FELCOR LODGING TRUST INCORPORATED

Transcription

1 Filed pursuant to Rule 424(b)(5) Registration No The information in this preliminary prospectus supplement is not complete and may be changed. This prospectus supplement and the accompanying prospectus are not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Dated April 6, 2015 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED AUGUST 13, 2014) 14,500,000 Shares FELCOR LODGING TRUST INCORPORATED Common Stock FelCor Lodging Trust Incorporated, or FelCor, a Maryland corporation, operates as a real estate investment trust, or REIT. We are the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in 48 hotels with approximately 14,435 rooms at December 31, Our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol FCH. We are offering 14,500,000 shares of our common stock. The closing price of our common stock on the NYSE on April 2, 2015 was $11.94 per share. We elected to be treated as a REIT under U.S. federal income tax laws. To assist us in qualifying as a REIT, ownership of our common stock by any person is generally limited to 9.9% of the outstanding shares of any class of our capital stock. In addition, our charter contains various other restrictions on the ownership and transfer of our common stock. See Description of Common Stock and Certain Charter, Bylaw and Statutory Provisions in the accompanying prospectus. Investing in our common stock involves risks. See Risk Factors beginning on page S-6 of this prospectus supplement for a discussion of those risks. Per Share Total Public offering price $ $ Underwriting discounts and commissions $ $ Proceeds to us, before expenses $ $ We have granted the underwriters a 30-day option to purchase up to an additional 2,175,000 shares of common stock from us on the same terms and conditions as set forth above. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of common stock to investors on or about, Joint Book-Running Managers J.P. Morgan BofA Merrill Lynch

2 The date of this prospectus supplement is, 2015.

3 TABLE OF CONTENTS Prospectus Supplement Page PROSPECTUS SUPPLEMENT SUMMARY S-1 RISK FACTORS S-6 FORWARD LOOKING STATEMENTS S-8 PRICE RANGE OF COMMON STOCK S-9 USE OF PROCEEDS S-10 CAPITALIZATION S-11 SUPPLEMENTAL U.S. FEDERAL INCOME TAX CONSIDERATIONS S-12 UNDERWRITING S-19 LEGAL MATTERS S-23 EXPERTS S-23 WHERE YOU CAN FIND MORE INFORMATION S-23 INFORMATION INCORPORATED BY REFERENCE S-23 Prospectus Page ABOUT THIS PROSPECTUS 1 A WARNING ABOUT FORWARD-LOOKING STATEMENTS 1 OUR COMPANY 2 RISK FACTORS 3 USE OF PROCEEDS 3 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED SECURITIES DIVIDENDS 3 DESCRIPTION OF COMMON STOCK 3 DESCRIPTION OF PREFERRED STOCK 4 DESCRIPTION OF DEPOSITARY SHARES 20 DESCRIPTION OF WARRANTS 24 LEGAL OWNERSHIP OF SECURITIES 25 CERTAIN CHARTER, BYLAW, AND STATUTORY PROVISIONS 28 PARTNERSHIP AGREEMENT 33 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS 35 PLAN OF DISTRIBUTION 48 LEGAL MATTERS 50 EXPERTS 51 WHERE YOU CAN FIND MORE INFORMATION 51 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 51 i

4 ABOUT THIS PROSPECTUS SUPPLEMENT This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into the accompanying prospectus. The second part, the accompanying prospectus, gives more general information about securities we may offer from time to time, some of which does not apply to this offering. Generally, when we refer only to the prospectus, we are referring to both parts of this document combined. If the description of this offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement. You should rely only on the information contained or incorporated by reference in this prospectus supplement or the accompanying prospectus in making a decision about whether to invest in our common stock. We have not, and the underwriter has not, authorized anyone to provide you with different or additional information. We take no responsibility for, and can provide no assurance as to the reliability of, any different or inconsistent information. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus and the documents incorporated by reference is only accurate as of the respective dates which are specified in those documents. Our business, financial condition, results of operations and prospects may have changed since those dates. This prospectus supplement and the accompanying prospectus contain registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Fairmont Raffles Hotels International Inc., or Fairmont, Hilton Worldwide Holdings Inc., or Hilton, InterContinental Hotels Group PLC, or InterContinental Hotels Group, Marriott International, Inc., or Marriott, Morgans Hotel Group Co., or Morgans, Starwood Hotels & Resorts Worldwide, Inc., or Starwood, Wyndham Worldwide Corporation, or Wyndham, Aimbridge Hospitality, L.P., or Aimbridge, and Highgate Hotels, L.P., or Highgate. None of the owners of these trademarks, their affiliates or any of their respective officers, directors, agents or employees is an issuer or underwriter of the securities being offered hereby. In addition, none of the owners of these trademarks, their affiliates or any of their respective officers, directors, agents or employees has or will have any liability arising out of or related to the sale or offer of the securities being offered hereby, including any liability or responsibility for any financial statements, projections or other financial information or other information contained in this prospectus supplement or otherwise disseminated in connection with the offer or sale of the securities offered hereby. This prospectus supplement and accompanying prospectus contain references to certain non-gaap financial measures. A detailed reconciliation and further discussion of such non-gaap measures is contained in the Non-GAAP Financial Measures section of Management s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which is incorporated by reference herein.

