Supertel Hospitality Reports 2012 Third Quarter Results

NORFOLK, NE -- (Marketwire) -- 11/14/12 -- Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which currently owns 94 hotels in 23 states, today announced its results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights

  • Improved revenues from continuing operations 4.7 percent to $22.2 million.
  • Bettered RevPAR 0.5 percent to $36.12 for the 72, same-store, continuing operations hotels.
  • Reduced loss from continuing operations to $(0.4) million, an improvement of 18.6 percent over the same year-ago period.
  • Increased continuing operations Property Operating Income (POI) to $6.1 million, a 5.9 percent rise.
  • Advanced Adjusted EBITDA 1.0 percent to 5.9 million, compared to the same year-ago period.
  • Sold an economy hotel, generating gross proceeds of $1.55 million.
  • Expanded upper midscale portfolio with an agreement to purchase a 116-room TownePlace Suites in suburban Des Moines (Urbandale), Iowa.
  • Refinanced a $28.2 million loan shortly after the close of the 2012 third quarter, replacing it with a $30.6 million loan while reducing annual debt service obligations by approximately $1.1 million.

Third Quarter Operating and Financial Results

Revenues from continuing operations for the 2012 third quarter improved 4.7 percent, or $1.0 million, to $22.2 million, compared to the like year-ago period. The improved performance was led primarily by the first full quarter of the recently acquired Hilton Garden Inn.

The company reported a net loss of $(2.3) million, or $(0.13) per diluted share, for the 2012 third quarter, compared to a net loss of $(1.4) million or $(0.08) per diluted share for the same 2011 period. The third quarter loss includes a non-cash, $1.2 million increase in the fair market value of derivative liabilities, as well as an impairment charge of $2.7 million on properties which are held for sale. This compares to a non-cash $0.3 million impairment in the 2011 third quarter on properties held for sale and $2.2 million impairment on properties held for use. All income and expenses related to sold and held-for-sale hotels are classified as discontinued operations.

Funds from operations (FFO) in the 2012 third quarter was $1.3 million, compared to $2.1 million in the same 2011 period. Adjusted funds from operations (AFFO), which is FFO adjusted to include gains or exclude losses on derivatives and acquisition expense, in the 2012 third quarter was $2.6 million, up 23.9 percent, compared to $2.1 million in the same 2011 period.

Earnings before interest, taxes, depreciation and amortization (EBITDA) declined to $1.6 million from $4.0 million for the third quarter of 2012. Adjusted EBITDA, which is EBITDA before non-controlling interest, net gain/loss on disposition of assets, impairment, preferred stock dividends, unrealized gain/loss on derivatives and acquisition expense, improved to $5.9 million, compared to $5.8 million for the 2011 third quarter.

In the 2012 third quarter, the 72-hotel, same-store portfolio reported revenue per available room (RevPAR) of $36.12, an increase of 0.5 percent, led by a 1.3 percent improvement in ADR to $53.40, partially offset by a 0.9 percent decline in occupancy to 67.6 percent, compared to the 2011 third quarter.

"Supertel continues to make progress in operations," said Kelly A. Walters, Supertel president and CEO. "Equally important, we have also made additional progress in strengthening our balance sheet within the past 30 days."


              --------------------------------------------------------------
                         Third Quarter 2012 vs Third Quarter 2011
              --------------------------------------------------------------
                     Occ %               ADR ($)             RevPAR ($)
               2012 2011 Variance  2012   2011 Variance 2012   2011 Variance
              --------------------------------------------------------------
Industry -
 Total US
 Market       67.1% 66.3%    1.2% 107.34 103.28    3.9% 72.00  68.47    5.1%
Supertel -
 Same Store
 (72 hotels)  67.6% 68.2%   -0.9%  53.40  52.71    1.3% 36.12  35.93    0.5%

Chain Scale

Industry -
 Upper
 Midscale     69.2% 68.3%    1.4% 101.28  97.63    3.7% 70.12  66.67    5.2%
Supertel -
 Upper
 Midscale
 (20)         71.2% 72.0%   -1.1%  73.04  72.58    0.6% 52.04  52.23   -0.4%

Industry -
 Midscale     61.3% 60.7%    1.0%  78.31  76.04    3.0% 48.02  46.18    4.0%
Supertel -
 Midscale (5) 59.9% 52.6%   13.9%  63.39  64.97   -2.4% 37.99  34.19   11.1%

Industry -
 Economy      60.5% 59.7%    1.3%  55.83  54.15    3.1% 33.76  32.33    4.4%
Supertel -
 Economy (40) 66.2% 67.2%   -1.5%  52.53  51.71    1.6% 34.76  34.75    0.0%

Industry -
 Extended
 Stay           n/a   n/a     n/a    n/a    n/a     n/a   n/a    n/a     n/a
Supertel -
 Extended
 Stay (7)     69.3% 70.5%   -1.7%  24.77  24.08    2.9% 17.16  16.98    1.1%

----------------------------------------------------------------------------
Industry Source: STR Monthly Review

Upscale Hotels

Comparative operating results for the Hilton Garden Inn, which was acquired in the 2012 second quarter, are not reflected in the 72, same-store hotel operating results shown above. For the 2012 third quarter, the hotel generated RevPAR of $94.53, led by $123.43 ADR and 76.6 percent occupancy.

