Innkeepers USA Trust Announces Fourth Quarter and Year 2004 Earnings; RevPAR Increases 9.5 Percent in Fourth Quarter

Business Wire, Feb 22, 2005

PALM BEACH, Fla. -- Innkeepers USA Trust (NYSE: KPA), a hotel real estate investment trust (REIT) and a leading owner of upscale extended-stay hotel properties throughout the United States, today announced results for the fourth quarter and the year 2004.

%       Year     Year      %
                 4Q 2004* 4Q 2003*  Change*   2004*    2003*   Change*
----------------------------------------------------------------------
Net loss
 applicable to
 common
 shareholders    $(2,340) $(7,359)   68%    $(1,138) $(18,144)  94%
----------------------------------------------------------------------
Diluted loss per
 share           $(0.06)  $(0.20)    70%    $(0.03)   $(0.49)   94%
----------------------------------------------------------------------
Funds from
 operations
 (FFO)           $5,796   $1,464     296%   $31,418  $15,893    98%
----------------------------------------------------------------------
Adjusted FFO     $5,867   $5,243     12%    $34,631  $27,553    26%
----------------------------------------------------------------------
FFO per share     $0.15    $0.04     275%    $0.81    $0.41     98%
----------------------------------------------------------------------
Adjusted FFO per
 share            $0.15    $0.14      7%     $0.89    $0.71     25%
----------------------------------------------------------------------
Earnings before
 interest,
 taxes,
 depreciation
 and
 amortization
 (EBITDA)        $15,353  $10,078    52%    $74,276  $50,152    48%
----------------------------------------------------------------------
Adjusted EBITDA  $15,428  $13,857    11%    $72,458  $61,869    17%
----------------------------------------------------------------------

    *In thousands, except per share and percentage change data

    FFO, Adjusted FFO, FFO per share, Adjusted FFO per share, EBITDA
    and Adjusted EBITDA are not generally accepted accounting
    principles (GAAP) financial measures and are discussed in further
    detail on pages 6-7.

    FFO and FFO per share for the year 2004 include $4,249,000 in
    issuance costs pertaining to the Series A Cumulative Convertible
    preferred shares that were redeemed in January 2004. The Series A
    preferred share issuance costs have been excluded from Adjusted
    FFO, Adjusted FFO per share, EBITDA and Adjusted EBITDA.

    FFO, FFO per share and EBITDA for the fourth quarter 2003 includes
    $10,249,000 in percentage lease revenue that was deferred for the
    first, second and third quarters 2003. The deferred percentage
    lease revenue is not recognized as revenue for the fourth quarter
    2003 for Adjusted FFO, Adjusted FFO per share and Adjusted EBITDA.

    Adjusted FFO, Adjusted FFO per share and Adjusted EBITDA exclude
    other charges and discontinued operations.

Highlights

In 2004, the company achieved a number of significant milestones:

--Reported the first year of positive revenue per available room (RevPAR) growth since the year 2000.

--Completed the acquisition by its wholly owned taxable REIT subsidiaries (TRS) of all its leases from its former lessees.

--Doubled the amount of its quarterly common share dividend in the third quarter 2004. The company paid $0.18 in common share dividends for 2004, which included a $0.03 common share dividend for the first and second quarters and $0.06 for the third and fourth quarters 2004.

--Completed an offering of new 8.0% Series C Cumulative Preferred shares and used proceeds to redeem its Series A 8.625% Cumulative Convertible Preferred shares.

--Continued to shed non-strategic assets with the sale of a Residence Inn in Eden Prairie, Minn., and a Hampton Inn in Norcross, Ga.

--Completed the purchase of three hotel properties representing 544 rooms: the Homewood Suites-Riverwalk/Downtown San Antonio, the Four Points by Sheraton, Ft. Walton Beach, Fla., and a hotel property in downtown Louisville, Ky., to be converted to a Hampton Inn.

--Acquired a site in Valencia, Calif., for $3.7 million, with plans to build a 157-suite Embassy Suites, which is projected to open in 2006.

--Announced in December the pending acquisition of three hotel properties, which closed in late December and January 2005, comprising 387 rooms in downtown Washington, D.C. (Doubletree Guest Suites), Columbia, Md. (Hampton Inn) and Montvale, N.J. (to be converted to a Courtyard).

--In January sold Residence Inns in Portland, Ore. and Vancouver, Wash.

--Spent $25 million on selected capital projects at its hotel properties.

--Completed a new $135 million revolving unsecured line of credit.

--Maintained a low-levered balance sheet. Debt to investment in hotels at cost ratio is 30 percent at December 31, 2004.

--The nearest term maturity on the company's outstanding debt is in 2007.

Results

RevPAR for the company's 66 comparable hotel properties increased 9.5 percent for the fourth quarter 2004 to $66.51. Occupancy increased 3.3 percent to 70.2 percent, and average daily rate (ADR) increased 6.0 percent to $94.74 for the fourth quarter 2004.

The RevPAR improvement of 9.5 percent for the fourth quarter 2004 reflects a 13.3 percent increase in RevPAR at the company's eight Silicon Valley, Calif., hotel properties primarily as a result of a continuing rebound in the local economy and the beginning of the return of the business traveler. Excluding Silicon Valley, the remainder of the company's portfolio achieved a RevPAR increase of 8.8 percent for the fourth quarter 2004.