Innkeepers USA Trust Announces Third-Quarter 2006 Earnings

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PALM BEACH, Fla., Nov. 7 /PRNewswire-FirstCall/ -- Innkeepers USA Trust (NYSE:KPA), a hotel real estate investment trust (REIT) and a leading owner of upscale properties throughout the United States, today announced results for the three months and nine months ended September 30, 2006. -------------------------------------------------------------------------- % YTD YTD % Q3 2006 Q3 2005 Change* 2006 2005 Change* -------------------------------------------------------------------------- Total revenue $73,051 $67,095 9% $210,843 $186,264 13% -------------------------------------------------------------------------- Net income applicable to common shareholders $7,100 $6,837 4% $18,774 $11,185 68% -------------------------------------------------------------------------- Diluted income per share $0.16 $0.16 0% $0.42 $0.27 56% -------------------------------------------------------------------------- Funds from operations (FFO) $17,125 $16,970 1% $48,997 $39,310 25% -------------------------------------------------------------------------- Adjusted FFO $17,125 $16,967 1% $48,551 $42,487 14% -------------------------------------------------------------------------- Diluted FFO per share $0.36 $0.36 0% $1.03 $0.84 23% -------------------------------------------------------------------------- Adjusted FFO per share $0.36 $0.36 0% $1.02 $0.91 12% -------------------------------------------------------------------------- Earnings before interest, taxes, depreciation and amortization (EBITDA) $26,366 $25,404 4% $76,755 $65,826 17% -------------------------------------------------------------------------- Adjusted EBITDA $26,366 $25,390 4% $76,233 $67,502 13% -------------------------------------------------------------------------- * 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 GAAP (generally accepted accounting principles) financial measures and are discussed in further detail and reconciled to net income applicable to common shareholders later in this press release. Adjusted FFO, Adjusted FFO per share and Adjusted EBITDA exclude other charges and discontinued operations. Operating Results Revenue per available room (RevPAR) at the company's 66 comparable hotels rose 6.3 percent to $88.36 for the 2006 third quarter, reflecting an 8.2 percent increase in average daily rate (ADR) to $114.80 and a 140 basis points decline in occupancy to 77.0 percent. The comparable hotels for the 2006 third quarter exclude the Boston Bulfinch, which was acquired in 2005, and three hotels that were not open for all of the 2005 and 2006 third quarters, including the Hampton Inn Louisville, Ky., and the two hotels in Montvale and Atlantic City, N.J. being converted to the Courtyard by Marriott brand. For the 2006 nine months, at the company's 65 comparable hotels (also excludes the Westin Morristown, N.J.), the company reported a 7.1 percent increase in RevPAR to $85.34, with ADR up 7.6 percent to $111.84, partially offset by a decrease in occupancy of approximately 60 basis points to 76.3 percent. "We had a disappointing quarter from an FFO growth standpoint, as FFO remained flat year over year despite a 6.3 percent increase in RevPAR," said Jeffrey H. Fisher, chief executive officer and president. "Industry RevPAR growth was not as robust and grew at a rate of 6.0 percent in the third quarter versus 9.7 percent in the first quarter and 8.3 percent in the second quarter. We were not able to generate positive flowthrough to FFO on our RevPAR growth due to significant increases in utilities costs, insurance and taxes. Combined, these items impacted FFO by $0.03 in the quarter. Although FFO did not meet both our own and consensus estimates, there were a number of positive developments in the third quarter: our RevPAR growth and ADR growth outperformed the industry, we increased our dividend 33 percent and we acquired or are in the process of acquiring nearly $250 million in high- quality assets, an increase of 25 percent to our investment in hotels." The 2006 third quarter RevPAR improvement reflects a 14.7 percent increase in RevPAR at the company's eight Silicon Valley, Calif. hotel properties, comprising a 4.7 percentage point rise in occupancy to 84.3 percent and a 9.5 percent advance in ADR to $120.68. Year to date, the Silicon Valley properties experienced a 20.4 percent increase in RevPAR, with a 10.2 percentage point increase in occupancy to 82.5 percent and a 9.2 percent rise in ADR. Excluding Silicon Valley, RevPAR for the company's comparable hotels increased 4.7 percent in the 2006 third quarter and 4.6 percent year to date. Gross operating profit (GOP) margins (hotel revenue less hotel expenses, before property taxes and insurance) for the company's comparable hotels declined 70 basis points in the quarter to 43.5 percent. For the quarter, GOP flowthrough (increase in GOP compared to the increase in revenue) was 32 percent; however, after adjusting for the increase in utilities and an insurance claim in 2005, the company generated a GOP flowthrough of 52 percent. "The significant increase in utilities, insurance and property taxes hampered our ability to meet the consensus estimate," Fisher said. "We are, therefore, revising our fourth quarter and full-year guidance to reflect these rising costs. We had a tough quarter from a GOP standpoint, but GOP margins are still strong at 43.5 percent for the quarter and 45.6 percent year to date, and we should see continued margin growth in 2007." Renovations/Development Update As previously announced, the company expects to open the renovated and converted Montvale, N.J. Courtyard by Marriott in early 2007 and the Atlantic City Courtyard by Marriott in May 2007, while the Valencia Embassy Suites development is expected to open in June 2007. Acquisitions Update Fisher noted that the company closed in early October on four previously announced southern California hotel acquisitions, which includes two Residence Inns, a Hilton and Hilton Suites. The company expects to close in the fourth quarter on its acquisition