480,982	$	496,426
Florida	124,142		119,841		112,854		244,104		264,248		318,430
Texas	78,287		75,906		73,014		95,910		104,641		128,749
Georgia	35,977		35,408		34,012		44,585		100,541		105,526
Other states	382,926		374,168		348,893		786,227		827,366		886,127
Canada	14,686		14,911		15,600		14,408		16,786		18,537
Total	$	893,436	$	862,126	$	808,490	$	1,653,267	$	1,794,564	$	1,953,795

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. Quarterly Operating Results (unaudited)

Our unaudited consolidated quarterly operating data for the years ended December 31, 2013 and 2012 follows (in thousands, except per share/unit 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. The quarterly results reflect properties no longer owned as discontinued operations for all periods presented. 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 (or partners’ capital) and cash flows for a period of several years.

FelCor



2013	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total revenues	$	208,937		$	239,856		$	230,429		$	214,214
Loss from continuing operations	$	(27,458	)	$	(28,915	)	$	(8,158	)	$	(19,262	)
Discontinued operations	$	853		$	6,120		$	11,947		$	(910	)
Net income (loss) attributable to FelCor	$	(26,185	)	$	(18,683	)	$	3,230		$	(19,866	)
Net loss attributable to FelCor common stockholders	$	(35,863	)	$	(28,361	)	$	(6,448	)	$	(29,545	)
Comprehensive income (loss) attributable to FelCor	$	(26,540	)	$	(19,247	)	$	3,557		$	(20,376	)
Basic and diluted per common share data:
Net loss from continuing operations	$	(0.30	)	$	(0.28	)	$	(0.14	)	$	(0.23	)
Discontinued operations	$	0.01		$	0.05		$	0.09		$	(0.01	)
Net loss	$	(0.29	)	$	(0.23	)	$	(0.05	)	$	(0.24	)
Basic weighted average common shares outstanding	123,814			123,814			123,817			123,827
Diluted weighted average common shares outstanding	123,814			123,814			123,817			123,827



2012	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total revenues	$	196,376		$	232,464		$	222,326		$	210,960
Loss from continuing operations	$	(33,027	)	$	(5,582	)	$	(27,595	)	$	(121,107	)
Discontinued operations	$	4,166		$	17,610		$	8,040		$	28,081
Net income (loss) attributable to FelCor	$	(28,463	)	$	11,869		$	(19,025	)	$	(92,388	)
Net income (loss) attributable to FelCor common stockholders	$	(38,141	)	$	2,191		$	(28,703	)	$	(102,067	)
Comprehensive income (loss) attributable to FelCor	$	(28,157	)	$	11,554		$	(18,526	)	$	(92,577	)
Basic and diluted per common share data:
Net loss from continuing operations	$	(0.34	)	$	(0.12	)	$	(0.30	)	$	(1.05	)
Discontinued operations	$	0.03		$	0.14		$	0.06		$	0.23
Net income (loss)	$	(0.31	)	$	0.02		$	(0.23	)	$	(0.83	)
Basic weighted average common shares outstanding	123,665			123,638			123,640			123,635
Diluted weighted average common shares outstanding	123,665			123,638			123,640			123,635

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. Quarterly Operating Results (unaudited) – (continued)

FelCor LP



2013	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total revenues	$	208,937		$	239,856		$	230,429		$	214,214
Loss from continuing operations	$	(27,458	)	$	(28,915	)	$	(8,158	)	$	(19,262	)
Discontinued operations	$	853		$	6,120		$	11,947		$	(910	)
Net income (loss) attributable to FelCor LP	$	(26,365	)	$	(18,823	)	$	3,198		$	(20,011	)
Net loss attributable to FelCor LP common unitholders	$	(36,043	)	$	(28,501	)	$	(6,480	)	$	(29,690	)
Comprehensive income (loss) attributable to FelCor LP	$	(26,722	)	$	(19,390	)	$	3,527		$	(20,524	)
Basic and diluted per common unit data:
Net loss from continuing operations	$	(0.30	)	$	(0.28	)	$	(0.14	)	$	(0.23	)
Discontinued operations	$	0.01		$	0.05		$	0.09		$	(0.01	)
Net loss	$	(0.29	)	$	(0.23	)	$	(0.05	)	$	(0.24	)
Basic weighted average common units outstanding	124,435			124,435			124,435			124,444
Diluted weighted average common units outstanding	124,435			124,435			124,435			124,444



2012	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total revenues	$	196,376		$	232,464		$	222,326		$	210,960
Loss from continuing operations	$	(33,027	)	$	(5,582	)	$	(27,595	)	$	(121,107	)
Discontinued operations	$	4,166		$	17,610		$	8,040		$	28,081
Net income (loss) attributable to FelCor LP	$	(28,659	)	$	11,880		$	(19,169	)	$	(92,901	)
Net income (loss) attributable to FelCor LP common unitholders	$	(38,337	)	$	2,202		$	(28,847	)	$	(102,580	)
Comprehensive income (loss) attributable to FelCor LP	$	(28,351	)	$	11,563		$	(18,667	)	$	(93,091	)
Basic and diluted per common unit data:
Net loss from continuing operations	$	(0.34	)	$	(0.12	)	$	(0.30	)	$	(1.05	)
Discontinued operations	$	0.03		$	0.14		$	0.06		$	0.23
Net income (loss)	$	(0.31	)	$	0.02		$	(0.23	)	$	(0.83	)
Basic weighted average common units outstanding	124,301			124,266			124,266			124,257
Diluted weighted average common units outstanding	124,301			124,266			124,266			124,257

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information

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

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

In the third quarter of 2013, we revised FelCor LP’s Consolidating Financial Information related to (1) the presentation of intercompany notes between a Subsidiary Guarantor, a Non-Guarantor Subsidiary, and FelCor LP and (2) the presentation of accumulated other comprehensive income and the related foreign currency translation adjustment. Certain intercompany notes owed by a Subsidiary Guarantor to one of the Non-Guarantor Subsidiaries were historically included within equity as a component of common units. These amounts have been reclassified to properly reflect the notes as intercompany debt in the consolidating balance sheet of the Subsidiary Guarantor and as other assets in the consolidating balance sheet of the Non-Guarantor Subsidiary. Additionally, FelCor LP had historically presented the accumulated other comprehensive income related to its subsidiaries within common units of FelCor LP. These amounts were reclassified to properly state accumulated other comprehensive income as a separate component of FelCor LP’s equity in the consolidating balance sheet. Similarly, the related foreign currency translation adjustment was added as a foreign currency translation adjustment to FelCor LP in the consolidating statement of comprehensive income.

The quantitative impacts of this revision on the condensed consolidating financial information as of December 31, 2012 and for the years ended December 31, 2012 and 2011 are described in Note 11 to Felcor's September 30, 2013 Form 10-Q. Management evaluated the impact of the above corrections on all previously issued condensed consolidating financial statements and concluded the impact was not material.

The following tables present consolidating information for the Subsidiary Guarantors.