Upper Midscale Hotels

Third quarter RevPAR for the company's 20 continuing operations, upper midscale hotels declined slightly, 0.4 percent, to $52.04, resulting from a 0.6 percent improvement in ADR to $73.04 and a 1.1 percent decrease in occupancy. Upper midscale hotel brands currently in the company's portfolio include Comfort Inns, Comfort Suites, Hampton Inn and Holiday Inn Express.

Midscale Hotels

The RevPAR for the company's five continuing operations, midscale hotels increased significantly, by 11.1 percent, to $37.99. Occupancy increased 13.9 percent slightly offset by a 2.4 percent ADR decrease to $63.39. Supertel's midscale brands include Quality Inn, Sleep Inn and Baymont Inn.

Economy Hotels

The company's 40 continuing operations economy hotels reported essentially flat RevPAR at $34.76 in the 2012 third quarter as a result of a 1.6 percent rise in ADR to $52.53, offset by a 1.5 percent decrease in occupancy. Supertel's branded properties in this segment include Days Inn, Super 8, Key West Inns and Guesthouse Inn.

Extended Stay Hotels

The company's seven continuing operations, extended-stay hotels reported a 1.1 percent increase in RevPAR to $17.16, led by a 2.9 percent increase in ADR to $24.77, partially offset by a 1.7 percent decline in occupancy. Hotels in this segment include the Savannah Suites brand.

"We believe our operators' performance validates our decision to move to a multi-operator model from one central management company," Walters said. "The West South Central and Middle Atlantic regions continue to recover more slowly and more erratically than the nation as a whole. Many of our markets, primarily small towns, have been hard hit, which does not give us as much flexibility as we would like in raising rate. Our properties outperform the industry in occupancy, but these segments are particularly sensitive to room rate. We will continue to focus on fine-tuning the trade-offs between occupancy and rate market-by-market."

Continuing operations interest expense was essentially unchanged at $2.0 million for the quarter. Depreciation and amortization expense from continuing operations increased $0.1 million from the 2011 third quarter to $2.2 million.

Property Operating Income (POI) from continuing operations for the 2012 third quarter rose to $6.1 million, or 5.9 percent, compared to $5.7 million for the same period a year earlier. The increase was led by $0.3 million of POI from the newly acquired Hilton Garden Inn. See attached chart (Property Operating Income Percentage Third Quarter 2012 versus Third Quarter 2011).

POI is calculated as revenue from room rentals and other hotel services less hotel and property operations expenses.

Year-to-Date Operating and Financial Results

Revenues from continuing operations for the nine months ended September 30, 2012, increased 4.3 percent or $2.5 million, to $59.5 million, compared to $57.1 million for the same year-ago period.

Net loss attributable to common shareholders was $(6.1) million, or $(0.26) per diluted share for the nine months ended September 30, 2012, compared to a net loss attributable to common shareholders of $(10.3) million, or $(0.45) per diluted share for the same 2011 period.

RevPAR for the 72 same-store hotels was $33.22, a 1.9 percent increase, compared to the same period in 2011.

FFO for the nine months ended September 30, 2012 was $2.9 million, compared to $3.7 million for the same 2011 period. The company's Adjusted FFO for the 2012 nine-month period was $4.7 million, a 26.4 percent improvement, compared to the $3.7 million reported at September 30, 2011.

EBITDA year-to-date for 2012 was $7.9 million versus $5.5 million compared to the same period in 2011.

Earnings before interest, taxes, depreciation and amortization, impairment, non-controlling interest, net gain/loss on disposition of assets, preferred stock dividends, unrealized gain/loss on derivatives and acquisition expense (Adjusted EBITDA) increased 10.8 percent to $14.4 million, compared to $13.0 million for the prior year's nine-month period.

Acquisition Activity

On September 24, the company entered into an agreement to acquire the TownePlace Suites by Marriott, located in suburban Des Moines (Urbandale), Iowa, for $10.2 million. The 116-room studio-suite hotel opened in December 2007 and is well located off I-80 with multiple business and leisure travel demand generators. The acquisition will be funded with available capital and financing. The closing, which is subject to customary conditions, is expected to occur in the 2012 fourth quarter.

"This acquisition continues our investment strategy of rebuilding our capital with premium-branded, select-service hotels," Walters said. "This extended-stay hotel will be the first property in our portfolio to carry the well-regarded Marriott brand name."

