Winston Hotels Reports Third Quarter 2005 Results

Business Wire, Nov 8, 2005

RALEIGH, N.C. -- Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust (REIT) and owner of premium limited-service, upscale extended-stay and full-service hotels, today announced results for the three and nine months ended September 30, 2005.

Net loss available to common shareholders was $8.7 million for the 2005 third quarter, or ($0.33) per share, compared to net income available to common shareholders of $3.1 million, or $0.12 per share, for the same period a year earlier. The 2005 results include a non-cash impairment charge of $13.0 million. Net income would have been $3.6 million, or $0.14 per share, for the 2005 third quarter were it not for the impairment charge.

Funds from operations ("FFO") available to common shareholders for the 2005 third quarter, including the non-cash impairment charge, decreased to ($4.3) million, or ($0.16) per common share, compared to $7.7 million, or $0.28 per common share, for the 2004 third quarter. The company had approximately 27.6 million fully diluted weighted average common shares outstanding in both the 2005 and 2004 reporting periods.

FFO available to common shareholders for the third quarter of 2005 was also reduced by approximately $0.01 per share due to a non-cash income tax expense, while FFO available to common shareholders for the third quarter of 2004 was increased by $0.02 per share due to a non-cash income tax benefit.

Excluding the effects of the non-cash impairment charge and non-cash income tax expense (benefit), FFO available to common shareholders would have been $0.33 per share for the third quarter of 2005, versus $0.26 per share for the third quarter of 2004.

Recent Developments - Third and Fourth Quarter

Hotel Acquisitions

--Closed the $46.0 million purchase of five Marriott Towneplace Suites and one Courtyard by Marriott

--Closed the $16.3 million purchase of the Hampton Inn & Suites in Baltimore, Md.

--Closed the $18.0 million purchase of the Stanley Hotel, Estes Park, Colo. through a joint venture

Hotel Developments

--Broke ground on a 142-room $19.6 million Homewood Suites hotel in Princeton, N.J., expected to open during the first quarter 2007

--Broke ground on a 121-room $12.0 million Hilton Garden Inn in Akron, Ohio through a joint venture, expected to open during the fourth quarter 2006

--Continued the development of the 123-room $16.7 million Courtyard by Marriott in Kansas City, Mo., expected to open during the third quarter 2006

--Continued due diligence to buy a site in Wilmington, N.C. to build a 119-room $13.3 million Hilton Garden Inn expected to break ground during the fourth quarter 2005 and open during the first quarter 2007

Debt Investment Financing Program

--Closed $14.0 million purchase of four senior participation interests in certain mezzanine loans through Credit Suisse First Boston

--Closed a $2.0 million senior note participation for a Miami, Fla. condo hotel project

Financing

--Expanded the company's GE Line from $155 million to $215 million

--Created additional $13.2 million in credit facilities with Marathon Structured Finance Fund, L.P.

Hotel Acquisitions

On October 31, 2005, the company purchased six hotels with an aggregate of 698 rooms for $46.0 million. The properties consist of one Courtyard by Marriott hotel and five Towneplace Suites hotels. Five of these properties are located in Texas--one in Austin, one in College Station, one in Clearlake and two in Houston--and one is located in Birmingham, Ala. None of the hotels was seriously impacted by Hurricane Rita. All of the hotels are less than six years old. "These properties are in excellent condition with strong locations and compete very effectively in their respective markets," Green said. The hotels will continue to be managed by Marriott, which will become the company's eighth management company.

On September 2, 2005, the company acquired the 116-room Hampton Inn & Suites Baltimore Inner Harbor in Maryland for $16.3 million from a private investment group. In 2002, the company co-funded equally with Hall Financial Group a $3.5 million mezzanine loan to help finance the acquisition and renovation of this hotel. The three-year loan required monthly principal and interest payments based on a 10-year amortization period and an interest rate of 30-day LIBOR (3.86 percent at September 30, 2005) plus 10.21 percent. In addition, the loan required quarterly interest payments equal to 4 percent of gross monthly revenues. Interest on the loan also accrued at a rate of 6 percent of gross monthly revenue. Upon acquiring the hotel, the mezzanine loan was paid off, which resulted in a lump sum payment of approximately $5.3 million, including $3.3 million of principal and $2.0 million in accrued interest and disposition fees. The company's portion of the $5.3 million totaled $2.8 million. Upon pay off of the loan, the company realized $0.7 million ($0.025 per share) in interest income that it had not previously received or accrued.

During 2005, the company entered into a new joint venture with Stanley Holdings, LLC to form New Stanley Associates, L.L.L.P. ("Stanley Associates")for the purpose of acquiring the Stanley Hotel in Estes Park, Colo. The company contributed $3.0 million of the total $5.0 million equity investment in the joint venture. The joint venture acquired the Stanley Hotel on September 5, 2005 and simultaneously closed on a $13.0 million first mortgage loan provided by Credit Suisse First Boston to finance the acquisition. The company currently owns a 60 percent interest in both Stanley Associates, which owns the hotel, and New Stanley Associates Lessee, LLC, which leases the hotel from Stanley Associates. GHG-Stanley Management, LLC will continue to manage the 138-room hotel.