WXH Winston Hotels

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, 2006. In addition, the company raised its guidance for 2006. 2006 Third Quarter Highlights and Recent Events Improved FFO available to common shareholders to $0.35 per share, exceeding First Call consensus analyst expectations by $0.02; Achieved net income available to common shareholders per share of $0.41; Increased EBITDA, excluding unusual charges, by $4.3 million, or 34.3 percent, to $16.9 million; Improved same store RevPAR by 10.9 percent; Posted same store operating margin growth of 100 basis points; Sold two hotels for total aggregate net proceeds of $19.2 million, resulting in an aggregate gain on sale, net of minority interest, of $6.9 million; Raised full-year guidance for FFO available to common shareholders to $0.96 to $0.98 per share, compared to $0.91 to $0.96 previously forecasted. Excluding non-recurring debt extinguishment expenses as well as certain non-cash charges, FFO available to common shareholders is expected to be $1.12 to $1.14, compared to $1.07 to $1.12 previously forecasted; Acquired the 121-room Courtyard by Marriott in St. Charles, Ill. and announced that it had entered into definitive agreements to acquire two hotels in New York, NY; and Opened a 121-room Hilton Garden Inn in Akron, Ohio on November 2, and expects to open a 142-room Homewood Suites in Princeton, N.J., in mid-November. 2006 Third Quarter Financial Results Net income available to common shareholders was $11.4 million for the 2006 third quarter, or $0.41 per share, compared to net loss available to common shareholders of ($8.7) million, or ($0.33) per share, for the same period in 2005. Net income available to common shareholders for the 2006 third quarter included a gain on sale, net of minority interest, of approximately $6.9 million, or $0.24 per share. Net loss available to common shareholders for the 2005 third quarter included a non-cash impairment charge totaling $12.4 million, net of minority interest. Net income available to common shareholders for the 2006 and 2005 third quarters would have been $4.6 million and $3.6 million, or $0.17 and $0.14 per share, respectively, excluding the effects of the gain and impairment charge. Funds from operations (�FFO�) available to common shareholders for the 2006 third quarter was $10.0 million, compared to ($3.7) million in the 2005 third quarter, or $0.35 and ($0.13) per share, respectively. Excluding the impairment charge, FFO available to common shareholders for the 2005 third quarter would have been approximately $8.7 million, or $0.32 per share. The company had approximately 28.9 million and 27.6 million fully diluted weighted average common shares outstanding in the 2006 and 2005 reporting periods, respectively. Same Store Operating Statistics Third quarter 2006 revenue per available room (�RevPAR�) rose 10.9 percent for the company�s 38 hotels that were open throughout each of the nine-month periods ended September 30, 2006 and 2005. The improvement was led by a 9.9 percent increase in average daily room rate (�ADR�) and a 1.0 percent increase in occupancy. Third quarter 2006 operating margins increased 100 basis points to 44.4 percent from 43.4 percent in the same period a year earlier, despite higher utility costs and franchise fees. These costs were partially offset by improvements in managing labor costs, lower food and beverage costs and lower frequent traveler expenses. �Our operators generated excellent results in the third quarter, continuing a trend of improving operating results over the past year,� said Robert W. Winston III, chief executive officer. �We continue to work closely with our operators to monitor costs and find ways to improve margins.� The following table details the company�s same store operating statistics, for the 38 consolidated hotels that were open throughout each of the nine-month periods ended September 30, 2006 and 2005 (includes 36 wholly owned hotels and two hotels, the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn, that are owned through joint ventures). Same Store Operating Statistics Three Months Ended Nine Months Ended September 30, September 30, 2006� 2005� Change 2006� 2005� Change Hotel Room Revenues $ 34,422� $ 31,334� 9.9% $ 102,174� $ 93,032� 9.8% RevPAR $70.26� $63.36� 10.9% $70.32� $63.36� 11.0% Occupancy 71.5% 70.8% 1.0% 72.5% 70.9% 2.3% ADR $98.25� $89.44� 9.9% $97.04� $89.40� 8.5% Operating Margin � 44.4% � 43.4% � 100� bps � 43.7% � 43.1% � 60� bps Excluding the operating results of two hotels that were negatively impacted by renovations for the nine months ended September 30, 2006 and 2005, same store RevPAR increased 11.7 percent to $72.04 from $64.48; and same store operating margins rose 100 basis points to 44.7 percent from 43.7 percent. 2006 Fourth Quarter Outlook and Guidance For the 2006 fourth quarter, the company forecasts net income per share available to common shareholders of $0.04 to $0.06. On a same-store basis, the company expects 2006 fourth quarter RevPAR to increase 6 to 8 percent, compared to the prior year�s fourth quarter. FFO per share available to common shareholders is expected to be between $0.21 and $0.23 for the 2006 fourth quarter. 2006 Annual Outlook and Guidance Revised For the year ended December 31, 2006, the company forecasts net income per share available to common shareholders of $0.75 to $0.77. On a same-store basis, the company expects 2006 RevPAR to increase 9 to 10 percent from the prior year. FFO per share available to common shareholders for the year ended December 31, 2006, is expected to be between $0.96 to $0.98, compared to a prior forecast of between $0.91 to $0.96. FFO per share available to common shareholders for the year ended December 31, 2006, excluding the non-recurring debt extinguishment expenses and certain non-cash charges, is expected to be between $1.12 and $1.14, compared to a prior forecast of $1.07 to $1.12. This guidance assumes no additional hotel acquisitions, dispositions, developments or placements of hotel debt during the remainder of 2006, other than those activities discussed below. Hotel Development On November 2, 2006, one of the company�s joint ventures opened a 121-room Hilton Garden Inn in Akron, Ohio. The company holds a 41.7 percent ownership interest in the joint venture and has provided an additional preferred equity investment of $2.2 million. �We believe this hotel�s location adjacent to the Akron-Canton Airport and the significant amount of office space in close proximity will allow us to ramp up the property quickly,� said Joe Green, president and chief financial officer. �In addition, we expect to open the 142-room, wholly owned $19.6 million Homewood Suites in Princeton, N.J. in mid-November, pending final inspections. Both properties are in strong markets, and we believe that both will quickly become leaders in their respective segments.� The company also is progressing on schedule with the following development projects: The company expects to open a wholly owned, 119-room, $13.3 million Hilton Garden Inn in Wilmington, N.C., in the first quarter of 2007. The company has begun construction on a wholly owned, 79-room, $10.7 million Residence Inn in Roanoke, Va., with a planned opening in the 2007 fourth quarter. The company has begun construction on a 120-room, $14.6 million Courtyard by Marriott at Flagler Corporate Park in Jacksonville, Fla., scheduled to open in the 2007 fourth quarter. The property is owned by a joint venture in which the company holds a 48 percent equity interest. During the fourth quarter of 2006, the company plans to break ground on a 22-room expansion of the Chapel Hill, N.C. Courtyard by Marriott hotel. The expansion is scheduled for completion in the 2007 fourth quarter. The property is owned by a joint venture in which the company holds a 48.78 percent equity interest. �Our development program has been timed well with the market,� Green said. �We are optimistic about each of the hotels opening in the fourth quarter, as well as the other projects under construction. These new properties give us significant upside potential in solid markets. Land and construction costs remain high; however, with the housing boom abating somewhat, we believe constructions costs may move downward. We continue to look for potential development opportunities and to maintain an active acquisition pipeline.� Hotel Acquisitions As previously announced, in August the company acquired the 121-room Courtyard by Marriott in St. Charles, Ill. for $9.2 million from a private investment group. The hotel is located 35 miles west of downtown Chicago, Ill. "We have expanded our portfolio strategy to include more locations in or near major urban markets,� Green pointed out. �We believe we can attain attractive, risk-adjusted returns in these markets, while also diversifying our portfolio.� In August, the company announced that it had entered into definitive agreements to acquire two hotels in New York City for a purchase price of $55 million each. Located in the Tribeca area and Chelsea area, the hotels currently are under construction and are expected to open late in the 2007 first quarter. Acquisition of the two hotels is subject to satisfactory completion of due diligence and other customary closing conditions. The company has been approved by Hilton Hotels Corporation for a Hilton Garden Inn franchise for the Tribeca hotel and negotiations are underway with Hilton to brand the Chelsea hotel as a Hilton Garden Inn. �There is significant demand for mid-market properties in Manhattan, which has one of the highest barriers to new competition in the country� Green said. �These hotels will carry one of the strongest mid-market brands in the industry and are well located in growing markets in the city. These hotels give us a significant urban presence in one of the nation�s most dynamic markets.� Hotel Dispositions The company sold two hotels in the third quarter, for total aggregate net proceeds of $19.2 million, resulting in an aggregate gain on sale, net of minority interest, of $6.9 million, bringing to six the number of hotel dispositions for the year. The aggregate net proceeds for the six dispositions during 2006 total $42.6 million, resulting in an aggregate gain on sale, net of minority interest, of approximately $14.6 million. �We have significantly upgraded our portfolio in the past 24 months through a combination of development, acquisitions and selective dispositions,� Green noted. �We believe these actions make our portfolio stronger and better positioned for all phases of the hotel economic cycle. Although these sales may have a short-term negative effect on FFO, we believe that re-investing our capital into newer, better located properties will allow us to achieve better and higher sustainable growth,� Green said. Hotel Debt Financing Program In October 2006, the company sold $6.3 million of its $8.5 million commitment to lend funds to develop a 101-room Hampton Inn and Suites in Murfreesboro, Tenn. to General Electric Capital Corporation (�GECC�). Winston now holds a $2.2 million �B� note. The �B� note bears interest at 30-day LIBOR plus 6.05 percent, with an additional 3.86 percent accrual per annum. As of September 30, 2006, the company had funded $0.9 million of the whole loan; on October 2, 2006, GECC funded their pro rata share of $0.7 million to the company, leaving the company�s funding of the �B� note at $0.2 million. The company is obligated to fund the remaining $2.0 million balance of the �B� note ratably over the projected construction period, which is expected to continue through the second quarter of 2007. At the close of the 2006 third quarter, the company had 13 loans outstanding, representing loans receivable totaling $61.7 million and related interest receivable totaling $2.0 million. �We continue to have an active loan pipeline,� Green pointed out. �We are using our substantial expertise in development to make informed lending decisions.