5 PROSPECTUS SUPPLEMENT SUMMARY This summary highlights some of the information contained elsewhere in this prospectus supplement and the accompanying prospectus or documents incorporated herein by reference. It is not complete and does not contain all of the information that you should consider before investing in our common stock. You should carefully read this entire prospectus supplement and the accompanying prospectus, including the information set forth under Risk Factors and Forward Looking Statements, our financial statements and the related notes and the other documents incorporated by reference, before you decide to invest in our common stock. Unless otherwise indicated or the context otherwise requires, the words we, our, ours, us, and the Company refer to FelCor and its subsidiaries, collectively. General FelCor is a Maryland corporation operating as a REIT. We are the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor LP, through which we held ownership interests in 48 hotels with approximately 14,435 rooms at December 31, At December 31, 2014, we had an aggregate of 125,216,536 shares and units outstanding, consisting of 124,605,074 shares of FelCor common stock and 611,462 units of limited partnership interest of FelCor LP not owned by FelCor. Our business is conducted in one reportable segment: hospitality. Our goal is to provide superior appreciation in stockholder value through earnings growth, asset appreciation and sustainable dividend growth. We strive to achieve this by building an ever-improving, well-maintained portfolio of great hotels in great locations, while leveraging our core competencies, and continuing to enhance our balance sheet flexibility and strength while reducing cost of capital. Our core portfolio consists primarily of upper-upscale and luxury hotels and resorts located in gateway urban markets and resort areas that have dynamic demand generators and high barriers-to-entry. We sell, acquire, rebrand and redevelop hotels to increase our return on invested capital, improve overall portfolio quality, enhance diversification and improve growth rates. Of the 46 hotels in which we had an ownership interest at December 31, 2014 (which excludes two hotels held for sale), we owned a 100% interest in 43 hotels and a 50% interest in entities owning three hotels. We consolidate our real estate interests in the 43 hotels in which we held majority interests, and we record the real estate interests of the three hotels in which we held 50% interests using the equity method. We lease 45 of our 46 hotels to our taxable REIT subsidiaries, or TRSs, of which we own a controlling interest. One 50% owned hotel is operated without a lease. Because we own controlling interests in these lessees, we consolidate our interests in these 45 hotels (which we refer to as our Consolidated Hotels) and reflect those hotels operating revenues and expenses in our statements of operations. At December 31, 2014, our Consolidated Hotels were located in 17 states. Nearly 90% of our portfolio is comprised of luxury (Fairmont) and upper-upscale (Embassy Suites, Hilton, Marriott, Renaissance, Sheraton, and Wyndham) hotels and resorts. We also own upscale (Doubletree), upper-midscale (Holiday Inn) and independent (The Knickerbocker, Royalton and Morgans) hotels. Our Properties We own a diversified portfolio of hotels managed and branded by Hilton, Starwood, Marriott, Fairmont, Morgans, Wyndham, InterContinental Hotels Group, Aimbridge and Highgate. Our hotels are high-quality lodging properties with respect to desirability of location, size, facilities, physical condition, quality and variety S-1

