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Supertel Hospitality Reports 2014 Second Quarter Results

NORFOLK, NE--(Marketwired - August 14, 2014) - Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT), today announced its results for the second quarter ended June 30, 2014. 

2014 Second Quarter Key Events 

  • Revenues from continuing operations of $16.1 million increased 8.6 percent over the same 2013 period.
  • Improved revenue per available room (RevPAR) 8.7 percent to $45.39 for the same-store, continuing operations hotels.
  • Sold five hotels in the second quarter and one hotel following the close of the quarter.
  • Improved Adjusted EBITDA to $5.1 million, an increase of 16.0 percent over the same 2013 period.
  • Increased Adjusted FFO (AFFO) to $2.0 million, an increase of 131.4 percent over the same 2013 period.

Second Quarter Operating and Financial Results

Second quarter 2014 revenues from continuing operations rose 8.6 percent to $16.1 million compared to the same year-ago period. The increase was due in part to improved results at the four hotels rebranded in 2013, improvement in the Washington D.C. market, increased construction business in the Midwest, along with aggressive rate and sales strategies implemented to capitalize on improving economic conditions.

Supertel had a 2014 second quarter net loss attributable to common shareholders of $(11.3) million, or $(3.44) per basic and diluted share, compared to net earnings of $1.5 million or $0.53 per basic share and $(0.01) per diluted share for the same 2013 period. The loss was due to the change in valuation of the derivative liabilities for the quarter. The fair value of the derivative liabilities increased by an aggregate of $11.7 million and decreased by an aggregate of $2.1 million during the second quarter of 2014 and 2013, respectively. The change in fair value is due primarily to a change in the conversion price of the Series C Preferred Stock and exercise price of the related warrants following the completion of the company's 2014 second quarter subscription rights offering.

Funds from operations (FFO) was $(9.6) million for the 2014 second quarter, compared to $3.0 million in the same 2013 period. Adjusted funds from operations (AFFO), which is FFO adjusted to exclude gains and losses on derivative liabilities, acquisition and termination expense, and terminated equity transactions expense, in the 2014 second quarter was $2.0 million, compared to $0.9 million in the same 2013 period.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $(7.4) million for the 2014 second quarter, compared to $6.1 million in the same year-ago period. Adjusted EBITDA, which is EBITDA before noncontrolling interest, net gain/loss on disposition of assets, impairment, preferred stock dividends, unrealized gain/loss on derivatives, acquisition and termination expense and terminated equity transactions expense, was $5.1 million, compared to $4.4 million for the 2013 second quarter.

In the second quarter 2014, the 47-hotel same store portfolio reported an increase in revenue per available room (RevPAR) of 8.7 percent to $45.39, led by a 7.7 percent improvement in occupancy to 69.9 percent, and a 0.9 percent increase in ADR to $64.92, compared to the 2013 second quarter. 

"I am pleased with the improvements we saw in the second quarter," said Jeffrey Dougan, Supertel's Chief Operating Officer. "It is clear that our work to properly position each hotel within its submarket is starting to pay off."

Disposition Program

In the 2014 second quarter the company sold five hotels with an aggregate of 378 rooms and combined gross proceeds of $9.2 million. The proceeds were used to reduce debt.

The five sold hotels include:

  • 65-room Baymont Inn and Suites in Brooks, Kentucky sold April 24, 2014 for $1.7 million
  • 101-room Super 8 in Omaha, West Dodge, Nebraska sold May 6, 2014 for $1.6 million
  • 108-room Super 8 in Boise, Idaho sold June 4, 2014 for $2.8 million
  • 40-room Super 8 in Clarinda, Iowa sold June 11, 2014 for $1.7 million
  • 64-room Super 8 in Norfolk, Nebraska sold June 23, 2014 for $1.4 million

Following the close of the 2014 second quarter, the company sold the 172-room Savannah Suites in Jonesboro, Georgia on July 15, 2014 for $1.4 million.

As of June 30, 2014, the company is marketing 16 hotels for sale and expects to generate approximately $23.7 million in gross proceeds to be used primarily to pay off the underlying loans and provide capital to reinvest in existing core properties.

Subsequent Events

On August 1, 2014, Supertel's revolving credit facility with Great Western Bank was extended to June 30, 2015. Additionally, the interest rate was reduced from 4.95 percent to 4.5 percent.