Disposition Program

During the 2012 third quarter, the company sold a Super 8 hotel in Watertown, S.D. for $1.55 million. Proceeds were used to retire the associated debt and for general corporate purposes. Year-to-date, the company has sold seven, non-core assets generating gross proceeds of approximately $14 million.

"We added two hotels to our held-for-sale portfolio, currently 21 properties, during the quarter," Walters said. "As of September 30, 2012, we have six under contract, which are expected to close by year-end, pending financing and other customary closing conditions. Lenders are slowly returning to the market, and interest rates remain at historically low rates, making these properties more attractive acquisition candidates. We have sold and continue to sell our non-core hotels to owners whose cost structure is more favorable for economy and midscale properties than the REIT structure."

Property Renovations

The company has invested $1.3 million in property improvements in the 2012 third quarter. "Typically, renovations cause some temporary revenue displacement, but we expect to receive a positive upswing in occupancy and rate after the hotels complete the upgrades. Looking at the fourth quarter through 2013, we expect to invest $2.5 million to $3.0 million to change the flags at four properties. The reflags result from changing market conditions, brand standard requirements and cost-benefit analysis.

Balance Sheet

The company made several important improvements to its balance sheet in the 2012 third quarter and early in the fourth quarter.

  • Completed a significant refinancing of debt through a new $30.6 million loan. The loan proceeds were used to pay the company's debt with Greenwich Capital, previously scheduled to mature on December 1, 2012. The loan, originated by Morgan Stanley Capital Holdings LLC, is expected to be securitized. The loan is secured by 22 hotels and carries a fixed annual interest rate of 5.83%, the prior loan had a 7.5% interest rate. The terms of the loan provide for monthly principal and interest payments based on an 18-year amortization with the principal balance due and payable on December 1, 2017. Eight of the hotels that previously secured the Greenwich Capital loan are now unencumbered. Five of these hotels are held for sale, four of which are currently under contract for sale. "This new loan gives us improved flexibility," said Connie Scarpello, chief financial officer. "Equally important, it will reduce our annual debt service obligations by approximately $1.1 million."
  • Hilton Garden Inn, Solomons Island (Dowell), Md. -- Completed on October 19, 2012 a $6.15 million secured loan with Cantor Commercial Real Estate. "The five-year loan, representing approximately 55 percent of the purchase price, carries a fixed interest rate of 4.24% per annum, based on a 30-year amortization," said Connie Scarpello, chief financial officer.
  • TownePlace Suites by Marriott, Des Moines -- Currently negotiating to borrow approximately $6 million to complete the previously announced $10.2 million acquisition of this 116-room property.

"We continue our efforts to reduce our leverage," she noted. "The loan-to-value on the 22-hotel portfolio, recently financed by Morgan Stanley, is in the 55 percent range, which is in line with our long-term goal. As of September 30, 2012, outstanding debt on our continuing operations hotels was $113.7 million, with an average term to maturity of three years and a weighted average annual interest rate of 6.4 percent."

Dividends

The company did not declare a common stock dividend for the 2012 third quarter. Preferred dividends have continued uninterrupted. The company will monitor requirements to maintain its REIT status and will routinely evaluate the dividend policy. The company intends to continue to meet its dividend requirements to retain its REIT status.

Outlook

"We are improving our balance sheet and our hotels' operations, and we continually seek opportunities to increase the pace of our improvement," Walters said.

"Looking to next year, the outlook for supply growth remains low, especially in our markets. Forecasters predict continued RevPAR growth next year, but at a slower pace than 2012. Our economy is slowly rebounding, but its impact has not fully benefited our principally small-town markets. We are encouraged by our progress and are confident that the strategy we enacted nearly two years ago is taking us in the right direction."

About Supertel Hospitality, Inc.

Supertel Hospitality, Inc. (NASDAQ: SPPR) is a self-administered real estate investment trust that specializes in the ownership of select-service hotels. The company currently owns 94 hotels comprising 8,283 rooms in 23 states. Supertel's hotels are franchised by a number of the industry's most well-regarded brand families, including Hilton, IHG, Choice and Wyndham. For more information or to make a hotel reservation, visit www.supertelinc.com.

Forward Looking Statement

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These risks are discussed in the Company's filings with the Securities and Exchange Commission.


                         Supertel Hospitality, Inc.
                                Balance Sheet
               As of September 30, 2012, and December 31, 2011
           (Dollars in thousands, except share and per share data)

The Company owned 94 hotels (including 21 hotels in discontinued operations) at September 30, 2012, and 105 hotels as of December 31, 2011 respectively.