of the new prototype Sheraton in Rockville, Md., which will be acquired in a directly negotiated transaction with Starwood Hotels. Innkeepers expects to acquire the hotel concurrent with the property's opening. Combined, the five properties will add 1,086 total rooms to Innkeepers' portfolio, an increase of 12.3 percent. "With the acquisition of these five first-class properties in very strong markets, we are continuing our push to enhance our portfolio with high-quality assets in 'A' locations with high barriers to new competition," he said. "We are setting ourselves up for sustainable FFO growth and executing our strategy of building long-term shareholder value with our acquisitions, conversions and developments." Fisher said that the company has an active acquisition and development pipeline and continues to target premium-branded, upscale extended-stay and select-service hotels, the core of the company's portfolio; selected full- service hotels; and turn-around opportunities for hotels that operate under or can be converted to the industry's leading brands. All acquisition candidates are located in major markets with multiple demand generators and high barriers to new competition. "These activities are part of our long-term strategy to transform the overall quality of our portfolio by deploying our capital into newer, more profitable assets that will position us for strong future growth and improve the overall operating margins of our portfolio." Capital Structure Dennis Craven, chief financial officer, pointed out that the company continues to maintain one of the industry's strongest capital structures. During the quarter the company completed two significant capital transactions: * Amended its unsecured line of credit to increase the capacity available to $205 million and extended the maturity by more than one year to September 2008; and * Issued $75 million in 10-year fixed-rate debt at approximately 6 percent annual interest. The proceeds were used to reduce borrowings outstanding under the line of credit. "The execution of these two transactions creates substantial flexibility under our line of credit to continue to execute on our growth strategy, while locking in very attractive long-term financing secured by three quality assets," he said. Additionally, in October the company borrowed approximately $215 million to finance the acquisition of the southern California portfolio. "With the completion of this financing, our weighted average interest rate on fixed-rate debt dropped 100 basis points from 7.8 percent at June 30th to 6.8 percent, and our average maturity increased approximately 3 years to 6.6 years. Our debt to investment in hotels at cost ratio is approximately 39 percent." Dividend In the third quarter, the company increased its common stock dividend 33 percent to $0.20. "We have raised our dividend three times since May 2005 based on our confidence in the economy, the hotel industry and the quality of our portfolio," Fisher said. The company and its Board of Trustees will continue to evaluate the dividend on a quarterly basis based on its projections for continued sustainable growth. Revised Fourth Quarter and Annual 2006 Earnings Guidance The company's revised fourth quarter and full-year guidance is based on the recent substantial increased costs for utilities, insurance and taxes across its portfolio. Based on assumed RevPAR growth of 6 percent to 8 percent for the quarter at its comparable hotels and the results from its non- comparable hotels, the company provides the following range of estimates: * Net income applicable to common shareholders of $1.0 million to $2.5 million for the quarter and $19.5 million to $21 million for the full year; * Diluted income per share of $0.02 to $0.05 for the quarter and $0.45 to $0.48 for the year; * Adjusted FFO per share of $0.22 to $0.25 for the quarter and $1.24 to $1.27 for the year; * Adjusted EBITDA of $23 million to $24.5 million for the quarter and $99.5 million to $101 million for the year. See reconciliations of net income applicable to common shareholders to FFO per share, Adjusted FFO per share and Adjusted EBITDA included in the tables of this press release. FFO per share, Adjusted FFO per share, and Adjusted EBITDA are not GAAP financial measures and are discussed in further detail in this press release. The forecasted financial results do not include any assumptions for future acquisitions, developments, dispositions or capital markets transactions. 2007 Outlook "Looking forward to 2007, with forecasted growth in the U.S. economy and moderate supply growth, it is setting up to be a good year for the industry," Fisher said. "Although the company is in the midst of its 2007 planning and budgeting process, based on preliminary discussions with our operators, we believe that comparable RevPAR will increase by approximately 6 percent to 8 percent." The company will hold a web cast of its third quarter 2006 conference call today, November 7, 2006, at 10 a.m. Eastern time. Interested parties may go to the company's Web site and click on Conference Calls. They also may listen to an archived web cast of the conference call on the Web site, or may dial (800) 405-2236, pass code 11073372, to hear a telephone replay. The archived web cast and telephone replay will be available through December 7, 2006. Innkeepers USA Trust owns 74 hotels with a total of 9,749 suites or rooms in 20 states and Washington, D.C., and focuses on acquiring or developing premium-branded upscale extended-stay and select-service hotels, the core of the company's portfolio; selected full-service hotels; and turn-around opportunities for hotels that operate under or can be converted to the industry's leading brands. For more information about Innkeepers USA Trust, visit the company's web site at http://www.innkeepersusa.com/. Included in this press release are certain "non-GAAP financial measures," within the meaning of Securities and 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, taxes, depreciation and amortization, common and preferred minority interests and preferred dividends (EBITDA), and (vi) Adjusted EBITDA. The following explains why we believe these measures, when considered along with earnings per share, calculated in accordance with GAAP, help provide investors with a more complete understanding of our financial and operating performance. FFO As Defined by NAREIT and Adjusted FFO The National Association of Real Estate Investment Trusts (NAREIT) adopted the definition of FFO in order to promote an industry standard measure of REIT financial and operating performance. Management believes that the presentation of FFO, FFO per share, Adjusted FFO (defined below) and Adjusted FFO per share provide useful supplemental information to investors regarding the company's financial condition and results of operations, particularly in reference to the company's ability to service debt, fund capital expenditures and pay cash dividends. Many other real estate investment trusts use FFO as a measure of their financial and operating performance, and therefore provides another basis of comparison for management. FFO, as defined, adds back historical cost depreciation. Historical cost depreciation assumes the value of real estate assets diminishes predictably over a certain period of time. In fact, real estate asset values historically have increased or decreased with market conditions. Consequently, FFO and Adjusted FFO may be useful supplemental measures in evaluating financial and operating performance by disregarding, or adding back, historical cost depreciation in the calculation of FFO and Adjusted FFO. Additionally, FFO per share and Adjusted FFO per share targets have historically been used to determine a significant portion of the incentive compensation of the company's senior management. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. The company calculates FFO in compliance with the NAREIT definition. The company defines Adjusted FFO as FFO (as defined by NAREIT), adjusted for non-recurring and/or non-cash items, including discontinued operations and impairment losses. FFO, Adjusted FFO, FFO per share, Adjusted FFO per share are reconciled to net income (loss) applicable to common shareholders determined in accordance with GAAP in the accompanying schedules. EBITDA and Adjusted EBITDA EBITDA is defined as net income (loss) (computed in accordance with GAAP) before interest, taxes, depreciation and amortization, common and preferred minority interests and preferred dividends. The company defines Adjusted EBITDA as EBITDA adjusted for non-recurring and/or non-cash items, including gains (losses) from sales of property, discontinued operations and impairment losses. Management believes that the presentation of EBITDA and Adjusted EBITDA provides useful supplemental information to investors regarding the company's financial condition and results of operations, particularly in reference to the company's ability to service debt, fund capital expenditures and pay cash dividends. Many other businesses measure their performance, in part, by their EBITDA results, which provide another basis for comparison between companies. EBITDA and Adjusted EBITDA are also factors in management's evaluation of the financial and operating performance of the company, hotel level performance, investment opportunities, dispositions and financing transactions. EBITDA and Adjusted EBITDA are reconciled to net income (loss) applicable to common shareholders determined in accordance with GAAP in the accompanying schedules. FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA and Adjusted EBITDA, as presented, may not be comparable to FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA and Adjusted EBITDA as calculated by other real estate companies. These measures do not reflect certain expenses that the company incurred and will incur, such as depreciation and interest (although we show such expenses in the reconciliation of these measures to their most directly comparable GAAP measures). None of these measures should be considered as an alternative to net income, net cash provided by operating activities, or any other financial and operating performance measure prescribed by GAAP. These measures should only be used in conjunction with GAAP measures. Forward-Looking Statement Safe Harbor This press release, and other publicly available information on the Company, includes forward-looking statements within the meaning of federal securities law. These statements include terms such as "should," "may," "believe" and "estimate," or assumptions, estimates or forecasts about future hotel and Company performance and results, and the Company's future need for capital. Such statements should not be relied on because they involve risks that could cause actual results to differ materially from the Company's expectations when such statements are made. Some of these risks are set forth in reports filed from time to time with the SEC and include, without limitation, (i) the operational risks of the hotel business (including decreasing hotel revenues and increasing hotel expenses), (ii) risks that war, terrorism or similar activities, widespread health alerts, disruption in oil imports or higher oil prices, or changes in domestic or international political environments negatively affect the travel industry and the company, (iii) risk of declines in the performance and prospects of businesses and industries (e.g., technology, automotive, aerospace, pharmaceuticals) that are important hotel demand generators in the company's key markets (e.g. the Silicon Valley, CA, Northern NJ, Washington, DC, etc.), (iv) risk that poor, declining and/or uncertain international, national, regional and/or local economic conditions will, among other things, negatively affect demand for the company's hotel rooms and the availability and terms of financing, (v) risk that the company's ability to maintain its properties in competitive condition becomes prohibitively expensive, (vi) risk that pricing in the hotel acquisition market becomes prohibitively expensive or non-financeable and that potential acquisitions or developments do not perform in accordance with expectations, (vii) risk that