Boykin Lodging 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-11975

Boykin Lodging Company

(Exact Name of Registrant as Specified in Its Charter)


Ohio		34-1824586

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


Guildhall Building, Suite 1500, 45 W.
Prospect Avenue,
Cleveland, Ohio		44115

(Address of Principal Executive Office)		(Zip Code)

(216) 430-1200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of common shares, without par value, outstanding as of July 31, 2006 was 17,687,567.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EXHIBIT INDEX
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BOYKIN LODGING COMPANY
INDEX TO FINANCIAL STATEMENTS


Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005 (unaudited)			3

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005 (unaudited)			4

Consolidated Statement of Shareholders’ Equity for the Six Months Ended June 30, 2006 (unaudited)			5

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005 (unaudited)			6

Notes to Consolidated Financial Statements June 30, 2006 (unaudited)			7

BOYKIN LODGING COMPANY
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2006 AND DECEMBER 31, 2005
(unaudited, dollar amounts in thousands)


	June 30,			December 31,
	2006			2005
ASSETS
Investment in hotel properties	$	520,377		$	483,334
Accumulated depreciation		(146,034	)		(135,667	)

Investment in hotel properties, net		374,343			347,667
Cash and cash equivalents		12,241			16,290
Restricted cash		9,460			31,699
Accounts receivable, net of allowance for doubtful accounts of $292 and $340 as of June 30, 2006 and December 31, 2005, respectively		7,955			6,621
Inventories		1,174			1,223
Deferred financing costs and other, net		1,272			1,933
Investment in unconsolidated joint ventures		1,412			1,410
Other assets		16,349			12,368
Assets related to discontinued operations, net		28,216			28,594

	$	452,422		$	447,805


LIABILITIES AND SHAREHOLDERS’ EQUITY
Borrowings against credit facility	$	34,000		$	40,000
Term notes payable		103,917			98,529
Accounts payable and accrued expenses		44,370			36,391
Accounts payable to related party		934			962
Dividends/distributions payable		1,188			1,188
Minority interest in joint ventures		2,649			777
Minority interest in operating partnership		13,025			13,946
Liabilities related to discontinued operations		1,301			1,462
SHAREHOLDERS’ EQUITY:
Preferred shares, without par value; 10,000,000 shares authorized; 181,000 shares issued and outstanding as of June 30, 2006 and December 31, 2005 (liquidation preference of $45,250)		—			—
Common shares, without par value; 40,000,000 shares authorized; 17,687,567 and 17,594,081 shares issued and outstanding as of June 30, 2006 and December 31, 2005, respectively		—			—
Additional paid-in capital		361,068			361,309
Distributions and losses in excess of income		(107,964	)		(104,261	)
Unearned compensation – restricted shares		(2,066	)		(2,498	)

Total shareholders’ equity		251,038			254,550

	$	452,422		$	447,805

See notes to consolidated financial statements.

BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 and 2005
(unaudited, amounts in thousands except for per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Revenues:
Hotel revenues
Rooms	$	33,808		$	32,303		$	65,057		$	61,192
Food and beverage		15,240			15,456			29,814			28,960
Other		1,977			3,352			3,806			9,276

Total hotel revenues		51,025			51,111			98,677			99,428
Other operating revenue		41			40			74			123
Revenues from condominium development and unit sales		242			—			1,248			—

Total revenues		51,308			51,151			99,999			99,551
Expenses:
Hotel operating expenses
Rooms		8,080			7,681			15,699			14,687
Food and beverage		9,909			10,089			19,630			19,285
Other direct		1,343			1,379			2,650			2,676
Indirect		15,628			14,921			30,804			29,174
Management fees to related party		1,246			1,570			2,785			3,100

Total hotel operating expenses		36,206			35,640			71,568			68,922
Property taxes, insurance and other		4,635			4,096			9,070			8,395
Cost of condominium development and unit sales		216			—			1,124			—
Real estate related depreciation and amortization		5,179			5,470			10,393			10,941
Corporate general and administrative		3,995			3,821			7,088			6,084

Total operating expenses		50,231			49,027			99,243			94,342
Operating income		1,077			2,124			756			5,209
Interest income		92			422			597			434
Other income		—			—			16			—
Interest expense		(2,724	)		(3,015	)		(5,617	)		(6,198	)
Amortization of deferred financing costs		(473	)		(286	)		(939	)		(639	)
Minority interest in (earnings) loss of joint ventures		6			—			(9	)		—
Minority interest in (income) loss of operating partnership		561			392			1,324			(1,918	)
Equity in income of unconsolidated joint ventures including gain on sale		209			93			212			11,159

Income (loss) before gain on sale/disposal of assets and discontinued operations		(1,252	)		(270	)		(3,660	)		8,047
Gain on sale/disposal of assets		6			38			6			6,914

Income (loss) before discontinued operations		(1,246	)		(232	)		(3,654	)		14,961
Discontinued operations:
Discontinued operations, net of operating partnership minority interest expense of $133 and $403 for the three and six months ended June 30, 2006 and $1,303 and $1,426 for the three and six months ended June 30, 2005, respectively		771			7,459			2,327			8,158

Net income (loss)	$	(475	)	$	7,227		$	(1,327	)	$	23,119

Preferred dividends		(1,188	)		(1,188	)		(2,376	)		(2,376	)

Net income (loss) attributable to common shareholders	$	(1,663	)	$	6,039		$	(3,703	)	$	20,743

Net income (loss) attributable to common shareholders before discontinued operations per share
Basic	$	(0.14	)	$	(0.08	)	$	(0.34	)	$	0.72
Diluted	$	(0.14	)	$	(0.08	)	$	(0.34	)	$	0.71
Discontinued operations per share
Basic	$	0.04		$	0.43		$	0.13		$	0.47
Diluted	$	0.04		$	0.42		$	0.13		$	0.46
Net income (loss) attributable to common shareholders per share (a)
Basic	$	(0.09	)	$	0.34		$	(0.21	)	$	1.18
Diluted	$	(0.09	)	$	0.34		$	(0.21	)	$	1.17
Weighted average number of common shares outstanding
Basic		17,688			17,544			17,688			17,539
Diluted		17,876			17,789			17,926			17,737


(a)		Per share amounts may not add due to rounding.

See notes to consolidated financial statements.

BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(unaudited, amounts in thousands)


	2006			2005
Cash flows from operating activities:
Net income (loss)	$	(1,327	)	$	23,119
Adjustments to reconcile net income (loss) to net cash flow provided by operating activities —
Gain on sale/disposal of assets		(678	)		(15,098	)
Depreciation and amortization		11,705			12,594
Charges related to equity based compensation		432			1,165
Equity in income of unconsolidated joint ventures including gain on sale		(212	)		(11,159	)
Deferred lease revenue		—			630
Minority interests		(912	)		3,389
Changes in assets and liabilities — Accounts receivable and inventories		(887	)		3,577
Accounts payable and accrued expenses		7,790			(1,553	)
Amounts due to/from lessees		(3	)		(291	)
Other		(4,477	)		(234	)


Net cash flow provided by operating activities		11,431			16,139


Cash flows from investing activities:
Distributions received from unconsolidated joint ventures		210			23,697
Changes in restricted cash		22,239			3,229
Improvements and additions to hotel properties, net		(37,096	)		(7,479	)
Net proceeds from sale of assets		690			34,630


Net cash flow provided by (used in) investing activities		(13,957	)		54,077


Cash flows from financing activities:
Payments of dividends and distributions		(2,376	)		(2,376	)
Net borrowings (repayments) against credit facility		(6,000	)		33,554
Term note borrowings		7,800			—
Repayment of term notes		(2,412	)		(93,043	)
Payment of deferred financing costs		(157	)		(1,394	)
Net proceeds from issuance of common shares		—			118
Cash payment for common share purchases		(241	)		(142	)
Contributions from (distributions to) to joint venture minority interest partners, net		1,863			(110	)


Net cash flow used in financing activities		(1,523	)		(63,393	)


Net change in cash and cash equivalents	$	(4,049	)	$	6,823
Cash and cash equivalents, beginning of period		16,290			13,521


Cash and cash equivalents, end of period	$	12,241		$	20,344

See notes to consolidated financial statements.