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATING BALANCE SHEET

December 31, 2013

(in thousands



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Net investment in hotels	$	48,971		$	1,053,724		$	550,572	$	—		$	1,653,267
Hotel development	—			—			216,747		—			216,747
Equity investment in consolidated entities	1,508,593			—			—		(1,508,593		)	—
Investment in unconsolidated entities	34,090			11,497			1,356		—			46,943
Hotel held for sale	—			—			16,319		—			16,319
Cash and cash equivalents	5,227			33,283			7,135		—			45,645
Restricted cash	—			9,051			68,176		—			77,227
Accounts receivable, net	516			34,366			865		—			35,747
Deferred expenses, net	20,540			—			8,785		—			29,325
Other assets	6,248			10,767			17,998		(11,953		)	23,060
Total assets	$	1,624,185		$	1,152,688		$	887,953	$	(1,520,546	)	$	2,144,280

Debt, net	$	1,279,190		$	11,953		$	464,036	$	(91,953	)	$	1,663,226
Distributions payable	11,047			—			—		—			11,047
Accrued expenses and other liabilities	37,980			96,494			16,264		—			150,738

Total liabilities	1,328,217			108,447			480,300		(91,953		)	1,825,011

Redeemable units, at redemption value	5,039			—			—		—			5,039

Preferred units	478,774			—			—		—			478,774
Common units	(212,888		)	1,039,903			363,647		(1,403,550		)	(212,888		)
Accumulated other comprehensive income	25,043			4,569			20,474		(25,043		)	25,043
Total FelCor LP partners’ capital	290,929			1,044,472			384,121		(1,428,593		)	290,929
Noncontrolling interests	—			(231		)	23,532		—			23,301
Total partners’ capital	290,929			1,044,241			407,653		(1,428,593		)	314,230
Total liabilities and partners’ capital	$	1,624,185		$	1,152,688		$	887,953	$	(1,520,546	)	$	2,144,280

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONSOLIDATING BALANCE SHEET

December 31, 2012

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
Net investment in hotels	$	66,945		$	1,102,262		$	625,357	$	—		$	1,794,564
Hotel development	—			—			146,079		—			146,079
Equity investment in consolidated entities	1,551,377			—			—		(1,551,377		)	—
Investment in unconsolidated entities	42,508			11,173			1,401		—			55,082
Cash and cash equivalents	8,312			30,425			7,008		—			45,745
Restricted cash	—			9,186			68,741		—			77,927
Accounts receivable, net	96			24,432			855		—			25,383
Deferred expenses, net	22,657			—			11,605		—			34,262
Other assets	8,122			10,322			16,187		(11,240		)	23,391
Total assets	$	1,700,017		$	1,187,800		$	877,233	$	(1,562,617	)	$	2,202,433

Debt, net	$	1,273,587		$	11,240		$	356,938	$	(11,240	)	$	1,630,525
Distributions payable	8,545			—			—		—			8,545
Accrued expenses and other liabilities	20,316			95,986			22,140		—			138,442

Total liabilities	1,302,448			107,226			379,078		(11,240		)	1,777,512

Redeemable units, at redemption value	2,902			—			—		—			2,902

Preferred units	478,774			—			—		—			478,774
Common units	(110,258		)	1,076,067			449,159		(1,525,226		)	(110,258		)
Accumulated other comprehensive income	26,151			4,782			21,369		(26,151		)	26,151
Total FelCor LP partners’ capital	394,667			1,080,849			470,528		(1,551,377		)	394,667
Noncontrolling interests	—			(275		)	27,627		—			27,352
Total partners’ capital	394,667			1,080,574			498,155		(1,551,377		)	422,019
Total liabilities and partners’ capital	$	1,700,017		$	1,187,800		$	877,233	$	(1,562,617	)	$	2,202,433

100

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2013

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Hotel operating revenue	$	—		$	890,006		$	—		$	—		$	890,006
Percentage lease revenue	5,041			—			62,903			(67,944		)	—
Other revenue	9			2,976			445			—			3,430
Total revenue	5,050			892,982			63,348			(67,944		)	893,436

Expenses:
Hotel operating expenses	—			600,931			—			—			600,931
Taxes, insurance and lease expense	2,078			148,932			13,128			(67,944		)	96,194
Corporate expenses	553			17,966			8,477			—			26,996
Depreciation and amortization	4,438			71,898			43,288			—			119,624
Impairment loss	14,294			—			10,147			—			24,441
Conversion expenses	23			666			445			—			1,134
Other expenses	3,179			3,166			2,404			—			8,749
Total operating expenses	24,565			843,559			77,889			(67,944		)	878,069
Operating income	(19,515		)	49,423			(14,541		)	—			15,367
Interest expense, net	(84,206		)	(1,270		)	(18,311		)	—			(103,787		)
Gain on involuntary conversion, net	—			—			41			—			41
Loss before equity in income from unconsolidated entities	(103,721		)	48,153			(32,811		)	—			(88,379		)
Equity in income from consolidated entities	40,276			—			—			(40,276		)	—
Equity in income from unconsolidated entities	4,183			449			(46		)	—			4,586
Loss from continuing operations	(59,262		)	48,602			(32,857		)	(40,276		)	(83,793		)
Income from discontinued operations	(2,739		)	1,842			18,907			—			18,010
Net loss	(62,001		)	50,444			(13,950		)	(40,276		)	(65,783		)
Loss attributable to noncontrolling interests	—			788			2,994			—			3,782
Net loss attributable to FelCor LP	(62,001		)	51,232			(10,956		)	(40,276		)	(62,001		)
Preferred distributions	(38,713		)	—			—			—			(38,713		)
Net loss attributable to FelCor LP common unitholders	$	(100,714	)	$	51,232		$	(10,956	)	$	(40,276	)	$	(100,714	)

101

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2012

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Hotel operating revenue	$	—		$	858,941		$	—		$	—		$	858,941
Percentage lease revenue	5,160			—			71,858			(77,018		)	—
Other revenue	21			2,752			412			—			3,185
Total revenue	5,181			861,693			72,270			(77,018		)	862,126

Expenses:
Hotel operating expenses	—			587,813			—			—			587,813
Taxes, insurance and lease expense	1,424			153,444			14,316			(77,018		)	92,166
Corporate expenses	533			17,015			8,580			—			26,128
Depreciation and amortization	4,778			63,533			48,073			—			116,384
Conversion expenses	487			14,210			16,500			—			31,197
Other expenses	685			3,375			566			—			4,626
Total operating expenses	7,907			839,390			88,035			(77,018		)	858,314
Operating income	(2,726		)	22,303			(15,765		)	—			3,812
Interest expense, net	(86,617		)	(16,052		)	(18,883		)	—			(121,552		)
Debt extinguishment	(55,056		)	(6,395		)	(10,899		)	—			(72,350		)
Loss before equity in income from unconsolidated entities	(144,399		)	(144		)	(45,547		)	—			(190,090		)
Equity in income from consolidated entities	13,038			—			—			(13,038		)	—
Equity in income from unconsolidated entities	2,589			236			(46		)	—			2,779
Loss from continuing operations	(128,772		)	92			(45,593		)	(13,038		)	(187,311		)
Income from discontinued operations	(77		)	(9,745		)	67,719			—			57,897
Net loss	(128,849		)	(9,653		)	22,126			(13,038		)	(129,414		)
Loss attributable to noncontrolling interests	—			779			(214		)	—			565
Net loss attributable to FelCor LP	(128,849		)	(8,874		)	21,912			(13,038		)	(128,849		)
Preferred distributions	(38,713		)	—			—			—			(38,713		)
Net loss attributable to FelCor LP common unitholders	$	(167,562	)	$	(8,874	)	$	21,912		$	(13,038	)	$	(167,562	)