Capital Reinvestment

The company invested $0.9 million in capital improvements throughout the portfolio in the 2014 second quarter to upgrade its properties and maintain brand standards, bringing the year to date investment to $1.3 million. Notable capital improvements included renovations at the former Captain's Table restaurant located at the Solomons (Beacon Marina), Maryland Comfort Inn; computer upgrades at all hotels to ensure PCI compliance; and an exterior update at the Burlington, Iowa Super 8.

Balance Sheet

As of June 30, 2014, Supertel had $81.7 million in outstanding debt on its continuing operations hotels with an average term of 2.3 years and weighted average annual interest rate of 6.4 percent.

Dividends

The company did not declare a dividend on common stock in the 2014 second quarter. The company's board of directors elected to suspend the payment of monthly dividends commencing December 31, 2013 on the outstanding shares of its 8.00% Series A Cumulative Convertible Preferred Stock (NASDAQ: SPPRP), quarterly dividends on the outstanding shares of its 10.00% Series B Preferred Cumulative Stock (NASDAQ: SPPRO), and the quarterly dividends on the outstanding shares of its 6.25% Series C Cumulative Convertible Preferred Stock to preserve capital and improve liquidity. The board of directors will continue to monitor the dividend policy.

Outlook 2014

"The company generated meaningful progress in its operational and financial pursuits in the second quarter. RevPar increased significantly over our same quarter results in 2013, sales of non-core assets continued as called for in our business plan, and Supertel's debt burden is now more consistent with the industry," said Kelly Walters, Supertel's President and Chief Executive Officer.

"Looking forward, the company must grow its asset base to compete effectively for capital in the public markets. Buoyed by the improving balance sheet, the Board of Directors is actively engaged with our financial advisors to chart a path toward restoring our access to equity capital. Patience remains essential as we continue our transformation to premium branded, select service hotels where economies of scale work in our favor."

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 62 hotels comprising 5,459 rooms in 20 states. Supertel's hotels are franchised by a number of the industry's most well-regarded brand families including Hilton, 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.

SELECTED FINANCIAL DATA:

                                                                            
                                                                            
                        Supertel Hospitality, Inc.                          
                               Balance Sheet                                
                 As of June 30, 2014 and December 31, 2013                  
          (Dollars in thousands, except share and per share data)           
                                                                            
                                                                            
                                                          As of             
                                                June 30,      December 31,  
                                                  2014            2013      
                                             --------------  -------------- 
                                               (unaudited)                  
                                                                            
ASSETS                                                                      
  Investments in hotel properties            $      192,518  $      194,078 
  Less accumulated depreciation                      69,220          68,475 
                                             --------------  -------------- 
                                                    123,298         125,603 
                                                                            
  Cash and cash equivalents                             639              45 
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $17 and $20                   2,187           1,083 
  Prepaid expenses and other assets                   5,258           4,000 
  Deferred financing costs, net                       2,332           2,601 
  Investment in hotel properties, held for                                  
   sale, net                                         28,958          38,753 
                                             --------------  -------------- 
                                             $      162,672  $      172,085 
                                             ==============  ============== 
                                                                            
LIABILITIES AND EQUITY                                                      
LIABILITIES                                                                 
  Accounts payable, accrued expenses and                                    
   other liabilities                         $        9,662  $        7,745 
  Derivative liabilities, at fair value              15,510           5,907 
  Debt related to hotel properties held for                                 
   sale                                              23,666          35,224 
  Long-term debt                                     81,743          82,821 
                                             --------------  -------------- 
                                                    130,581         131,697 
                                             --------------  -------------- 
                                                                            
  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              30 
    Common stock, $.01 par value,                                           
     200,000,000 shares authorized;                                         
     4,684,266 and 2,897,539 shares                                         
     outstanding                                         47              29 
  Additional paid-in capital                        137,941         135,293 
  Distributions in excess of retained                                       
   earnings                                        (113,694)       (102,747)
                                             --------------  -------------- 
    Total shareholders' equity                       24,332          32,613 
Noncontrolling interest                                                     
  Noncontrolling interest in consolidated                                   
   partnership, redemption value $22 and $87             97             113 
                                                                            
                                             --------------  -------------- 
    Total equity                                     24,429          32,726 
                                             --------------  -------------- 
                                                                            
COMMITMENTS AND CONTINGENCIES                                               
                                             $      162,672  $      172,085 
                                             ==============  ============== 
                                                                            