BOYKIN LODGING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(unaudited, dollar amounts in thousands except per share and per unit data)

1. BACKGROUND:

Boykin Lodging Company, an Ohio corporation (together with its subsidiaries “Boykin”), is a real estate investment trust (“REIT”) that owns hotels throughout the United States of America. As of June 30, 2006, Boykin owned interests in 21 hotels containing a total of 5,871 guest rooms located in 13 states.

Formation

Boykin was formed and completed an initial public offering (“IPO”) in 1996 to acquire, own and redevelop full and select service hotels. Boykin Hotel Properties, L.P., an Ohio limited partnership (the “Partnership”), is the operating partnership that transacts business and holds the direct and indirect ownership interest in Boykin’s hotels. As of June 30, 2006, Boykin had an 85.5% ownership interest in and was the sole general partner of the Partnership.

Since the IPO, Boykin has raised capital through a combination of common and preferred share issuances, debt financings, joint ventures and cash flow generated from operations.

Merger Agreement

Boykin and the Partnership entered into an Agreement and Plan of Merger, dated May 19, 2006 (the “Merger Agreement”) with Braveheart Investors LP, a Delaware limited partnership (“Parent”), Braveheart II Realty (Ohio) Corp., an Ohio corporation and a wholly owned subsidiary of Parent (“REIT Merger Sub”), Braveheart II Properties Holding LLC, a Delaware limited liability company (“OP Holdco”), and Braveheart II Properties Company LLC, an Ohio limited liability company and an indirectly wholly owned subsidiary of Parent (“OP Merger Sub”), pursuant to which OP Merger Sub will merge with and into the Partnership (the “OP Merger”), with the Partnership surviving as the surviving limited partnership and REIT Merger Sub will merge with and into Boykin (the “REIT Merger”), with Boykin continuing as the surviving corporation, (hereinafter sometimes referred to as the “Surviving Corporation”). Parent, REIT Merger Sub and OP Holdco and OP Merger Sub (the “Purchaser Parties”) are affiliates of Westmont Hospitality Group and Cadim Inc., a wholly owned subsidiary of Caisse de dépôt et placement du Québec.

Pursuant to the Merger Agreement, at the effective time of the REIT Merger and the OP Merger (the “Mergers”), each outstanding common share of Boykin and each unit of limited partnership interest in the Partnership for which a notice of redemption has been received prior to the effective time of the OP Merger, respectively, will be converted automatically into the right to receive $11.00, less the amount of any dividends or distribution paid by Boykin or the Partnership, respectively, on outstanding common shares or limited partnership units prior to closing. Each outstanding depositary share, representing a 1/10 fractional interest in a share of Boykin’s 10-1/2% Class A Cumulative Preferred Shares, Series 2002-A will be converted into the right to receive a cash payment of $25.00 (plus all accrued and unpaid dividends, whether or not declared). Boykin, the Partnership and the Purchaser Parties have made customary representations, warranties and covenants in the Merger Agreement, including, among others, Boykin and the Partnership making covenants not to solicit alternative transactions or, subject to certain exceptions, participate in discussions relating to an alternative transaction or furnish non-public information relating to an alternative transaction.

Boykin’s Board of Directors has unanimously approved the merger agreement (with Robert W. Boykin, Chairman and Chief Executive Officer of Boykin abstaining) and has recommended the approval of the transaction by Boykin’s common shareholders. Holders of common shares of Boykin as of August 4, 2006 will be asked to vote on the proposed transaction at a special meeting that will be held on September 12, 2006. Completion of the transaction, which is expected to occur during September 2006, is contingent on customary closing conditions and the approval of Boykin’s common shareholders. Availability of financing for the Mergers is not a condition to the Purchaser Parties’ obligations to close.

Contemporaneously with the execution of the Merger Agreement, Boykin entered into agreements to sell its interests in the Pink Shell Beach Resort & Spa and the Banana Bay Resort & Marina – Marathon to entities (the “Boykin Entities”) controlled by Mr. Boykin. The total purchase price for these interests is approximately $14,600 and will be adjusted based upon the additional capital investment and other cash flows of such interests from April 1, 2006 through the actual closing date. The closing of the sales to the Boykin Entities is contingent upon the satisfaction of the conditions to the closing of the Mergers.

Three shareholder complaints have been filed against Boykin and each the members of its Board of Directors seeking to, among other things, enjoin Boykin and its directors from proceeding with or consummating the mergers and to rescind, to the extent already implemented,

the merger agreement and related transactions. Based on the facts known to date, the defendants believe that the claims asserted are without merit and intend to defend these suits vigorously.

Radisson Suite Beach Resort – Marco Island

In May 2006, Boykin Marco LLC (“Boykin Marco”), a wholly owned subsidiary of the Partnership, entered into a definitive agreement to sell the Radisson Suite Beach Resort – Marco Island (“Marco Island”) to Marriott Ownership Resorts, Inc., an unaffiliated party, for a purchase price of $58,000. The proposed purchaser made non-refundable deposits of $6,000 in the second quarter of 2006. The sale closed in July 2006.

Consolidated Joint Ventures

In 2005, Boykin became a 50% partner in Marathon Partners LLC (“Marathon Partners”). In 2006, Marathon Partners purchased the Banana Bay Resort & Marina – Marathon for $12,000. The joint venture agreement provides that Boykin will act as the Company Manager of Marathon Partners and perform all day to day development functions related to the operation of and the potential redevelopment of the property as a hotel/condominium. Each partner is required to make capital contributions to the joint venture in equal proportions; provided, however, that once each partner has invested $1,250 of capital into the joint venture, Boykin’s joint venture partner may elect not to make additional contributions. In the event Boykin makes mandatory capital contributions to the joint venture in excess of $1,250 and the joint venture partner elects not to make contributions on an equal basis, Boykin will be entitled to a preferred return on its excess contributions. Because of the controlling nature of Boykin’s ownership interest in this joint venture, Boykin consolidates this joint venture into its financial statements.

In 2005, the consolidated joint venture which owned the Hampton Inn San Diego Airport/Sea World sold their hotel. Boykin was a 91% partner in the partnership, Boykin San Diego LLC. The partnership will be dissolved following the satisfaction of all outstanding obligations of the partnerships.

Unconsolidated Joint Ventures

Boykin has a 50% ownership interest in BoyCon, L.L.C. (“BoyCon”), a joint venture with an affiliate of Concord Hospitality Enterprises (“Concord”), a privately owned hotel investment and management company based in Raleigh, North Carolina. BoyCon owns a 227-room Courtyard by Marriott® in Lyndhurst, New Jersey, which is managed by Concord.

Boykin has a 25% ownership interest in a joint venture with AEW Partners III, L.P. (“AEW”), an investment partnership managed by AEW Capital Management, L.P., a Boston-based real estate investment firm. The Boykin/AEW venture has a 75% ownership interest, and Boykin directly owns the remaining 25% ownership interest, in Boykin Chicago, L.L.C., which owned Hotel 71, located in downtown Chicago. In March 2005, Boykin Chicago, L.L.C. sold Hotel 71 to an unrelated third party for a price of $95,050. A portion of the net proceeds from the sale was used to repay the outstanding balance on the mortgage for which the property served as collateral; the remainder was or will be, following the satisfaction of all outstanding obligations of the joint venture, distributed to the members of Boykin Chicago, L.L.C. The Boykin/AEW venture and Boykin Chicago, L.L.C will be dissolved following satisfaction of all outstanding obligations of the entities.