102

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2011

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Hotel operating revenue	$	—		$	805,541		$	—		$	—		$	805,541
Percentage lease revenue	4,787			—			62,569			(67,356		)	—
Other revenue	10			2,593			346			—			2,949
Total revenue	4,797			808,134			62,915			(67,356		)	808,490
Expenses:
Hotel operating expenses	—			555,615			—			—			555,615
Taxes, insurance and lease expense	1,593			135,131			13,759			(67,356		)	83,127
Corporate expenses	291			17,719			11,070			—			29,080
Depreciation and amortization	4,590			59,044			46,864			—			110,498
Impairment loss	—			4,315			—			—			4,315
Other expenses	122			3,674			221			—			4,017
Total operating expenses	6,596			775,498			71,914			(67,356		)	786,652
Operating income	(1,799		)	32,636			(8,999		)	—			21,838
Interest expense, net	(90,543		)	(17,517		)	(17,984		)	—			(126,044		)
Debt extinguishment	(27,354		)	(16		)	(270		)	—			(27,640		)
Gain on involuntary conversion, net	(21		)	316			—			—			295
Loss before equity in loss from unconsolidated entities	(119,717		)	15,419			(27,253		)	—			(131,551		)
Equity in loss from consolidated entities	(10,099		)	—			—			10,099			—
Equity in loss from unconsolidated entities	(1,590		)	(432		)	(46		)	—			(2,068		)
Loss from continuing operations	(131,406		)	14,987			(27,299		)	10,099			(133,619		)
Income from discontinued operations	863			(18,919		)	20,780			—			2,724
Net loss	(130,543		)	(3,932		)	(6,519		)	10,099			(130,895		)
Loss attributable to noncontrolling interests	—			367			(15		)	—			352
Net loss attributable to FelCor LP	(130,543		)	(3,565		)	(6,534		)	10,099			(130,543		)
Preferred distributions	(38,713		)	—			—			—			(38,713		)
Net loss attributable to FelCor LP common unitholders	$	(169,256	)	$	(3,565	)	$	(6,534	)	$	10,099		$	(169,256	)

103

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS

For the Year Ended December 31, 2013

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(62,001	)	$	50,444		$	(13,950	)	$	(40,276	)	$	(65,783	)
Foreign currency translation adjustment	(1,108		)	(213		)	(895		)	1,108			(1,108		)
Comprehensive loss	(63,109		)	50,231			(14,845		)	(39,168		)	(66,891		)
Comprehensive loss attributable to noncontrolling interests	—			788			2,994			—			3,782
Comprehensive loss attributable to FelCor LP	$	(63,109	)	$	51,019		$	(11,851	)	$	(39,168	)	$	(63,109	)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS

For the Year Ended December 31, 2012

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(128,849	)	$	(9,653	)	$	22,126		$	(13,038	)	$	(129,414	)
Foreign currency translation adjustment	303			16			287			(303		)	303
Comprehensive loss	(128,546		)	(9,637		)	22,413			(13,341		)	(129,111		)
Comprehensive loss attributable to noncontrolling interests	—			779			(214		)	—			565
Comprehensive loss attributable to FelCor LP	$	(128,546	)	$	(8,858	)	$	22,199		$	(13,341	)	$	(128,546	)

104

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS

For the Year Ended December 31, 2011

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Net loss	$	(130,543	)	$	(3,932	)	$	(6,519	)	$	10,099	$	(130,895	)
Foreign currency translation adjustment	(726		)	45			(771		)	726		(726		)
Comprehensive loss	(131,269		)	(3,887		)	(7,290		)	10,825		(131,621		)
Comprehensive loss attributable to noncontrolling interests	—			367			(15		)	—		352
Comprehensive loss attributable to FelCor LP	$	(131,269	)	$	(3,520	)	$	(7,305	)	$	10,825	$	(131,269	)

105

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2013

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Operating activities:
Cash flows from operating activities	$	(55,959	)	$	114,777		$	9,643		$	—		$	68,461
Investing activities:
Improvements and additions to hotels	2,383			(61,239		)	(42,501		)	—			(101,357		)
Hotel development	—			—			(60,553		)	—			(60,553		)
Net proceeds from asset dispositions	9,650			17,750			71,420			—			98,820
Distributions from unconsolidated entities	8,159			1,625			—			—			9,784
Contributions to unconsolidated entities	—			(1,500		)	—			—			(1,500		)
Intercompany financing	73,730			—			—			(73,730		)	—
Other	—			239			699			—			938
Cash flows from investing activities	93,922			(43,125		)	(30,935		)	(73,730		)	(53,868		)
Financing activities:
Proceeds from borrowings	—			—			164,000			—			164,000
Repayment of borrowings	—			—			(136,902		)	—			(136,902		)
Distributions paid to preferred unitholders	(38,713		)	—			—			—			(38,713		)
Intercompany financing	—			(69,561		)	(4,169		)	73,730			—
Other	(2,335		)	832			(1,510		)	—			(3,013		)
Cash flows from financing activities	(41,048		)	(68,729		)	21,419			73,730			(14,628		)
Effect of exchange rate changes on cash	—			(65		)	—			—			(65		)
Change in cash and cash equivalents	(3,085		)	2,858			127			—			(100		)
Cash and cash equivalents at beginning of period	8,312			30,425			7,008			—			45,745
Cash and cash equivalents at end of period	$	5,227		$	33,283		$	7,135		$	—		$	45,645

106

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2012

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Operating activities:
Cash flows from operating activities	$	(82,558	)	$	69,045		$	60,822		$	—		$	47,309
Investing activities:
Improvements and additions to hotels	(7,760		)	(79,696		)	(34,019		)	—			(121,475		)
Hotel development	—			—			(24,849		)	—			(24,849		)
Net proceeds from asset dispositions	(14		)	4,236			193,391			—			197,613
Distributions from unconsolidated entities	12,914			625			—			—			13,539
Intercompany financing	(49,051		)	—			—			49,051			—
Other	—			5,285			1,028			—			6,313
Cash flows from investing activities	(43,911		)	(69,550		)	135,551			49,051			71,141
Financing activities:
Proceeds from borrowings	525,000			—			473,611			—			998,611
Repayment of borrowings	(299,542		)	(208,027		)	(535,796		)	—			(1,043,365		)
Payment of deferred financing costs	(7,719		)	(26		)	(10,125		)	—			(17,870		)
Distributions paid to preferred unitholders	(106,461		)	—			—			—			(106,461		)
Intercompany financing	—			169,919			(120,868		)	(49,051		)	—
Other	—			2,001			559			—			2,560
Cash flows from financing activities	111,278			(36,133		)	(192,619		)	(49,051		)	(166,525		)
Effect of exchange rate changes on cash	—			62			—			—			62
Change in cash and cash equivalents	(15,191		)	(36,576		)	3,754			—			(48,013		)
Cash and cash equivalents at beginning of period	23,503			67,001			3,254			—			93,758
Cash and cash equivalents at end of period	$	8,312		$	30,425		$	7,008		$	—		$	45,745