                                                                            
                                                                            
                                                                            
                        Supertel Hospitality, Inc.                          
                          Statement of Operations                           
    For three and six months ended June 30, 2014 and 2013, respectively     
               (Dollars in thousands, except per share data)                
                                                                            
                                                                            
                                     Three Months Ended   Six Months Ended  
                                          June 30,            June 30,      
                                     ------------------  ------------------ 
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
REVENUES                                                                    
  Room rentals and other hotel                                              
   services                          $ 16,059  $ 14,789  $ 27,349  $ 26,170 
                                     --------  --------  --------  -------- 
                                                                            
EXPENSES                                                                    
  Hotel and property operations        11,102    10,878    20,924    20,710 
  Depreciation and amortization         1,617     1,532     3,219     3,122 
  General and administrative            1,092       980     2,077     2,039 
  Acquisition and termination                                               
   expense                                  0        28         0        49 
  Terminated equity transactions           (3)        0        65         0 
                                     --------  --------  --------  -------- 
                                       13,808    13,418    26,285    25,920 
                                     --------  --------  --------  -------- 
                                                                            
EARNINGS BEFORE NET LOSS ON                                                 
 DISPOSITIONS OF ASSETS, OTHER                                              
 INCOME, INTEREST EXPENSE AND INCOME                                        
 TAXES                                  2,251     1,371     1,064       250 
                                                                            
Net loss on dispositions of assets         (1)       (8)      (27)      (37)
Other income (loss)                   (11,624)    2,131    (9,478)    1,834 
Interest expense                       (1,819)   (1,330)   (3,548)   (2,669)
Loss on debt extinguishment               (94)     (117)     (104)     (208)
Impairment                                  0        (7)      119        (7)
                                     --------  --------  --------  -------- 
                                                                            
EARNINGS (LOSS) FROM CONTINUING                                             
 OPERATIONS BEFORE INCOME TAXES       (11,287)    2,040   (11,974)     (837)
                                                                            
Income tax expense                          0         0         0         0 
                                     --------  --------  --------  -------- 
                                                                            
EARNINGS (LOSS) FROM CONTINUING                                             
 OPERATIONS                           (11,287)    2,040   (11,974)     (837)
                                                                            
Gain (loss) from discontinued                                               
 operations, net of tax                   829       338     1,011      (850)
                                     --------  --------  --------  -------- 
                                                                            
NET EARNINGS (LOSS)                   (10,458)    2,378   (10,963)   (1,687)
                                                                            
Loss (earnings) attributable to                                             
 noncontrolling interest                   15        (4)       16         3 
                                     --------  --------  --------  -------- 
                                                                            
NET EARNINGS (LOSS) ATTRIBUTABLE TO                                         
 CONTROLLING INTERESTS                (10,443)    2,374   (10,947)   (1,684)
                                                                            
Preferred stock dividends declared                                          
 and undeclared                          (858)     (837)   (1,704)   (1,674)
                                     --------  --------  --------  -------- 
                                                                            
NET EARNINGS (LOSS) ATTRIBUTABLE                                            
TO COMMON SHAREHOLDERS               $(11,301) $  1,537  $(12,651) $ (3,358)
                                     ========  ========  ========  ======== 
                                                                            
NET EARNINGS (LOSS) PER COMMON SHARE                                        
 - BASIC AND DILUTED                                                        
                                                                            
EPS from continuing operations -                                            
 Basic                               $  (3.69) $   0.41  $  (4.42) $  (0.87)
                                     ========  ========  ========  ======== 
EPS from discontinued operations -                                          
 Basic                               $   0.25  $   0.12  $   0.33  $  (0.29)
                                     ========  ========  ========  ======== 
EPS Basic                            $  (3.44) $   0.53  $  (4.09) $  (1.16)
                                     ========  ========  ========  ======== 
EPS Diluted                          $  (3.44) $  (0.01) $  (4.09) $  (1.16)
                                     ========  ========  ========  ======== 
                                                                            
                                                                            
                                                                            
                                                                            
               Reconciliation of Non-GAAP Financial Measures                
             (Unaudited - In thousands, except per share data)              
                                                                            