                                                           As of
                                               September 30,   December 31,
                                                    2012           2011
                                               -------------  -------------
                                                (unaudited)

ASSETS
  Investments in hotel properties              $     258,251  $     249,763
  Less accumulated depreciation                       78,306         75,074
                                               -------------  -------------
                                                     179,945        174,689

  Cash and cash equivalents                              656            279
  Accounts receivable, net of allowance for
   doubtful accounts of $195 and $194                  2,718          1,891
  Prepaid expenses and other assets                   10,650          8,917
  Deferred financing costs, net                          597            850
  Investment in hotel properties, held for
   sale, net                                          22,767         34,546
                                               -------------  -------------
                                               $     217,333  $     221,172
                                               =============  =============

LIABILITIES AND EQUITY
LIABILITIES
  Accounts payable, accrued expenses and other
   liabilities                                 $      12,393  $      10,704
  Derivative liabilities, at fair value               17,267              -
  Debt related to hotel properties held for
   sale                                               22,285         37,904
  Long-term debt                                     113,715        127,941
                                               -------------  -------------
                                                     165,660        176,549
                                               -------------  -------------

  Redeemable noncontrolling interest in
   consolidated partnership,at redemption
   value                                                 114            114

  Redeemable preferred stock
    10% Series B, 800,000 shares authorized;
     $.01 par value, 332,500 shares
     outstanding, liquidation preference of
     $8,312                                            7,662          7,662

EQUITY
Shareholders' equity
  Preferred stock, 40,000,000 shares
   authorized;
    8% Series A, 2,500,000 shares authorized,
     $.01 par value, 803,270 shares
     outstanding, liquidation preference of
     $8,033                                                8              8
    6.25% Series C, 3,000,000 shares
     authorized, $.01 par value, 3,000,000
     shares outstanding, liquidation
     preference of $30,000                                30              -
  Common stock, $.01 par value, 200,000,000
   shares authorized; 23,137,202 and
   23,070,387 shares outstanding.                        231            231
  Common stock warrants                                  252            252
  Additional paid-in capital                         134,776        121,619
  Distributions in excess of retained earnings       (91,527)       (85,398)
                                               -------------  -------------
      Total shareholders' equity                      43,770         36,712
Noncontrolling interest
  Noncontrolling interest in consolidated
   partnership, redemption value $102 and $64            127            135

                                               -------------  -------------
      Total equity                                    43,897         36,847
                                               -------------  -------------

COMMITMENTS AND CONTINGENCIES
                                               $     217,333  $     221,172
                                               =============  =============



                         Supertel Hospitality, Inc.
                           Results of Operations
      For the three and nine months ended September 30, 2012 and 2011,
                                respectively
          (Unaudited-Dollars in thousands, except per share data)


                            Three Months Ended         Nine Months Ended
                               September 30,             September 30,
                         ------------------------  ------------------------
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
REVENUES                 (unaudited)               (unaudited)
  Room rentals and other
   hotel services        $    22,192  $    21,199  $    59,545  $    57,089
                         -----------  -----------  -----------  -----------

EXPENSES
  Hotel and property
   operations                 16,132       15,475       44,200       43,108
  Depreciation and
   amortization                2,223        2,139        6,473        6,582
  General and
   administrative                943          906        2,957        3,010
  Acquisition,
   termination expense            15            0          178            1
  Termination cost                 -            -            -          540
                         -----------  -----------  -----------  -----------
                              19,313       18,520       53,808       53,241
                         -----------  -----------  -----------  -----------

EARNINGS BEFORE NET LOSS
 ON DISPOSITIONS OF
 ASSETS, OTHER INCOME,
 INTEREST EXPENSE AND
 INCOME TAXES                  2,879        2,679        5,737        3,848

Net loss on dispositions
 of assets                        11        1,139            5        1,125
Other income (expense)        (1,138)           2       (1,478)         107
Interest expense              (1,964)      (1,975)      (6,051)      (6,344)
Impairment                         -       (2,227)      (3,714)      (6,010)
                         -----------  -----------  -----------  -----------

LOSS FROM CONTINUING
 OPERATIONS BEFORE
 INCOME TAXES                   (212)        (382)      (5,501)      (7,274)

Income tax (expense)
 benefit                        (212)        (139)        (111)         339
                         -----------  -----------  -----------  -----------

LOSS FROM CONTINUING
 OPERATIONS                     (424)        (521)      (5,612)      (6,935)

Gain (loss) from
 discontinued
 operations, net of tax       (1,842)        (883)       1,816       (2,292)
                         -----------  -----------  -----------  -----------

NET LOSS                      (2,266)      (1,404)      (3,796)      (9,227)

Noncontrolling interest            1           (8)          (1)           5
                         -----------  -----------  -----------  -----------

NET LOSS ATTRIBUTABLE TO
 CONTROLLING INTERESTS        (2,265)      (1,412)      (3,797)      (9,222)