107

FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


25.	FelCor LP's Consolidating Financial Information — (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2011

(in thousands)



	FelCor LP			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Operating activities:
Cash flows from operating activities	$	(84,572	)	$	66,994		$	63,443		$	—		$	45,865
Investing activities:
Acquisition of hotels	—			(137,985		)	—			—			(137,985		)
Improvements and additions to hotels	(3,810		)	(45,005		)	(40,227		)	—			(89,042		)
Hotel development	—			—			(119,611		)	—			(119,611		)
Net proceeds from asset dispositions	14,132			22,258			96,384			—			132,774
Intercompany financing	(458,506		)	—			—			458,506			—
Other	1,488			(3,171		)	3,127			—			1,444
Cash flows from investing activities	(446,696		)	(163,903		)	(60,327		)	458,506			(212,420		)
Financing activities:
Proceeds from borrowings	525,000			—			562,285			—			1,087,285
Repayment of borrowings	(233,761		)	(1,517		)	(900,544		)	—			(1,135,822		)
Payment of deferred financing costs	(14,081		)	(10		)	(6,142		)	—			(20,233		)
Distributions paid to preferred unitholders	(38,713		)	—			—			—			(38,713		)
Net proceeds from common unit issuance	158,476			—			—			—			158,476
Contributions from noncontrolling interests	—			425			6,542			—			6,967
Intercompany financing	—			122,484			336,022			(458,506		)	—
Other	2,500			(1,053		)	—			—			1,447
Cash flows from financing activities	399,421			120,329			(1,837		)	(458,506		)	59,407
Effect of exchange rate changes on cash	—			(66		)	—			—			(66		)
Change in cash and cash equivalents	(131,847		)	23,354			1,279			—			(107,214		)
Cash and cash equivalents at beginning of period	155,350			43,647			1,975			—			200,972
Cash and cash equivalents at end of period	$	23,503		$	67,001		$	3,254		$	—		$	93,758

108

FELCOR LODGING TRUST INCORPORATED and FELCOR LODGING LIMITED PARTNERSHIP

Schedule III – Real Estate and Accumulated Depreciation

as of December 31, 2013

(in thousands)



			Initial Cost				Cost Capitalized Subsequent to Acquisition					Gross Amounts at Which Carried at Close of Period						Accumulated Depreciation Buildings & Improvements				Life Upon Which Depreciation is Computed
Location	Encumbrances		Land		Building and Improvements		Land			Building and Improvements		Land		Building and Improvements		Total		Accumulated Depreciation Buildings & Improvements		Year Opened	Date Acquired	Life Upon Which Depreciation is Computed
Birmingham, AL^(a)	$	23,918	$	2,843	$	29,286	$	—		$	4,536	$	2,843	$	33,822	$	36,665	$	14,543	1987	1/3/1996	15 - 40 Yrs
Phoenix - Biltmore, AZ ^(a)	17,254		4,694		38,998		—			4,338		4,694		43,336		48,030		18,809		1985	1/3/1996	15 - 40 Yrs
Dana Point – Doheny Beach, CA^(c)	8,096		1,787		15,545		—			6,387		1,787		21,932		23,719		8,143		1992	2/21/1997	15 - 40 Yrs
Indian Wells – Esmeralda Resort & Spa, CA ^(d)	(m)		30,948		73,507		—			6,088		30,948		79,595		110,543		11,718		1989	12/16/2007	15 - 40 Yrs
Los Angeles – International Airport – South, CA (a)	(m)		2,660		17,997		—			3,769		2,660		21,766		24,426		9,553		1985	3/27/1996	15 - 40 Yrs
Milpitas – Silicon Valley, CA^(a)	(n)		4,021		23,677		—			4,229		4,021		27,906		31,927		12,101		1987	1/3/1996	15 - 40 Yrs
Napa Valley, CA ^(a)	27,994		2,218		14,205		—			6,993		2,218		21,198		23,416		7,754		1985	5/8/1996	15 - 40 Yrs
Oxnard - Mandalay Beach – Hotel & Resort, CA^(a)	13,112		2,930		22,125		—			11,276		2,930		33,401		36,331		13,046		1986	5/8/1996	15 - 40 Yrs
San Diego Bayside, CA^(k)	(l)		—		68,229		—			12,551		—		80,780		80,780		38,729		1965	7/28/1998	15 - 40 Yrs
San Francisco – Airport/Waterfront, CA ^(a)	(l)		—		39,929		—			5,290		—		45,219		45,219		19,037		1986	11/6/1995	15 - 40 Yrs
San Francisco – Airport/South San Francisco, CA^(a)	(n)		3,418		31,737		—			4,476		3,418		36,213		39,631		15,785		1988	1/3/1996	15 - 40 Yrs
San Francisco - Fisherman’s Wharf, CA ^(e)	(l)		—		61,883		—			17,181		—		79,064		79,064		38,766		1970	7/28/1998	15 - 40 Yrs
San Francisco –Union Square, CA ^(f)	(l)		8,466		73,684		(434		)	53,380		8,032		127,064		135,096		41,436		1970	7/28/1998	15 - 40 Yrs
Santa Monica Beach – at the Pier, CA ^(k)	12,839		10,200		16,580		—			1,595		10,200		18,175		28,375		4,194		1967	3/11/2004	15 - 40 Yrs
Toronto - Airport, Canada ^(e)	(l)		—		21,041		—			15,188		—		36,229		36,229		14,195		1970	7/28/1998	15 - 40 Yrs
Deerfield Beach – Resort & Spa, FL ^(a)	31,714		4,523		29,443		68			6,722		4,591		36,165		40,756		15,446		1987	1/3/1996	15 - 40 Yrs
Ft. Lauderdale – 17th Street, FL ^(a)	35,852		5,329		47,850		(163		)	6,955		5,166		54,805		59,971		23,787		1986	1/3/1996	15 - 40 Yrs

109

FELCOR LODGING TRUST INCORPORATED and FELCOR LODGING LIMITED PARTNERSHIP

Schedule III – Real Estate and Accumulated Depreciation – (continued)

as of December 31, 2013

(in thousands)