                                        Three months         Six months     
                                       ended June 30,      ended June 30,   
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
Weighted average shares outstanding                                         
 for:                                                                       
  calculation of earnings per share                                         
   - basic                              3,287     2,889     3,092     2,888 
                                     ========  ========  ========  ======== 
  calculation of earnings per share                                         
   - diluted                            3,287    10,389     3,092     2,888 
                                     ========  ========  ========  ======== 
                                                                            
Weighted average shares outstanding                                         
 for:                                                                       
  calculation of FFO per share -                                            
   basic                                3,287     2,889     3,092     2,888 
                                     ========  ========  ========  ======== 
  calculation of FFO per share -                                            
   diluted                              3,287    10,389     3,092     2,890 
                                     ========  ========  ========  ======== 
                                                                            
Reconciliation of Weighted average                                          
 number of shares for                                                       
EPS basic to FFO per share diluted:                                         
EPS basic shares                        3,287     2,889     3,092     2,888 
  Restricted Stock                          -         -         -         2 
  Series C Preferred Stock                  -     3,750         -         - 
  Warrants                                  -     3,750                     
                                     --------  --------  --------  -------- 
FFO per share diluted shares            3,287    10,389     3,092     2,890 
                                     ========  ========  ========  ======== 
                                                                            
Reconciliation of net loss to FFO                                           
Net loss attributable to common                                             
 shareholders                        $(11,301) $  1,537  $(12,651) $ (3,358)
Depreciation and amortization           1,655     1,842     3,331     3,802 
Net (gain) loss on disposition of                                           
 assets                                  (465)   (1,350)     (608)   (1,297)
Impairment                                506       954       477     1,461 
                                     --------  --------  --------  -------- 
FFO                                  $ (9,605) $  2,983  $ (9,451) $    608 
Unrealized (gain) loss on                                                   
 derivatives                           11,718    (2,137)    9,603    (1,820)
Gain on debt conversion                   (88)        -       (88)        - 
Acquisition and termination expense         -        28         -        49 
Terminated equity transactions             (3)        -        65         - 
                                     --------  --------  --------  -------- 
Adjusted FFO                         $  2,022  $    874  $    129  $ (1,163)
                                     ========  ========  ========  ======== 
                                                                            
FFO per share - basic                $  (2.92) $   1.03  $  (3.06) $   0.21 
                                     ========  ========  ========  ======== 
Adjusted FFO per share - basic       $   0.62  $   0.30  $   0.04  $  (0.40)
                                     ========  ========  ========  ======== 
FFO per share - diluted              $  (2.92) $   0.13  $  (3.06) $   0.21 
                                     ========  ========  ========  ======== 
Adjusted FFO per share - diluted     $   0.17  $   0.13  $   0.04  $  (0.40)
                                     ========  ========  ========  ======== 
                                                                            
                                                                            

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, amortization and impairment of real estate assets. We believe our method of calculating FFO complies with the NAREIT definition. AFFO is FFO adjusted to exclude gains or losses on derivative liabilities and gain on debt conversion, which are non-cash charges against income and which do not represent results from our core operations. AFFO also adds back acquisition costs and equity offering expense. 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. The Company's outstanding stock options and certain warrants to purchase common stock 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. 

                                                                            
                                                                            
                        EBITDA and Adjusted EBITDA                          
                        (Unaudited - In thousands)                          
                                                                            
                                                                            
                                        Three months         Six months     
                                       ended June 30,      ended June 30,   
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
RECONCILIATION OF NET EARNINGS                                              
 (LOSS) TO ADJUSTED EBITDA                                                  
Net earnings (loss) attributable to                                         
 common shareholders                 $(11,301) $  1,537  $(12,651) $ (3,358)
Interest expense, including                                                 
 discontinued operations                2,167     2,097     4,347     4,327 
Loss on debt extinguishment                94       608       104       891 
Income tax expense (benefit),                                               
 including discontinued operations          0         0         0         0 
Depreciation and amortization,                                              
 including discontinued operations      1,655     1,842     3,331     3,802 
                                     --------  --------  --------  -------- 
  EBITDA                               (7,385)    6,084    (4,869)    5,662 
Noncontrolling interest                   (15)        4       (16)       (3)
Net gain on disposition of assets        (465)   (1,350)     (608)   (1,297)
Impairment                                506       954       477     1,461 
Preferred stock dividends declared                                          
 and undeclared                           858       837     1,704     1,674 
Unrealized (gain) loss on                                                   
 derivatives                           11,718    (2,137)    9,603    (1,820)
Gain on debt conversion                   (88)        0       (88)        0 
Acquisition and termination expense         0        28         0        49 
Terminated equity transactions             (3)        0        65         0 
                                     --------  --------  --------  -------- 
  ADJUSTED EBITDA                    $  5,126  $  4,420  $  6,268  $  5,726 
                                     ========  ========  ========  ======== 
                                                                            