� Strengthened Balance Sheet In August 2006, the company successfully completed a public offering of its common stock, selling 2.4 million shares at $11.75 per share and generating net cash proceeds of $26.5 million. The proceeds were used to pay down the company�s line of credit. At September 30, 2006, the outstanding balance under the line of credit was $13.0 million and the remaining available balance was $118.9 million, based upon the borrowing base created by the hotels that serve as collateral for the line. During the fourth quarter, the company expects to add an additional five hotels as collateral to the line, which would add approximately $40 million to the available balance. Dividends During the 2006 third quarter, the company declared a regular cash dividend of $0.15 per common share and a cash dividend of $0.50 per share of Series B Preferred Stock. �The company�s board of directors evaluates our dividend policy on a quarterly basis and is comfortable with the payout level of our dividends,� Winston said. Conference Call Winston Hotels� 2006 third quarter investor conference call is scheduled for 1 p.m. EST today, November 7, 2006. The call also will be simulcast over the Internet via the company�s Web site, www.winstonhotels.com. The replay will be available on the company�s Web site for 30 days and via telephone for seven days by calling 800-475-6701, access code 845841. About the Company As of September 30, 2006, the company owned or was invested in 52 hotel properties in 17 states having an aggregate of 7,064 rooms. This included 44 wholly owned properties with an aggregate of 5,993 rooms, a 60% ownership interest in a joint venture that owned one hotel with 138 rooms, a 49% ownership interest in a joint venture that owned one hotel with 118 rooms, a 48.78% ownership interest in a joint venture that owned one hotel with 147 rooms, a 13.05% ownership interest in a joint venture that owned four hotels with an aggregate of 545 rooms, and a 0.21% ownership interest in a joint venture that owned one hotel with 123 rooms, for which substantially all of the profit or loss generated by the joint venture is allocated to the company. As of September 30, 2006, the company also had $61.7 million in loan receivables from owners of several hotels. The company does not hold an ownership interest in any of the hotels for which it has provided financing. For more information about Winston Hotels, visit the company�s Web site at www.winstonhotels.com. Notes About Forward-Looking Statements In addition to historical information, this press release contains forward-looking statements. The reader can identify these statements by use of words like �may,� �will,� �expect,� �project,� �anticipate,� �estimate,� �target,� �believe,� �continue� or similar expressions, including without limitation its acquisition, disposition and development plans for hotel properties, its hotel lending plans, its dividend policy, and its estimated net income available to common shareholders, net income available to common shareholders per share, FFO available to common shareholders, FFO available to common shareholders per share and RevPAR. These statements represent the company�s judgment and are subject to risks and uncertainties that could cause actual operating results to differ materially from those expressed or implied in the forward looking statements including, but not limited to, changes in general economic conditions, lower occupancy rates, lower average daily rates, acquisition risks, development risks including risk of construction delay, cost overruns, occupancy and governmental permits, zoning, the increase of development costs in connection with projects that are not pursued to completion, the risk of non-payment of subordinated loans, or the failure to make additional hotel debt investments and investments in hotels. Other risks are discussed in the company�s filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2005. Notes About Non-GAAP Financial Measures This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission (�SEC�) rules. As required by SEC rules, the company has provided reconciliation in this press release of each non-GAAP financial measure to its most directly comparable GAAP measure. We believe that these non-GAAP measures, when combined with the company�s primary GAAP presentations required by the SEC, help improve our equity holders� ability to understand our operating performance and make it easier to compare the results of our company with other hotel REITs. A description of each is provided below. FFO and FFO Available to Common Shareholders The company reports FFO in accordance with the definition of the National Association of Real Estate Investment Trusts (�NAREIT�). NAREIT defines FFO as net income (loss) (determined in accordance with generally accepted accounting principles, or �GAAP�), excluding gains (losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). The company further subtracts preferred stock dividends from FFO to calculate FFO available to common shareholders. FFO available to common shareholders is a performance measure used by the company in its budgeting and forecasting models, it is discussed during Board meetings, and is considered when making decisions regarding acquisitions, sales of properties and other investments, and is a metric in determining executive compensation. The calculation of FFO and FFO available to common shareholders may vary from entity to entity, and as such the presentation of FFO and FFO available to common shareholders by the company may not be comparable to other similarly titled measures of other reporting companies. FFO and FFO available to common shareholders are not intended to represent cash flows for the period. FFO and FFO available to common shareholders have not been presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. FFO is a supplemental industry-wide measure of REIT operating performance, the definition of which was first proposed by NAREIT in 1991 (and clarified in 1995, 1999 and 2002) in response to perceived drawbacks associated with the presentation of net income under GAAP as applied to REITs. Since the introduction of the definition by NAREIT, the term has come to be widely used by REITs. Historical GAAP 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 have considered presentations of operating results for real estate companies that use historical GAAP cost accounting to be insufficient by themselves. Accordingly, the company believes FFO and FFO available to common shareholders (combined with the company�s primary GAAP presentations required by the SEC) improve our investors� ability to understand the company�s operating performance. The company also provides FFO Available to Common Shareholders excluding extinguishment of debt and other unusual expenses as well as non-cash charges. We describe this measure as FFO Available to Common Shareholders, excluding unusual charges in the attached reconciliation schedules. The following describes the unusual charges the company incurred during 2005 and 2006 that are added back to FFO: The Company recorded a $12.4 million, net of minority interest, non-cash impairment charge in the third quarter of 2005 relating to two hotels. In May 2006, the company borrowed funds under its line of credit to pay off the outstanding balance of $11.3 million on the ten-year first mortgage loan collateralized by the Evanston Hilton Garden Inn. A prepayment premium and write-off of related deferred expenses of $0.2 million are included in "extinguishment of debt" in the Consolidated Statements of Operations. In May 2006 the company defeased the remaining $61.3�million balance of the company�s $71 million ten-year 7.375% fixed-rate CMBS debt secured in part by the company�s hotels. The difference between the amount of securities purchased to defease the debt and the debt paid down, which totaled $3.2 million, as well as $0.5 million for the write-off of related deferred expenses, were recorded as an "extinguishment of debt" in the Consolidated Statements of Operations. The company adopted FASB issued Interpretation No. 47, �Accounting for Conditional Asset Retirement Obligations,� (�FIN 47�) an interpretation of SFAS No. 143, �Accounting for Asset Retirement Obligations� effective December 31, 2005. Under the interpretation, an entity is required to recognize a liability for the fair value of an asset retirement obligation (�ARO�) that is conditional on a future event if the liability�s fair value can be reasonably estimated. During the second quarter the company recorded an ARO liability for one of its hotels, which included a non-recurring, non-cash cumulative adjustment of $0.2 million. One of the company�s taxable REIT subsidiaries provided development services to one of the company�s consolidated joint ventures, and recorded development fee income. This income is taxable and therefore income tax expense related to the development fees, totaling $0.4 million, is included in the Consolidated Statements of Operations. Since the joint venture�s income is consolidated into the company�s financial statements, the development fee income is eliminated in consolidation. The above adjustments are not in accordance with the NAREIT definition of FFO and are not comparable to similar adjusted FFO measures reported by other REITs. The company presents these adjustments to FFO because it believes that the resulting measure provides investors a useful indicator of the operating performance of the Company's hotels and other investments during the three and nine months ended September 30, 2006 as compared to prior periods by adjusting for the effects of certain unusual or non-cash items arising during the periods. FFO available to common shareholders, excluding unusual charges, is not intended to represent cash flows for the period, is not presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. In addition to being used by management in the annual budget process, the compensation committee of the board of directors of the company will consider these adjustments