		Initial Cost		Cost Capitalized Subsequent to Acquisition			Gross Amounts at Which Carried at Close of Period			Accumulated Depreciation Buildings & Improvements			Life Upon Which Depreciation is Computed
Location	Encumbrances	Land	Building and Improvements	Land		Building and Improvements	Land	Building and Improvements	Total	Accumulated Depreciation Buildings & Improvements	Year Opened	Date Acquired	Life Upon Which Depreciation is Computed
Miami – International Airport, FL ^(a)	10,921	4,135	24,950	—		6,663	4,135	31,613	35,748	13,429	1983	1/3/1996	15 - 40 Yrs
Orlando – International Airport, FL ^(e)	7,947	2,549	22,188	6		3,746	2,555	25,934	28,489	9,365	1984	7/28/1998	15 - 40 Yrs
Orlando – International Drive South/Convention, FL ^(a)	(n)	1,632	13,870	—		3,770	1,632	17,640	19,272	8,312	1985	7/28/1994	15 - 40 Yrs
Orlando – Walt Disney World Resort, FL ^(c)	(l)	—	28,092	—		3,460	—	31,552	31,552	16,933	1987	7/28/1997	15 - 40 Yrs
St. Petersburg – Vinoy Resort & Golf Club, FL ^(d)	(m)	—	100,823	—		6,182	—	107,005	107,005	17,671	1925	12/16/2007	15 - 40 Yrs
Atlanta – Buckhead, GA ^(a)	(n)	7,303	38,996	(300	)	3,025	7,003	42,021	49,024	17,870	1988	10/17/1996	15 - 40 Yrs
Atlanta – Gateway-Atlanta Airport, GA ^(b)	(l)	5,113	22,857	—		1,944	5,113	24,801	29,914	9,776	1986	6/30/1997	15 - 40 Yrs
Indianapolis – North, IN ^(a)	9,904	5,125	13,821	—		6,867	5,125	20,688	25,813	12,158	1986	8/1/1996	15 - 40 Yrs
New Orleans – French Quarter, LA ^(k)	(l)	—	50,732	—		9,441	—	60,173	60,173	22,528	1969	7/28/1998	15 - 40 Yrs
Boston – at Beacon Hill, MA ^(k)	(l)	—	45,192	—		9,528	—	54,720	54,720	29,461	1968	7/28/1998	15 - 40 Yrs
Boston – Copley Plaza, MA ⁽ⁱ⁾	(m)	27,600	62,500	—		14,480	27,600	76,980	104,580	6,199	1912	8/18/2010	15 - 40 Yrs
Boston – Marlborough, MA ^(a)	(n)	948	8,143	761		15,448	1,709	23,591	25,300	9,682	1988	6/30/1995	15 - 40 Yrs
Baltimore – at BWI Airport, MD ^(a)	19,388	2,568	22,433	(2	)	4,991	2,566	27,424	29,990	11,075	1987	3/20/1997	15 - 40 Yrs
Bloomington, MN ^(a)	—	2,038	17,731	—		3,278	2,038	21,009	23,047	8,721	1980	2/1/1997	15 - 40 Yrs
Minneapolis – Airport, MN ^(a)	38,455	5,417	36,508	24		2,962	5,441	39,470	44,911	17,339	1986	11/6/1995	15 - 40 Yrs
Charlotte – SouthPark, NC ^(c)	4,805	1,458	12,681	—		3,601	1,458	16,282	17,740	5,158	N/A	7/12/2002	15 - 40 Yrs

110

FELCOR LODGING TRUST INCORPORATED and FELCOR LODGING LIMITED PARTNERSHIP

Schedule III – Real Estate and Accumulated Depreciation – (continued)

as of December 31, 2013

(in thousands)



			Initial Cost				Cost Capitalized Subsequent to Acquisition					Gross Amounts at Which Carried at Close of Period						Accumulated Depreciation Buildings & Improvements				Life Upon Which Depreciation is Computed
Location	Encumbrances		Land		Building and Improvements		Land			Building and Improvements		Land		Building and Improvements		Total		Accumulated Depreciation Buildings & Improvements		Year Opened	Date Acquired	Life Upon Which Depreciation is Computed
New York - Morgans (j)	(m)		$	16,200	$	29,872	$	—		$	1,231	$	16,200	$	31,103	$	47,303	$	1,980	1984	5/23/2011	15 - 40 Yrs
New York - Royalton (j)	(m)		32,500		48,423		—			2,161		32,500		50,584		83,084		3,256		1988	5/23/2011	15 - 40 Yrs
Philadelphia – Historic District, PA ^(k)	10,111		3,164		27,535		7			10,624		3,171		38,159		41,330		16,084		1972	7/28/1998	15 - 40 Yrs
Philadelphia – Society Hill, PA ^(b)	(n)		4,542		45,121		—			9,517		4,542		54,638		59,180		21,430		1986	10/1/1997	15 - 40 Yrs
Pittsburgh – at University Center (Oakland), PA ^(k)	8,835		—		25,031		—			3,530		—		28,561		28,561		11,463		1988	11/1/1998	15 - 40 Yrs
Charleston – Mills House, SC^(k)	11,880		3,251		28,295		7			7,382		3,258		35,677		38,935		12,518		1982	7/28/1998	15 - 40 Yrs
Myrtle Beach – Oceanfront Resort, SC ^(a)	(l)		2,940		24,988		—			11,667		2,940		36,655		39,595		13,168		1987	12/5/1996	15 - 40 Yrs
Myrtle Beach Resort ^(g)	(n)		9,000		19,844		6			31,821		9,006		51,665		60,671		14,652		1974	7/23/2002	15 - 40 Yrs
Nashville – Opryland – Airport (Briley Parkway), TN ^(e)	(l)		—		27,734		—			3,521		—		31,255		31,255		17,089		1981	7/28/1998	15 - 40 Yrs
Austin, TX ^(c)	7,799		2,508		21,908		—			4,411		2,508		26,319		28,827		10,737		1987	3/20/1997	15 - 40 Yrs
Dallas – Love Field, TX ^(a)	(n)		1,934		16,674		—			4,854		1,934		21,528		23,462		9,267		1986	3/29/1995	15 - 40 Yrs
Dallas – Park Central, TX ^(h)	—		4,513		43,125		762			8,688		5,275		51,813		57,088		20,545		1983	6/30/1997	15 - 40 Yrs
Houston - Medical Center, TX ^(k)	7,401		—		22,027		—			7,017		—		29,044		29,044		10,471		1984	7/28/1998	15 - 40 Yrs
Burlington Hotel & Conference Center, VT ^(b)	(n)		3,136		27,283		(2		)	4,434		3,134		31,717		34,851		12,240		1967	12/4/1997	15 - 40 Yrs
Total hotels	$	308,225	$	233,611	$	1,555,093	$	740		$	381,198	$	234,351	$	1,936,291	$	2,170,642	$	697,619
Other properties (less than 5% of total)	$	—	$	550	$	3,686	$	—		$	222	$	550	$	3,908	$	4,458	$	527
Total	$	308,225	$	234,161	$	1,558,779	$	740		$	381,420	$	234,901	$	1,940,199	$	2,175,100	$	698,146

111

FELCOR LODGING TRUST INCORPORATED AND

FELCOR LODGING LIMITED PARTNERSHIP

Schedule III – Real Estate and Accumulated Depreciation – (continued)

as of December 31, 2013

(in thousands)

(a) Embassy Suites Hotel

(b) Sheraton

(d) Renaissance

(e) Holiday Inn

(f) Marriott

(g) Hilton

(h) Westin

(i) Fairmont

(j) Morgans Hotel Group

(k) Wyndham


(l)	This hotel is mortgaged or otherwise encumbered to secure repayment of our 10% senior notes due in 2014.