6 of services offered in the markets in which they are located. Our hotels appeal to a broad range of hotel customers, including frequent business travelers, groups and conventions, as well as leisure travelers. They generally feature comfortable, modern guest rooms, meeting and convention facilities and full-service restaurant and catering facilities. The following table shows the distribution of hotel brands among our 45 Consolidated Hotels at December 31, 2014: Number of Properties Embassy Suites Hotels 18 Wyndham and Wyndham Grand(a) 8 Renaissance and Marriott 3 DoubleTree by Hilton and Hilton 3 Sheraton 2 Fairmont 1 Holiday Inn 2 Morgans and Royalton 2 Core hotels 39 Non-strategic hotels(b) 6 Same-store hotels 45 (a) These hotels were converted from Holiday Inn (brand and management) on March 1, (b) Excludes two hotels held for sale as of December 31, 2014, both of which were sold in February. We are committed to maintaining the high standards of our hotels. Our hotels average 300 rooms. In March 2013, we repositioned eight Wyndham hotels from Holiday Inns. We completed renovations at two of these Wyndham hotels during 2014 (the other six were renovated in 2012 and 2013). In 2014, we spent $83.7 million on capital expenditures, primarily for renovations and redevelopment at nine of our hotels, including the two Wyndham hotels. Recent Developments Preliminary Hotel Operating Statistics. The following hotel operating statistics for the three months ended March 31, 2015 are preliminary. None of this information reflects adjustments normally made after the end of a full quarter in the course of preparing quarterly financial statements. Three months ended March Change Occupancy(a) 75.1% 70.7% 6.2% Average Daily Rate(a) $ $ % RevPAR(a) $ $ % (a) Information relates to our 43 same-store hotels at March 31, We may not provide or report future statistical information for any period other than with respect to our annual and quarterly fiscal periods. The preliminary statistical information presented herein for the three months ended March 31, 2015 is based only upon preliminary information available to us as of the date of this prospectus supplement and is subject to change pending finalization of such periods and our quarterly financial results. As a result, the foregoing discussion constitutes forward-looking statements and, therefore, we caution you that these S-2

7 statements are subject to risks and uncertainties, and you should not place undue reliance thereon. For more information, please see Forward Looking Statements and Risk Factors. The preliminary operating statistics for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for any other quarter or for the full fiscal year. The preliminary operating statistics for the three months ended March 31, 2015 and the three months ended March 31, 2014 included in this prospectus supplement have been prepared by and are the responsibility of our management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to such operating statistics. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. Asset Sales. From 2010 through December 31, 2014, we have sold 32 non-strategic hotels for $700.9 million. Since then, we have sold three additional non-strategic hotels for $93.1 million. In addition, of the five remaining non-strategic hotels, three are currently under contract to be sold. Election of Directors. Our board of directors is currently divided into three classes of directors who are elected to serve staggered (by class) three-year terms. Our board of directors has approved, and we intend to submit for a vote of our stockholders at our 2015 annual meeting of stockholders, articles of amendment and restatement, or the Amended Charter, to amend our current charter to eliminate the provision that classifies our directors. Our charter requires that holders of not less than 75% of our outstanding common stock vote to approve our Amended Charter as a predicate to its filing and effectiveness. If our stockholders vote in sufficient number at our 2015 annual meeting to approve the Amended Charter, then the Amended Charter will become effective when we file it with the State of Maryland after the meeting adjourns. At nearly the same time, we anticipate amending our bylaws to provide, in relevant part, that each director elected on or after May 20, 2015 shall serve until the next annual meeting of the stockholders and until his or her successor is elected and qualifies. Each director elected prior to May 20, 2015 shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected and until his or her successor is elected and qualifies. For more information regarding our current charter and bylaws, see Certain Charter, Bylaw and Statutory Provisions in the accompanying prospectus. Our Corporate Information Our principal executive offices are located at 545 E. John Carpenter Freeway, Suite 1300, Irving, TX 75062, and our telephone number is (972) Our website is The contents of our website are not a part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website. Information contained on our website is not incorporated into this prospectus and you should not consider information contained on our website to be part of this prospectus. S-3

8 Summary of the Offering Common stock offered by us Common stock outstanding immediately after the offering Dividend policy Trading market and symbol Ownership and transfer restrictions Risk factors 14,500,000 shares (plus up to an additional 2,175,000 shares of our common stock that we may issue and sell upon exercise of the underwriters option to purchase additional shares). 139,371,811 shares, based on 124,871,811 shares of common stock outstanding on March 31, 2015 assuming the underwriters option is not exercised. We currently pay quarterly dividends on our shares of common stock at a rate of $0.04 per share. We intend to continue to make quarterly distributions to holders of our common stock. To maintain our qualification as a REIT, we intend to make annual distributions to our stockholders of at least 90% of our REIT taxable income, subject to certain adjustments and excluding net capital gains (which does not necessarily equal net income as calculated in accordance with GAAP). The timing and frequency of distributions will be authorized by our board of directors and declared by us based upon a variety of factors deemed relevant by our directors. Our ability to pay distributions to our stockholders depends, in part, upon our receipt of rent payments with respect to our hotels from our TRSs, and, in turn, upon the management of our hotels by the various managers engaged to operate our hotels. In addition to the factors outlined above, the amounts of future distributions per share will depend on the number of shares of our common and preferred stock outstanding from time to time. Our common stock ranks junior to our preferred stock with respect to payment of dividends. As of the date of this prospectus, but after giving effect to this offering and the use of proceeds as set forth below, 12,879,475 shares of our preferred stock would be outstanding. Our common stock is quoted on the NYSE under the symbol FCH. In order to assist us in satisfying the limitations on the concentration of ownership of interests imposed by the Code on REITs, our charter generally prohibits, among other things, any stockholder from beneficially or constructively owning more than 9.9% of the outstanding shares of any class of our capital stock. Investing in our common stock involves a high degree of risk. You should carefully read and consider the information set forth under the caption Risk Factors beginning on page S-6 and all other information in this prospectus supplement and the accompanying prospectus before investing in our common stock. S-4