                                                                            

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, acquisition expenses and equity offering expense which are cash charges. We also add back impairment, gain on debt conversion 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. EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Property Operating Income (POI) - Continuing and Discontinued Operations

This presentation includes non-GAAP financial measures, and should not be considered as an alternative to loss from continuing operations or loss from discontinued operations, net of tax. The company believes that the presentation of hotel property operating income (POI) is helpful to investors, and represents a more useful description of its core operations, as it better communicates the comparability of its hotels' operating results. Same store results for the quarter are for 47 hotels in continuing operations.

                                                                            
                                                                            
Unaudited-in thousands except                                               
 statistical data:                      Three months         Six months     
                                       ended June 30,      ended June 30,   
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
Total Same Store Hotels:                                                    
  Revenue per available room                                                
   (RevPAR):                         $  45.39  $  41.75  $  38.75  $  37.12 
  Average daily room rate (ADR):     $  64.92  $  64.35  $  62.83  $  62.94 
  Occupancy percentage:                  69.9%     64.9%     61.7%     59.0%
                                                                            
Revenue from room rentals and                                               
other hotel services consists of:                                           
Room rental revenue                  $ 15,514  $ 14,278  $ 26,348  $ 25,246 
Telephone revenue                           3         3         5         5 
Other hotel service revenues              542       508       996       919 
                                     --------  --------  --------  -------- 
  Total revenue from room rentals                                           
   and other hotel services          $ 16,059  $ 14,789  $ 27,349  $ 26,170 
                                     ========  ========  ========  ======== 
                                                                            
Hotel and property operations                                               
 expense                                                                    
  Total hotel and property                                                  
   operations expense                $ 11,102  $ 10,878  $ 20,924  $ 20,710 
                                     ========  ========  ========  ======== 
                                                                            
Property Operating Income ("POI")                                           
  Total property operating income    $  4,957  $  3,911  $  6,425  $  5,460 
                                     ========  ========  ========  ======== 
                                                                            
POI as a percentage of revenue from                                         
 room rentals and other hotel                                               
 services                                                                   
  Total POI as a percentage of                                              
   revenue                               30.9%     26.4%     23.5%     20.9%
                                     ========  ========  ========  ======== 
                                                                            
                                                                            
--------------------------------------------------------------------------- 
Discontinued Operations                                                     
                                                                            
Room rentals and other hotel                                                
 services                                                                   
  Total room rental and other hotel                                         
   services                          $  4,739  $  7,614  $  8,987  $ 14,411 
                                     ========  ========  ========  ======== 
                                                                            
Hotel and property operations                                               
 expense                                                                    
  Total hotel and property                                                  
   operations expense                $  3,484  $  6,119  $  7,104  $ 12,120 
                                     ========  ========  ========  ======== 
                                                                            
Property Operating Income ("POI")                                           
  Total property operating income    $  1,255  $  1,495  $  1,883  $  2,291 
                                     ========  ========  ========  ======== 
                                                                            
POI as a percentage of revenue from                                         
 room rentals and other hotel                                               
 services                                                                   
  Total POI as a percentage of                                              
   revenue                               26.5%     19.6%     21.0%     15.9%
                                     ========  ========  ========  ======== 
                                                                            
                                                                            

(Unaudited - In thousands, except statistical data)

POI from continuing operations is reconciled to net loss as follows:                       

                                                                            
                                                                            
                                        Three months         Six months     
                                       ended June 30,      ended June 30,   
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
                                                                            
                                                                            
                                                                            
Net earnings (loss) from continuing                                         
 operations                          $(11,287) $  2,040  $(11,974) $   (837)
Depreciation and amortization           1,617     1,532     3,219     3,122 
Net loss on disposition of assets           1         8        27        37 
Other (income) expense                 11,624    (2,131)    9,478    (1,834)
Interest expense                        1,819     1,330     3,548     2,669 
Loss on debt extinguishment                94       117       104       208 
General and administrative expense      1,092       980     2,077     2,039 
Acquisition and termination expense         0        28         0        49 
Equity offering expense                    (3)        0        65         0 
Impairment expense                          0         7      (119)        7 
                                     --------  --------  --------  -------- 
POI - continuing operations          $  4,957  $  3,911  $  6,425  $  5,460 
                                     ========  ========  ========  ======== 
                                                                            