(m) This hotel is mortgaged to secure repayment of our 6.75% senior notes due in 2019.

(n) This hotel is mortgaged to secure repayment of our 5.625% senior notes due in 2023.



	Year Ended December 31,
	2013			2012			2011
Reconciliation of Land and Buildings and Improvements
Balance at beginning of period	$	2,305,896		$	2,528,930		$	2,609,050
Additions during period:
Acquisitions	—			—			131,231
Improvements	21,236			44,887			34,981
Deductions during period:
Disposition of properties	(152,032		)	(267,921		)	(246,332		)
Balance at end of period before impairment charges	2,175,100			2,305,896			2,528,930
Cumulative impairment charges on real estate assets owned at end of period	(107,492		)	(95,121		)	(151,408		)
Balance at end of period	$	2,067,608		$	2,210,775		$	2,377,522
Reconciliation of Accumulated Depreciation
Balance at beginning of period	$	693,114		$	723,982		$	729,420
Additions during period:
Depreciation for the period	58,643			64,953			68,826
Deductions during period:
Disposition of properties	(53,611		)	(95,821		)	(74,264		)
Balance at end of period	$	698,146		$	693,114		$	723,982

112

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Controls and Procedures (FelCor)

Evaluation of Disclosure Controls and Procedures.

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

Changes in Internal Control over Financial Reporting.

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

Management’s Report on Internal Control over Financial Reporting.

FelCor’s management is responsible for establishing and maintaining adequate internal control over financial reporting. 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.

FelCor’s management assessed the effectiveness of its internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework (1992). Based on our assessment, FelCor has concluded that, as of December 31, 2013, its internal control over financial reporting is effective, based on those criteria.

The effectiveness of FelCor’s internal control over financial reporting as of December 31, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in their report, which appears in Item 8 of this report.

Controls and Procedures (FelCor LP)

Evaluation of Disclosure Controls and Procedures.

113

officer and principal financial officer concluded, as of the Evaluation Date, that FelCor LP’s disclosure controls and procedures were effective, such that the information relating to FelCor LP required to be disclosed in its reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to FelCor’s management, including FelCor’s chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

There have not been any changes in FelCor LP’s internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934) during the fourth quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting.

FelCor’s management assessed the effectiveness of FelCor LP’s internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework (1992). Based on our assessment, FelCor LP has concluded that, as of December 31, 2013, its internal control over financial reporting is effective, based on those criteria.

The effectiveness of FelCor LP’s internal control over financial reporting as of December 31, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in their report, which appears in Item 8 of this report.

114

PART III

Item 10. Directors, Executive Officers of the Registrant and Corporate Governance

The information called for by this Item is contained in FelCor’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders, and is incorporated herein by reference.

Item 11. Executive Compensation

The information called for by this Item is contained in FelCor’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information called for by this Item is contained in FelCor’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders, or in Item 5 of this report, and is incorporated herein by reference.

Item 13. Certain Relationships, Related Transactions and Director Independence

The information called for by this Item is contained in FelCor’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information called for by this Item is contained in FelCor’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders, and is incorporated herein by reference.

115

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.

All financial statements of the registrants are included herein under Item 8 of this report.

(2) Financial Statement Schedules.

The following financial statement schedule is included herein under Item 8 of this report.

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

3.1		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).

3.1.1		Articles Supplementary filed October 31, 2013 (filed as Exhibits 3.1 and 3.2 to FelCor’s Form 8‑K, dated October 29, 2013, and incorporated herein by reference).

3.2		Amended and Restated Bylaws of FelCor (filed as Exhibit 3.3 to FelCor’s Form 8-K, dated October 29, 2013, and incorporated herein by reference).

4.1		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).

4.2		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).

116



4.3	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 incorporated herein by reference).

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

4.4.1	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 Form 8-K, dated April 6, 2005, and incorporated herein by reference).

4.5	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 incorporated herein by reference).

4.6	Indenture, dated as of October 1, 2009, by and between FelCor Escrow Holdings, L.L.C. and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to FelCor’s Form 8-K, dated October 1, 2009, and incorporated herein by reference).

4.6.1	First Supplemental Indenture dated as of October 12, 2009, by and between FelCor Escrow Holdings, L.L.C. and U.S. Bank National Association (filed as Exhibit 4.1 to FelCor’s Form 8‑K, dated October 13, 2009, and incorporated herein by reference).

4.6.2	Second Supplemental Indenture dated as of October 13, 2009, by and among FelCor, FelCor Lodging Limited Partnership (“FelCor LP”), certain subsidiary guarantors named therein, FelCor Holdings Trust, FelCor Escrow Holdings, L.L.C. and U.S. Bank National Association (filed as Exhibit 4.2 to FelCor’s Form 8-K, dated October 13, 2009, and incorporated herein by reference).

4.6.3	Third Supplemental Indenture dated as of March 23, 2010, by and among FelCor, FelCor LP, certain subsidiary guarantors named therein, FelCor Holdings Trust and U.S. Bank National Association (filed as Exhibit 4.1 to FelCor’s Form 10-Q for the quarter ended March 31, 2010 and incorporated herein by reference).

4.6.4	Fourth Supplemental Indenture, dated as of March 3, 2011, by and among FelCor, FelCor LP, certain of their subsidiaries, as guarantors, and U.S. Bank National Association, as trustee (filed as Exhibit 4.4 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

4.6.5	Fifth Supplemental Indenture, dated as of May 23, 2011, by and among FelCor, FelCor LP, certain of their subsidiaries, as guarantors, and U.S. Bank National Association, as trustee (filed as Exhibit 4.5 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

4.6.6	Sixth Supplemental Indenture, dated as of January 7, 2013, by and among FelCor, FelCor LP, certain of their subsidiaries, as guarantors, and U.S. Bank National Association, as trustee (filed as Exhibit 4.3 to FelCor’s Form 8-K, dated January 7, 2013, and incorporated herein by reference).