in its criteria for performance-based executive compensation. Operating Margin Gross operating profit margin, which is referred to herein as �operating margin,� is defined as hotel revenues minus hotel operating costs before property taxes, insurance and management fees, divided by hotel revenues. RevPAR RevPAR is an acronym for Revenue Per Available Room, which is determined by multiplying average daily rate by occupancy percentage for any given period. RevPAR does not include food and beverage or other ancillary revenues, such as parking, telephone, or other guest services generated by the property. Similar to the reporting periods for the company�s statement of operations, hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) are always reported on a quarter to date and/or year to date basis. EBITDA, excluding unusual charges EBITDA is an acronym for Earnings before Interest, Taxes, Depreciation, and Amortization, which is defined as GAAP net income (loss) adjusted for interest expense, taxes, depreciation and amortization. EBITDA is helpful to investors and management as a measure of the performance of the company because it provides an indication of the operating performance of the properties within the portfolio and is not impacted by the capital structure of the REIT. EBITDA does not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income as an indication of our financial performance or to cash flow from operating activities as determined by GAAP as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. EBITDA may include funds that may not be available for the company�s discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions, and other commitments and uncertainties. The company provides EBITDA, excluding unusual charges in the attached reconciliation schedule. EBITDA, excluding unusual charges excludes all operating results from discontinued operations, minority interest, extinguishment of debt charges, and loss on impairment of assets held for sale because the company believes that exclusion of such items in EBITDA better reflects the ongoing operating performance of the company�s remaining assets. The company presents these adjustments to EBITDA because it believes that the resulting measure provides investors a more useful indicator of the operating performance of the Company's hotels and other investments in the three and nine months ended September 30, 2006 as compared to prior periods, by adjusting for the effects of certain unusual items arising during the periods. EBITDA, excluding unusual charges is not intended to represent cash flows for the period, is not presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS (in thousands) � � As of September 30, 2006 � � As of December 31, 2005 � ASSETS Land $ 57,235� $ 55,758� Buildings and improvements 418,545� 422,081� Furniture and equipment � 64,533� � � 63,048� Operating properties 540,313� 540,887� Less accumulated depreciation � 139,406� � � 139,259� 400,907� 401,628� Properties under development � 29,924� � � 25,139� Net investment in hotel properties 430,831� 426,767� � Assets held for sale 7,051� 11,009� Corporate furniture, fixtures and equipment, net 580� 371� Cash 13,498� 15,047� Accounts receivable, net 3,464� 3,820� Notes receivable 61,731� 38,050� Investment in joint ventures 2,882� 1,795� Deferred expenses, net 9,371� 6,807� Prepaid expenses and other assets 13,231� 12,556� Deferred tax asset � 10,072� � � 11,471� Total assets � $ 552,711� � � $ 527,693� � LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY Lines of credit $ 31,196� $ 157,896� Mortgage loans 223,818� 99,874� Accounts payable and accrued expenses 19,489� 27,915� Distributions payable � 6,414� � � 6,011� Total liabilities � 280,917� � � 291,696� � Minority interest � 14,082� � � 12,786� � Shareholders' equity: Preferred stock, Series B, $.01 par value, 5,000 shares authorized, 3,680 shares issued and outstanding (liquidation preference of $93,840) 37� 37� Common stock, $.01 par value, 50,000 shares authorized, 29,192 shares issued and outstanding at September 30, 2006 and 26,509 shares issued and outstanding at December 31, 2005 292� 265� Additional paid-in capital 351,073� 325,238� Unearned compensation -� (1,454) Distributions in excess of earnings � (93,690) � � (100,875) Total shareholders' equity � 257,712� � � 223,211� Total liabilities, minority interest and shareholders' equity � $ 552,711� � � $ 527,693� WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) � Three Months Ended September 30, � � 2006� � 2005� Operating revenue: Rooms $ 42,321� $ 32,121� Food and beverage 4,062� 3,001� Other operating departments 1,457� 960� Joint venture fee income � 60� � 63� Total operating revenue � 47,900� � 36,145� Hotel operating expenses: Rooms 8,543� 6,742� Food and beverage 2,637� 2,166� Other operating departments 1,063� 709� Undistributed operating expenses: Property operating expenses 8,838� 6,706� Real estate taxes and property and casualty insurance 2,008� 1,666� Franchise costs 2,856� 2,329� Maintenance and repair 2,139� 1,726� Management fees 1,570� 905� General and administrative 2,810� 2,261� Depreciation 5,383� 4,208� Amortization � 523� � 405� Total operating expenses � 38,370� � 29,823� Operating income � 9,530� � 6,322� � Interest and other income 2,324� 2,062� Interest expense � (4,076) � (2,822) Income before allocation to minority interest in Partnership, allocation to minority interest in consolidated joint ventures, income taxes, and equity in income of unconsolidated joint ventures 7,778� 5,562� Income allocation to minority interest in Partnership (206) (146) Income allocation to minority interest in consolidated joint ventures (482) (272) Income tax expense (906) (338) Equity in income of unconsolidated joint ventures � 34� � 75� Income from continuing operations 6,218� 4,881� Discontinued operations: Income from discontinued operations 174� 595� Gain on sale of discontinued operations 6,887� 2� Loss on impairment of assets held for sale � -� � (12,386) Net income (loss) 13,279� (6,908) Preferred stock distribution � (1,840) � (1,840) Net income (loss) available to common shareholders � $ 11,439� � $ (8,748) Basic weighted average number of common shares outstanding � 27,500� � 26,314� Diluted weighted average number of common shares outstanding � 28,928� � 27,620� Income (loss) per common share basic and diluted: Income from continuing operations $ 0.16� $ 0.12� Income (loss) from discontinued operations � 0.25� � (0.45) Net income (loss) available to common shareholders � $ 0.41� � $ (0.33) Per share dividends to common shareholders � $ 0.15� � $ 0.15� WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) � Nine Months Ended September 30, � � 2006� � 2005� Operating revenue: Rooms $ 120,293� $ 92,225� Food and beverage 10,074� 7,073� Other operating departments 4,000� 2,655� Joint venture fee income � 163� � 187� Total operating revenue � 134,530� � 102,140� Hotel operating expenses: Rooms 24,775� 19,793� Food and beverage 7,166� 5,341� Other operating departments 2,865� 1,943� Undistributed operating expenses: Property operating expenses 25,686� 19,401� Real estate taxes and property and casualty insurance 5,831� 4,957� Franchise costs 8,224� 6,660� Maintenance and repair 6,339� 5,108� Management fees 4,609� 2,709� General and administrative 8,336� 6,151� Depreciation 15,680� 12,068� Amortization � 1,530� � 1,041� Total operating expenses � 111,041� � 85,172� Operating income � 23,489� � 16,968� � Extinguishment of debt (3,961) -� Interest and other income 5,730� 4,809� Interest expense � (13,426) � (7,652) Income before allocation to minority interest in Partnership, allocation to minority interest in consolidated joint ventures, income taxes, and equity in income of unconsolidated joint ventures 11,832� 14,125� Income allocation to minority interest in Partnership (175) (354) Income allocation to minority interest in consolidated joint ventures (701) (539) Income tax expense (1,820) (514) Equity in income of unconsolidated joint ventures � 98� � 42� Income from continuing operations 9,234� 12,760� Discontinued operations: Income from discontinued operations 1,276� 1,106� Gain on sale of discontinued operations 14,615� 366� Loss on impairment of assets held for sale � -� � (12,386) Net income 25,125� 1,846� Preferred stock distribution � (5,520) � (5,520) Net income (loss) available to common shareholders � $ 19,605� � $ (3,674) Basic weighted average number of common shares outstanding � 26,803� � 26,298� Diluted weighted average number of common shares outstanding � 28,251� � 27,609� Income (loss) per common share basic and diluted: Income from continuing operations $ 0.14� $ 0.28� Income (loss) from discontinued operations � 0.59� � (0.42) Net income (loss) available to common shareholders � $ 0.73� � $ (0.14) Per share dividends to common shareholders � $ 0.45� � $ 0.45� WINSTON HOTELS, INC. RECONCILIATION OF NET INCOME (LOSS) TO FFO, FFO AVAILABLE TO COMMON SHAREHOLDERS AND FFO AVAILABLE TO COMMON SHAREHOLDERS, EXCLUDING UNUSUAL CHARGES ($ in thousands, except per share amounts) � Three Months Ended Nine Months Ended September 30, September 30, � � 2006� � 2005� � 2006� � 2005� Net income (loss) $ 13,279� $ (6,908) $ 25,125� $ 1,846� Gain on sale (7,203) (2) (15,306) (383) Minority interest in Partnership allocation of income 206� 146� 175� 354� Minority interest in Partnership allocation of gain on sale of discontinued operations 316� -� 691� 17� Minority interest in Partnership allocation of income (loss) from discontinued operations 8� 29� 59� 53� Depreciation 4,980� 3,842� 14,498� 11,158� Depreciation from discontinued operations -� 782� 658� 2,395� Depreciation from joint ventures � 267� � 280� � 790� � 660� FFO 11,853� (1,831) 26,690� 16,100� � Preferred stock dividend � (1,840) � (1,840) � (5,520) � (5,520) FFO available to common shareholders � 10,013� � (3,671) � 21,170� � 10,580� � Unusual Charges: Extinguishment of debt -� -� 3,961� -� Asset retirement obligation -� -� 195� -� Tax on joint venture development fees -� -� 420� -� Impairment of wholly owned hotels, net of minority interest � -� � 12,386� � -� � 12,386� FFO available to common shareholders, excluding unusual charges � $ 10,013� � $ 8,715� � $ 25,746� � $ 22,966� � Weighted average common shares outstanding assuming dilution 28,928� 27,620� 28,251� 27,609� � FFO available to common shareholders per share � $ 0.35� � $ (0.13) � $ 0.75� � $ 0.38� FFO available to common shareholders per share, excluding unusual charges � $ 0.35� � $ 0.32� � $ 0.91� � $ 0.83� � � Common dividend per share � $ 0.15� � $ 0.15� � $ 0.45� � $ 0.45� WINSTON HOTELS, INC. RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND EBITDA, EXCLUDING UNUSUAL CHARGES ($ in thousands) � Three Months Ended Nine Months Ended September 30, September 30, � � 2006� � 2005� � 2006� � 2005� Net income (loss) $ 13,279� $ (6,908) $ 25,125� $ 1,846� Add back: Interest expense 3,612� 2,427� 12,046� 6,809� Interest expense from joint ventures 319� 268� 943� 608� Depreciation 