Preferred stock
 dividends                      (837)        (369)      (2,332)      (1,105)
                         -----------  -----------  -----------  -----------

NET LOSS ATTRIBUTABLE TO
 COMMON SHAREHOLDERS     $    (3,102) $    (1,781) $    (6,129) $   (10,327)
                         ===========  ===========  ===========  ===========

NET INCOME (LOSS) PER
 COMMON SHARE - BASIC
 AND DILUTED
EPS from continuing
 operations              $     (0.05) $     (0.04) $     (0.34) $     (0.35)
                         ===========  ===========  ===========  ===========
EPS from discontinued
 operations              $     (0.08) $     (0.04) $      0.08  $     (0.10)
                         ===========  ===========  ===========  ===========
EPS Basic and Diluted    $     (0.13) $     (0.08) $     (0.26) $     (0.45)
                         ===========  ===========  ===========  ===========



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FFO and AFFO

FFO and Adjusted FFO ("AFFO") are non-GAAP financial measures. We consider FFO and AFFO to be market accepted measures of an equity REIT's operating performance, which are necessary, along with net earnings (loss), for an understanding of our operating results. FFO, as defined under the National Association of Real Estate Investment Trusts (NAREIT) standards, consists of net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets, plus depreciation and amortization of real estate assets. We believe our method of calculating FFO complies with the NAREIT definition. AFFO is FFO adjusted to include gain or exclude losses on derivative liabilities, which is a non-cash charge against income and which does not represent results from our core operations. AFFO also adds back acquisition costs. FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO and AFFO should not be considered as alternatives to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. All REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

Diluted FFO per share and diluted Adjusted FFO per share are computed after adjusting the numerator and denominator of the basic computation for the effects of any dilutive potential common shares outstanding during the period. Up to 30,000,000 shares of common stock may be issued upon conversion of the Series C convertible preferred stock, and adjustments are made for these shares in the computation of diluted FFO per share and diluted Adjusted FFO per share. The Company's outstanding warrants to purchase common stock and stock options would be antidilutive and are not included in the dilution computation.

We use FFO and AFFO as performance measures to facilitate a periodic evaluation of our operating results relative to those of our peers. We consider FFO and AFFO to be useful additional measures of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO and AFFO provide a meaningful indication of our performance.


(Unaudited-In thousands, except per share data)
                               Three months               Nine Months
                            ended September 30,       ended September 30,
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
RECONCILIATION OF NET
 LOSS TO FFO
Net loss attributable to
 common shareholders     $    (3,102) $    (1,781) $    (6,129) $   (10,327)
Depreciation and
 amortization                  2,256        2,420        6,652        7,684
Net gain loss on
 disposition of assets          (564)      (1,126)      (5,827)      (1,461)
Impairment                     2,732        2,561        8,249        7,823
                         -----------  -----------  -----------  -----------
FFO available to common
 shareholders            $     1,322  $     2,074  $     2,945  $     3,719
Unrealized loss on
 derivatives                   1,232            -        1,578            -
Acquisition expense               15            -          178            1
                         -----------  -----------  -----------  -----------
Adjusted FFO             $     2,569  $     2,074  $     4,701  $     3,720
                         ===========  ===========  ===========  ===========

FFO available to common
 shareholders            $     1,322  $     2,074  $     2,945  $     3,719
Dividends paid on series
 C convertible preferred
 stock                           469            -        1,227            -
                         -----------  -----------  -----------  -----------
FFO for FFO per share -
 diluted                 $     1,791  $     2,074  $     4,172  $     3,719
                         ===========  ===========  ===========  ===========

Adjusted FFO available
 to common shareholders  $     2,569  $     2,074  $     4,701  $     3,720
Dividends paid on series
 C convertible preferred
 stock                           469            -        1,227            -
                         -----------  -----------  -----------  -----------
Adjusted FFO for
 Adjusted FFO per share
 - diluted               $     3,038  $     2,074  $     5,928  $     3,720
                         ===========  ===========  ===========  ===========

Weighted average number
 of shares outstanding
 for:
calculation of FFO per
 share - basic                23,084       23,005       23,076       22,963
                         -----------  -----------  -----------  -----------
calculation of FFO per
 share - diluted              53,091       23,005       49,225       22,963
                         -----------  -----------  -----------  -----------

FFO per share - basic    $      0.06  $      0.09  $      0.13  $      0.16
                         ===========  ===========  ===========  ===========
Adjusted FFO per share -
 basic                   $      0.11  $      0.09  $      0.20  $      0.16
                         ===========  ===========  ===========  ===========
FFO per share - diluted  $      0.03  $      0.09  $      0.08  $      0.16
                         ===========  ===========  ===========  ===========
Adjusted FFO per share -
 diluted                 $      0.06  $      0.09  $      0.12  $      0.16
                         ===========  ===========  ===========  ===========



EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We calculate EBITDA and Adjusted EBITDA by adding back to net earnings (loss) available to common shareholders certain non-operating expenses and non-cash charges which are based on historical cost accounting and we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods, even though EBITDA and Adjusted EBITDA also do not represent an amount that accrues directly to common shareholders. In calculating Adjusted EBITDA, we add back noncontrolling interest, net (gain) loss on disposition of assets, preferred stock dividends and acquisition expenses which are cash charges. We also add back impairment and unrealized gain or loss on derivatives, which are non-cash charges.