117



4.7	Indenture, dated as of May 10, 2011, by and between FelCor Escrow Holdings, L.L.C. and Wilmington Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as collateral agent, registrar and paying agent (filed as Exhibit 4.1 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

4.7.1	First Supplemental Indenture, dated as of May 23, 2011, by and among FelCor Escrow Holdings, L.L.C., FelCor LP, FelCor, certain of their subsidiaries, as guarantors, and Wilmington Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as collateral agent, registrar and paying agent (filed as Exhibit 4.2 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

4.7.2	Second Supplemental Indenture, dated as of January 7, 2013, by and among FelCor LP, FelCor, certain of their subsidiaries, as guarantors, and Wilmington Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as collateral agent, registrar and paying agent (filed as Exhibit 4.2 to FelCor’s Form 8-K, dated January 7, 2013, and incorporated herein by reference).

4.8	Registration Rights Agreement, dated May 10, 2011, among FelCor LP, FelCor, the subsidiary guarantors named therein, and J.P. Morgan Securities LLC (filed as Exhibit 4.3 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

4.9	Indenture, dated as of December 17, 2012, between FelCor LP, FelCor, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee, collateral agent, registrar and paying agent (filed as Exhibit 4.1 to FelCor’s Form 8-K, dated December 17, 2012, and incorporated herein by reference).

4.9.1	First Supplemental Indenture, dated as of January 7, 2013, by and among FelCor, FelCor LP, certain of their subsidiaries, as guarantors, and U.S. Bank National Association, as trustee. (filed as Exhibit 4.1 to FelCor’s Form 8-K, dated January 7, 2013, and incorporated herein by reference).

4.10	Registration Rights Agreement, dated December 17, 2012, among FelCor LP, FelCor, the subsidiary guarantors named therein, and J.P. Morgan Securities LLC (filed as Exhibit 4.2 to FelCor’s Form 8-K, dated December 17, 2012, 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 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 incorporated herein by reference).

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 FelCor’s Form 10-K for the fiscal year ended December 31, 2002 (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).

118



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 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 L P (filed as Exhibit 10.1.8 to FelCor’s Form 8-K, dated April 6, 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 incorporated herein by reference).

10.2	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 prior to July 28, 2004 (filed as Exhibit 10.5 to the 2001 Form 10-K and incorporated herein by reference).

10.2.1	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 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).

10.3	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).

10.4	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 incorporated herein by reference).

10.4.1	Letter Agreement dated March 1, 2008 between Thomas J. Corcoran, Jr. and FelCor (filed as Exhibit 10.1 to FelCor’s Form 10-Q for the quarter ended March 31, 2008 and incorporated herein by reference).

10.5	Executive Employment Agreement dated October 19, 2007, between FelCor and Richard A. Smith (filed as Exhibit 10.1 to FelCor’s Form 10-Q for the quarter ended September 30, 2007 and incorporated herein by reference).

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10.5.1	Letter dated October 16, 2012 amending the 2007 Employment Agreement between FelCor and Richard A. Smith (filed as Exhibit 10.3 to FelCor’s Form 10-Q for the quarter ended September 30, 2012 and incorporated herein by reference).

10.6	Form of 2007 Change in Control and Severance Agreement between FelCor and each of Rick Smith, Michael Hughes, Mike DeNicola, Troy Pentecost, Jon Yellen and Tom Corcoran (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated October 23, 2007, and incorporated herein by reference).

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

10.8	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).

10.9	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).

10.10	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).

10.11	FelCor’s 2005 Restricted Stock and Stock Option Plan (as amended through October 29, 2012)(filed as Exhibit 10.1 to FelCor’s Form 10-Q for the quarter ended March 31, 2013 and incorporated herein by reference).

10.12	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 incorporated herein by reference).

10.13	Form of Employee Stock Grant and Supplemental Long-Term Cash Payment Agreement dated as of February 19, 2009 (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated February 20, 2009, and incorporated herein by reference).

10.13.1	Amendment to Employee Stock Grant and Supplemental Long-Term Cash Payment Agreement dated as of February 19, 2009 (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated December 28, 2009, and incorporated herein by reference).

10.14	Form of Restricted Payment Contract (filed as Exhibit 10.2 to FelCor’s Form 8-K, dated December 28, 2009, and incorporated herein by reference).

10.15	Form of Employee Stock Grant Contract (filed as Exhibit 10.3 to FelCor’s Form 8-K, dated December 28, 2009, and incorporated herein by reference.

10.16	Form of Performance Equity Grant Agreement (filed as Exhibit 10.2 to FelCor’s Form 10-Q for the quarter ended September 30, 2012 and incorporated herein by reference).

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10.17	Form of Indemnification Agreement by and among FelCor, FelCor LP and individual officers and directors of FelCor (filed as Exhibit 10.1 to FelCor’s 10-Q for the quarter ended March 31, 2009 and incorporated herein by reference; superseding the form of Indemnification Agreement that was filed as Exhibit 10.1 to FelCor’s Form 8-K, dated November 9, 2006, and incorporated herein by reference.)

10.18	Form of Guaranty Agreement by and among FelCor, FelCor LP and individual employees of FelCor (filed as Exhibit 10.2 to FelCor’s Form 10-Q for the quarter ended March 31, 2009 and incorporated herein by reference).

10.19	Summary of Amended Annual Compensation Program for Directors of FelCor (filed as Exhibit 10.21 to FelCor's Form 10-K for the fiscal year ended December 31, 2009 and incorporated herein by reference).

10.20	Summary of FelCor’s Revised Performance-Based Annual Incentive Compensation Programs for Executive Officers (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated August 24, 2012, and incorporated herein by reference).

10.21	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).

10.21.1	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 Phoenix Hotel, L.L.C., DJONT/JPM Phoenix 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).

10.21.2	Form of five separate Promissory Notes, each dated either May 26, 2004, June 10, 2004 or July 19, 2004, made by FelCor/JPM Phoenix 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 $21,368,000 (Phoenix, Arizona), $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).

10.21.4	Form of Guaranty of Recourse 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).

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10.22	Pledge Agreement dated October 13, 2009, by and among FelCor, FelCor LP, certain subsidiary pledgors named therein, FelCor Holdings Trust, and U.S. Bank National Association (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated October 13, 2009, and incorporated herein by reference).

10.22.1	Form of Mortgage, Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing for the benefit of U.S. Bank National Association, as trustee and collateral agent, relating to FelCor LP’s 10% Senior Secured Notes due 2014 (filed as Exhibit 10.1 to FelCor’s Form 10-Q for the quarter ended March 31, 2010, and incorporated herein by reference).

10.23	Amended and Restated Revolving Credit Agreement dated as of December 18, 2012, among FelCor/JPM Hospitality (SPE), L.L.C., DJONT/JPM Hospitality Leasing (SPE), L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., DJONT/JPM Boca Raton Leasing, L.L.C. and Miami AP Hotel, L.L.C. as borrowers, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders that are parties thereto (filed as Exhibit 10.2 to FelCor’s Form 8-K, dated December 17, 2012, and incorporated herein by reference).

10.23.1	Amended and Restated Guaranty Agreement to the Revolving Credit Agreement dated as of December 18, 2012, by FelCor and FelCor LP in favor of JPMorgan Chase Bank, N.A., as administrative agent, on behalf of the lenders (filed as Exhibit 10.3 to FelCor’s Form 8-K, dated December 17, 2012, and incorporated herein by reference).