9 Use of proceeds We estimate that our net proceeds from this offering, after deducting the underwriting discount and other estimated offering expenses payable by us, will be approximately $ million (approximately $ million if the underwriters exercise their option to purchase additional shares in full). We will use the net proceeds from this offering to redeem our 8% Series C Cumulative Redeemable Preferred Stock, or our Series C Preferred Stock, and corresponding depositary shares representing the Series C Preferred Stock being redeemed (we refer to the shares of Series C Preferred Stock and the corresponding depositary shares collectively as the Series C Preferred Shares). This redemption is part of our long-term strategy to strengthen our balance sheet and reduce leverage, improve our portfolio quality and enhance returns on investment. We intend to use any remaining net proceeds from this offering, along with cash on hand and proceeds from future asset sales, if and when available, to facilitate this strategy, which includes investing in future redevelopment projects and other growth opportunities. Pending application of the net proceeds from this offering, we may invest such net proceeds in short-term, interest bearing investments. We have agreed to pay all costs and expenses incurred in connection with the registration under the Securities Act of 1933, as amended, or the Securities Act, of the shares of our common stock being registered hereby, including, without limitation, all registration and filing fees, printing expenses and fees and disbursements of our counsel and our accountants. For more information, please see Use of Proceeds. S-5

10 RISK FACTORS Investing in our common stock involves risks, including those described in our annual report on Form 10-K for the year ended December 31, 2014, which is incorporated herein by reference. Prospective investors should carefully consider such risk factors, together with all of the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus in determining whether to purchase our common stock in this offering. In addition to the risks identified in our annual report on Form 10-K for the year ended December 31, 2014, we are also subject to the risks set forth below. The risks and uncertainties set forth below and described in our annual report on Form 10-K for the year ended December 31, 2014 are not the only risks that may have a material adverse effect on us. Additional risks and uncertainties of which we currently are unaware, or that we currently deem to be immaterial, also may become important factors that adversely impact us and your investment in our common stock. Further, to the extent any of the information contained in this prospectus supplement or the accompanying prospectus constitutes forward-looking information, the risk factors incorporated by reference into this prospectus supplement are cautionary statements identifying important factors that could cause our actual results for various financial reporting periods to differ materially from those expressed in any forward-looking statements made by or on behalf of us. Additional Risks Broad market fluctuations could impact the market price of our common stock negatively. The capital markets experience price and volume fluctuations that affect the market price of the shares of many companies unrelated to their operating performance. These broad market fluctuations could adversely affect the market price of our common stock. Furthermore, our operating results and prospects may be below market expectations or may be lower than those of comparable companies, which could materially and adversely impact the market price of our common stock. You may experience significant dilution as a result of additional issuances of our securities, which could harm our stock price. Investors in this offering do not have preemptive rights to any shares issued by us in the future. Therefore, investors purchasing shares in this offering may experience dilution of their equity investment if we: sell additional common shares in the future, whether publicly or privately; sell securities that are convertible into common shares; issue restricted shares to our officers or directors; or issue common stock upon the exercise of options. After giving effect to the issuance of common stock in this offering, the receipt of the expected net proceeds and the use of those proceeds, we expect that this offering will have a dilutive effect on our earnings per share and funds from operations per share. The actual amount of dilution from this offering, or from any future offering of common or preferred stock, will be based on numerous factors and cannot be determined at this time. Additionally, the market price of our common stock could decline if a large number of shares of our common stock are sold in the market pursuant to this offering, or otherwise, or as a result of the perception or expectation that such sales could occur. S-6

