Innkeepers USA Trust Announces Second Quarter Earnings; RevPAR Increases 9.3 Percent in Second Quarter

Business Wire, August 3, 2004

The forecasted financial results for 2004 include the three hotel acquisitions completed in the second quarter and exclude the forecasted results for the Norcross, Ga., hotel sold in July

2004. The TRS has a projected net loss of $(3.2) million, which includes $1.0 million for the amortization of deferred franchise conversion costs and $0.5 million for the amortization of leaseacquisition cost. The TRS has a projected gross margin of 75.5 percent and gross operating profit of 42.1 percent. The company's assumptions for its 2004 guidance do not include the effects of any additional sales, acquisitions or development of new hotels or capital transactions.

Balance Sheet

Bulger pointed out that the company continues to maintain one of the industry's strongest capital structures and lowest-levered balance sheets. "Our debt to investment in hotels at cost ratio was 28 percent at June 30, 2004, low by industry standards during a recovery, with no maturities until 2007 and beyond. Our weighted average interest rate on our total debt is 7.0 percent, and 86 percent of our total debt is at fixed rates.

"In July, we replaced our existing $135 million revolving unsecured line of credit, which matured July 31, 2004, with a new $135 million revolving unsecured line of credit with a majority of our existing lenders--Wells Fargo, Calyon, Wachovia and PNC--on substantially the same terms. With only $26 million outstanding on our $135 million line of credit and unrestricted cash of $15 million, we have the resources, balance sheet strength and flexibility to respond to acquisition opportunities as they arise."

Capital Expenditures

Bulger added that the company spent $13.3 million on selective capital renovation projects for the first six months of 2004, with a total of $20.0 million budgeted for capital expenditures for the full year (excluding the renovations at two hotel properties to be rebranded)."We have continued to maintain our hotel properties in highly competitive condition in their respective marketplaces."

Innkeepers USA Trust is a hotel real estate investment trust (REIT) and a leading owner of upscale, extended-stay hotel properties throughout the United States. The company owns 68 hotels with a total of 8,580 suites or rooms in 21 states and focuses on acquiring and/or developing upscale and upscale extended-stay hotels with premium brands and the rebranding and repositioning of other hotel properties. For more information about Innkeepers USA Trust, visit the company's web site at www.innkeepersusa.com.

To listen to a web cast of the company's 2004 second quarter conference call on August 3, 2004, at 2 p.m. Eastern time, go to the web site and click on Conference Calls. Interested parties may listen to an archived web cast of the conference call on the web site, or may dial (800) 405-2236, pass code 11003165, to hear a telephone replay. The archived web cast and telephone replay will be available through midnight Tuesday, August 10, 2004.

Included in this press release are certain non-GAAP financial measures within the meaning of Securities Exchange Commission (SEC) rules and regulations that are different from measures calculated and presented in accordance with GAAP (generally accepted accounting principles). These non-GAAP financial measures are (i) funds from operations (FFO), (ii) FFO per share, (iii) Adjusted FFO, (iv) Adjusted FFO per share, (v) net income (loss) (computed in accordance with GAAP) before interest expense, taxes, depreciation and amortization and common and preferred minority interests (EBITDA) and Adjusted EBITDA. The following explains why we believe these measures help provide investors with a more complete understanding of our financial and operating performance.