4,980� 3,842� 14,498� 11,158� Depreciation from discontinued operations -� 782� 658� 2,395� Depreciation from joint ventures 267� 280� 790� 660� Amortization expense 491� 386� 1,428� 1,008� Amortization from discontinued operations 18� 12� 30� 28� Amortization expense from joint ventures 20� 13� 69� 26� Expense from income tax � 807� � 354� � 1,569� � 507� EBITDA � $ 23,793� � $ 1,456� � $ 57,156� � $ 25,045� � Unusual Charges: Minority interest in Partnership allocation of income $ 206� $ 146� $ 175� $ 354� Extinguishment of debt -� -� 3,961� -� Depreciation from discontinued operations -� (782) (658) (2,395) Amortization from discontinued operations (18) (12) (30) (28) Income from discontinued operations, net of minority interest (174) (595) (1,276) (1,106) Gain on sale, net of minority interest (6,887) (2) (14,615) (366) Impairment, net of minority interest � -� � 12,386� � -� � 12,386� EBITDA, excluding unusual charges � $ 16,920� � $ 12,597� � $ 44,713� � $ 33,890� WINSTON HOTELS, INC. 2006 FOURTH QUARTER AND ANNUAL GUIDANCE � RECONCILIATION OF NET INCOME TO FFO AVAILABLE TO COMMON SHAREHOLDERS (a) ($ in thousands, except per share amounts) � Quarter Ended Year Ended � � December 31, 2006 � December 31, 2006 Guidance Range Guidance Range Low High Low High � Net income $ 2,900� $ 3,500� $ 28,000� $ 28,600� � Gain on sale -� -� (15,300) (15,300) � Minority interest 50� 100� 900� 1,000� � Depreciation 5,000� 5,000� 20,200� 20,200� � Depreciation from joint ventures 300� 300� 1,100� 1,100� � Preferred stock dividend (1,840) (1,840) (7,360) (7,360) � FFO Available to Common Shareholders � 6,410� � 7,060� � 27,540� � 28,240� � Unusual Charges: Extinguishment of debt -� -� 3,961� 3,961� Asset retirement obligation -� -� 195� 195� Tax on joint venture development fees � -� � -� � 420� � 420� FFO Available to Common Shareholders, excluding unusual charges � $ 6,410� � $ 7,060� � $ 32,116� � $ 32,816� � Weighted average common shares assuming dilution 30,400� 30,400� 28,800� 28,800� � FFO Available to Common Shareholders per share � $0.21� � $0.23� � $0.96� � $0.98� � FFO Available to Common Shareholders per share, excluding unusual charges � $0.21� � $0.23� � $1.12� � $1.14� � (a) Assumes no additional hotel acquisitions, dispositions, developments or placements of hotel debt, other than those discussed in this press release. Winston Hotels, Inc. Same-Store Revenue Per Available Room Statistics Three and Nine Months Ended September 30, 2006 and 2005 � Total for 38 Hotels Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� % CH 2006� 2005� % CH Combined Brands Comfort Inn/Suites & Quality Suites $49.94� $44.12� 13.2% $53.27� $46.93� 13.5% Courtyard, Fairfield Inn, Residence Inn $70.03� $63.42� 10.4% $70.20� $62.98� 11.5% Hampton Inn/Suites $67.85� $60.14� 12.8% $68.60� $59.91� 14.5% Hilton Garden Inn $84.87� $78.41� 8.2% $82.36� $76.02� 8.3% Holiday Inn Express/Select $83.13� $77.26� 7.6% $74.86� $70.48� 6.2% Homewood Suites $70.73� $63.71� 11.0% $74.95� $69.57� 7.7% � Region South Atlantic $64.68� $57.42� 12.6% $66.10� $58.92� 12.2% East North Central $93.58� $82.86� 12.9% $84.80� $75.73� 12.0% West South Central $63.84� $60.11� 6.2% $63.27� $57.97� 9.1% Mountain $41.66� $35.64� 16.9% $63.75� $56.05� 13.7% New England $72.39� $70.30� 3.0% $70.59� $67.25� 5.0% Middle Atlantic $99.67� $94.79� 5.1% $89.15� $83.94� 6.2% � Segment Upscale $74.59� $67.95� 9.8% $75.40� $68.90� 9.4% Mid-scale w/ F&B $88.86� $82.84� 7.3% $80.66� $74.10� 8.9% Mid-scale w/o F&B $60.26� $53.04� 13.6% $61.29� $53.90� 13.7% � Service Limited-service $60.71� $53.64� 13.2% $61.63� $54.29� 13.5% Full-service $82.12� $75.30� 9.1% $78.17� $71.35� 9.6% Extended-stay $64.97� $58.83� 10.4% $72.79� $67.03� 8.6% � Total $70.26� � $63.36� � 10.9% $70.32� � $63.36� � 11.0% � The above presentation includes 36 of the company's 44 wholly owned hotels as of September 30, 2006, as well as two joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn. � The above presentation excludes the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels (five Towneplace Suites hotels and one Courtyard by Marriott hotel) acquired in October 2005. The above presentation also excludes the Stanley Hotel in Estes Park, Colo., which was acquired in August 2005, in which the company owns a 60 percent interest, the Courtyard by Marriott in Kansas City, Mo which opened April 20, 2006 and the Courtyard by Marriott in St Charles, Ill. which was acquired in September 2006. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. Winston Hotels, Inc. Same-Store Average Daily Rate Statistics Three and Nine Months Ended September 30, 2006 and 2005 � Total for 38 Hotels Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� % CH 2006� 2005� % CH Combined Brands Comfort Inn/Suites & Quality Suites $70.21� $63.87� 9.9% $71.46� $67.64� 5.6% Courtyard, Fairfield Inn, Residence Inn $102.91� $90.53� 13.7% $102.82� $89.90� 14.4% Hampton Inn/Suites $95.34� $84.05� 13.4% $94.15� $83.97� 12.1% Hilton Garden Inn $116.13� $109.70� 5.9% $113.39� $109.30� 3.7% Holiday Inn Express/Select $110.88� $104.06� 6.6% $106.99� $98.52� 8.6% Homewood Suites $95.75� $91.64� 4.5% $96.03� $93.94� 2.2% � Region South Atlantic $90.29� $81.45� 10.9% $89.74� $82.63� 8.6% East North Central $117.37� $108.59� 8.1% $114.72� $104.29� 10.0% West South Central $104.64� $92.13� 13.6% $103.82� $90.44� 14.8% Mountain $80.08� $72.39� 10.6% $93.54� $86.24� 8.5% New England $106.01� $97.12� 9.2% $103.87� $99.11� 4.8% Middle Atlantic $125.27� $117.19� 6.9% $121.75� $113.77� 7.0% � Segment Upscale $105.13� $96.68� 8.7% $104.12� $97.05� 7.3% Mid-scale w/ F&B $111.10� $106.22� 4.6% $105.96� $102.23� 3.6% Mid-scale w/o F&B $85.79� $75.91� 13.0% $85.54� $76.62� 11.6% � Service Limited-service $86.35� $76.55� 12.8% $86.02� $77.13� 11.5% Full-service $111.49� $102.40� 8.9% $108.52� $100.66� 7.8% Extended-stay $93.81� $88.99� 5.4% $96.26� $92.96� 3.5% � Total $98.25� � $89.44� � 9.9% $97.04� � $89.40� � 8.5% � The above presentation includes 36 of the company's 44 wholly owned hotels as of September 30, 2006, as well as two joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn. � The above presentation excludes the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels (five Towneplace Suites hotels and one Courtyard by Marriott hotel) acquired in October 2005. The above presentation also excludes the Stanley Hotel in Estes Park, Colo., which was acquired in August 2005, in which the company owns a 60 percent interest, the Courtyard by Marriott in Kansas City, Mo which opened April 20, 2006 and the Courtyard by Marriott in St Charles, Ill. which was acquired in September 2006. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. Winston Hotels, Inc. Same-Store Occupancy Statistics Three and Nine Months Ended September 30, 2006 and 2005 � Total for 38 Hotels Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� % CH 2006� 2005� % CH Combined Brands Comfort Inn/Suites & Quality Suites 71.1% 69.1% 2.9% 74.5% 69.4% 7.3% Courtyard, Fairfield Inn, Residence Inn 68.0% 70.1% -3.0% 68.3% 70.1% -2.6% Hampton Inn/Suites 71.2% 71.6% -0.6% 72.9% 71.3% 2.2% Hilton Garden Inn 73.1% 71.5% 2.2% 72.6% 69.6% 4.3% Holiday Inn Express/Select 75.0% 74.2% 1.1% 70.0% 71.5% -2.1% Homewood Suites 73.9% 69.5% 6.3% 78.1% 74.1% 5.4% � Region South Atlantic 71.6% 70.5% 1.6% 73.7% 71.3% 3.4% East North Central 79.7% 76.3% 4.5% 73.9% 72.6% 1.8% West South Central 61.0% 65.2% -6.4% 60.9% 64.1% -5.0% Mountain 52.0% 49.2% 5.7% 68.1% 65.0% 4.8% New England 68.3% 72.4% -5.7% 68.0% 67.8% 0.3% Middle Atlantic 79.6% 80.9% -1.6% 73.2% 73.8% -0.8% � Segment Upscale 70.9% 70.3% 0.9% 72.4% 71.0% 2.0% Mid-scale w/ F&B 80.0% 78.0% 2.6% 76.1% 72.5% 5.0% Mid-scale w/o F&B 70.2% 69.9% 0.4% 71.7% 70.3% 2.0% � Service Limited-service 70.3% 70.1% 0.3% 71.6% 70.4% 1.7% Full-service 73.7% 73.5% 0.3% 72.0% 70.9% 1.6% Extended-stay 69.3% 66.1% 4.8% 75.6% 72.1% 4.9% � Total 71.5% � 70.8% � 1.0% 72.5% � 70.9% � 2.3% � The above presentation includes 36 of the company's 44 wholly owned hotels as of September 30, 2006, as well as two joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn. � The above presentation excludes the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels (five Towneplace Suites hotels and one Courtyard by Marriott hotel) acquired in October 2005. The above presentation also excludes the Stanley Hotel in Estes Park, Colo., which was acquired in August 2005, in which the company owns a 60 percent interest, the Courtyard by Marriott in Kansas City, Mo. which opened April 20, 2006 and the Courtyard by Marriott in St Charles, Ill. which was acquired in September 2006. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. 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, 2006. In addition, the company raised its guidance for 2006. 2006 Third Quarter Highlights and Recent Events -- Improved FFO available to common shareholders to $0.35 per share, exceeding First Call consensus analyst expectations by $0.02; -- Achieved net income available to common shareholders per share of $0.41; -- Increased EBITDA, excluding unusual charges, by $4.3 million, or 34.3 percent, to $16.9 million; -- Improved same store RevPAR by 10.9 percent; -- Posted same store operating margin growth of 100 basis points; -- Sold two hotels for total aggregate net proceeds of $19.2 million, resulting in an aggregate gain on sale, net of minority interest, of $6.9 million; -- Raised full-year guidance for FFO available to common shareholders to $0.96 to $0.98 per share, compared to $0.91 to $0.96 previously forecasted. Excluding non-recurring debt extinguishment expenses as well as certain non-cash charges, FFO available to common shareholders is expected to be $1.12 to $1.14, compared to $1.07 to $1.12 previously forecasted; -- Acquired the 121-room Courtyard by Marriott in St. Charles, Ill. and announced that it had entered into definitive agreements to acquire two hotels in New York, NY; and -- Opened a 121-room Hilton Garden Inn in Akron, Ohio on November 2, and expects to open a 142-room Homewood Suites in Princeton, N.J., in mid-November. 