11 Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may harm the value of our common stock. In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock. Upon our liquidation, holders of our debt securities and shares of preferred stock, lenders with respect to other borrowings and all of our creditors will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings by us may dilute the holdings of our existing stockholders or reduce the value of our common stock, or both. Our preferred stock, if issued, would have a preference on distributions that could limit our ability to make distributions to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the value of our common stock and diluting their stock holdings in us. Our ability to achieve our long-term objectives is subject to various risks and uncertainties, and we may be unable to execute some or all of the foregoing as contemplated, or at all. Our long-term strategy contemplates: (i) redeveloping hotels in our portfolio, including potentially rebranding and enhancing facilities, to enhance hotel performance and improve returns on our investment; (ii) acquiring additional hotels in our target markets that meet our investment criteria and/or present redevelopment opportunities similar to hotels already in our portfolio; and (iii) recycling capital invested in our portfolio by selling hotels that no longer meet our investment criteria or are significantly more valuable as single assets than as part of a larger portfolio and reinvesting the proceeds in hotels that meet or exceed our investment criteria. For example, while we intend to recycle capital invested in hotels that no longer meet our investment criteria, there is no assurance that we will be able to sell such hotels at acceptable prices, or at all, and we can provide no assurance that the capital recycled from selling hotels will, when reinvested, generate targeted returns. Similarly, although we have extensive experience and success redeveloping hotel and resort properties, we can provide no assurance that current and future redevelopment opportunities will proceed as contemplated or at all or whether, if they do proceed, they will be successful and achieve or exceed targeted returns. In addition, while we contemplate acquiring hotels in our target markets, we can provide no assurances that we will successfully identify appropriate acquisition opportunities that meet our investment criteria or that we will be able to act on those opportunities and acquire hotels that will contribute to the long-term growth of our portfolio and deliver incremental stockholder value or that our assumptions about the benefits of our target markets (growth rates and potential returns, among others) will prove correct. If we are unable to execute our plans, we may be unable to realize the growth underlying our strategy, and our future business operations or financial performance could be adversely affected. S-7

12 FORWARD LOOKING STATEMENTS This prospectus supplement and the documents incorporated by reference in this prospectus supplement, as well as other written and oral statements made or incorporated by reference from time to time by us and our representatives in other reports, filings with the Securities and Exchange Commission, or the SEC, press releases, conferences, or otherwise, may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology, including, without limitation, believes, expects, anticipates, may, will, would, should, strive, seeks, pro forma or other variations of these terms, including their use in the negative, or by discussions of strategies, plans or intentions. A number of factors could cause actual results to differ materially from those anticipated by these forward-looking statements. Among these factors are: the state of the U.S. economy generally or in specific geographic regions in which we operate, and the effect of general economic conditions on the lodging industry in particular; market trends in our industry, interest rates, real estate values and the capital markets; future terrorist activities and political instability; changes in the global economic and political environment; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; our failure to maintain our status as a REIT; our overall debt levels and our ability to refinance or obtain new financing and service debt; our inability to retain earnings; our liquidity and capital expenditures; our ability to complete hotel dispositions at acceptable prices and to pursue our growth strategy and acquisition activities; and competitive conditions in the lodging industry. In addition, these forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect. Accordingly, while we believe that the plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these plans, intentions or expectations will be achieved. The forward-looking statements included in this prospectus, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by the information contained in this prospectus, including Risk Factors, and the documents incorporated herein by reference, which identify important factors that could cause these differences. All forward-looking statements speak only as of the date of this prospectus. We undertake no obligation to update any forward-looking statements to reflect future events or circumstances. You should also review the forward-looking statements contained in the Prospectus Supplement Summary Recent Developments section of this prospectus supplement as qualified by the information set forth herein, and as further qualified by the statements contained in that section. S-8

13 PRICE RANGE OF COMMON STOCK Our common stock is traded on the NYSE under the symbol FCH. The following table sets forth the high and low intraday sales prices per share of our common stock, as reported by the NYSE, and dividends declared on our common stock, for the periods indicated. High Low Common Dividends Declared Year Ended December 31, 2015: First Quarter $12.43 $9.70 $0.04 Year Ended December 31, 2014: First Quarter $9.35 $7.49 $0.02 Second Quarter $10.61 $8.59 $0.02 Third Quarter $10.92 $9.16 $0.02 Fourth Quarter $11.18 $8.99 $0.04 Year Ended December 31, 2013: First Quarter $6.03 $4.71 $ Second Quarter $6.47 $5.38 $ Third Quarter $6.33 $5.49 $ Fourth Quarter $8.23 $5.83 $0.02 S-9

14 USE OF PROCEEDS We estimate that our net proceeds from this offering, after deducting the underwriting discount and other estimated offering expenses payable by us, will be approximately $ million (approximately $ million if the underwriters exercise their option to purchase additional shares in full). We will use the net proceeds from this offering to redeem our Series C Preferred Shares. This redemption is part of our long-term strategy to strengthen our balance sheet and reduce leverage, improve our portfolio quality and enhance returns on investment. We intend to use any remaining net proceeds from this offering, along with cash on hand and proceeds from future asset sales, if and when available, to facilitate this strategy, which includes investing in future redevelopment projects and other growth opportunities. Pending application of the net proceeds from this offering, we may invest such net proceeds in short-term, interest bearing investments. The per share redemption price for our Series C Preferred Stock is $2, per share (or $25.00 per depositary share), plus all accrued and unpaid distributions thereon to the call date. We have agreed to pay all costs and expenses incurred in connection with the registration under the Securities Act of the shares of our common stock being registered hereby, including, without limitation, all registration and filing fees, printing expenses and fees and disbursements of our counsel and our accountants. S-10