                                                                            

POI from discontinued operations is reconciled to loss from discontinued operations, net of tax, as follows:

                                                                            
                                                                            
                                        Three months         Six months     
                                       ended June 30,      ended June 30,   
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
Gain (loss) from discontinued                                               
 operations                          $    829  $    338  $  1,011  $   (850)
                                                                            
Depreciation and amortization from                                          
 discontinued operations                   38       310       112       680 
                                                                            
Net gain on disposition of assets                                           
 from discontinued operations            (466)   (1,358)     (635)   (1,334)
Interest expense from discontinued                                          
 operations                               348       767       799     1,658 
Loss on debt extinguishment                 0       491         0       683 
Impairment losses from discontinued                                         
 operations                               506       947       596     1,454 
                                     --------  --------  --------  -------- 
POI - discontinued operations        $  1,255  $  1,495  $  1,883  $  2,291 
                                     ========  ========  ========  ======== 
                                                                            
                                                                            
                                                                            
                                                                            
                                        Three months         Six months     
                                       ended June 30,      ended June 30,   
                                       2014      2013      2014      2013   
                                     --------  --------  --------  -------- 
                                                                            
POI--continuing operations              4,957     3,911     6,425     5,460 
POI--discontinued operations            1,255     1,495     1,883     2,291 
                                     --------  --------  --------  -------- 
Total - POI                          $  6,212  $  5,406  $  8,308  $  7,751 
                                     ========  ========  ========  ======== 
                                                                            
Total POI as a percentage of                                                
 revenues                                29.9%     24.1%     22.9%     19.1%
                                     ========  ========  ========  ======== 
                                                                            
                                                                            

The comparisons of same store operations are for 47 hotels in continuing operations as of April 1, 2013 for the three months ended June 30, 2014 and exclude 16 properties held for sale.

                                                                            
                                                                            
                         Supertel Hospitality, Inc.                         
                       Operating Statistics by Region                       
    For three and six months ended June 30, 2014 and 2013, respectively     
                    (Unaudited - except per share data)                     
                                                                            
                                                                            
                 Three months ended June 30,    Three months ended June 30, 
                            2014                           2013             
               ------------------------------ ------------------------------
                Room                           Room                         
Region         Count RevPAR Occupancy    ADR  Count RevPAR Occupancy    ADR 
               ----- ------ ---------  ------ ----- ------ ---------  ------
Mountain         106 $47.14      79.6% $59.26   106 $47.46      83.6% $56.79
West North                                                                  
 Central       1,150  38.98      71.2%  54.73 1,150  37.54      69.4%  54.09
East North                                                                  
 Central         723  47.80      68.5%  69.78   723  45.83      67.0%  68.42
Middle                                                                      
 Atlantic        142  48.48      78.0%  62.18   142  46.54      74.3%  62.61
South Atlantic 1,097  53.82      70.2%  76.62 1,097  47.13      60.6%  77.80
East South                                                                  
 Central         364  45.28      67.4%  67.14   364  38.46      59.4%  64.75
West South                                                                  
 Central         176  21.58      58.1%  37.12   176  18.63      46.1%  40.44
               ----- ------ ---------  ------ ----- ------ ---------  ------
Total Same                                                                  
 Store         3,758 $45.39      69.9% $64.92 3,758 $41.75      64.9% $64.35
               ----- ------ ---------  ------ ----- ------ ---------  ------
                                                                            
Total                                                                       
 Continuing                                                                 
 Operations    3,758 $45.39      69.9% $64.92 3,758 $41.75      64.9% $64.35
               ===== ====== =========  ====== ===== ====== =========  ======
                                                                            
States included in the Regions                                              
Mountain       Montana                                                      
West North                                                                  
 Central       Iowa, Kansas, Missouri, Nebraska and South Dakota            
East North                                                                  
 Central       Indiana and Wisconsin                                        
Middle                                                                      
 Atlantic      Pennsylvania                                                 
South Atlantic Florida, Maryland, North Carolina,                           
               Virginia and West Virginia                                   
East South                                                                  
 Central       Kentucky and Tennessee                                       
West South                                                                  
 Central       Louisiana                                                    
                                                                            