Because of the non-controlling nature of Boykin’s ownership interests in these joint ventures, Boykin accounts for these investments using the equity method.

Prior to the sale of Hotel 71, Boykin’s carrying value of its investment in the joint ventures differed from its share of the partnership equity reported in the balance sheets of the unconsolidated joint ventures due to Boykin’s cost of its investment being in excess of the historical net book values related to the direct investment in Boykin Chicago, L.L.C. Boykin’s additional basis was allocated to depreciable assets and depreciation was being recognized on a straight-line basis over 30 years. When Hotel 71 was sold, the remaining balance was written off as a reduction of the income the Partnership recognized on its investment in Boykin Chicago, L.L.C.

The following table sets forth the total assets, liabilities, equity and components of net income (loss), including Boykin’s share, related to the unconsolidated joint ventures discussed above as of June 30, 2006 and December 31, 2005 and for the three and six month periods ended June 30, 2006 and 2005:


	Boykin/AEW				Boykin/Concord
	June 30,		December 31,		June 30,		December 31,
	2006		2005		2006		2005
Total assets	$	1,748	$	2,828	$	20,289	$	20,499

Accrued expenses		806		1,934		564		578
Outstanding debt		—		—		17,909		18,078

Total liabilities		806		1,934		18,473		18,656
Minority interest		229		224		—		—
Equity		713		670		1,816		1,843

Investment in unconsolidated joint venture	$	504	$	488	$	908	$	922


	Boykin/AEW										Boykin/Concord
	Three Months					Six Months					Three Months						Six Months
	Ended					Ended					Ended						Ended
	June 30,					June 30,					June 30,						June 30,
	2006		2005			2006		2005			2006			2005			2006			2005
Revenues	$	—	$	6		$	—	$	2,009		$	2,422		$	2,221		$	4,314		$	3,909
Hotel operating expenses		30		(78	)		32		(2,111	)		(1,370	)		(1,234	)		(2,630	)		(2,315	)
Management fees to related party		—		—			—		(60	)		—			—			—			—
Real estate related depreciation		—		—			—		(772	)		(286	)		(281	)		(570	)		(561	)
Property taxes, insurance and other		—		—			11		(368	)		(83	)		(83	)		(166	)		(162	)

Operating income (loss)		30		(72	)		43		(1,302	)		683			623			948			871
Interest and other income		8		4			15		28			4			2			8			3
Amortization		—		—			—		(133	)		(11	)		(11	)		(22	)		(22	)
Interest expense		—		—			—		(512	)		(272	)		(277	)		(542	)		(552	)
Gain (loss) on sale/disposal of assets		—		(4	)		—		29,308			—			—			—			—
Other		—		—			—		—			(19	)		(87	)		(19	)		(112	)

Net income (loss) before minority interest		38		(72	)		58		27,389			385			250			373			188
Boykin’s share of net income (loss)		16		(32	)		25		12,012			193			125			187			94
Reduction of additional basis in Boykin Chicago, L.L.C		—		—			—		(947	)		—			—			—			—

		16		(32	)		25		11,065			193			125			187			94

Taxable REIT Subsidiaries

As of June 30, 2006, all hotels in which Boykin had an ownership interest were operated under a taxable REIT subsidiary (“TRS”) structure. The Hampton Inn San Diego Airport/Sea World, which was sold during 2005, was never operated under a TRS structure. Prior to the sale, lease revenue was recorded within the consolidated financial statements related to this property.

Bellboy, Inc. (“Bellboy”) is a wholly-owned TRS of Boykin which, through its subsidiaries, leased 19 of Boykin’s properties as of June 30, 2006. The Banana Bay Resort & Marina – Marathon is owned by a subsidiary of Bellboy. The Boykin/Concord joint venture has a related TRS entity, BoyCon Leasing, Inc., that leases its property.

The consolidated financial statements include the operating results of the consolidated hotels operated under the TRS structure.

Hotel Managers

As of June 30, 2006, Boykin Management Company Limited Liability Company (“BMC”) and certain of its subsidiaries managed 20 of the 21 hotels in which Boykin had an ownership interest. BMC is owned by Robert W. Boykin, Chairman and Chief Executive Officer of Boykin (53.8%), and his brother, John E. Boykin (46.2%). Concord managed one property, the Meadowlands-Lyndhurst Courtyard by Marriott, as of such date.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The separate financial statements of Boykin, the Partnership, Bellboy and the consolidated joint ventures discussed above are consolidated because Boykin exercises unilateral control over these entities. All significant intercompany transactions and balances have been eliminated. Boykin believes that the results of operations contained within the financial statements reflect all costs of Boykin doing business.

These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Boykin believes that all adjustments, consisting of normal recurring adjustments and accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. The operations of the hotels have historically been seasonal. The hotels located in Florida have historically experienced their highest occupancy in the first quarter, while the remaining hotels have historically maintained higher occupancy rates during the second and third quarters. For further information, refer to the consolidated financial statements and footnotes thereto included in Boykin’s annual report on Form 10-K for the year ended December 31, 2005. Certain prior period amounts have been reclassified to conform to the current period presentation.

Condominium Units

Condominium project revenue and expenses for units under construction are recognized using the percentage of completion method upon satisfaction of certain criteria. Revenue is recognized under the completed contract method until such criteria is met. During the three and six month periods ended June 30, 2006, Boykin reported revenues of $242 and $1,248 respectively, and costs of $216 and $1,124, respectively, using the percentage of completion method of accounting related to the Captiva Villas project. The outstanding accounts receivable related to the recognition of revenue for the project totaled $1,248 as of June 30, 2006.

As of June 30, 2006 and December 31, 2005, costs incurred in the preparation for and the commencement of construction of the Captiva Villas in excess of revenue recognized totaling $5,320 and $1,899, respectively, as well as the original $900 basis in the land on which the new building is being constructed, are reflected in the consolidated balance sheets as other assets. Deposits received for the purchase of units totaling $4,623 are reflected as a liability on the consolidated balance sheet as of June 30, 2006. A portion of the deposits was available for use as payment of construction costs. The portion that is not available is reflected in restricted cash. For the three and six months periods ended June 30, 2006, approximately $48 and $59, respectively, of the interest incurred on the credit facility was capitalized into this project.

Investment in Hotel Properties

Boykin reviews the hotel properties for impairment whenever events or changes in circumstances indicate the carrying value of the hotel properties may not be recoverable. Boykin does not believe that there are any factors or circumstances indicating impairment of any investments in hotel properties as of June 30, 2006.

As of June 30, 2006, Marco Island was considered held for sale as defined within the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and has been classified as discontinued operations within the financial statements for all periods presented. Boykin considers assets to be “held for sale” when they are under contract, significant non-refundable deposits have been made by the potential buyer and the assets are immediately available to be sold.

Insurance Recoveries

Boykin records insurance recoveries in an amount equal to the losses recorded by the property being covered as the losses are recognized until such time as those recoveries are deemed not probable or reasonably estimable. In addition, Boykin recognizes income of amounts in excess of those losses to the extent that cash has been received or a settlement has been reached and the amount is not considered to be an advance on future losses. Business interruption recoveries are reflected as other hotel revenues within the consolidated financial statements. Property insurance recoveries are reflected as gain on sale/disposal of assets within the consolidated financial statements.

Fees due to service providers in connection with casualty insurance recoveries are reflected as reductions in the gain recognized. Fees due to service providers related to business interruption insurance recoveries are reflected as corporate general and administrative expenses within the consolidated financial statements.

Beginning in September 2004, Boykin’s two hotels located in Melbourne, Florida were closed due to damage sustained from Hurricane Frances. During the three and six months ended June 30, 2005, Boykin recorded business interruption insurance recoveries of

$1,281 and $4,007, respectively. Property insurance recoveries of $3,700 were received and recorded for the six months ended June 30, 2005 for these properties.