15 CAPITALIZATION The following table sets forth (1) our cash and cash equivalents and (2) our capitalization as of December 31, 2014, in each case: on an actual basis on an adjusted basis to reflect the sale of our common stock in the offering at the offering price of $ per share, as if such transaction had been completed on December 31, 2014, and assuming: net proceeds of the offering are $ million, after deducting the estimated offering expenses and the underwriting discount and commissions; use of net proceeds to redeem all of our outstanding Series C Preferred Shares ($ million, excluding any accrued and unpaid dividends, as of March 31, 2015); and the underwriter s option to purchase additional shares is not exercised. You should review this information together with Use of Proceeds and our consolidated financial statements and related notes incorporated by reference in this prospectus. December 31, 2014 Actual As Adjusted (in thousands) Cash and cash equivalents $47,147 Short term debt: Current portion of debt 2,466 Long term debt: Line of Credit 111,500 Senior Secured Notes due ,000 Senior Secured Notes due ,000 Mortgage debt 421,901 Total long-term debt 1,583,401 Redeemable FelCor LP Units at redemption value 6,616 $1.95 Series A Cumulative Convertible Preferred stock 309,337 8% Series C Cumulative Redeemable Preferred Stock 169,412 Common stock 1,246 Additional paid-in capital 2,353,666 Accumulated deficit (2,530,671) Total FelCor stockholders equity 302,990 Non-controlling interest in other partnerships 18,435 Preferred equity in consolidated joint venture 41,422 Total capitalization $1,955,330 S-11

16 SUPPLEMENTAL U.S. FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of certain U.S. federal income tax consequences and, in the case of a non-u.s. stockholder (as defined below), U.S. federal estate tax consequences of qualification and taxation as a REIT and of the ownership and disposition of our common stock. Because this section is a summary, it does not address all of the tax issues that may be important to you in light of your personal investment or tax circumstances. In addition, this section does not address the tax issues that may be important to certain types of holders of our common stock that are subject to special treatment under U.S. federal income tax laws, such as insurance companies, partnerships or other pass-through entities (or investors in such entities), expatriates, taxpayers subject to the alternative minimum tax, tax-exempt organizations (except as discussed herein), non-u.s. trusts and estates with non-u.s. beneficiaries, financial institutions or broker-dealers, and dealers in securities. This discussion applies only to persons who purchase our common stock described in this prospectus in this offering and who hold our common stock as a capital asset for U.S. federal income tax purposes. This summary supplements and should be read together with the general discussion of certain U.S. federal income tax considerations described in the accompanying prospectus under the title Certain U.S. Federal Income Tax Considerations. The statements of law in this discussion are based on current provisions of the Code, existing temporary and final Treasury regulations thereunder, and current administrative rulings and court decisions. No assurance can be given that future legislative, judicial, or administrative actions or decisions, any of which may take effect retroactively, will not affect the accuracy of any statements in this discussion. We have not and will not seek any rulings or opinions from the IRS regarding the matters discussed below. There can be no assurance that the IRS will not take positions which are different from those discussed below. As used in this discussion, a U.S. stockholder is a beneficial owner of our common stock that, for United States federal income tax purposes, is: an individual who is a citizen or resident of the United States; a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate if its income is subject to U.S. federal income taxation regardless of its source; or a trust, if a U.S. court is able to exercise primary supervision over administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or if the trust has validly elected to continue to be treated as a domestic trust. As used in this discussion, a non-u.s. stockholder is a beneficial owner of our common stock that, for United States federal income tax purposes, is an individual, corporation, estate or trust and is not a U.S. stockholder. If any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership that is considering purchasing our common stock, you should consult with your tax advisor. This discussion assumes that a stockholder will structure its ownership of our common stock so as to not be subject to the newly enacted withholding tax discussed in Additional Withholding Requirements. THIS SUMMARY IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT INTENDED TO BE CONSTRUED AS TAX ADVICE. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF INVESTING IN S-12