the Company may invest in hotels of a size or nature (e.g., upscale full service or resort) different than those it has focused on historically (e.g., upscale extended-stay, and mid-scale limited service); (viii) risks that the company may be uninsured or underinsured against property, casualty or other risks that may negatively affect its properties, or business, including but not limited to earthquakes or hurricanes; (ix) risks related to an increasing focus on development, including permitting risks, increasing the proportion of Company assets not producing revenue at a given time and risks that projects cost more, take longer to complete or do not perform as anticipated; (x) changes in travel patterns or the prevailing means of commerce (i.e., e-commerce) may reduce demand for hotels in general or the Company's hotels in particular, (xi) the complex tax rules that the company must satisfy to qualify as a REIT and the potentially severe consequences of failing to satisfy such requirements, and (xii) governmental regulation that may increase the company's cost of doing business or otherwise negatively effect its business or its attractiveness as an investment and create risk of liability for non-compliance (e.g., changes in laws affecting wages, taxes or dividends, compliance with building codes, compliance with the Americans with Disabilities Act, workers compensation law changes, the Sarbanes-Oxley law, etc.). The Company undertakes no obligation to update any forward-looking statement to reflect actual results, changes in the Company's expectation, or for any other reason. Contact: Dennis Craven (Company) Jerry Daly or Carol McCune Chief Financial Officer Daly Gray (Media) (561) 227-1302 (703) 435-6293 INNKEEPERS USA TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ------------------------------------------------------------------------- Revenue: Hotel operating Rooms $68,469 $62,819 $197,375 $176,192 Food and beverage 2,344 1,984 7,017 3,900 Telephone 345 507 1,065 1,366 Other 1,752 1,643 4,975 4,410 Corporate Other 141 142 411 396 ------------------------------------------------------------------------- Total revenue 73,051 67,095 210,843 186,264 ------------------------------------------------------------------------- Expenses: Hotel operating Rooms 13,509 12,890 39,612 36,668 Food and beverage 1,874 1,611 5,383 2,950 Telephone 728 739 2,267 2,144 Other 817 732 2,285 1,980 General and administrative 6,944 5,740 20,370 17,432 Franchise and marketing fees 4,921 4,313 13,683 12,263 Amortization of deferred franchise conversion 292 292 877 948 Advertising and promotions 2,210 2,239 6,861 5,952 Utilities 3,662 3,001 10,036 8,572 Repairs and maintenance 3,563 3,368 9,681 9,232 Management fees 2,186 2,007 6,330 5,569 Amortization of deferred lease acquisition 131 130 392 392 Insurance 464 356 1,302 1,136 Corporate Depreciation 9,425 8,957 28,002 26,226 Amortization of franchise fees 20 16 66 51 Ground rent 141 132 419 391 Interest 5,214 4,687 15,431 13,836 Amortization of loan origination fees 218 216 649 651 Property taxes and insurance 3,444 2,561 9,629 8,566 G & A 2,688 2,198 8,325 6,344 Other charges (income) -- -- -446 3,053 ------------------------------------------------------------------------- Total expenses 62,451 56,185 181,148 164,356 ------------------------------------------------------------------------- Income before minority interest 10,600 10,910 29,695 21,908 Minority interest, common -98 -119 -248 -195 Minority interest, preferred -502 -1,068 -2,049 -3,205 ------------------------------------------------------------------------- Income from continuing operations 10,000 9,723 27,398 18,508 Income (loss) from discontinued operations -- 3 -- -124 Gain on sale of assets from discontinued operations -- 11 76 1,501 ------------------------------------------------------------------------- Net income 10,000 9,737 27,474 19,885 Preferred share dividends -2,900 -2,900 -8,700 -8,700 ------------------------------------------------------------------------- Net income applicable to common shareholders $7,100 $6,837 $18,774 $11,185 ------------------------------------------------------------------------- Earnings per share data: Basic - continuing operations $0.16 $0.16 $0.43 $0.24 ------------------------------------------------------------------------- Basic $0.16 $0.16 $0.43 $0.27 ------------------------------------------------------------------------- Basic - weighted average shares 45,055,286 42,730,549 43,890,717 41,726,975 ------------------------------------------------------------------------- Diluted - continuing operations $0.16 $0.16 $0.42 $0.23 ------------------------------------------------------------------------- Diluted $0.16 $0.16 $0.42 $0.27 ------------------------------------------------------------------------- Diluted - weighted average shares 46,007,813 43,051,919 44,852,577 41,964,476 ------------------------------------------------------------------------- Per share dividends to common shareholders $0.20 $0.15 $0.50 $0.31 ------------------------------------------------------------------------- INNKEEPERS USA TRUST CALCULATION OF FFO, EBITDA AND RECONCILIATION TO NET INCOME APPLICABLE TO COMMON SHAREHOLDERS (UNAUDITED) (in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ---------------------- ---------------------- CALCULATION OF FFO Net income (loss) applicable to common shareholders $7,100 $6,837 $18,774 $11,185 Depreciation 9,425 8,957 28,002 26,226 Gain on sale of hotels included in discontinued operations -- (11) (76) (1,501) Minority interest, preferred 502 1,068 2,049 3,205 Minority interest, common 98 119 248 195 ---------------------- ---------------------- Diluted FFO $17,125 $16,970 $48,997 $39,310 ---------------------- ---------------------- Weighted average number of common shares and common share equivalents 47,833,357 47,629,045 47,755,942 46,640,482 ---------------------- ---------------------- FFO per share $0.36 $0.36 $1.03 $0.84 ---------------------- ---------------------- FFO 17,125 16,970 48,997 39,310 Other charges -- -- (446) 3,053 Discontinued operations -- (3) -- 124 ---------------------- ---------------------- Adjusted FFO $17,125 $16,967 $48,551 $42,487 ---------------------- ---------------------- Adjusted FFO per share $0.36 $0.36 $1.02 $0.91 ---------------------- ---------------------- Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ---------------------- ---------------------- CALCULATION OF EBITDA Net income applicable to common shareholders $7,100 $6,837 $18,774 $11,185 Interest 5,214 4,687 15,431 13,836 Depreciation and amortization 10,552 9,793 31,553 28,705 Minority interest, common 98 119 248 195 Minority interest, preferred 502 1,068 2,049 3,205 Preferred share dividends 2,900 2,900 8,700 8,700 ---------------------- ---------------------- EBITDA $26,366 $25,404 $76,755 $65,826 ---------------------- ---------------------- Other charges -- -- (446) 3,053 Discontinued operations -- (3) -- 124 Gain on sale of hotels included in discontinued operations -- (11) (76) (1,501) ---------------------- ---------------------- Adjusted EBITDA $26,366 $25,390 $76,233 $67,502 ---------------------- ---------------------- INNKEEPERS USA TRUST CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) September 30, December 31, 2006 2005 ------------------------------------------------------------------------- ASSETS Investment in hotels: Land and improvements $150,254 $150,375 Buildings and improvements 757,545 754,131 Furniture and equipment 111,259 106,944 Renovations in process 21,529 4,534 Hotels under development 10,221 4,413 ------------------------------------------------------------------------- 1,050,808 1,020,397 Accumulated depreciation -258,081 -230,139 ------------------------------------------------------------------------- Net investment in hotels 792,727 790,258 Cash and cash equivalents 10,276 11,897 Restricted cash and cash equivalents 6,970 6,675 Accounts receivable, net 5,168 6,124 Receivable from manager 455 -- Prepaid and other 2,416 2,478 Deferred and other 32,779 19,546 ------------------------------------------------------------------------- Total assets $850,791 $836,978 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Debt $278,647 $269,426 Accounts payable and accrued expenses 19,999 15,956 Payable to manager -- 236 Franchise conversion fee obligations 10,287 10,714 Distributions payable 11,711 9,645 ------------------------------------------------------------------------- Total liabilities 320,644 305,977 Minority interest in Partnership 5,663 47,982 Shareholders' equity: Preferred shares, $0.01 par value, 20,000,000 shares authorized, 5,800,000 shares issued and outstanding 145,000 145,000 Common shares, $0.01 par value, 100,000,000 shares authorized, 45,196,011 and 42,939,086 issued and outstanding, respectively 452 429 Additional paid-in capital 505,562 460,873 Unearned compensation -- -1,939 Distributions in excess of earnings -126,530 -121,344 ------------------------------------------------------------------------- Total shareholders' equity 524,484 483,019 ------------------------------------------------------------------------- Total liabilities and shareholders' equity $850,791 $836,978 ------------------------------------------------------------------------- INNKEEPERS USA TRUST DEBT COMPOSITION As of September 30, 2006 (outstanding balance in thousands) Stated Outstanding Interest Maturity Encumbered DEBT Balance Rate Date Properties ------------------------------------------------------------------------- Unsecured Line of Credit(1) $2,574 6.73% September 2008 -- --------------------------------------------- Industrial Revenue Bonds(1) 10,000 3.70% December 2014 -- --------------------------------------------- Term Loan #1 22,273 8.17% October 2007 8 --------------------------------------------- Term Loan #2 33,855 8.15% March 2009 8 --------------------------------------------- Term Loan #3 27,635 7.02% April 2010 7 --------------------------------------------- Term Loan #4 44,694 7.16% October 2009 6 --------------------------------------------- Term Loan #5 48,925 7.75% January 2011 6 --------------------------------------------- Mortgage Loans 12,413 10.35% June 2010 1 --------------------------------------------- Mortgage Loans 75,000 6.03% September 2016 3 --------------------------------------------- Adjustments (4) 1,278 -- -- -- --------------------------------------------- TOTAL $278,647 7.33%(2) 5.2 years(3) 39 --------------------------------------------- (1) Variable rated debt. The stated interest rate of the industrial revenue bonds includes an annual letter of credit fee of 1.25% (2) Weighted average calculated using the stated interest rate (3) Weighted average maturity (4) Adjustment to record $13 million mortgage at a fair market interest rate of 7% (the stated interest rate is 10.35%) INNKEEPERS USA TRUST OTHER DATA (in thousands, except shares data) September 30, September 30, 2006 2005 ---------------------------- CAPITALIZATION ---------------------------- Common share market capitalization $747,000 $673,000 ---------------------------- Total market capitalization $940,000 $1,072,000 ---------------------------- Common share closing price $16.29 $15.45 ---------------------------- Common share dividend(1) $0.80 $0.60 ---------------------------- Common share dividend yield(1) 4.9% 3.8% ---------------------------- Preferred share closing price $25.32 $26.15 ---------------------------- Preferred share dividend(2) $2.00 $2.00 ---------------------------- Preferred share dividend yield(2) 7.9% 7.6% ---------------------------- DEBT COVERAGE Debt weighted average interest rate 7.2% 7.1% ---------------------------- Debt to investment in hotel properties, at cost 27% 25% ---------------------------- Debt and preferred shares to investment in hotel properties 40% 39% ---------------------------- Debt to market capitalization 30% 23% ---------------------------- Debt and preferred shares to market capitalization 45% 37% ---------------------------- LIQUIDITY/FLEXIBILITY Debt due 2005 -- $1,865 ---------------------------- Debt due 2006 $1,483 $6,399 ---------------------------- Debt due 2007 $29,449 $68,140 ---------------------------- Debt due 2008 $5,267 $6,006 ---------------------------- Debt due 2009 and thereafter $242,448 $164,889 ---------------------------- Unencumbered hotel assets(3) 44% 48% ---------------------------- Unsecured Line of Credit outstanding balance $2,574 $40,574 ---------------------------- Unsecured Line of Credit available balance(4) $190,926 $82,839 ---------------------------- SHARES AND UNITS OUTSTANDING Common Shares 45,196,011 42,914,086 ---------------------------- Common Partnership Units 666,891 666,891 ---------------------------- Preferred Partnership Units 1,825,544 3,884,469 ---------------------------- Preferred Shares 5,800,000 5,800,000 ---------------------------- (1) Annualized based on the quarterly dividend paid for the three months ended September 30, 2006 and 2005. (2) Regular annual preferred share dividends. (3) Based upon the number of hotels. (4) The actual amount that may be borrowed is contingent upon many factors, such as compliance with unsecured line of credit covenants and the use of proceeds from borrowings. The $205 million revolving unsecured line of credit available balance has been reduced by $11.5 million in letters of credit at September 30, 2006. INNKEEPERS USA TRUST HOTEL OPERATING RESULTS (UNAUDITED) Three Months Ended September 30, % 2006 2005 Inc (dec) ----------------------------------- PORTFOLIO(1) ------------------------------ Average Daily Rate $114.80 $106.13 8.17% ------------------------- Occupancy 76.97% 78.36% -1.77% ------------------------- RevPAR $88.36 $83.16 6.25% ------------------------- Number of hotel properties 65 ------ Percent of total rooms 100.0% ------ Percent of room revenue(2) 100.0% ------ BY SEGMENT ------------------------------ Upscale Extended Stay Average Daily Rate $115.51 $105.87 9.11% ------------------------- Occupancy 80.07% 82.42% -2.85% ------------------------- RevPAR $92.49 $87.25 5.99% ------------------------- Number of hotel properties 49 ------ Percent of total rooms 74.7% ------ Percent of room revenue(2) 77.7% ------ Upscale(1) Average Daily Rate $147.18 $132.45 11.12% ------------------------- Occupancy 66.96% 66.95% 0.02% ------------------------- RevPAR $98.56 $88.67 11.15% ------------------------- Number of hotel properties 3 ------ Percent of total rooms 5.8% ------ Percent of room revenue(2) 6.7% ------ Mid Priced(1) Average Daily Rate $98.01 $95.94 2.15% ------------------------- Occupancy 69.53% 67.87% 2.44% ------------------------- RevPAR $68.14 $65.11 4.65% ------------------------- Number of hotel properties 13 ------ Percent of total rooms 19.6% ------ Percent of room revenue(2) 15.5% ------ BY FRANCHISE AFFILIATION ------------------------------ Residence Inn Average Daily Rate $116.31 $106.13 9.59% ------------------------- Occupancy 79.89% 82.05% -2.63% ------------------------- RevPAR $92.92 $87.07 6.71% ------------------------- Number of hotel properties 42 ------ Percent of total rooms 63.5% ------ Percent of room revenue(2) 66.2% ------ Summerfield Suites Average Daily Rate $106.34 $101.12 5.16% ------------------------- Occupancy 81.77% 85.77% -4.67% ------------------------- RevPAR $86.96 $86.73 0.26% ------------------------- Number of hotel properties 6 ------ Percent of total rooms 9.4% ------ Percent of room revenue(2) 9.2% ------ Hampton Inn(1) Average Daily Rate $101.26 $98.19 3.13% ------------------------- Occupancy 70.43% 67.63% 4.13% ------------------------- RevPAR $71.31 $66.41 7.39% ------------------------- Number of hotel properties 11 ------ Percent of total rooms 16.7% ------ Percent of room revenue(2) 13.4% ------ BY MANAGEMENT COMPANY ------------------------------ Innkeepers Hospitality Management(1)(3)(4) Average Daily Rate $114.03 $105.78 7.80% ------------------------- Occupancy 77.34% 78.68% -1.70% ------------------------- RevPAR $88.19 $83.23 5.96% ------------------------- Number of hotel properties 64 ------ Percent of total rooms 97.3% ------ Percent of room revenue(2) 97.1% ------ Third Party Managed Average Daily Rate $149.26 $121.03 23.32% ------------------------- Occupancy 63.43% 66.66% -4.85% ------------------------- RevPAR $94.67 $80.68 17.34% ------------------------- Number of hotel properties 1 ------ Percent of total rooms 2.7% ------ Percent of room revenue(2) 2.9% ------ BY GEOGRAPHIC REGION ------------------------------ New England [ME, NH, VT, MA, CT, RI] Average Daily Rate $117.30 $112.92 3.88% ------------------------- Occupancy 78.71% 76.59% 2.76% ------------------------- RevPAR $92.32 $86.48 6.75% ------------------------- Number of hotel properties 4 ------ Percent of total rooms 4.6% ------ Percent of room revenue(2) 4.4% ------ Middle Atlantic(1) [NY, NJ, PA] Average Daily Rate $121.10 $119.21 1.58% ------------------------- Occupancy 79.13% 75.35% 5.02% ------------------------- RevPAR $95.82 $89.82 6.68% ------------------------- Number of hotel properties 10 ------ Percent of total rooms 14.2% ------ Percent of room revenue(2) 13.9% ------ South Atlantic(1) [DE, MD, WV, DC, VA, NC, SC, GA, FL] Average Daily Rate $114.45 $107.05 6.91% ------------------------- Occupancy 69.31% 72.92% -4.96% ------------------------- RevPAR $79.32 $78.07 1.61% ------------------------- Number of hotel properties 15 ------ Percent of total rooms 23.9% ------ Percent of room revenue(2) 24.1% ------ East North Central [OH, MI, IN, IL, WI] Average Daily Rate $98.55 $92.98 5.98% ------------------------- Occupancy 76.69% 76.77% -0.10% ------------------------- RevPAR $75.58 $71.38 5.88% ------------------------- Number of hotel properties 12 ------ Percent of total rooms 16.7% ------ Percent of room revenue(2) 13.9% ------ East South Central(1) [KY, TN, AL, MS] Average Daily Rate $94.90 $91.76 3.43% ------------------------- Occupancy 82.80% 85.80% -3.50% ------------------------- RevPAR $78.58 $78.73 -0.19% ------------------------- Number of hotel properties 2 ------ Percent of total rooms 2.2% ------ Percent of room revenue(2) 1.9% ------ West North Central [MN, IA, MO, KS, NE, SD, ND] Average Daily Rate $84.83 $82.58 2.72% ------------------------- Occupancy 92.29% 88.47% 4.32% ------------------------- RevPAR $78.29 $73.06 