In October 2005, three of Boykin’s hotels located in southwest Florida suffered damage due to Hurricane Wilma. Included in accounts receivable at December 31, 2005 were estimated recoveries of $332 which were recorded to offset costs incurred and losses on disposal of damaged assets. The properties were cross-insured with other properties not owned by Boykin that are managed by BMC and its subsidiaries or owned directly or indirectly by Robert W. Boykin, Chairman and Chief Executive Officer of Boykin. As Boykin was the primary insured party in the claim, all insurance proceeds are paid to Boykin and then are allocated to the insured parties. During the first quarter of 2006, $1,500 was collected of which $197 is recorded in accounts payable to related party relative to the Robert W. Boykin owned property, $168 is recorded in accounts payable and accrued expenses for the BMC managed property not owned by Boykin, $70 is recorded in accounts payable and accrued expenses relating to fees for the claims and $61 was used to pay fees related to the claim. The remaining proceeds relieved the December 31, 2005 outstanding accounts receivable in full and $672 was recorded in discontinued operations as gain on sale/disposal of assets within the consolidated financial statements for the six months ended June 30, 2006.

In 2003 and in 2005, Boykin disposed of certain assets due to water infiltration remediation activities. Property insurance recoveries recorded during the six months ended June 30, 2005 totaled $2,436. Approximately $1,350 of proceeds were received and recognized during the six months ended June 30, 2005 related to the business interruption insurance claim for the period in which the water infiltration remediation activities occurred. As of December 31, 2005, an additional $21 of business interruption insurance recoveries were deferred until completion of the remediation, which occurred during 2006.

For the six months ended June 30, 2005, $1,006 of property insurance recoveries were received and recorded related to water infiltration remediation activities at another of Boykin’s properties. These proceeds were recorded as gain on sale/disposal of assets within the consolidated financial statements.

As other property insurance claims are filed for repair work done at the properties, Boykin records estimated recoveries to offset the costs incurred, less appropriate deductibles.

Deferred Compensation Plans

Boykin has nonqualified deferred compensation programs which permitted certain employees to annually elect (via individual contracts) to defer a portion of their compensation on a pre-tax basis. To assist in the funding of these programs, Boykin has purchased shares of mutual funds as directed by the participants and placed them in rabbi trusts. The market value of the mutual fund shares included in other assets totaled $3,304 and $3,204 at June 30, 2006 and December 31, 2005, respectively. A liability of the equal amount is recorded within accounts payable and accrued expenses within the consolidated financial statements as of each period. Boykin no longer permits deferrals into these plans for compensation earned during 2005 and beyond.

Stock-based Compensation

At June 30, 2006, Boykin had two long-term incentive plans. Boykin had previously adopted the disclosure only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and applied Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its employee share option plan. Effective July 1, 2005, Boykin adopted SFAS No. 123 (revised 2004), “Share-Based Payment,” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based at their fair values. Adoption did not have any effect on Boykin.

3. EARNINGS PER SHARE:

Basic earnings per share is based on the weighted average number of common shares outstanding during the period whereas diluted earnings per share adjusts the weighted average shares outstanding for the effect of all dilutive securities. For the three and six months ended June 30, 2006 and 2005, the weighted average basic and diluted common shares outstanding were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
Basic		17,687,567		17,543,916		17,687,567		17,539,026
Effect of dilutive securities:
Common stock options		106,549		123,898		139,843		97,375
Restricted share grants		82,216		121,582		98,717		100,304


Diluted		17,876,332		17,789,396		17,926,127		17,736,705

4. PARTNERSHIP UNITS/MINORITY INTERESTS:

Other than units owned by Boykin, a total of 2,718,256 units of the Partnership were issued and outstanding at June 30, 2006 and 2005. The weighted average number of partnership units, other than units owned by Boykin, outstanding for each of the three and six month periods ended June 30, 2006 and 2005 was 2,718,256.

The minority interest liability is affected by the outstanding partnership units other than those owned by Boykin as well as the existence of preferred partnership units which are owned by Boykin. The preferred partnership units mirror the terms of the preferred depositary shares outstanding.

5. DISCONTINUED OPERATIONS:

The provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” require that hotels sold or held for sale be treated as discontinued operations.

During 2005, Boykin sold its French Lick Springs Resort and Spa located in French Lick, Indiana, the Clarion Hotel & Conference Center located in Yakima, Washington, and the Hampton Inn San Diego Airport/Sea World in San Diego, California.

In May 2006, Boykin entered into a contract to sell Marco Island; as of June 30, 2006, the property was considered held for sale as defined within the provisions of SFAS No. 144.

The assets and liabilities of the French Lick Springs Resort and Spa, the Clarion Hotel & Conference Center, the joint venture which owned and leased out the Hampton Inn San Diego Airport/Sea World and Marco Island as of June 30, 2006 and December 31, 2005 and the results of operations for the three and six months ended June 30, 2006 and 2005 have been reclassified as discontinued operations in the accompanying financial statements. The results of operations and the financial position related to the applicable properties and joint venture were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Lease revenue	$	—		$	354		$	—		$	709
Hotel revenues		3,934			4,290			8,296			11,221
Hotel operating expenses		(2,507	)		(3,273	)		(4,813	)		(8,511	)
Management fees to related party		(132	)		(110	)		(342	)		(310	)
Management fees — other		—			(11	)		—			(19	)
Property taxes, insurance and other		(375	)		(254	)		(710	)		(632	)
Other expenses		—			(3	)		—			(12	)
Interest income		—			2			—			4
Real estate related depreciation and amortization		(149	)		(394	)		(373	)		(1,005	)
Gain on sale of individual assets		133			366			672			366
Gain on sale of property		—			7,818			—			7,818
Minority interest in earnings of joint ventures		—			(23	)		—			(45	)

Income from discontinued operations	$	904		$	8,762		$	2,730		$	9,584


	June 30,		December 31,
	2006		2005
Accounts receivable, net	$	322	$	686
Inventories		40		74
Other assets		736		371
Deferred financing costs and other, net		13		13
Investment in hotel properties, net		27,105		27,450

Total assets	$	28,216	$	28,594


Accounts payable and accrued expenses	$	1,189	$	1,279
Accounts payable to related party		112		183

Total liabilities	$	1,301	$	1,462

6. CREDIT FACILITY:

As of June 30, 2006, Boykin had a secured, revolving credit facility with a financial institution which enabled Boykin to borrow up to $100,000, subject to borrowing base and loan-to-value limitations. The credit facility was expanded during 2005 from $60,000 and four properties were added as security for the facility. Boykin had borrowings of $34,000 and $40,000 under this facility at June 30, 2006 and December 31, 2005, respectively. The facility was reduced to $60,000 effective July 1, 2006, matures during October 2006 and bears interest at a floating rate of LIBOR plus 3.75% (9.12% at June 30, 2006). Boykin is required to pay a fee of 0.375% on the unused portion of the credit facility. The facility was secured by nine properties with a net carrying value of $87,515 and $89,463 at June 30, 2006 and December 31, 2005, respectively.

The credit facility requires Boykin, among other things, to maintain a minimum net worth, a coverage ratio of EBITDA to debt service, coverage of EBITDA to debt service and fixed charges and a maximum leverage ratio. Further, Boykin is required to maintain the franchise agreement at each hotel and to maintain its REIT status. The terms of the agreement provide certain restrictions on common share dividends; however, Boykin is entitled to distribute sufficient dividends to maintain its REIT status. At June 30, 2006 and December 31, 2005, Boykin was in compliance with its covenants.