17 OUR COMMON STOCK AND OF OUR ELECTION TO BE TAXED AS A REIT. SPECIFICALLY, WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH INVESTMENT AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS. Federal Income Taxation of U.S. Stockholders Distributions As long as we qualify as a REIT, distributions made to our taxable U.S. stockholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) generally will be taken into account by such U.S. stockholders as ordinary income and will not be eligible for the qualified dividends rate generally available to non-corporate holders or for the dividends received deduction generally available to corporations. Distributions in excess of current and accumulated earnings and profits will not be taxable to a stockholder to the extent that they do not exceed the adjusted basis of the stockholder s common stock (determined on a share-by-share basis), but rather will reduce the adjusted basis of those shares. To the extent that distributions in excess of current and accumulated earnings and profits exceed the adjusted basis of a stockholder s shares, such distributions will be included in income as long-term capital gain if the stockholder has held its shares for more than one year and otherwise as short-term capital gain. In addition, any distribution declared by us in October, November or December of any year and payable to a stockholder of record on a specified date in any such month shall be treated as both paid by us and received by the stockholder on December 31 of such year, provided that the distribution is actually paid by us during January of the following calendar year. Distributions that are designated as capital gain dividends will be taxed as long-term capital gain (to the extent such distributions do not exceed our actual net capital gain for the taxable year) without regard to the period for which the stockholder has held our common shares. However, corporate U.S. stockholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. The tax rates applicable to such capital gains are discussed below. We may elect to treat all or a part of our undistributed net capital gain as if it had been distributed to our stockholders (including for purposes of the 4% excise tax discussed above). If we make such an election, our U.S. stockholders would be required to include in their income as long-term capital gain their proportionate share of our undistributed net capital gain, as designated by us. Each such U.S. stockholder would be deemed to have paid its proportionate share of the income tax imposed on us with respect to such undistributed net capital gain, and this amount would be credited or refunded to the U.S. stockholder. In addition, the tax basis of the U.S. stockholder s shares would be increased by its proportionate share of undistributed net capital gains included in its income, less its proportionate share of the income tax imposed on us with respect to such gains. U.S. stockholders may not include in their individual income tax returns any of our net operating losses or net capital losses. Instead, such losses would be carried over by us for potential offset against our future income (subject to certain limitations). Taxable distributions from us and gain from the disposition of our common stock will not be treated as passive activity income, and, therefore, U.S. stockholders generally will not be able to apply any passive activity losses (such as losses from certain types of limited partnerships in which the U.S. stockholder is a limited partner) against such income. In addition, taxable distributions from us generally will be treated as investment income for purposes of the investment interest limitations. Capital gains from the disposition of common stock (or distributions treated as such) will be treated as investment income only if the U.S. stockholder so elects, in which case such capital gains will be taxed at ordinary income rates. Tax Rates We will notify U.S. stockholders after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary income, return of capital and capital gain. The maximum tax rate S-13

18 for non-corporate taxpayers for (1) capital gains, including certain capital gain dividends, is 20% (although depending on the characteristics of the assets which produced these gains and on designations which we may make, certain capital gain dividends may be taxed at a 25% rate) and (2) qualified dividend income is 20%. In general, dividends payable by REITs are not eligible for the reduced tax rate on qualified dividend income, except to the extent that certain holding requirements have been met and the REIT s dividends are attributable to dividends received from taxable corporations (such as its TRSs) or to income that was subject to tax at the corporate/reit level (for example, if the REIT distributed taxable income that it retained and paid tax on in the prior taxable year) or are properly designated by the REIT as capital gain dividends. Thus, the tax rate differential between capital gain and ordinary income for non-corporate taxpayers may be significant. In addition, the characterization of income as capital gain or ordinary income may affect the deductibility of capital losses. A non- corporate taxpayer may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum annual amount of $3,000. A non-corporate taxpayer may carry forward unused capital losses indefinitely. A corporate taxpayer must pay tax on its net capital gain at ordinary corporate rates. A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses being carried back three years and forward five years. Taxation of U.S. Stockholders on the Disposition of Shares of Common Stock Upon the taxable disposition of common stock, a U.S. stockholder generally will recognize gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received (less any portion thereof attributable to accumulated and declared but unpaid dividends, which will be taxable as a dividend to the extent of our current and accumulated earnings and profits) and (ii) the U.S. stockholder s adjusted tax basis in such stock. In general, a U.S. stockholder must treat any gain or loss realized upon a taxable disposition of our common stock as long-term capital gain or loss if the U.S. stockholder has held the shares for more than one year, and otherwise as short-term capital gain or loss. However, a U.S. stockholder must treat any loss upon a sale or exchange of shares of our common stock held for six months or less (after applying certain holding period rules) as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us which the U.S. stockholder treats as long-term capital gain. All or a portion of any loss that a U.S. stockholder realizes upon a taxable disposition of our common stock may be disallowed if the U.S. stockholder purchases substantially identical stock within 30 days before or after the disposition. Medicare Tax on Unearned Income Certain U.S. stockholders who are individuals, estates or trusts are required to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of stock. U.S. stockholders should consult their tax advisors regarding the effect, if any, of this tax on their ownership and disposition of our common stock. Treatment of Tax-Exempt Stockholders While many investments in real estate generate unrelated business taxable income, or UBTI, the IRS has issued a ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that the shares of the REIT are not otherwise used in an unrelated trade or business of the exempt employee pension trust. Based on that ruling, except as otherwise provided below, distributions by us to a tax-exempt U.S. stockholder generally should not constitute UBTI provided that (i) the U.S. stockholder has not financed the acquisition of its common stock with acquisition indebtedness within the meaning of the Code and (ii) our common stock is not otherwise used in an unrelated trade or business of such tax-exempt U.S. stockholder. Notwithstanding the preceding paragraph, under certain circumstances, qualified trusts that hold more than 10% (by value) of our shares of stock may be required to treat a certain percentage of dividends as UBTI. This requirement will only apply if we are treated as a pension-held REIT. S-14