10.23.2	Form of Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing under the Revolving Credit Agreement for the benefit of JPMorgan Chase Bank, N.A., as administrative agent for the lenders (filed as Exhibit 10.4 to FelCor’s Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference).

10.23.3	Amendment No. 1 to Amended and Restated Revolving Credit Agreement dated as of March 1, 2013, among FelCor/JPM Hospitality (SPE), L.L.C., DJONT/JPM Hospitality Leasing (SPE), L.L.C., FelCor/JPM Boca Raton Hotel, L.L.C., DJONT/JPM Boca Raton Leasing, L.L.C., Miami AP Hotel, L.L.C. and Charleston Mills House Hotel, L.L.C. as borrowers, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders that are parties thereto (filed as Exhibit 10.2 to FelCor’s Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference).

10.24	Form of [Fee and] Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing for the benefit of Deutsch Bank Trust Company, as collateral agent, relating to FelCor LP’s 6.75% senior secured notes due 2019 (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

10.24.1	Pledge Agreement, dated as of May 23, 2011, among FelCor LP, FelCor, the subsidiaries named therein, and Deutsche Bank Trust Company Americas, as collateral agent (filed as Exhibit 10.2 to FelCor’s Form 8-K, dated May 23, 2011, and incorporated herein by reference).

10.25	Pledge Agreement, dated as of December 17, 2012, by FelCor LP, in favor of U.S. Bank National Association, as collateral agent (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated December 17, 2012, and incorporated herein by reference).

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10.25.1	Form of [Fee and] Leasehold Mortgage, Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing for the benefit of U.S. Bank National Association, as collateral agent, relating to FelCor LP’s 5.625% Senior Secured Notes due 2023 (filed as Exhibit 10.3 to FelCor’s Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.

10.26	Severance and Release Agreement, dated as of April 30, 2013 by and between FelCor and Andrew Welch (filed as Exhibit 10.1 to FelCor’s Form 8-K, dated April 30, 2013, and incorporated herein by reference).

21.1*	List of Subsidiaries of FelCor.

21.2*	List of Subsidiaries of FelCor LP.

23*	Consent of PricewaterhouseCoopers LLP.




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

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

31.3*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.

31.4*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.

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

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

101.INS	XBRL Instance Document. Submitted electronically with this report.

101.SCH	XBRL Taxonomy Extension Schema Document. Submitted electronically with this report.

101.CAL	XBRL Taxonomy Calculation Linkbase Document. Submitted electronically with this report.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document. Submitted electronically with this report.

101.LAB	XBRL Taxonomy Label Linkbase Document. Submitted electronically with this report.

101.PRE	XBRL Taxonomy Presentation Linkbase Document. Submitted electronically with this report.

---------------------

*Filed herewith

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Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) FelCor’s Consolidated Balance Sheets at December 31, 2013 and 2012; (ii) FelCor’s Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011; (iii) FelCor’s Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2013, 2012 and 2011; (iv) FelCor’s Consolidated Statements of Changes in Equity for the years ended December 31, 2013, 2012 and 2011; (v) FelCor’s Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011; (vi) FelCor LP’s Consolidated Balance Sheets at December 31, 2013 and 2012; (vii) FelCor LP’s Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011; (viii) FelCor LP’s Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2013, 2012 and 2011; (ix) FelCor LP’s Consolidated Statements of Partners’ Capital for the years ended December 31, 2013, 2012 and 2011; (x) FelCor LP’s Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011; and (xi) the Notes to Consolidated Financial Statements. Users of this data are advised pursuant to Rule 406T of Regulation S‑T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

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



	FELCOR LODGING TRUST INCORPORATED



Date: February 28, 2014	By:	/s/ Jonathan H. Yellen
		Name:	Jonathan H. Yellen
		Title:	Executive Vice President, General Counsel and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant, and in the capacities and on the dates indicated.



	Date		Signature
February 28, 2014		/s/ Richard A. Smith
		Richard A. Smith President and Director (Chief Executive Officer)
February 28, 2014		/s/ Michael C. Hughes
		Michael C. Hughes Senior Vice President and Chief Financial Officer (Principal Financial Officer)
February 28, 2014		/s/ Jeffrey D. Symes
		Jeffrey D. Symes Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
February 28, 2014		/s/ Thomas J. Corcoran, Jr.
		Thomas J. Corcoran, Jr. Chairman of the Board and Director
February 28, 2014		/s/ Glenn A. Carlin
		Glenn A. Carlin, Director
February 28, 2014		/s/Robert F. Cotter
		Robert F. Cotter, Director
February 28, 2014		/s/Christopher J. Hartung
		Christopher J. Hartung, Director
February 28, 2014		/s/ Thomas C. Hendrick
		Thomas C. Hendrick, Director

125



	Date		Signature
February 28, 2014		/s/ Charles A. Ledsinger, Jr.
		Charles A. Ledsinger, Jr., Director
February 28, 2014		/s/ Robert H. Lutz, Jr.
		Robert H. Lutz, Jr., Director
February 28, 2014		/s/ Robert A. Mathewson
		Robert A. Mathewson, Director
February 28, 2014		/s/ Mark D. Rozells
		Mark D. Rozells, Director

126



	FELCOR LODGING LIMITED PARTNERSHIP
	a Delaware limited partnership

	By:	FelCor Lodging Trust Incorporated
		Its General Partner


Date: February 28, 2014	By:	/s/ Jonathan H. Yellen
		Name:	Jonathan H. Yellen
		Title:	Executive Vice President, General Counsel and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following officers and directors of FelCor Lodging Trust Incorporated, the general partner of the registrant, and in the capacities and on the dates indicated.



	Date		Signature
		/s/ Richard A. Smith
February 28, 2014		Richard A. Smith President and Director (Chief Executive Officer)
February 28, 2014		/s/ Michael C. Hughes
		Michael C. Hughes Senior Vice President and Chief Financial Officer (Principal Financial Officer)
February 28, 2014		/s/ Jeffrey D. Symes
		Jeffrey D. Symes Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)



	February 28, 2014			/s/ Thomas J. Corcoran, Jr.
				Thomas J. Corcoran, Jr. Chairman of the Board and Director
	February 28, 2014			/s/ Glenn A. Carlin
				Glenn A. Carlin, Director
	February 28, 2014			/s/Robert F. Cotter
				Robert F. Cotter, Director
	February 28, 2014			/s/Christopher J. Hartung
				Christopher J. Hartung, Director

127



	Date		Signature

February 28, 2014		/s/ Thomas C. Hendrick
		Thomas C. Hendrick, Director
February 28, 2014		/s/ Charles A. Ledsinger, Jr.
		Charles A. Ledsinger, Jr., Director
February 28, 2014		/s/ Robert H. Lutz, Jr.
		Robert H. Lutz, Jr., Director
February 28, 2014		/s/ Robert A. Mathewson
		Robert A. Mathewson, Director
February 28, 2014		/s/ Mark D. Rozells
		Mark D. Rozells, Director

128