2006 Third Quarter Financial Results Net income available to common shareholders was $11.4 million for the 2006 third quarter, or $0.41 per share, compared to net loss available to common shareholders of ($8.7) million, or ($0.33) per share, for the same period in 2005. Net income available to common shareholders for the 2006 third quarter included a gain on sale, net of minority interest, of approximately $6.9 million, or $0.24 per share. Net loss available to common shareholders for the 2005 third quarter included a non-cash impairment charge totaling $12.4 million, net of minority interest. Net income available to common shareholders for the 2006 and 2005 third quarters would have been $4.6 million and $3.6 million, or $0.17 and $0.14 per share, respectively, excluding the effects of the gain and impairment charge. Funds from operations ("FFO") available to common shareholders for the 2006 third quarter was $10.0 million, compared to ($3.7) million in the 2005 third quarter, or $0.35 and ($0.13) per share, respectively. Excluding the impairment charge, FFO available to common shareholders for the 2005 third quarter would have been approximately $8.7 million, or $0.32 per share. The company had approximately 28.9 million and 27.6 million fully diluted weighted average common shares outstanding in the 2006 and 2005 reporting periods, respectively. Same Store Operating Statistics Third quarter 2006 revenue per available room ("RevPAR") rose 10.9 percent for the company's 38 hotels that were open throughout each of the nine-month periods ended September 30, 2006 and 2005. The improvement was led by a 9.9 percent increase in average daily room rate ("ADR") and a 1.0 percent increase in occupancy. Third quarter 2006 operating margins increased 100 basis points to 44.4 percent from 43.4 percent in the same period a year earlier, despite higher utility costs and franchise fees. These costs were partially offset by improvements in managing labor costs, lower food and beverage costs and lower frequent traveler expenses. "Our operators generated excellent results in the third quarter, continuing a trend of improving operating results over the past year," said Robert W. Winston III, chief executive officer. "We continue to work closely with our operators to monitor costs and find ways to improve margins." The following table details the company's same store operating statistics, for the 38 consolidated hotels that were open throughout each of the nine-month periods ended September 30, 2006 and 2005 (includes 36 wholly owned hotels and two hotels, the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn, that are owned through joint ventures). -0- *T Same Store Operating Statistics ---------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 2006 2005 Change 2006 2005 Change --------- -------- --------- --------- -------- --------- Hotel Room Revenues $34,422 $31,334 9.9% $102,174 $93,032 9.8% RevPAR $70.26 $63.36 10.9% $70.32 $63.36 11.0% Occupancy 71.5% 70.8% 1.0% 72.5% 70.9% 2.3% ADR $98.25 $89.44 9.9% $97.04 $89.40 8.5% Operating Margin 44.4% 43.4% 100 bps 43.7% 43.1% 60 bps ---------------------------------------------------------------------- *T Excluding the operating results of two hotels that were negatively impacted by renovations for the nine months ended September 30, 2006 and 2005, same store RevPAR increased 11.7 percent to $72.04 from $64.48; and same store operating margins rose 100 basis points to 44.7 percent from 43.7 percent. 2006 Fourth Quarter Outlook and Guidance For the 2006 fourth quarter, the company forecasts net income per share available to common shareholders of $0.04 to $0.06. On a same-store basis, the company expects 2006 fourth quarter RevPAR to increase 6 to 8 percent, compared to the prior year's fourth quarter. FFO per share available to common shareholders is expected to be between $0.21 and $0.23 for the 2006 fourth quarter. 2006 Annual Outlook and Guidance Revised For the year ended December 31, 2006, the company forecasts net income per share available to common shareholders of $0.75 to $0.77. On a same-store basis, the company expects 2006 RevPAR to increase 9 to 10 percent from the prior year. FFO per share available to common shareholders for the year ended December 31, 2006, is expected to be between $0.96 to $0.98, compared to a prior forecast of between $0.91 to $0.96. FFO per share available to common shareholders for the year ended December 31, 2006, excluding the non-recurring debt extinguishment expenses and certain non-cash charges, is expected to be between $1.12 and $1.14, compared to a prior forecast of $1.07 to $1.12. This guidance assumes no additional hotel acquisitions, dispositions, developments or placements of hotel debt during the remainder of 2006, other than those activities discussed below. Hotel Development On November 2, 2006, one of the company's joint ventures opened a 121-room Hilton Garden Inn in Akron, Ohio. The company holds a 41.7 percent ownership interest in the joint venture and has provided an additional preferred equity investment of $2.2 million. "We believe this hotel's location adjacent to the Akron-Canton Airport and the significant amount of office space in close proximity will allow us to ramp up the property quickly," said Joe Green, president and chief financial officer. "In addition, we expect to open the 142-room, wholly owned $19.6 million Homewood Suites in Princeton, N.J. in mid-November, pending final inspections. Both properties are in strong markets, and we believe that both will quickly become leaders in their respective segments." The company also is progressing on schedule with the following development projects: -- The company expects to open a wholly owned, 119-room, $13.3 million Hilton Garden Inn in Wilmington, N.C., in the first quarter of 2007. -- The company has begun construction on a wholly owned, 79-room, $10.7 million Residence Inn in Roanoke, Va., with a planned opening in the 2007 fourth quarter. -- The company has begun construction on a 120-room, $14.6 million Courtyard by Marriott at Flagler Corporate Park in Jacksonville, Fla., scheduled to open in the 2007 fourth quarter. The property is owned by a joint venture in which the company holds a 48 percent equity interest. -- During the fourth quarter of 2006, the company plans to break ground on a 22-room expansion of the Chapel Hill, N.C. Courtyard by Marriott hotel. The expansion is scheduled for completion in the 2007 fourth quarter. The property is owned by a joint venture in which the company holds a 48.78 percent equity interest. "Our development program has been timed well with the market," Green said. "We are optimistic about each of the hotels opening in the fourth quarter, as well as the other projects under construction. These new properties give us significant upside potential in solid markets. Land and construction costs remain high; however, with the housing boom abating somewhat, we believe constructions costs may move downward. We continue to look for potential development opportunities and to maintain an active acquisition pipeline." Hotel Acquisitions As previously announced, in August the company acquired the 121-room Courtyard by Marriott in St. Charles, Ill. for $9.2 million from a private investment group. The hotel is located 35 miles west of downtown Chicago, Ill. "We have expanded our portfolio strategy to include more locations in or near major urban markets," Green pointed out. "We believe we can attain attractive, risk-adjusted returns in these markets, while also diversifying our portfolio." In August, the company announced that it had entered into definitive agreements to acquire two hotels in New York City for a purchase price of $55 million each. Located in the Tribeca area and Chelsea area, the hotels currently are under construction and are expected to open late in the 2007 first quarter. Acquisition of the two hotels is subject to satisfactory completion of due diligence and other customary closing conditions. The company has been approved by Hilton Hotels Corporation for a Hilton Garden Inn franchise for the Tribeca hotel and negotiations are underway with Hilton to brand the Chelsea hotel as a Hilton Garden Inn. "There is significant demand for mid-market properties in Manhattan, which has one of the highest barriers to new competition in the country" Green said. "These hotels will carry one of the strongest mid-market brands in the industry and are well located in growing markets in the city. These hotels give us a significant urban presence in one of the nation's most dynamic markets." Hotel Dispositions The company sold two hotels in the third quarter, for total aggregate net proceeds of $19.2 million, resulting in an aggregate gain on sale, net of minority interest, of $6.9 million, bringing to six the number of hotel dispositions for the year. The aggregate net proceeds for the six dispositions during 2006 total $42.6 million, resulting in an aggregate gain on sale, net of minority interest, of approximately $14.6 million. "We have significantly upgraded our portfolio in the past 24 months through a combination of development, acquisitions and selective dispositions," Green noted. "We believe these actions make our portfolio stronger and better positioned for all phases of the hotel economic cycle. Although these sales may have a short-term negative effect on FFO, we believe that re-investing our capital into newer, better located properties will allow us to achieve better and higher sustainable growth," Green said. Hotel Debt Financing Program In October 2006, the company sold $6.3 million of its $8.5 million commitment to lend funds to develop a 101-room Hampton Inn and Suites in Murfreesboro, Tenn. to General Electric Capital Corporation ("GECC"). Winston now holds a $2.2 million "B" note. The "B" note bears interest at 30-day LIBOR plus 6.05 percent, with an additional 3.86 percent accrual per annum. As of September 30, 2006, the company had funded $0.9 million of the whole loan; on October 2, 2006, GECC funded their pro rata share of $0.7 million to the company, leaving the company's funding of the "B" note at $0.2 million. The company is obligated to fund the remaining $2.0 million balance of the "B" note ratably over the projected construction period, which is expected to continue through the second quarter of 2007. At the close of the 2006 third quarter, the company had 13 loans outstanding, representing loans receivable totaling $61.7 million and related interest receivable totaling $2.0 million. "We continue to have an active loan pipeline," Green pointed out. "We are using our substantial expertise in development to make informed lending decisions." Strengthened Balance Sheet In August 2006, the company successfully completed a public offering of its common stock, selling 2.4 million shares at $11.75 per share and generating net cash proceeds of $26.5 million. The proceeds were used to pay down the company's line of credit. At September 30, 2006, the outstanding balance under the line of credit was $13.0 million and the remaining available balance was $118.9 million, based upon the borrowing base created by the hotels that serve as collateral for the line. During the fourth quarter, the company expects to add an additional five hotels as collateral to the line, which would add approximately $40 million to the available balance. Dividends During the 2006 third quarter, the company declared a regular cash dividend of $0.15 per common share and a cash dividend of $0.50 per share of Series B Preferred Stock. "The company's board of directors evaluates our dividend policy on a quarterly basis and is comfortable with the payout level of our dividends," Winston said. Conference Call Winston Hotels' 2006 third quarter investor conference call is scheduled for 1 p.m. EST today, November 7, 2006. The call also will be simulcast over the Internet via the company's Web site, www.winstonhotels.com. The replay will be available on the company's