                                                                            
               Three months ended June 30,     Three months ended June 30,  
                           2014                            2013             
             ------------------------------- -------------------------------
              Room                            Room                          
Brand        Count  RevPAR Occupancy   ADR   Count  RevPAR Occupancy   ADR  
             ----- ------- --------- ------- ----- ------- --------- -------
Select                                                                      
 Service                                                                    
 Upscale                                                                    
  Hilton                                                                    
   Garden                                                                   
   Inn         100 $ 85.19     73.4% $116.03   100 $ 87.85     69.3% $126.71
             ----- ------- --------  ------- ----- ------- --------  -------
 Total                                                                      
  Upscale      100 $ 85.19     73.4% $116.03   100 $ 87.85     69.3% $126.71
             ----- ------- --------  ------- ----- ------- --------  -------
 Upper                                                                      
  Midscale                                                                  
  Comfort                                                                   
   Inn /                                                                    
   Suites    1,298   54.11     71.9%   75.28 1,298   48.66     65.8%   74.00
  Other                                                                     
   Upper                                                                    
   Midscale     59   34.29     50.5%   67.83    59   26.54     40.5%   65.50
             ----- ------- --------  ------- ----- ------- --------  -------
  Total                                                                     
   Upper                                                                    
   Midscale  1,357 $ 53.25     71.0% $ 75.04 1,357 $ 47.70     64.7% $ 73.77
             ----- ------- --------  ------- ----- ------- --------  -------
 Midscale                                                                   
  Sleep Inn     90   50.03     65.7%   76.13    90   45.20     58.9%   76.74
  Quality                                                                   
   Inn         122   40.26     56.2%   71.65   122   32.20     46.7%   68.89
             ----- ------- --------  ------- ----- ------- --------  -------
 Total                                                                      
  Midscale     212 $ 44.41     60.2% $ 73.72   212 $ 37.72     51.9% $ 72.67
             ----- ------- --------  ------- ----- ------- --------  -------
 Economy                                                                    
  Days Inn     642   35.86     66.3%   54.08   642   34.10     62.5%   54.61
  Super 8    1,246   37.95     72.1%   52.64 1,246   36.37     70.3%   51.71
  Other                                                                     
   Economy                                                                  
   (1)         201   50.18     69.5%   72.23   201   40.67     51.7%   78.63
             ----- ------- --------  ------- ----- ------- --------  -------
 Total                                                                      
  Economy    2,089 $ 38.48     70.1% $ 54.93 2,089 $ 36.09     66.1% $ 54.58
             ----- ------- --------  ------- ----- ------- --------  -------
                                                                            
Total Same                                                                  
 Store       3,758 $ 45.39     69.9% $ 64.92 3,758 $ 41.75     64.9% $ 64.35
             ----- ------- --------  ------- ----- ------- --------  -------
                                                                            
                                                                            
Total                                                                       
 Continuing                                                                 
 Operations  3,758 $ 45.39     69.9% $ 64.92 3,758 $ 41.75     64.9% $ 64.35
             ===== ======= ========  ======= ===== ======= ========  =======
                                                                            
           1 Includes Rodeway Inn and Independent Brands                    

The comparisons of same store operations are for 47 hotels in continuing operations as of January 1, 2013 for the six months ended June 30, 2014 and exclude 16 properties held for sale.

                                                                            
                                                                            
                   Six months ended June 30,     Six months ended June 30,  
                              2014                          2013            
                 ----------------------------- -----------------------------
                  Room                          Room                        
Region           Count RevPAR Occupancy   ADR  Count RevPAR Occupancy   ADR 
                 ----- ------ --------- ------ ----- ------ --------- ------
Mountain           106 $39.90     70.1% $56.90   106 $39.19     71.1% $55.13
West North                                                                  
 Central         1,150  32.87     62.2%  52.88 1,150  31.99     60.8%  52.58
East North                                                                  
 Central           723  42.04     62.0%  67.85   723  39.44     59.9%  65.81
Middle Atlantic    142  40.78     69.2%  58.91   142  40.72     67.6%  60.28
South Atlantic   1,097  45.69     61.5%  74.30 1,097  44.38     58.7%  75.63
East South                                                                  
 Central           364  37.45     57.5%  65.11   364  34.21     53.4%  64.10
West South                                                                  
 Central           176  20.86     56.0%  37.26   176  17.66     42.0%  42.06
                 ----- ------ --------  ------ ----- ------ --------  ------
Total Same Store 3,758 $38.75     61.7% $62.83 3,758 $37.12     59.0% $62.94
                 ----- ------ --------  ------ ----- ------ --------  ------
                                                                            