EBITDA and Adjusted EBITDA do not represent cash generated from operating activities determined by GAAP and should not be considered as alternatives to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. EBITDA and Adjusted EBITDA are not measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make cash distributions. Neither do the measurements reflect cash expenditures for long-term assets and other items that have been and will be incurred. EBITDA and Adjusted EBITDA may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of our operating performance. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.


(Unaudited-In thousands, except statistical data)



                               Three months               Nine months
                            ended September 30,       ended September 30,
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
RECONCILIATION OF NET
 LOSS TO ADJUSTED EBITDA
Net loss attributable to
 common shareholders     $    (3,102) $    (1,781) $    (6,129) $   (10,327)
Interest expense,
 including discontinued
 operations                    2,372        3,462        7,599        9,426
Income tax expense
 (benefit), including
 discontinued operations          83         (111)        (225)      (1,238)
Depreciation and
 amortization, including
 discontinued operations       2,256        2,420        6,652        7,684
                         -----------  -----------  -----------  -----------
  EBITDA                       1,609        3,990        7,897        5,545
Noncontrolling interest           (1)           8            1           (5)
Net gain on disposition
 of assets                      (564)      (1,126)      (5,827)      (1,461)
Impairment                     2,732        2,561        8,249        7,823
Preferred stock dividend         837          369        2,332        1,105
Unrealized loss on
 derivatives                   1,232            -        1,578            -
Acquisition expense               15            -          178            1
                         -----------  -----------  -----------  -----------
  ADJUSTED EBITDA        $     5,860  $     5,802  $    14,408  $    13,008
                         ===========  ===========  ===========  ===========



                         Supertel Hospitality, Inc.
 Operating Statistics by Chain Scale Classification - Hotels in Continuing
                                 Operations
      For the three and nine months ended September 30, 2012 and 2011,
                                respectively
             (Unaudited - In thousands, except per share data)

Unaudited-In thousands,
 except statistical data:         Three months            Nine months
                              ended September 30,     ended September 30,
                                2012        2011        2012        2011
                            ----------- ----------- ----------- -----------
Same Store:
  Revenue per available room
   (RevPAR):
    Upper Midscale          $     52.04 $     52.23 $     48.37 $     46.41
    Midscale                $     37.99 $     34.19 $     33.74 $     30.25
    Economy                 $     34.76 $     34.75 $     31.26 $     31.37
    Extended Stay           $     17.16 $     16.98 $     17.47 $     17.45
                            ----------- ----------- ----------- -----------
      Total                 $     36.12 $     35.93 $     33.22 $     32.59
                            =========== =========== =========== ===========

  Average daily room rate
   (ADR):
    Upper Midscale          $     73.04 $     72.58 $     70.94 $     70.18
    Midscale                $     63.39 $     64.97 $     63.98 $     62.87
    Economy                 $     52.53 $     51.71 $     50.43 $     49.43
    Extended Stay           $     24.77 $     24.08 $     24.62 $     23.76
                            ----------- ----------- ----------- -----------
      Total                 $     53.40 $     52.71 $     51.41 $     50.10
                            =========== =========== =========== ===========

  Occupancy percentage:
    Upper Midscale                 71.2%       72.0%       68.2%       66.1%
    Midscale                       59.9%       52.6%       52.7%       48.1%
    Economy                        66.2%       67.2%       62.0%       63.5%
    Extended Stay                  69.3%       70.5%       71.0%       73.4%
                            ----------- ----------- ----------- -----------
      Total                        67.6%       68.2%       64.6%       65.0%
                            =========== =========== =========== ===========

*Same store reflects 72 hotels.

                         Supertel Hospitality, Inc.
  Property Operating Income (POI) - Continuing and Discontinued Operations

Note: This presentation includes non-GAAP financial measures. The Company believes that the presentation of hotel property operating income (POI) is helpful to investors, and represents a useful description of its operations, as it communicates the comparability of its hotels' operating results.