Web site for 30 days and via telephone for seven days by calling 800-475-6701, access code 845841. About the Company As of September 30, 2006, the company owned or was invested in 52 hotel properties in 17 states having an aggregate of 7,064 rooms. This included 44 wholly owned properties with an aggregate of 5,993 rooms, a 60% ownership interest in a joint venture that owned one hotel with 138 rooms, a 49% ownership interest in a joint venture that owned one hotel with 118 rooms, a 48.78% ownership interest in a joint venture that owned one hotel with 147 rooms, a 13.05% ownership interest in a joint venture that owned four hotels with an aggregate of 545 rooms, and a 0.21% ownership interest in a joint venture that owned one hotel with 123 rooms, for which substantially all of the profit or loss generated by the joint venture is allocated to the company. As of September 30, 2006, the company also had $61.7 million in loan receivables from owners of several hotels. The company does not hold an ownership interest in any of the hotels for which it has provided financing. For more information about Winston Hotels, visit the company's Web site at www.winstonhotels.com. Notes About Forward-Looking Statements In addition to historical information, this press release contains forward-looking statements. The reader can identify these statements by use of words like "may," "will," "expect," "project," "anticipate," "estimate," "target," "believe," "continue" or similar expressions, including without limitation its acquisition, disposition and development plans for hotel properties, its hotel lending plans, its dividend policy, and its estimated net income available to common shareholders, net income available to common shareholders per share, FFO available to common shareholders, FFO available to common shareholders per share and RevPAR. These statements represent the company's judgment and are subject to risks and uncertainties that could cause actual operating results to differ materially from those expressed or implied in the forward looking statements including, but not limited to, changes in general economic conditions, lower occupancy rates, lower average daily rates, acquisition risks, development risks including risk of construction delay, cost overruns, occupancy and governmental permits, zoning, the increase of development costs in connection with projects that are not pursued to completion, the risk of non-payment of subordinated loans, or the failure to make additional hotel debt investments and investments in hotels. Other risks are discussed in the company's filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2005. Notes About Non-GAAP Financial Measures This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission ("SEC") rules. As required by SEC rules, the company has provided reconciliation in this press release of each non-GAAP financial measure to its most directly comparable GAAP measure. We believe that these non-GAAP measures, when combined with the company's primary GAAP presentations required by the SEC, help improve our equity holders' ability to understand our operating performance and make it easier to compare the results of our company with other hotel REITs. A description of each is provided below. FFO and FFO Available to Common Shareholders The company reports FFO in accordance with the definition of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as net income (loss) (determined in accordance with generally accepted accounting principles, or "GAAP"), excluding gains (losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). The company further subtracts preferred stock dividends from FFO to calculate FFO available to common shareholders. FFO available to common shareholders is a performance measure used by the company in its budgeting and forecasting models, it is discussed during Board meetings, and is considered when making decisions regarding acquisitions, sales of properties and other investments, and is a metric in determining executive compensation. The calculation of FFO and FFO available to common shareholders may vary from entity to entity, and as such the presentation of FFO and FFO available to common shareholders by the company may not be comparable to other similarly titled measures of other reporting companies. FFO and FFO available to common shareholders are not intended to represent cash flows for the period. FFO and FFO available to common shareholders have not been presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. FFO is a supplemental industry-wide measure of REIT operating performance, the definition of which was first proposed by NAREIT in 1991 (and clarified in 1995, 1999 and 2002) in response to perceived drawbacks associated with the presentation of net income under GAAP as applied to REITs. Since the introduction of the definition by NAREIT, the term has come to be widely used by REITs. Historical GAAP 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 have considered presentations of operating results for real estate companies that use historical GAAP cost accounting to be insufficient by themselves. Accordingly, the company believes FFO and FFO available to common shareholders (combined with the company's primary GAAP presentations required by the SEC) improve our investors' ability to understand the company's operating performance. The company also provides FFO Available to Common Shareholders excluding extinguishment of debt and other unusual expenses as well as non-cash charges. We describe this measure as FFO Available to Common Shareholders, excluding unusual charges in the attached reconciliation schedules. The following describes the unusual charges the company incurred during 2005 and 2006 that are added back to FFO: -- The Company recorded a $12.4 million, net of minority interest, non-cash impairment charge in the third quarter of 2005 relating to two hotels. -- In May 2006, the company borrowed funds under its line of credit to pay off the outstanding balance of $11.3 million on the ten-year first mortgage loan collateralized by the Evanston Hilton Garden Inn. A prepayment premium and write-off of related deferred expenses of $0.2 million are included in "extinguishment of debt" in the Consolidated Statements of Operations. -- In May 2006 the company defeased the remaining $61.3 million balance of the company's $71 million ten-year 7.375% fixed-rate CMBS debt secured in part by the company's hotels. The difference between the amount of securities purchased to defease the debt and the debt paid down, which totaled $3.2 million, as well as $0.5 million for the write-off of related deferred expenses, were recorded as an "extinguishment of debt" in the Consolidated Statements of Operations. -- The company adopted FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations," ("FIN 47") an interpretation of SFAS No. 143, "Accounting for Asset Retirement Obligations" effective December 31, 2005. Under the interpretation, an entity is required to recognize a liability for the fair value of an asset retirement obligation ("ARO") that is conditional on a future event if the liability's fair value can be reasonably estimated. During the second quarter the company recorded an ARO liability for one of its hotels, which included a non-recurring, non-cash cumulative adjustment of $0.2 million. -- One of the company's taxable REIT subsidiaries provided development services to one of the company's consolidated joint ventures, and recorded development fee income. This income is taxable and therefore income tax expense related to the development fees, totaling $0.4 million, is included in the Consolidated Statements of Operations. Since the joint venture's income is consolidated into the company's financial statements, the development fee income is eliminated in consolidation. The above adjustments are not in accordance with the NAREIT definition of FFO and are not comparable to similar adjusted FFO measures reported by other REITs. The company presents these adjustments to FFO because it believes that the resulting measure provides investors a useful indicator of the operating performance of the Company's hotels and other investments during the three and nine months ended September 30, 2006 as compared to prior periods by adjusting for the effects of certain unusual or non-cash items arising during the periods. FFO available to common shareholders, excluding unusual charges, is not intended to represent cash flows for the period, is not presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. In addition to being used by management in the annual budget process, the compensation committee of the board of directors of the company will consider these adjustments in its criteria for performance-based executive compensation. Operating Margin Gross operating profit margin, which is referred to herein as "operating margin," is defined as hotel revenues minus hotel operating costs before property taxes, insurance and management fees, divided by hotel revenues. RevPAR RevPAR is an acronym for Revenue Per Available Room, which is determined by multiplying average daily rate by occupancy percentage for any given period. RevPAR does not include food and beverage or other ancillary revenues, such as parking, telephone, or other guest services generated by the property. Similar to the reporting periods for the company's statement of operations, hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) are always reported on a quarter to date and/or year to date basis. EBITDA, excluding unusual charges EBITDA is an acronym for Earnings before Interest, Taxes, Depreciation, and Amortization, which is defined as GAAP net income (loss) adjusted for interest expense, taxes, depreciation and amortization. EBITDA is helpful to investors and management as a measure of the performance of the company because it provides an indication of the operating performance of the properties within the portfolio and is not impacted by the capital structure of the REIT. EBITDA does not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income as an indication of our financial performance or to cash flow from operating activities as determined by GAAP as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. EBITDA may include funds that may not be available for the company's discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions, and other commitments and uncertainties. The company provides EBITDA, excluding unusual charges in the attached reconciliation schedule. EBITDA, excluding unusual charges excludes all operating results from discontinued operations, minority interest, extinguishment of debt charges, and loss on impairment of assets held for sale because the company believes that exclusion of such items in EBITDA better reflects the ongoing operating performance of the company's remaining assets. The company presents these adjustments to EBITDA because it believes that the resulting measure provides investors a more useful indicator of the operating