7.16% ------------------------- Number of hotel properties 1 ------ Percent of total rooms 0.8% ------ Percent of room revenue(2) 0.7% ------ West South Central [AR, LA, OK, TX] Average Daily Rate $113.61 $91.78 23.79% ------------------------- Occupancy 71.96% 84.07% -14.40% ------------------------- RevPAR $81.76 $77.15 5.97% ------------------------- Number of hotel properties 5 ------ Percent of total rooms 8.7% ------ Percent of room revenue(2) 8.4% ------ Mountain [MT, ID, WY, CO, UT, NM, AZ, NV] Average Daily Rate $109.52 $97.50 12.33% ------------------------- Occupancy 79.14% 83.56% -5.28% ------------------------- RevPAR $86.68 $81.47 6.40% ------------------------- Number of hotel properties 2 ------ Percent of total rooms 3.6% ------ Percent of room revenue(2) 3.3% ------ Pacific [WA, OR, CA, AK, HI] Average Daily Rate $124.33 $112.52 10.49% ------------------------- Occupancy 83.02% 83.21% -0.23% ------------------------- RevPAR $103.21 $93.62 10.24% ------------------------- Number of hotel properties 14 ------ Percent of total rooms 25.4% ------ Percent of room revenue(2) 29.4% ------ BY SELECTED MSA ------------------------------ Atlanta Average Daily Rate $105.38 $96.82 8.84% ------------------------- Occupancy 75.86% 76.86% -1.30% ------------------------- RevPAR $79.94 $74.41 7.43% ------------------------- Number of hotel properties 2 ------ Percent of total rooms 3.5% ------ Percent of room revenue(2) 3.4% ------ Boston Average Daily Rate $105.07 $94.22 11.51% ------------------------- Occupancy 68.77% 68.40% 0.55% ------------------------- RevPAR $72.26 $64.45 12.12% ------------------------- Number of hotel properties 1 ------ Percent of total rooms 1.3% ------ Percent of room revenue(2) 0.9% ------ Chicago Average Daily Rate $103.42 $93.41 10.72% ------------------------- Occupancy 78.01% 74.71% 4.43% ------------------------- RevPAR $80.68 $69.78 15.62% ------------------------- Number of hotel properties 4 ------ Percent of total rooms 7.1% ------ Percent of room revenue(2) 6.1% ------ Dallas/Ft. Worth Average Daily Rate $106.89 $84.12 27.07% ------------------------- Occupancy 70.44% 85.66% -17.77% ------------------------- RevPAR $75.29 $72.06 4.49% ------------------------- Number of hotel properties 4 ------ Percent of total rooms 6.8% ------ Percent of room revenue(2) 6.0% ------ Denver Average Daily Rate $109.52 $97.50 12.33% ------------------------- Occupancy 79.14% 83.56% -5.28% ------------------------- RevPAR $86.68 $81.47 6.40% ------------------------- Number of hotel properties 2 ------ Percent of total rooms 3.6% ------ Percent of room revenue(2) 3.3% ------ Detroit Average Daily Rate $97.67 $95.59 2.17% ------------------------- Occupancy 71.53% 80.92% -11.60% ------------------------- RevPAR $69.86 $77.35 -9.68% ------------------------- Number of hotel properties 3 ------ Percent of total rooms 4.5% ------ Percent of room revenue(2) 3.7% ------ Hartford Average Daily Rate $117.17 $114.28 2.53% ------------------------- Occupancy 80.31% 78.14% 2.77% ------------------------- RevPAR $94.10 $89.30 5.37% ------------------------- Number of hotel properties 2 ------ Percent of total rooms 2.4% ------ Percent of room revenue(2) 2.5% ------ Philadelphia Average Daily Rate $103.12 $104.00 -0.84% ------------------------- Occupancy 81.74% 78.64% 3.93% ------------------------- RevPAR $84.29 $81.79 3.06% ------------------------- Number of hotel properties 4 ------ Percent of total rooms 5.8% ------ Percent of room revenue(2) 5.5% ------ Richmond Average Daily Rate $104.88 $97.72 7.33% ------------------------- Occupancy 84.58% 80.67% 4.86% ------------------------- RevPAR $88.71 $78.83 12.54% ------------------------- Number of hotel properties 2 ------ Percent of total rooms 2.3% ------ Percent of room revenue(2) 2.3% ------ San Francisco/San Jose/Oakland (Silicon valley) Average Daily Rate $120.68 $110.17 9.54% ------------------------- Occupancy 84.27% 80.47% 4.72% ------------------------- RevPAR $101.70 $88.66 14.71% ------------------------- Number of hotel properties 8 ------ Percent of total rooms 15.0% ------ Percent of room revenue(2) 17.4% ------ Seattle/Portland Average Daily Rate $133.61 $115.92 15.26% ------------------------- Occupancy 84.30% 87.31% -3.45% ------------------------- RevPAR $112.63 $101.21 11.28% ------------------------- Number of hotel properties 4 ------ Percent of total rooms 6.3% ------ Percent of room revenue(2) 7.5% ------ Washington, D.C.(1) Average Daily Rate $139.11 $134.42 3.49% ------------------------- Occupancy 72.05% 73.24% -1.62% ------------------------- RevPAR $100.23 $98.45 1.81% ------------------------- Number of hotel properties 4 ------ Percent of total rooms 6.7% ------ Percent of room revenue(2) 8.3% ------ Nine Months Ended September 30, % 2006 2005 Inc (dec) ------------------------------- PORTFOLIO(1) ------------------------------ Average Daily Rate $111.84 $103.95 7.59% ------------------------------- Occupancy 76.31% 76.67% -0.47% ------------------------------- RevPAR $85.34 $79.69 7.09% ------------------------------- BY SEGMENT ------------------------------ Upscale Extended Stay Average Daily Rate $112.36 $103.82 8.23% ------------------------------- Occupancy 79.05% 79.67% -0.78% ------------------------------- RevPAR $88.82 $82.72 7.38% ------------------------------- Upscale(1) Average Daily Rate $138.20 $126.70 9.08% ------------------------------- Occupancy 72.42% 69.88% 3.64% ------------------------------- RevPAR $100.09 $88.54 13.05% ------------------------------- Mid Priced(1) Average Daily Rate $101.10 $97.56 3.63% ------------------------------- Occupancy 66.97% 67.17% -0.31% ------------------------------- RevPAR $67.70 $65.53 3.31% ------------------------------- BY FRANCHISE AFFILIATION ------------------------------ Residence Inn Average Daily Rate $112.75 $103.96 8.45% ------------------------------- Occupancy 78.88% 79.09% -0.26% ------------------------------- RevPAR $88.94 $82.22 8.17% ------------------------------- Summerfield Suites Average Daily Rate $104.70 $98.26 6.56% ------------------------------- Occupancy 79.85% 