Unaudited-In thousands,
 except statistical
 data:                         Three months               Nine months
                            ended September 30,       ended September 30,
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------

Total Same Store Hotels:
  Revenue per available
   room (RevPAR):        $     36.12  $     35.93  $     33.22  $     32.59
  Average daily room
   rate (ADR):           $     53.40  $     52.71  $     51.41  $     50.10
  Occupancy percentage:         67.6%        68.2%        64.6%        65.0%

----------------------------------------------------------------------------
Continuing Operations
Revenue from room
 rentals and other hotel
 services consists of:
Room rental revenue      $    21,497  $    20,550  $    57,711  $    55,313
Telephone revenue                 71           75          219          220
Other hotel service
 revenues                        624          574        1,615        1,556
                         -----------  -----------  -----------  -----------
  Total revenue from
   room rentals and
   other hotel services  $    22,192  $    21,199  $    59,545  $    57,089
                         ===========  ===========  ===========  ===========

Hotel and property
 operations expense
  Total hotel and
   property operations
   expense               $    16,132  $    15,475  $    44,200  $    43,108
                         ===========  ===========  ===========  ===========

Property Operating
 Income ("POI")
  Total property
   operating income      $     6,060  $     5,724  $    15,345  $    13,981
                         ===========  ===========  ===========  ===========

POI as a percentage of
 revenue from room
 rentals and other hotel
 services
  Total POI as a
   percentage of revenue        27.3%        27.0%        25.8%        24.5%
                         ===========  ===========  ===========  ===========

----------------------------------------------------------------------------
Discontinued Operations

Room rentals and other
 hotel services
  Total room rental and
   other hotel services  $     4,714  $     6,552  $    14,641  $    18,984
                         ===========  ===========  ===========  ===========

Hotel and property
 operations expense
  Total hotel and
   property operations
   expense               $     4,065  $     5,570  $    12,721  $    16,464
                         ===========  ===========  ===========  ===========

Property Operating
 Income ("POI")
  Total property
   operating income      $       649  $       982  $     1,920  $     2,520
                         ===========  ===========  ===========  ===========

POI as a percentage of
 revenue from room
 rentals and other hotel
 services
  Total POI as a
   percentage of revenue        13.8%        15.0%        13.1%        13.3%
                         ===========  ===========  ===========  ===========

                               Three months               Nine months
                            ended September 30        ended September 30
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
RECONCILIATION OF NET
 LOSS FROM CONTINUING
 OPERATIONS TO POI FROM
 CONTINUING OPERATIONS
Net loss from continuing
 operations              $      (424) $      (521) $    (5,612) $    (6,935)
Depreciation and
 amortization                  2,223        2,139        6,473        6,582
Net loss on disposition
 of assets.                      (11)      (1,139)          (5)      (1,125)
Other (income) expense         1,138           (2)       1,478         (107)
Interest expense               1,964        1,975        6,051        6,344
General and
 administrative expense          943          906        2,957        3,010
Acquisition, termination
 expense                          15            -          178            1
Termination cost                   -            -            -          540
Income tax (benefit)
 expense                         212          139          111         (339)
Impairment expense                 -        2,227        3,714        6,010
                         -----------  -----------  -----------  -----------
POI - continuing
 operations              $     6,060  $     5,724  $    15,345  $    13,981
                         ===========  ===========  ===========  ===========



Reconciliation of gain
(loss) from discontinued
operations to POI -
discontinued operations:       Three months               Nine months
                            ended September 30,       ended September 30,
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
Gain (loss) from
 discontinued operations $    (1,842) $      (883) $     1,816  $    (2,292)
Depreciation and
 amortization from
 discontinued operations          33          281          179        1,102
Net gain on disposition
 of assets from
 discontinued operations        (553)          13       (5,822)        (336)
Interest expense from
 discontinued operations         408        1,487        1,548        3,082
General and
 administrative expense
 from discontinued
 operations                        -            -            -           50
Impairment losses from
 discontinued operations       2,732          334        4,535        1,813
Income tax benefit from
 discontinued operations        (129)        (250)        (336)        (899)
                         -----------  -----------  -----------  -----------
POI - discontinued
 operations              $       649  $       982  $     1,920  $     2,520
                         ===========  ===========  ===========  ===========



Reconciliation of Total
POI:                           Three months               Nine months
                            ended September 30,       ended September 30,
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
POI - Continuing
 operations                    6,060        5,724       15,345       13,981
POI- Discontinued
 operations                      649          982        1,920        2,520
                         -----------  -----------  -----------  -----------
Total - POI              $     6,709  $     6,706  $    17,265  $    16,501
                         ===========  ===========  ===========  ===========

Total POI as a
 percentage of revenues         24.9%        24.2%        23.3%        21.7%
                         ===========  ===========  ===========  ===========



                         Supertel Hospitality, Inc.
                       Operating Statistics by Region
    For the three months ended September 30, 2012 and 2011, respectively
              (Unaudited - In thousands, except per share data)

The comparisons of same store operations are for 72 hotels in continuing operations as of July 1, 2011.