performance of the Company's hotels and other investments in the three and nine months ended September 30, 2006 as compared to prior periods, by adjusting for the effects of certain unusual items arising during the periods. EBITDA, excluding unusual charges is not intended to represent cash flows for the period, is not presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. -0- *T WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS (in thousands) As of As of September 30, 2006 December 31, 2005 ---------------------------------------------------------------------- ASSETS Land $57,235 $55,758 Buildings and improvements 418,545 422,081 Furniture and equipment 64,533 63,048 ---------------------------------------------------------------------- Operating properties 540,313 540,887 Less accumulated depreciation 139,406 139,259 ---------------------------------------------------------------------- 400,907 401,628 Properties under development 29,924 25,139 ---------------------------------------------------------------------- Net investment in hotel properties 430,831 426,767 Assets held for sale 7,051 11,009 Corporate furniture, fixtures and equipment, net 580 371 Cash 13,498 15,047 Accounts receivable, net 3,464 3,820 Notes receivable 61,731 38,050 Investment in joint ventures 2,882 1,795 Deferred expenses, net 9,371 6,807 Prepaid expenses and other assets 13,231 12,556 Deferred tax asset 10,072 11,471 ---------------------------------------------------------------------- Total assets $552,711 $527,693 ====================================================================== LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY Lines of credit $31,196 $157,896 Mortgage loans 223,818 99,874 Accounts payable and accrued expenses 19,489 27,915 Distributions payable 6,414 6,011 ---------------------------------------------------------------------- Total liabilities 280,917 291,696 ---------------------------------------------------------------------- Minority interest 14,082 12,786 ---------------------------------------------------------------------- Shareholders' equity: Preferred stock, Series B, $.01 par value, 5,000 shares authorized, 3,680 shares issued and outstanding (liquidation preference of $93,840) 37 37 Common stock, $.01 par value, 50,000 shares authorized, 29,192 shares issued and outstanding at September 30, 2006 and 26,509 shares issued and outstanding at December 31, 2005 292 265 Additional paid-in capital 351,073 325,238 Unearned compensation - (1,454) Distributions in excess of earnings (93,690) (100,875) ---------------------------------------------------------------------- Total shareholders' equity 257,712 223,211 ---------------------------------------------------------------------- Total liabilities, minority interest and shareholders' equity $552,711 $527,693 ====================================================================== *T -0- *T WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Ended September 30, 2006 2005 ---------------------------------------------------------------------- Operating revenue: Rooms $42,321 $32,121 Food and beverage 4,062 3,001 Other operating departments 1,457 960 Joint venture fee income 60 63 ---------------------------------------------------------------------- Total operating revenue 47,900 36,145 ---------------------------------------------------------------------- Hotel operating expenses: Rooms 8,543 6,742 Food and beverage 2,637 2,166 Other operating departments 1,063 709 Undistributed operating expenses: Property operating expenses 8,838 6,706 Real estate taxes and property and casualty insurance 2,008 1,666 Franchise costs 2,856 2,329 Maintenance and repair 2,139 1,726 Management fees 1,570 905 General and administrative 2,810 2,261 Depreciation 5,383 4,208 Amortization 523 405 ---------------------------------------------------------------------- Total operating expenses 38,370 29,823 ---------------------------------------------------------------------- Operating income 9,530 6,322 ---------------------------------------------------------------------- Interest and other income 2,324 2,062 Interest expense (4,076) (2,822) ---------------------------------------------------------------------- Income before allocation to minority interest in Partnership, allocation to minority interest in consolidated joint ventures, income taxes, and equity in income of unconsolidated joint ventures 7,778 5,562 Income allocation to minority interest in Partnership (206) (146) Income allocation to minority interest in consolidated joint ventures (482) (272) Income tax expense (906) (338) Equity in income of unconsolidated joint ventures 34 75 ---------------------------------------------------------------------- Income from continuing operations 6,218 4,881 Discontinued operations: Income from discontinued operations 174 595 Gain on sale of discontinued operations 6,887 2 Loss on impairment of assets held for sale - (12,386) ---------------------------------------------------------------------- Net income (loss) 13,279 (6,908) Preferred stock distribution (1,840) (1,840) ---------------------------------------------------------------------- Net income (loss) available to common shareholders $11,439 $(8,748) ====================================================================== Basic weighted average number of common shares outstanding 27,500 26,314 ---------------------------------------------------------------------- Diluted weighted average number of common shares outstanding 28,928 27,620 ---------------------------------------------------------------------- Income (loss) per common share basic and diluted: Income from continuing operations $0.16 $0.12 Income (loss) from discontinued operations 0.25 (0.45) ---------------------------------------------------------------------- Net income (loss) available to common shareholders $0.41 $(0.33) ---------------------------------------------------------------------- Per share dividends to common shareholders $0.15 $0.15 ---------------------------------------------------------------------- *T -0- *T WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Nine Months Ended September 30, 2006 2005 ---------------------------------------------------------------------- Operating revenue: Rooms $120,293 $92,225 Food and beverage 10,074 7,073 Other operating departments 4,000 2,655 Joint venture fee income 163 187 ---------------------------------------------------------------------- Total operating revenue 134,530 102,140 ---------------------------------------------------------------------- Hotel operating expenses: Rooms 24,775 19,793 Food and beverage 7,166 5,341 Other operating departments 2,865 1,943 Undistributed operating expenses: Property operating expenses 25,686 19,401 Real estate taxes and property and casualty insurance 5,831 4,957 Franchise costs 8,224 6,660 Maintenance and repair 6,339 5,108 Management fees 4,609 2,709 General and administrative 8,336 6,151 Depreciation 15,680 12,068 Amortization 1,530 1,041 ---------------------------------------------------------------------- Total operating expenses 111,041 85,172 ---------------------------------------------------------------------- Operating income 23,489 16,968 ---------------------------------------------------------------------- Extinguishment of debt (3,961) - Interest and other income 5,730 4,809 Interest expense (13,426) (7,652) ---------------------------------------------------------------------- Income before allocation to minority interest in Partnership, allocation to minority interest in consolidated joint ventures, income taxes, and equity in income of unconsolidated joint ventures 11,832 14,125 Income allocation to minority interest in Partnership (175) (354) Income allocation to minority interest in consolidated joint ventures (701) (539) Income tax expense (1,820) (514) Equity in income of unconsolidated joint ventures 98 42 ---------------------------------------------------------------------- Income from continuing operations 9,234 12,760 Discontinued operations: Income from discontinued operations 1,276 1,106 Gain on sale of discontinued operations 14,615 366 Loss on impairment of assets held for sale - (12,386) ---------------------------------------------------------------------- Net income 25,125 1,846 Preferred stock distribution (5,520) (5,520) ---------------------------------------------------------------------- Net income (loss) available to common shareholders $19,605 $(3,674) ====================================================================== Basic weighted average number of common shares outstanding 26,803 26,298 ---------------------------------------------------------------------- Diluted weighted average number of common shares outstanding 28,251 27,609 ---------------------------------------------------------------------- Income (loss) per common share basic and diluted: Income from continuing operations $0.14 $0.28 Income (loss) from discontinued operations 0.59 (0.42) ---------------------------------------------------------------------- Net income (loss) available to common shareholders $0.73 $(0.14) ---------------------------------------------------------------------- Per share dividends to common shareholders $0.45 $0.45 ---------------------------------------------------------------------- *T -0- *T WINSTON HOTELS, INC. RECONCILIATION OF NET INCOME (LOSS) TO FFO, FFO AVAILABLE TO COMMON SHAREHOLDERS AND FFO AVAILABLE TO COMMON SHAREHOLDERS, EXCLUDING UNUSUAL CHARGES ($ in thousands, except per share amounts) ---------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ---------------------------------------------------------------------- Net income (loss) $13,279 $(6,908) $25,125 $1,846 Gain on sale (7,203) (2) (15,306) (383) Minority interest in Partnership allocation of income 206 146 175 354 Minority interest in Partnership allocation of gain on sale of discontinued operations 316 - 691 17 Minority interest in Partnership allocation of income (loss) from discontinued operations 8 29 59 53 Depreciation 4,980 3,842 14,498 11,158 Depreciation from discontinued operations - 782 658 2,395 Depreciation from joint ventures 267 280 790 660 ---------------------------------------------------------------------- FFO 11,853 (1,831) 26,690 16,100 Preferred stock dividend (1,840) (1,840) (5,520) (5,520) ---------------------------------------------------------------------- FFO available to common shareholders 10,013 (3,671) 21,170 10,580 ---------------------------------------------------------------------- Unusual Charges: Extinguishment of debt - - 3,961 - Asset retirement obligation - - 195 - Tax on joint venture development fees - - 420 - Impairment of wholly owned hotels, net of minority interest - 12,386 - 12,386 ---------------------------------------------------------------------- FFO available to common shareholders, excluding unusual charges $10,013 $8,715 $25,746 $22,966 ====================================================================== Weighted average common shares outstanding assuming