19 Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of Section 501(c) of the Code, are subject to different UBTI rules, which generally will require them to characterize income or gain from us as UBTI. Federal Income Taxation of Non-U.S. Stockholders The following discussion addresses the rules governing the U.S. federal income taxation of the ownership and disposition of common stock by non-u.s. stockholders. These rules are complex, and no attempt is made herein to provide more than a brief summary of such rules. Accordingly, the discussion does not address all aspects of U.S. federal income taxation and does not address state, local or foreign tax consequences that may be relevant to a non-u.s. stockholder in light of its particular circumstances. Non-U.S. stockholders should consult their own tax advisors to determine the impact of U.S. federal, state, local and foreign tax consequences to them of an investment in our common stock, including tax return filing requirements and withholding requirements. Distributions Distributions to a non-u.s. stockholder that are neither attributable to gain from sales or exchanges by us of U.S. real property interests nor designated as capital gains dividends will be treated as dividends of ordinary income to the extent that they are made out of current or accumulated earnings and profits. These distributions ordinarily will be subject to withholding of U.S. federal income tax on a gross basis at a rate of 30%, or a lower rate as permitted under an applicable income tax treaty, unless the dividends are treated as effectively connected with the conduct by the non-u.s. stockholder of a U.S. trade or business. Under some treaties, however, lower withholding rates generally applicable to dividends do not apply to dividends from REITs. Applicable certification and disclosure requirements must be satisfied to be exempt from withholding under the effectively connected income exemption. Dividends that are effectively connected with a trade or business generally will be subject to tax on a net basis in the same manner as U.S. stockholders are taxed, and are generally not subject to withholding. Any dividends received by a corporate non-u.s. stockholder that is engaged in a U.S. trade or business also may be subject to an additional branch profits tax at a 30% rate, or lower applicable treaty rate, on its effectively connected earnings and profits attributable to such dividends. Distributions in excess of current and accumulated earnings and profits that exceed the non-u.s. stockholder s basis in its common stock will be taxable to a non-u.s. stockholder as gain from the sale of common stock, which is discussed below. Distributions in excess of current or accumulated earnings and profits that do not exceed the adjusted basis of the non-u.s. stockholder in its common stock (determined on a share-byshare basis) will reduce the non-u.s. stockholder s adjusted basis in its common stock and will not be subject to U.S. federal income tax, but will be subject to U.S. withholding tax as described below. Because we generally determine at the time a distribution is made whether or not it will be in excess of earnings and profits, we expect to withhold on the gross amount of each distribution made to a non-u.s. stockholder at the 30% rate (other than distributions subject to the 35% FIRPTA withholding rules discussed below) unless: (i) a lower treaty rate applies and the non-u.s. stockholder files an IRS Form W-8BEN evidencing eligibility for that reduced treaty rate; or (ii) the non-u.s. stockholder files an IRS Form W-8ECI claiming that the distribution is income effectively connected with the non-u.s. stockholder s trade or business. A non-u.s. stockholder may seek a refund of these amounts from the IRS if the non-u.s. stockholder s U.S. tax liability with respect to the distribution is less than the amount withheld. Distributions to a non-u.s. stockholder that are designated at the time of the distribution as capital gain dividends, other than those arising from the disposition of a U.S. real property interest, generally should not be subject to U.S. federal income taxation unless: (i) the investment in our common stock is effectively connected with the non-u.s. stockholder s U.S. trade or business, in which case the non-u.s. stockholder generally will be subject S-15