Winston Hotels Reports Third Quarter 2001 Results

Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust and owner of premium limited-service, high-end extended-stay and full-service hotels, today announced results for the third quarter and nine months ended September 30, 2001. FFO totaled $6.7 million for the third quarter of 2001 as compared to $8.9 million for the third quarter of 2000. On a per share basis, FFO for the third quarter of 2001 totaled $0.37 on 18.3 million weighted average shares outstanding compared to $0.49 on 18.2 million weighted average shares outstanding for the same quarter a year ago. Lease revenue prior to the adoption of SAB 101 totaled $13.8 million for the third quarter of 2001 as compared to $16.5 million for the third quarter of 2000.

Bob Winston, Chief Executive Officer, commented: “Although our results were negatively affected by the tragic events of September 11, 2001, in an already weakening economy, we are optimistic about where our Company is positioned for the future. Our segments and locations should benefit from changes in travel patterns, as well as the inherent lower supply growth, for the next several years. These results, combined with our conservative balance sheet, cash position and debt structure, allow Winston to continue to pay a dividend, although at a lower rate.”

Winston Hotels President & Chief Operating Officer, James D. Rosenberg, commented on the third quarter highlights:

“For the quarter, our RevPar decreased 10.2%. Relative to the other hotel segments, our segments have performed well during uncertain economic times. We believe that the recent performance of these hotel segments supports our business plan, which focuses on investing in premium limited service hotels and certain upscale brands, rather than in large full service hotels that tend to create more earnings volatility.”

Winston`s financial strength remains strong as evidenced by the following:


* Our total debt to EBITDA multiple is 3.3 based on our trailing 12 month EBITDA

* Our consolidated debt to total assets at cost is 36%

* Our annual interest coverage ratio multiple is 3.3

* Although our current line of credit for $140 million matures in early January 2002, we expect to receive a commitment from our bank group to renew the credit with a $125 million facility for an additional three-year period. While our existing credit facility maintains several spreads to LIBOR depending upon our corporate leverage, we always have qualified for a LIBOR spread of 1.45%. We anticipate that the comparable spread under our renewed facility will be 2.00%. Moreover, we are in full compliance with all of our current debt covenants and expect to be throughout the term of our renewed facility.

* The leases for our hotels are still owned by third parties, such as Meristar Hotels and Resorts, Inc. As such, our lessees bear the risks of reduction in the hotel profit margins, not the REIT, which could be generated from a reduction in RevPar. Although at some time in the future, we may elect to purchase our leases, we do not believe that it is prudent for the Company to incur additional debt at this time to do so.

* We are very pleased with the physical condition of our portfolio. We have spent approximately $43 million on our hotels over the last 4 years, which represents approximately 8.6% of room revenues and is significantly above industry benchmarks.

* Based on information provided by Smith Travel Research, the year to date RevPar yield for our entire portfolio exceeded 105%, which indicates that our portfolio achieved a greater RevPar than our fair share.

* Preliminary estimates from Smith Travel Research indicate that the US Hotel Industry RevPar for the month of October was a -16% to -18%, while Winston`s RevPar was -11%.

* Our portfolio generated an unleveraged return on assets of 11.6% for the trailing 12-month period.

* The year to date return to common shareholders is 24%, based on our stock price at the beginning of the year through November 8, 2001, including our dividend payments.

Dividend Performance:
During the third quarter, Winston Hotels declared a cash dividend of $0.28 per common share. The cash dividend was paid on October 16, 2001 to shareholders of record on September 30, 2001. The regular quarterly dividend is equivalent to $1.12 on an annualized basis. Also in the third quarter, the Company announced its regular quarterly cash dividend to preferred shareholders of record of $0.578125 per share. This dividend also was paid on October 16, 2001 to shareholders of record on September 30, 2001.