dilution 28,928 27,620 28,251 27,609 ---------------------------------------------------------------------- FFO available to common shareholders per share $0.35 $(0.13) $0.75 $0.38 ---------------------------------------------------------------------- FFO available to common shareholders per share, excluding unusual charges $0.35 $0.32 $0.91 $0.83 ---------------------------------------------------------------------- Common dividend per share $0.15 $0.15 $0.45 $0.45 ====================================================================== *T -0- *T WINSTON HOTELS, INC. RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND EBITDA, EXCLUDING UNUSUAL CHARGES ($ in thousands) ---------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ---------------------------------------------------------------------- Net income (loss) $13,279 $(6,908) $25,125 $1,846 Add back: Interest expense 3,612 2,427 12,046 6,809 Interest expense from joint ventures 319 268 943 608 Depreciation 4,980 3,842 14,498 11,158 Depreciation from discontinued operations - 782 658 2,395 Depreciation from joint ventures 267 280 790 660 Amortization expense 491 386 1,428 1,008 Amortization from discontinued operations 18 12 30 28 Amortization expense from joint ventures 20 13 69 26 Expense from income tax 807 354 1,569 507 ---------------------------------------------------------------------- EBITDA $23,793 $1,456 $57,156 $25,045 ---------------------------------------------------------------------- Unusual Charges: Minority interest in Partnership allocation of income $206 $146 $175 $354 Extinguishment of debt - - 3,961 - Depreciation from discontinued operations - (782) (658) (2,395) Amortization from discontinued operations (18) (12) (30) (28) Income from discontinued operations, net of minority interest (174) (595) (1,276) (1,106) Gain on sale, net of minority interest (6,887) (2) (14,615) (366) Impairment, net of minority interest - 12,386 - 12,386 ---------------------------------------------------------------------- EBITDA, excluding unusual charges $16,920 $12,597 $44,713 $33,890 ====================================================================== *T -0- *T WINSTON HOTELS, INC. 2006 FOURTH QUARTER AND ANNUAL GUIDANCE RECONCILIATION OF NET INCOME TO FFO AVAILABLE TO COMMON SHAREHOLDERS (a) ($ in thousands, except per share amounts) ---------------------------------------------------------------------- Quarter Ended Year Ended December 31, 2006 December 31, 2006 ---------------------------------------------------------------------- Guidance Range Guidance Range Low High Low High --------- --------- --------- --------- Net income $2,900 $3,500 $28,000 $28,600 Gain on sale - - (15,300) (15,300) Minority interest 50 100 900 1,000 Depreciation 5,000 5,000 20,200 20,200 Depreciation from joint ventures 300 300 1,100 1,100 Preferred stock dividend (1,840) (1,840) (7,360) (7,360) ---------------------------------------------------------------------- FFO Available to Common Shareholders 6,410 7,060 27,540 28,240 ---------------------------------------------------------------------- Unusual Charges: Extinguishment of debt - - 3,961 3,961 Asset retirement obligation - - 195 195 Tax on joint venture development fees - - 420 420 ---------------------------------------------------------------------- FFO Available to Common Shareholders, excluding unusual charges $6,410 $7,060 $32,116 $32,816 ---------------------------------------------------------------------- Weighted average common shares assuming dilution 30,400 30,400 28,800 28,800 ---------------------------------------------------------------------- FFO Available to Common Shareholders per share $0.21 $0.23 $0.96 $0.98 ---------------------------------------------------------------------- FFO Available to Common Shareholders per share, excluding unusual charges $0.21 $0.23 $1.12 $1.14 ====================================================================== (a) Assumes no additional hotel acquisitions, dispositions, developments or placements of hotel debt, other than those discussed in this press release. *T -0- *T Winston Hotels, Inc. Same-Store Revenue Per Available Room Statistics Three and Nine Months Ended September 30, 2006 and 2005 Three Months Ended Nine Months Ended Total for 38 Hotels September 30, September 30, --------------------- --------------------- 2006 2005 % CH 2006 2005 % CH ------- ------- ----- ------- ------- ----- Combined Brands ------------------------- Comfort Inn/Suites & Quality Suites $49.94 $44.12 13.2% $53.27 $46.93 13.5% Courtyard, Fairfield Inn, Residence Inn $70.03 $63.42 10.4% $70.20 $62.98 11.5% Hampton Inn/Suites $67.85 $60.14 12.8% $68.60 $59.91 14.5% Hilton Garden Inn $84.87 $78.41 8.2% $82.36 $76.02 8.3% Holiday Inn Express/Select $83.13 $77.26 7.6% $74.86 $70.48 6.2% Homewood Suites $70.73 $63.71 11.0% $74.95 $69.57 7.7% Region ------------------------- South Atlantic $64.68 $57.42 12.6% $66.10 $58.92 12.2% East North Central $93.58 $82.86 12.9% $84.80 $75.73 12.0% West South Central $63.84 $60.11 6.2% $63.27 $57.97 9.1% Mountain $41.66 $35.64 16.9% $63.75 $56.05 13.7% New England $72.39 $70.30 3.0% $70.59 $67.25 5.0% Middle Atlantic $99.67 $94.79 5.1% $89.15 $83.94 6.2% Segment ------------------------- Upscale $74.59 $67.95 9.8% $75.40 $68.90 9.4% Mid-scale w/ F&B $88.86 $82.84 7.3% $80.66 $74.10 8.9% Mid-scale w/o F&B $60.26 $53.04 13.6% $61.29 $53.90 13.7% Service ------------------------- Limited-service $60.71 $53.64 13.2% $61.63 $54.29 13.5% Full-service $82.12 $75.30 9.1% $78.17 $71.35 9.6% Extended-stay $64.97 $58.83 10.4% $72.79 $67.03 8.6% Total $70.26 $63.36 10.9% $70.32 $63.36 11.0% ------------------------- --------------------- --------------------- The above presentation includes 36 of the company's 44 wholly owned hotels as of September 30, 2006, as well as two joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn. The above presentation excludes the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels (five Towneplace Suites hotels and one Courtyard by Marriott hotel) acquired in October 2005. The above presentation also excludes the Stanley Hotel in Estes Park, Colo., which was acquired in August 2005, in which the company owns a 60 percent interest, the Courtyard by Marriott in Kansas City, Mo which opened April 20, 2006 and the Courtyard by Marriott in St Charles, Ill. which was acquired in September 2006. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. *T -0- *T Winston Hotels, Inc. Same-Store Average Daily Rate Statistics Three and Nine Months Ended September 30, 2006 and 2005 Three Months Ended Nine Months Ended Total for 38 Hotels September 30, September 30, ----------------------- ----------------------- 2006 2005 % CH 2006 2005 % CH -------- -------- ----- -------- -------- ----- Combined Brands --------------------- Comfort Inn/Suites & Quality Suites $70.21 $63.87 9.9% $71.46 $67.64 5.6% Courtyard, Fairfield Inn, Residence Inn $102.91 $90.53 13.7% $102.82 $89.90 14.4% Hampton Inn/Suites $95.34 $84.05 13.4% $94.15 $83.97 12.1% Hilton Garden Inn $116.13 $109.70 5.9% $113.39 $109.30 3.7% Holiday Inn Express/Select $110.88 $104.06 6.6% $106.99 $98.52 8.6% Homewood Suites $95.75 $91.64 4.5% $96.03 $93.94 2.2% Region --------------------- South Atlantic $90.29 $81.45 10.9% $89.74 $82.63 8.6% East North Central $117.37 $108.59 8.1% $114.72 $104.29 10.0% West South Central $104.64 $92.13 13.6% $103.82 $90.44 14.8% Mountain $80.08 $72.39 10.6% $93.54 $86.24 8.5% New England $106.01 $97.12 9.2% $103.87 $99.11 4.8% Middle Atlantic $125.27 $117.19 6.9% $121.75 $113.77 7.0% Segment --------------------- Upscale $105.13 $96.68 8.7% $104.12 $97.05 7.3% Mid-scale w/ F&B $111.10 $106.22 4.6% $105.96 $102.23 3.6% Mid-scale w/o F&B $85.79 $75.91 13.0% $85.54 $76.62 11.6% Service --------------------- Limited-service $86.35 $76.55 12.8% $86.02 $77.13 11.5% Full-service $111.49 $102.40 8.9% $108.52 $100.66 7.8% Extended-stay $93.81 $88.99 5.4% $96.26 $92.96 3.5% Total $98.25 $89.44 9.9% $97.04 $89.40 8.5% --------------------- ----------------------- ----------------------- The above presentation includes 36 of the company's 44 wholly owned hotels as of September 30, 2006, as well as two joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn. The above presentation excludes the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels (five Towneplace Suites hotels and one Courtyard by Marriott hotel) acquired in October 2005. The above presentation also excludes the Stanley Hotel in Estes Park, Colo., which was acquired in August 2005, in which the company owns a 60 percent interest, the Courtyard by Marriott in Kansas City, Mo which opened April 20, 2006 and the Courtyard by Marriott in St Charles, Ill. which was acquired in September 2006. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. *T -0- *T Winston Hotels, Inc. Same-Store Occupancy Statistics Three and Nine Months Ended September 30, 2006 and 2005 Three Months Ended Nine Months Ended Total for 38 Hotels September 30, September 30, ------------------- ------------------- 2006 2005 % CH 2006 2005 % CH ------ ------ ----- ------ ------ ----- Combined Brands ----------------------------- Comfort Inn/Suites & Quality Suites 71.1% 69.1% 2.9% 74.5% 69.4% 7.3% Courtyard, Fairfield Inn, Residence Inn 68.0% 70.1% -3.0% 68.3% 70.1% -2.6% Hampton Inn/Suites 71.2% 71.6% -0.6% 72.9% 71.3% 2.2% Hilton Garden Inn 73.1% 71.5% 2.2% 72.6% 69.6% 4.3% Holiday Inn Express/Select 75.0% 74.2% 1.1% 70.0% 71.5% -2.1% Homewood Suites 73.9% 69.5% 6.3% 78.1% 74.1% 5.4% Region ----------------------------- South Atlantic 71.6% 70.5% 1.6% 73.7% 71.3% 3.4% East North Central 79.7% 76.3% 4.5% 73.9% 72.6% 1.8% West South Central 61.0% 65.2% -6.4% 60.9% 64.1% -5.0% Mountain 52.0% 49.2% 5.7% 68.1% 65.0% 4.8% New England 68.3% 72.4% -5.7% 68.0% 67.8% 0.3% Middle Atlantic 79.6% 80.9% -1.6% 73.2% 73.8% -0.8% Segment ----------------------------- Upscale 70.9% 70.3% 0.9% 72.4% 71.0% 2.0% Mid-scale w/ F&B 80.0% 78.0% 2.6% 76.1% 72.5% 5.0% Mid-scale w/o F&B 70.2% 69.9% 0.4% 71.7% 70.3% 2.0% Service ----------------------------- Limited-service 70.3% 70.1% 0.3% 71.6% 70.4% 1.7% Full-service 73.7% 73.5% 0.3% 72.0% 70.9% 1.6% Extended-stay 69.3% 66.1% 4.8% 75.6% 72.1% 4.9% Total 71.5% 70.8% 1.0% 72.5% 70.9% 2.3% ----------------------------- ------------------- ------------------- The above presentation includes 36 of the company's 44 wholly owned hotels as of September 30, 2006, as well as two joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn. The above presentation excludes the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels (five Towneplace Suites hotels and one Courtyard by Marriott hotel) acquired in October 2005. The above presentation also excludes the Stanley Hotel in Estes Park, Colo., which was acquired in August 2005, in which the company owns a 60 percent interest, the Courtyard by Marriott in Kansas City, Mo. which opened April 20, 2006 and the Courtyard by Marriott in St Charles, Ill. which was acquired in September 2006. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. *T