                                                                            
Total Continuing                                                            
 Operations      3,758 $38.75     61.7% $62.83 3,758 $37.12     59.0% $62.94
                 ===== ====== ========  ====== ===== ====== ========  ======
                                                                            
States included in the Regions                                              
Mountain         Idaho and Montana                                          
West North                                                                  
 Central         Iowa, Kansas, Missouri and Nebraska                        
East North                                                                  
 Central         Indiana and Wisconsin                                      
Middle Atlantic  Pennsylvania                                               
South Atlantic   Florida, Maryland, North Carolina,                         
                 Virginia and West Virginia                                 
East South                                                                  
 Central         Kentucky and Tennessee                                     
West South                                                                  
 Central         Louisiana                                                  
                                                                            
                                                                            
                                                                            
                                                                            
              Six months ended June 30, 2014  Six months ended June 30, 2013
             ------------------------------- -------------------------------
              Room                            Room                          
Brand        Count  RevPAR Occupancy   ADR   Count  RevPAR Occupancy   ADR  
             ----- ------- --------- ------- ----- ------- --------- -------
Select                                                                      
 Service                                                                    
 Upscale                                                                    
  Hilton                                                                    
   Garden                                                                   
   Inn         100 $ 73.26     65.7% $111.58   100 $ 81.83     64.6% $126.61
             ----- ------- --------  ------- ----- ------- --------  -------
 Total                                                                      
  Upscale      100 $ 73.26     65.7% $111.58   100 $ 81.83     64.6% $126.61
             ----- ------- --------  ------- ----- ------- --------  -------
 Upper                                                                      
  Midscale                                                                  
  Comfort                                                                   
   Inn /                                                                    
   Suites    1,298 $ 45.79     63.4% $ 72.25 1,298 $ 42.92     60.5% $ 70.88
  Clarion       59   31.18     47.0%   66.30    59   30.48     44.1%   69.07
             ----- ------- --------  ------- ----- ------- --------  -------
 Total Upper                                                                
  Midscale   1,357 $ 45.16     62.7% $ 72.06 1,357 $ 42.37     59.8% $ 70.82
             ----- ------- --------  ------- ----- ------- --------  -------
 Midscale                                                                   
  Sleep Inn     90   41.43     58.4%   70.94    90   38.81     53.7%   72.32
  Quality                                                                   
   Inn         122   31.99     46.8%   68.38   122   25.55     38.3%   66.66
             ----- ------- --------  ------- ----- ------- --------  -------
 Total                                                                      
  Midscale     212 $ 36.00     51.7% $ 69.61   212 $ 31.18     44.8% $ 69.53
             ----- ------- --------  ------- ----- ------- --------  -------
 Economy                                                                    
  Days Inn     642   30.79     59.4%   51.81   642   30.42     57.0%   53.32
  Super 8    1,246   31.81     62.6%   50.80 1,246   30.65     61.2%   50.11
  Other                                                                     
   Economy                                                                  
   (1)         201   49.78     64.9%   76.64   201   47.09     57.8%   81.53
             ----- ------- --------  ------- ----- ------- --------  -------
 Total                                                                      
  Economy    2,089 $ 33.22     61.9% $ 53.71 2,089 $ 32.16     59.6% $ 53.98
             ----- ------- --------  ------- ----- ------- --------  -------
                                                                            
Total Same                                                                  
 Store       3,758 $ 38.75     61.7% $ 62.83 3,758 $ 37.12     59.0% $ 62.94
             ----- ------- --------  ------- ----- ------- --------  -------
                                                                            
Total                                                                       
 Continuing                                                                 
 Operations  3,758 $ 38.75     61.7% $ 62.83 3,758 $ 37.12     59.0% $ 62.94
             ===== ======= ========  ======= ===== ======= ========  =======
                                                                            
                                                                            
           1 Includes Rodeway Inn and Independent Brands                    
                                                                            
                                                                            

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