7. TERM NOTES PAYABLE:

Red Lion Inns Operating L.P. (“OLP”), a wholly-owned subsidiary of the Partnership, has a term loan agreement in the original amount of $130,000 which matures in June 2023 and may be prepaid without penalty after May 21, 2008. The outstanding balance as of June 30, 2006 and December 31, 2005 was $96,117 and $98,529, respectively. The loan bears interest at a fixed rate of 6.9% until May 2008, and at a new fixed rate to be determined thereafter. The loan requires principal repayment based on a 25-year amortization schedule. As of June 30, 2006 and December 31, 2005, the loan was secured by six Doubletree hotels with a net carrying value of $179,387 and $182,867, respectively. Under covenants in the loan agreement, assets of OLP are not available to pay the creditors of any other Boykin entity, except to the extent of permitted cash distributions from OLP to Boykin. Likewise, the assets of other Boykin entities are not available to pay the creditors of OLP. The loan agreement also requires OLP to hold funds in escrow for the payment of capital expenditures, insurance, interest and real estate taxes and requires OLP to maintain certain financial reporting requirements. OLP was in compliance with these requirements at June 30, 2006 and December 31, 2005.

During 2006, Marathon Partners obtained a term loan in the amount of $7,800. The loan is secured by the Banana Bay Resort & Marina – Marathon which has a net carrying value of $11,948 as of June 30, 2006. The principal balance of the loan is to be repaid upon maturity during January 2008. The loan bears interest at a rate that fluctuates at prime plus 0.75% (9.0% at June 30, 2006). The loan agreement requires certain financial reporting requirements. The joint venture was in compliance with these requirements at June 30, 2006.

Boykin Holding, LLC (“BHC”), a wholly-owned subsidiary of the Partnership, had a term loan agreement for which the outstanding balance of $91,125 was repaid during the second quarter of 2005. The term loan bore interest at a rate that fluctuated at LIBOR plus 2.35%.

As a part of normal business activities, Boykin has issued letters of credit through major banking institutions as required by certain debt and insurance agreements. As of June 30, 2006, there were no outstanding letters of credit. As of June 30, 2006, Boykin had not entered into any other significant off-balance sheet financing arrangements.

Maturities of the term notes payable at June 30, 2006 were as follows:


2006	$	1,754
2007		4,448
2008		12,588
2009		5,134
2010		5,505
2011 and thereafter		74,488

	$	103,917

8. RELATED PARTY TRANSACTIONS:

Management and other fees earned by BMC for the continuing operations of the consolidated hotels related to provisions within the hotel management contracts totaled $1,246 and $2,785 for the three and six months ended June 30, 2006, respectively, and $1,570 and $3,100 for the three and six month periods ended June 30, 2005, respectively. Management fees earned by BMC related to discontinued operations totaled $132 and $342 for the three and six month periods ended June 30, 2006, respectively, and $110 and $310 for the three and six month periods ended June 30, 2005, respectively. An additional $8 and $28 were paid in 2006 and 2005, respectively, for other services provided pursuant to the management agreements. The management agreements between Boykin and BMC were approved by the independent members of Boykin’s Board of Directors. Boykin had related party payables to BMC of $1,046 and $1,145 as of June 30, 2006 and December 31, 2005, respectively, primarily related to management fees and reimbursements of expenses on behalf of the hotel properties. Included within the June 30, 2006 payable balance is $197 related to insurance proceeds received by Boykin related to a property owned by Robert W. Boykin.

Boykin Chicago, L.L.C. had entered into a management agreement with a wholly-owned subsidiary of BMC to manage Hotel 71 prior to its sale. Management and other fees earned by the subsidiary during 2005, prior to the sale of Hotel 71, totaled $60.

For the three and six months ended June 30, 2006, Boykin paid a wholly-owned subsidiary of BMC $35 and $62, respectively, for design and project management services and for reimbursement of expenses related to capital improvements at its consolidated hotels. During 2001, a subsidiary of BMC sold a portion of its business to an unrelated third party. A portion of the sales price is contingent upon the revenues the business receives from Boykin. For the six months ended June 30, 2006 and 2005 an additional $4 and $1, respectively, of sales proceeds was provided to BMC as a result of purchases made by Boykin.

Fees paid to BMC and its subsidiaries for services which are not subject to management agreements are at market prices as determined by the independent members of the Board of Directors. The Board’s market price determinations are based on market checks performed by management and outside independent consultants from time to time, comparative information provided by BMC, and industry publications.

Boykin believes that the methodologies used for determining the amounts to be paid to BMC and its subsidiaries for management and other services are reasonable.

9. STATEMENT OF CASH FLOWS, SUPPLEMENTAL DISCLOSURES:

As of June 30, 2006 and December 31, 2005, there were $1,188 of preferred share dividends which were declared but not paid.

Interest paid during the six month periods ended June 30, 2006 and 2005 was $6,239 and $6,584, respectively. For the six months ended June 30, 2006, approximately $59 of the interest paid was capitalized as a part of the Captiva Villas development project.

Cash flows from discontinued operations are combined with the cash flows from continuing operations in the consolidated statements of cash flows. For 2006, cash flows related to discontinued operations approximated $2,948. For 2005, cash flows related to discontinued operations approximated $30,367, including $27,357 of proceeds from sales of fixed assets.

10. INCOME TAXES:

Boykin qualifies as a REIT under Sections 856-860 of the Internal Revenue Code. As a REIT, Boykin is entitled to a dividends paid deduction for certain shareholder distributions, which deduction reduces its taxable income. Boykin is required to pay corporate income taxes on the income, if any, of its TRS subsidiaries and on any REIT taxable income after the effect of dividend paid deductions. In certain cases, dividends paid during the immediately subsequent year may be applied to the prior year’s dividends paid deduction; however, an excise tax may be applicable based on the timing of such distributions. During 2005, Boykin had REIT taxable income in excess of the dividends paid during 2005. Boykin therefore intends to designate the preferred dividends paid during January, April and July of 2006 as 2005 dividends. Further, Boykin anticipates paying common share dividends of approximately $10,000 which will be designated as a 2005 dividend and, in the event the merger is approved by Boykin’s common shareholders, Boykin expects to pay common share dividends equal to its estimated taxable income for the period January 1, 2006 through closing of the merger, which dividends will be paid the day prior to the closing of the merger.

Payments and timing of dividends are subject to approval by the Board of Directors. Boykin recorded an excise tax expense in the fourth quarter of 2005 related to its anticipated distribution schedule. Boykin also anticipates that it will incur an Alternative Minimum Tax which was also recorded in the fourth quarter of 2005.

Upon the effective date of the establishment of Boykin’s TRSs, the subsidiaries became subject to federal and state income taxes. Boykin’s TRSs account for income taxes in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes.” As of June 30, 2006, Boykin has a deferred tax asset of approximately $17,118, prior to any valuation allowance, related to the assumption of the retained deficit of certain leases upon the formation of the TRSs as well as the cumulative operating losses of the TRSs and their subsidiaries since their formation. Boykin has recorded a 100% valuation allowance against this asset due to the uncertainty of realization; therefore, no provision or benefit from income taxes is reflected in the accompanying consolidated statements of operations. As of June 30, 2006, the net operating loss carry-forwards have remaining lives of approximately 16 to 19 years.

Certain of Boykin’s entities are required to pay various state and local franchise and income taxes which are based on amounts other than net income such as gross receipts or net worth. These amounts are reflected within corporate general and administrative expenses within the consolidated financial statements and have been deemed immaterial for disclosure for the applicable periods.

11. SUBSQUENT EVENTS:

In July 2006, Boykin Marco closed on the sale of Marco Island to Marriott Ownership Resorts, Inc. for a purchase price of $58,000. The net proceeds from the sale totaled approximately $57,170 and were used to repay the outstanding balance on the secured line of credit and for general corporate purposes. Boykin anticipates recording a gain on the sale of the property, net of minority interest, of approximately $25,332.