83.37% -4.22% ------------------------------- RevPAR $83.60 $81.91 2.06% ------------------------------- Hampton Inn(1) Average Daily Rate $102.87 $97.79 5.20% ------------------------------- Occupancy 66.60% 66.01% 0.91% ------------------------------- RevPAR $68.52 $64.54 6.15% ------------------------------- BY MANAGEMENT COMPANY ------------------------------ Innkeepers Hospitality Management(1)(3)(4) Average Daily Rate $111.25 $103.61 7.37% ------------------------------- Occupancy 76.57% 77.09% -0.67% ------------------------------- RevPAR $85.18 $79.87 6.65% ------------------------------- Third Party Managed Average Daily Rate $136.00 $118.90 14.38% ------------------------------- Occupancy 67.03% 61.65% 8.72% ------------------------------- RevPAR $91.16 $73.30 24.36% ------------------------------- BY GEOGRAPHIC REGION ------------------------------ New England [ME, NH, VT, MA, CT, RI] Average Daily Rate $111.28 $106.47 4.52% ------------------------------- Occupancy 72.12% 72.16% -0.05% ------------------------------- RevPAR $80.26 $76.83 4.46% ------------------------------- Middle Atlantic(1) [NY, NJ, PA] Average Daily Rate $111.66 $108.95 2.49% ------------------------------- Occupancy 74.89% 76.15% -1.65% ------------------------------- RevPAR $83.63 $82.97 0.80% ------------------------------- South Atlantic(1) [DE, MD, WV, DC, VA, NC, SC, GA, FL] Average Daily Rate $119.34 $109.74 8.75% ------------------------------- Occupancy 72.31% 74.57% -3.02% ------------------------------- RevPAR $86.30 $81.83 5.46% ------------------------------- East North Central [OH, MI, IN, IL, WI] Average Daily Rate $96.55 $92.12 4.81% ------------------------------- Occupancy 73.69% 72.77% 1.26% ------------------------------- RevPAR $71.15 $67.04 6.13% ------------------------------- East South Central(1) [KY, TN, AL, MS] Average Daily Rate $93.14 $87.85 6.03% ------------------------------- Occupancy 79.16% 83.01% -4.63% ------------------------------- RevPAR $73.74 $72.92 1.12% ------------------------------- West North Central [MN, IA, MO, KS, NE, SD, ND] Average Daily Rate $84.01 $81.85 2.63% ------------------------------- Occupancy 89.57% 86.15% 3.96% ------------------------------- RevPAR $75.24 $70.52 6.70% ------------------------------- West South Central [AR, LA, OK, TX] Average Daily Rate $106.16 $92.63 14.61% ------------------------------- Occupancy 77.68% 83.23% -6.67% ------------------------------- RevPAR $82.47 $77.10 6.96% ------------------------------- Mountain [MT, ID, WY, CO, UT, NM, AZ, NV] Average Daily Rate $100.17 $93.72 6.88% ------------------------------- Occupancy 77.86% 76.82% 1.36% ------------------------------- RevPAR $78.00 $72.00 8.33% ------------------------------- Pacific [WA, OR, CA, AK, HI] Average Daily Rate $120.75 $110.54 9.24% ------------------------------- Occupancy 81.98% 79.18% 3.52% ------------------------------- RevPAR $98.98 $87.53 13.09% ------------------------------- BY SELECTED MSA ------------------------------ Atlanta Average Daily Rate $108.03 $97.30 11.03% ------------------------------- Occupancy 76.36% 74.61% 2.35% ------------------------------- RevPAR $82.49 $72.60 13.63% ------------------------------- Boston Average Daily Rate $102.81 $94.48 8.82% ------------------------------- Occupancy 60.63% 58.62% 3.44% ------------------------------- RevPAR $62.34 $55.38 12.57% ------------------------------- Chicago Average Daily Rate $100.44 $93.43 7.50% ------------------------------- Occupancy 73.13% 70.06% 4.39% ------------------------------- RevPAR $73.45 $65.46 12.22% ------------------------------- Dallas/Ft. Worth Average Daily Rate $97.21 $83.38 16.59% ------------------------------- Occupancy 76.82% 83.82% -8.36% ------------------------------- RevPAR $74.67 $69.89 6.84% ------------------------------- Denver Average Daily Rate $100.17 $93.72 6.88% ------------------------------- Occupancy 77.86% 76.82% 1.36% ------------------------------- RevPAR $78.00 $72.00 8.33% ------------------------------- Detroit Average Daily Rate $98.73 $94.66 4.30% ------------------------------- Occupancy 70.43% 75.22% -6.37% ------------------------------- RevPAR $69.53 $71.20 -2.35% ------------------------------- Hartford Average Daily Rate $114.84 $112.64 1.96% ------------------------------- Occupancy 75.63% 74.11% 2.04% ------------------------------- RevPAR $86.85 $83.48 4.04% ------------------------------- Philadelphia Average Daily Rate $103.78 $101.54 2.21% ------------------------------- Occupancy 78.45% 79.44% -1.25% ------------------------------- RevPAR $81.41 $80.67 0.93% ------------------------------- Richmond Average Daily Rate $104.66 $95.57 9.51% ------------------------------- Occupancy 80.39% 82.66% -2.75% ------------------------------- RevPAR $84.13 $79.00 6.50% ------------------------------- San Francisco/San Jose/Oakland (Silicon valley) Average Daily Rate $120.33 $110.19 9.20% ------------------------------- Occupancy 82.47% 74.82% 10.23% ------------------------------- RevPAR $99.24 $82.44 20.37% ------------------------------- Seattle/Portland Average Daily Rate $123.21 $109.09 12.95% ------------------------------- Occupancy 82.38% 85.12% -3.22% ------------------------------- RevPAR $101.50 $92.85 9.31% ------------------------------- Washington, D.C.(1) Average Daily Rate $144.92 $133.48 8.57% ------------------------------- Occupancy 72.70% 73.31% -0.83% ------------------------------- RevPAR $105.36 $97.85 7.67% ------------------------------- (1) Comparable hotels for the quarter exclude two hotels which are being converted to Courtyard by Marriott, a Hampton Inn which reopened in August 2005 and the Bullfinch hotel acquired in November 2005. Year to date statistics also exclude the Westin which was acquired in May 2005. (2) Room revenue for January 1, 2006 to September 30, 2006. DATASOURCE: Innkeepers USA Trust CONTACT: Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, +1-561-227-1302; or Media: Jerry Daly or Carol McCune of Daly Gray, +1-703-435-6293, for Innkeepers USA Trust Web site: http://www.innkeepersusa.com/

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