                Three months ended September   Three months ended September
                          30, 2012                       30, 2011
              ------------------------------- ------------------------------
               Room                            Room
Region        Count RevPAR Occupancy    ADR   Count RevPAR Occupancy    ADR
------------- ----- ------ ---------  ------- ----- ------ ---------  ------
Mountain        214 $46.72      82.4% $ 56.68   214 $44.27      80.9% $54.70
West North
 Central      1,559  37.53      70.5%   53.27 1,559  36.79      70.5%  52.21
East North
 Central        978  45.99      68.5%   67.19   978  44.17      66.2%  66.76
Middle
 Atlantic       142  48.58      77.7%   62.50   142  50.60      83.1%  60.92
South
 Atlantic     2,388  30.08      66.8%   45.04 2,388  30.01      67.1%  44.70
East South
 Central        563  42.62      65.3%   65.26   563  43.41      66.9%  64.93
West South
 Central        373  22.12      50.0%   44.19   373  26.89      59.4%  45.29
              ----- ------ ---------  ------- ----- ------ ---------  ------
Total Same
 Store        6,217 $36.12      67.6% $ 53.40 6,217 $35.93      68.2% $52.71
              ----- ------ ---------  ------- ----- ------ ---------  ------

South
 Atlantic
 Acquisitions   100 $94.53      76.6% $123.43     - $    -       0.0% $    -
              ----- ------ ---------  ------- ----- ------ ---------  ------
Total
 Acquisitions   100 $94.53      76.6% $123.43     - $    -       0.0% $    -
              ----- ------ ---------  ------- ----- ------ ---------  ------

Total         6,317 $37.05      67.8% $ 54.66 6,217 $35.93      68.2% $52.71
              ===== ====== =========  ======= ===== ====== =========  ======

States included in the Regions
Mountain                       Idaho and Montana
West North Central             Iowa, Kansas, Missouri, Nebraska and South Dakota
East North Central             Indiana and Wisconsin
Middle Atlantic                Pennsylvania
South Atlantic                 Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia
East South Central             Kentucky and Tennessee
West South Central             Arkansas and Louisiana



                         Supertel Hospitality, Inc.
                       Operating Statistics by Region
    For the nine months ended September 30, 2012 and 2011, respectively
              (Unaudited - In thousands, except per share data)

The comparisons of same store operations are for 72 hotels in continuing operations as of January 1, 2011.


              Nine months ended September 30,   Nine months ended September
                            2012                         30, 2011
              ------------------------------- ------------------------------
               Room                            Room
Region        Count RevPAR Occupancy    ADR   Count RevPAR Occupancy    ADR
              ----- ------ ---------  ------- ----- ------ ---------  ------
Mountain        214 $37.46      71.4% $ 52.46   214 $34.29      67.6% $50.74
West North
 Central      1,559  32.95      64.1%   51.38 1,559  32.03      64.3%  49.79
East North
 Central        978  37.62      59.9%   62.76   978  36.87      59.1%  62.40
Middle
 Atlantic       142  44.78      73.9%   60.64   142  43.32      74.3%  58.30
South
 Atlantic     2,388  30.25      68.0%   44.49 2,388  29.56      68.5%  43.14
East South
 Central        563  40.66      61.9%   65.73   563  38.89      59.5%  65.35
West South
 Central        373  23.49      53.7%   43.75   373  28.53      64.8%  44.03
              ----- ------ ---------  ------- ----- ------ ---------  ------
Total Same
 Store        6,217 $33.22      64.6% $ 51.41 6,217 $32.59      65.0% $50.10
              ===== ====== =========  ======= ===== ====== =========  ======

South
 Atlantic
 Acquisitions   100 $94.10      75.8% $124.16     - $    -       0.0% $    -
              ----- ------ ---------  ------- ----- ------ ---------  ------
Total
 Acquisitions   100 $94.10      75.8% $124.16     - $    -       0.0% $    -
              ----- ------ ---------  ------- ----- ------ ---------  ------

Total         6,317 $33.68      64.7% $ 52.05 6,217 $32.59      65.0% $50.10
              ===== ====== =========  ======= ===== ====== =========  ======

States
 included in
 the Regions
Mountain      Idaho and Montana
West North    Iowa, Kansas, Missouri, Nebraska and South Dakota
 Central
East North    Indiana and Wisconsin
 Central
Middle        Pennsylvania
 Atlantic
South         Florida, Georgia, Maryland, North Carolina, South Carolina,
 Atlantic      Virginia and West Virginia
East South    Kentucky and Tennessee
 Central
West South    Arkansas and Louisiana
 Central


Note: The following properties have been moved from the same store portfolio
 during the reporting period and classified as held for sale: Ellenton,
 Florida, Ramada Limited; Dover, Delaware, Comfort Suites

Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=2152547

Contact:
Ms. Krista Arkfeld
Director of Corporate Communications
karkfeld@supertelinc.com

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