Boykin’s Doubletree Guest Suites Melbourne Beach Oceanfront hotel, formerly known as the Melbourne Suites Beach Resort, resumed operations in July 2006. The hotel had been closed since suffering damage as a result of Hurricane Frances in September 2004.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Boykin Lodging Company (“Boykin”), an Ohio corporation, is a real estate investment trust (“REIT”) that currently owns interests in 20 hotels throughout the United States. Boykin Hotel Properties, L.P., an Ohio limited partnership (the “Partnership”), is the operating partnership entity that transacts business and holds the direct and indirect ownership interests in our hotels. As of June 30, 2006, Boykin had an 85.5% ownership interest in, was the sole general partner of and conducted all of its business through the Partnership.

Our primary business objectives are to maximize current returns to our shareholders by increasing cash flow available for distribution and long-term total returns to shareholders through appreciation in value of our common shares.

FORWARD LOOKING STATEMENTS

This Form 10-Q contains statements that constitute forward-looking statements. Those statements appear in a number of places in this Form 10-Q and the documents incorporated by reference herein and include statements regarding our intent, belief or current expectations or those of our directors or officers with respect to:

	•		Our ability to close the announced merger transaction;

	•		Leasing, management or performance of the hotels;

	•		Our plans for expansion, conversion or renovation of the hotels;

	•		Adequacy of reserves for renovation and refurbishment;

	•		Our financing plans;

	•		Our continued qualification as a REIT under applicable tax laws;

	•		Our policies and activities regarding investments, acquisitions, dispositions, financings, conflicts of interest and other matters;

	•		National and international economic, political or market conditions; and

	•		Trends affecting us or any hotel’s financial condition or results of operations.

You can identify the forward-looking statements by their use of forward-looking words, such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” or the negative of those words or similar words. You are cautioned that any such forward-looking statement is not a guarantee of future performance and involves risks and uncertainties, and that actual results may differ materially from those in the forward-looking statement as a result of various factors. The factors that could cause actual results to differ materially from those expressed in a forward-looking statement include, among other factors, financial performance, real estate conditions, execution of hotel acquisition or disposition programs, changes in local or national economic conditions and their impact on the occupancy of our hotels, military action, terrorism, hurricanes, changes in interest rates, changes in local or national supply and construction of new hotels, changes in profitability and margins and the financial condition of our operators and lessee and other similar variables.

The information contained in this Form 10-Q and in the documents incorporated by reference herein and in Boykin’s periodic filings with the Securities and Exchange Commission also identifies important factors that could cause such differences.

With respect to any such forward-looking statement that includes a statement of its underlying assumptions or bases, we caution that, while we believe such assumptions or bases to be reasonable and have formed them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material depending on the circumstances. When, in any forward-looking statement, we or our management express an expectation or belief as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis, but there can be no assurance that the stated expectation or belief will result or be achieved or accomplished.

SECOND QUARTER HIGHLIGHTS AND OUTLOOK FOR THE REMAINDER OF 2006

During the second quarter, Boykin and the Partnership entered into a merger agreement with Braveheart Investors LP (“Braveheart Investors”), an affiliate of Westmont Hospitality Group and Cadim, Inc., a wholly-owned subsidiary of Caisse de depot et placement du Quebec. For each outstanding common share, our common shareholders will be entitled to receive merger consideration, determined pursuant to formulas set forth in the merger agreement, equal to $11.00 per share, less the per share amount of any pre-closing dividends paid by Boykin with respect to the common shares. The pre-closing dividends will be based upon Boykin’s estimated undistributed taxable income as of the closing date and are currently estimated to total approximately $3.00 per share. The exact amount of these pre-closing dividends will depend on a number of factors, including the amount of the Company’s taxable income before the Company merger effective time. Pursuant to the merger agreement, holders of depositary shares representing a 1/10^th interest in our 10 ¹/2% Class A Cumulative Preferred Shares, Series 2002-A will be entitled to receive $25.00 per depositary share, plus all accrued and unpaid dividends (whether or not declared).

Our Board of Directors has unanimously approved the merger agreement and has recommended the approval of the transaction by our common shareholders. Holders of common shares as of August 4, 2006 will be asked to vote on the proposed transaction at a special meeting that will be held on September 12, 2006. Completion of the transaction, which is expected to occur during September 2006, is contingent on customary closing conditions and the approval of our common shareholders. Availability of financing for the mergers is not a condition to Braveheart Investors’ obligations to close. Please see further discussion regarding risk factors surrounding the potential merger under “Risk Factors” below.

In addition, immediately prior to the merger effective time, Boykin has agreed to sell, to entities controlled by Robert W. Boykin, interests in the Pink Shell Beach Resort and Spa and the Banana Bay Resort & Marina – Marathon. These sales are conditioned on the completion of the mergers and will not occur if the merger agreement is terminated or the mergers do not occur. The closing of the merger is not contingent upon these sales occurring.

Revenue per available room (RevPAR) for the second quarter for all hotels owned or partially owned by Boykin as of August 8, 2006 and for all periods presented, excluding properties not operating during such periods due to damage caused by hurricanes, increased 3.7% to $74.01 from last year’s $71.38. The RevPAR increase is a result of an 8.2% increase in average daily rate to $106.76 from last year’s $98.71 and a decrease in occupancy to 69.3% during the second quarter of 2006 from 72.3% during the same period in the prior year. Refer to the “Results of Operations” section below for further discussion of our second quarter and year to date 2006 results compared to 2005.

In July 2006, we closed on the sale of the Radisson Suite Beach Resort – Marco Island to Marriott Ownership Resorts, Inc. for a purchase price of $58.0 million. In July 2006, the Doubletree Guest Suites Melbourne Beach Oceanfront hotel, formerly known as the Melbourne Suites Beach Resort, resumed operations. The Hilton Melbourne Beach Oceanfront hotel is expected to resume operations in August 2006. The hotels were closed due to damage suffered as a result of Hurricane Frances in September 2004.

On the development front, we are progressing with the final condominium hotel project at the Pink Shell Beach Resort and Spa. This project, Captiva Villas, will conclude the redevelopment of the resort and will contain 43 beach-front units. Construction commenced in late 2005 and is scheduled for completion in the first quarter of 2007. The units in the new building are being sold as condominiums, with the anticipation that the owners will put their unused room nights back to the resort by contract.

Based upon our year to date results and our current booking trends, we are anticipating that the third quarter RevPAR for our entire portfolio will be 4.0% to 6.0% above the same period last year. Net income attributable to common shareholders per share is expected to range from $1.27 to $1.31 for the third quarter. We expect that our funds from operations attributable to common shareholders (“FFO”) could range between $0.10 and $0.14 per fully-diluted share for the third quarter. This guidance incorporates the impact of the sale of the Radisson Suite Beach Resort – Marco Island but does not incorporate any impact from further property disposition activity which may occur or the impact of the proposed merger. For a definition of FFO, a reconciliation of net income to FFO and why we believe FFO is an important measure to investors of a REIT’s financial performance, see the “Non-GAAP Financial Measures” section below.

During the second quarter, our Board of Directors declared a dividend on our preferred shares of $6.5625 per preferred share or $0.65625 per depositary share. The dividends were payable to shareholders of record as of June 30, 2006 and were paid on July 14, 2006. The Board did not declare a common share dividend for the second quarter. In 2006, we expect to make common share dividend distributions sufficient to satisfy the distribution requirements relating to 2005 REIT taxable income. The declaration of the distribution must be made prior to September 14, 2006; however, the exact timing of payment will be dependent upon projections of cash available for distribution and other factors considered relevant by the Board of Directors.

CRITICAL ACCOUNTING POLICIES

Investment in Hotel Properties

We review our hotel properties for impairment whenever events or changes in circumstances indicate the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the properties due to declining national or local economic conditions, new hotel construction in markets where the hotels are located or changes in the expected holding period of the property. When such conditions exist, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel property are equal to or exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel property’s estimated fair market value is recorded and an impairment loss recognized. We did not believe that there were any factors or circumstances indicating impairment in the second quarter of 2006.

If actual conditions differ from those in our assumptions, the actual results of each asset’s future operations and fair market value could be significantly different from the estimated results and value used in our analysis. Our operating results are also subject to the risks discussed within this Quarterly Report on Form 10-Q.

Revenue recognition

Hotel Condominium Revenues-

The related gross rental income generated by units put back to the resort by contract for use as hotels rooms and the units owned by Boykin is recorded by the resort and included in hotel revenues within the consolidated financial statements. Under the terms of their contracts, a percentage of the gross rental income of each unit is to be remitted to the respective unit owner. The remitted amounts are recorded as expenses within the property taxes, insurance and other line of the consolidated financial statements.

Percentage of completion — In 2006, we began recognizing revenue related to the Captiva Villas project under the percentage of completion method for units meeting specified criteria. Condominium project revenues and expenses are recognized on the percentage of completion method upon satisfaction of the following criteria: (a) construction is determined to be beyond a preliminary stage, (b) the buyer is not entitled to a refund except for nondelivery of the unit, (c) sufficient units are under binding contract to assure the entire property will not revert to rental property, (d) sales prices have been determined to be collectible, and (e) aggregate sales proceeds and costs can be reasonably estimated. In 2006, revenue was recognized under percentage of completion accounting as the Captiva Villas project had satisfied the criteria outlined above. Percentage of completion accounting involves the use of estimates for the relation of revenues on sold units to total revenues of the project, for determinations of sales price collectibility, and for total cost of the project. Revenue for units not meeting the criteria is recognized on the completed contract method.

Insurance Recoveries –

Since 2003, we have had several significant open insurance claims for water infiltration remediation and hurricane damage.

We record insurance recoveries in an amount equal to the losses recorded by the property being covered as the losses are recognized until such time as those recoveries are deemed not probable or reasonably estimable. Amounts in excess of those losses are recognized to the extent that cash has been received or a settlement has been reached and the amount is not considered to be an advance on future losses. Business interruption recoveries are reflected as other hotel revenues within the consolidated financial statements. Property insurance recoveries are reflected as gain on sale/disposal of assets within the consolidated financial statements. Fees due to service providers in connection with casualty insurance recoveries are reflected as reductions in the gain recognized. Fees due to service providers related to business interruption insurance recoveries are reflected as corporate general and administrative expenses within the consolidated financial statements.

As other property insurance claims are filed for repair work done at the properties, we record estimated recoveries to offset the costs incurred, less appropriate deductibles.

FINANCIAL CONDITION

June 30, 2006 Compared to December 31, 2005

Included in restricted cash as of December 31, 2005 was $22.7 million of funds from the sale of the Hampton Inn San Diego Airport/Sea World which were held by a third party intermediary for potential use in a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code. During January 2006, the potential like-kind exchange was cancelled, and the cash held by the third party intermediary was released from restricted and transferred into operating cash.

As a result of the progress made regarding the Captiva Villas project at the Pink Shell Beach Resort and Spa, as of June 30, 2006, outstanding accounts receivable related to the recognition of revenue for the units based upon the percentage of completion method totaled $1.2 million. Deposits received from the pre-sales totaling $4.6 million are recorded as accounts payable and accrued expenses as of June 30, 2006. The portion of the deposits available for use as payment of construction costs approximated $2.2 million. The remaining portion that is not available is reflected in restricted cash. Costs incurred in the preparation for and the commencement of construction of the units in excess of revenue recognized totaled $5.3 million and $1.9 million as of June 30, 2006 and December 31, 2005, respectively, and are reflected in the consolidated balance sheets as other assets.

RESULTS OF OPERATIONS

Quarter Ended June 30, 2006 Compared to Quarter Ended June 30, 2005

Total revenues from continuing operations increased slightly to $51.3 million for the second quarter 2006 versus $51.2 million for the same period in 2005. Hotel revenues for the three months ended June 30, 2006 were $51.0 million, slightly lower than $51.1 million in hotel revenues for the same period in 2005. Included in second quarter 2005 hotel revenues is $1.3 million of business interruption insurance recoveries related to the two Melbourne properties which were closed at the time. There were no revenues or insurance recoveries recorded related to the two Melbourne hotels during the second quarter of 2006. Included in 2006 hotel revenues is approximately $0.6 million related to the Banana Bay Resort & Marina which was acquired earlier in 2006. For further information regarding changes in hotel revenues, see the

table below which illustrates the key operating statistics of our hotels, including RevPAR. Offsetting the decrease in hotel revenues is the $0.2 million inclusion of revenues from condominium development and unit sales as a result of the progress made on the Captiva Villas project during 2006.

Hotel operating profit margins, defined as hotel operating profit (hotel revenues less hotel operating expenses) as a percentage of hotel revenues, of the consolidated hotels operated under the TRS structure included in continuing operations for the second quarter of 2006 were 29.0%, a decrease from 30.3% for the second quarter of 2005. Excluding all business interruption amounts from 2006 and 2005 and the Banana Bay Resort & Marina which was acquired during 2006, hotel operating profit margins for the portfolio increased to 29.9%, from 29.5% in 2005.

Property taxes, insurance and other increased approximately $0.5 million to $4.6 million for the second quarter of 2006 versus the second quarter of 2005, primarily as a result of increases in insurance costs due to rising insurance rates.

Cost of condominium development and unit sales of $0.2 million for the second quarter of 2006 related to the progress of the Captiva Villas project. There were no similar costs recorded during the second quarter of 2005 as the project had not met established criteria at that time.

Corporate general and administrative expenses for the second quarter of 2006 increased approximately $0.2 million from the same period in 2005. During the second quarter of 2006, the Company incurred professional fees and expenses related to the proposed merger totaling approximately $2.6 million versus approximately $0.4 million during the second quarter of 2005. These increased costs were partially offset by a decrease in compensation expense of approximately $1.9 million from the second quarter of 2005. Contributing to this decline was $1.0 million of non-recurring second quarter 2005 expenses related to compensation plans and agreements which were contingent or valued based upon our common share price combined with a $0.9 million decline in second quarter 2006 bonus expense from 2005 as a result of the reversal of a portion of the 2005 bonus accrual.

Interest income decreased approximately $0.3 million during the quarter ended June 30, 2006 versus the second quarter of 2005 as a result of lower amounts of cash and restricted cash on hand throughout the period as well as the decrease in the fair market value of the employee deferred compensation rabbi trust accounts, versus increases during the prior year period.

Interest expense decreased from $3.0 million to $2.7 million from the second quarter of 2005 to the second quarter of 2006 as a result of the payoff of the outstanding balance of the original $108.0 million term loan during the second quarter of 2005 partially offset by the addition of the loan supporting the Banana Bay Resort & Marina – Marathon acquired during 2006 and an approximate $32.3 million increase in the weighted average outstanding balance on our credit facility at an approximate 1.6% higher weighted average interest rate.

Amortization of deferred financing costs increased approximately $0.2 million to $0.5 million from the second quarter of 2005 to the second quarter of 2006 primarily as a result of the increased deferred costs to be amortized associated with the second quarter 2005 expansion of the secured credit facility which were partially offset by the absence of the amortization of the deferred costs related to the original $108.0 million term loan which was repaid during the second quarter of 2005.

As a result of the above, second quarter 2006 resulted in net loss before discontinued operations of $1.2 million compared with $0.2 million in the same period last year.

In accordance with SFAS No. 144, the results of operations of the French Lick Springs Resort and Spa and the Clarion Hotel & Conference Center sold during 2005, the joint venture which owned and leased out the Hampton Inn San Diego Airport/Sea World sold in 2005, and the Radisson Suite Beach Resort – Marco Island which was held for sale as of June 30, 2006 for the three months ended June 30, 2006 and 2005, have been reclassified as discontinued operations in the accompanying financial statements. Please refer to note 5 of our Notes to Consolidated Financial Statements included within this Quarterly Report on Form 10-Q for a summary of such operations.

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005

Total revenues from continuing operations increased to $100.0 million for the first six months of 2006 versus $99.6 million for the same period in 2005. Hotel revenues for the six months ended June 30, 2006 were $98.7 million, a 0.8% decrease from $99.4 million in hotel revenues for the same period in 2005. Included in hotel revenues for the first six months of 2005 is $1.3 million related to a business interruption insurance claim for a property which had rooms out of service as a result of a remediation project during 2003, the first half of 2004 and 2005, as well as $4.0 million of business interruption insurance recoveries related to the two Melbourne properties which were closed at the time. There were no revenues or insurance recoveries recorded related to the two Melbourne hotels during the first six months of 2006 and only approximately $21,000 of business interruption insurance recoveries related to the property which was remediated. Included in 2006 hotel revenues is approximately $1.1 million related to the Banana Bay Resort & Marina which was acquired during the first quarter of 2006. For further information regarding changes in hotel revenues, see the table below which illustrates the key operating statistics of our hotels, including RevPAR. Offsetting the decrease in hotel revenues is the $1.2 million inclusion of revenues from condominium development and unit sales as a result of the progress made on the Captiva Villas project during 2006.

Hotel operating profit margins, defined as hotel operating profit (hotel revenues less hotel operating expenses) as a percentage of hotel revenues, of the consolidated hotels operated under the TRS structure included in continuing operations for the first six months of 2006 were 27.5%, a decrease from 30.7% for the first six months of 2005. Excluding all business interruption amounts from 2006 and 2005 and the Banana Bay Resort & Marina which was acquired during 2006, hotel operating profit margins for the portfolio increased to 28.1%, from 27.7% in 2005.

Property taxes, insurance and other increased approximately $0.7 million to $9.1 million for the first six months of 2006 versus the first six months of 2005, primarily as a result of increases in insurance costs due to rising insurance rates partially offset by refunds and reductions related to property taxes.

Cost of condominium development and unit sales of $1.1 million for the first six months of 2006 related to the progress of the Captiva Villas project. There were no similar costs recorded during the first six months of 2005 as the project had not met established criteria at that time.

Corporate general and administrative expenses for the first six months of 2006 increased approximately $1.0 million from the same period in 2005. During the first six months of 2006, the Company incurred professional fees and expenses related to the proposed merger totaling approximately $3.3 million versus approximately $0.4 million during the first six months of 2005. These increased costs were partially offset by a decrease in compensation expense of approximately $1.9 million from the first six months of 2005. Contributing to this decline was $1.1 million of non-recurring 2005 expenses related to compensation plans and agreements which were contingent or valued based upon our common share price combined with a $0.8 million decline in 2006 bonus expense from 2005 as a result of the reversal of a portion of the 2005 bonus accrual.

Interest income increased approximately $0.2 million during the six months ended June 30, 2006 versus the first six months of 2005 primarily as a result of increases in the fair market value of the employee deferred compensation rabbi trust accounts versus decreases during the prior year period.

Interest expense decreased from $6.2 million to $5.6 million from the first six months of 2005 to the first six months of 2006 as a result of the payoff of the outstanding balance of the original $108.0 million term loan during 2005 partially offset by the addition of the loan supporting the Banana Bay Resort & Marina – Marathon acquired during 2006, the recognition of $0.2 million of interest expense related to the deferred gain recognition on the 2005 sale of the San Diego property and an approximate $29.5 million increase in the weighted average outstanding balance on our credit facility at an approximate 2.2% higher weighted average interest rate.

Amortization of deferred financing costs increased approximately $0.3 million to $0.9 million from the first six months of 2005 to the first six months of 2006 primarily as a result of the increased deferred costs to be amortized associated with the second quarter 2005 expansion of the secured credit facility which were partially offset by the absence of the amortization of the deferred costs related to the original $108.0 million term loan which was repaid during the second quarter of 2005.

Equity in income of unconsolidated joint ventures including gain on sale decreased approximately $10.9 million from the first six months of 2005 to the first six months of 2006. The results of the first six months of 2005 included the recognition of our share of the gain on the sale of Hotel 71, which was owned by one of our unconsolidated joint ventures.

Gain on sale/disposals of assets during the first six months of 2005 totaled $6.9 million as a result of the recording of property insurance proceeds received or due to us in excess of the net book value of the disposed assets related to water infiltration remediation and the damages suffered by the Melbourne properties from Hurricane Frances.

As a result of the above, the first six months of 2006 resulted in net loss before discontinued operations of $3.7 million compared with net income before discontinued operations of $15.0 million in the same period last year.

In accordance with SFAS No. 144, the results of operations of the French Lick Springs Resort and Spa and the Clarion Hotel & Conference Center sold during 2005, the joint venture which owned and leased out the Hampton Inn San Diego Airport/Sea World sold in 2005, and the Radisson Suite Beach Resort – Marco Island which was held for sale as of June 30, 2006 for the six months ended June 30, 2006 and 2005, have been reclassified as discontinued operations in the accompanying financial statements. Please refer to note 5 of our Notes to Consolidated Financial Statements included within this Quarterly Report on Form 10-Q for a summary of such operations.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, funds from operations attributable to common shareholders (“FFO”) and earnings before interest, taxes, depreciation and amortization (“EBITDA”), which are measures of our historical financial performance that are not calculated and presented in accordance with GAAP. The following discussion defines these terms and describes why we believe they are useful measures of our performance as well as provides a reconciliation from GAAP measures to these non-GAAP measures for each of the three and six month periods ended June 30, 2006 and 2005.

Neither FFO nor EBITDA represent cash generated from operating activities as determined by GAAP and neither should be considered as an alternative to GAAP net income as an indication of the Company’s financial performance or to cash flow from operating activities as determined by GAAP as a measure of liquidity, nor is either indicative of funds available to fund cash needs, including the ability to make cash distributions. FFO and EBITDA may include funds that may not be available for the Company’s discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions, and other commitments and uncertainties.

FFO

The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in April 2002 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties, plus real estate related depreciation and amortization, and after comparable adjustments for our portion of these items related to unconsolidated entities and joint ventures. We believe that FFO is helpful as a measure of the performance of an equity REIT because it provides investors and management with another indication of the Company’s performance prior to deduction of real estate related depreciation and amortization.

We compute FFO in accordance with our interpretation of standards established by NAREIT which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the NAREIT definition differently than we do.

The following is a reconciliation between net income (loss) and FFO for the three and six months ended June 30, 2006 and 2005, respectively (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Net income (loss)	$	(475	)	$	7,227		$	(1,327	)	$	23,119
Minority interest		(434	)		934			(912	)		3,389
Gain on sale/disposal of assets		(6	)		(7,856	)		(6	)		(14,732	)
Gain on sale/disposal of individual assets included in discontinued operations		(133	)		(366	)		(672	)		(366	)
Real estate related depreciation and amortization		5,179			5,470			10,393			10,941
Real estate related depreciation and amortization included in discontinued operations		149			394			373			1,005
Equity in income of unconsolidated joint ventures including gain on sale		(209	)		(93	)		(212	)		(11,159	)
FFO adjustment related to joint ventures		345			204			463			(190	)
Preferred dividends declared		(1,188	)		(1,188	)		(2,376	)		(2,376	)


Funds from operations after preferred dividends	$	3,228		$	4,726		$	5,724		$	9,631
Less: Funds from operations related to minority interest		430			634			763			1,292


Funds from operations attributable to common shareholders	$	2,798		$	4,092		$	4,961		$	8,339

EBITDA

We believe that EBITDA is helpful to investors and management as a measure of the performance of the Company because it provides an indication of the operating performance of the properties within the portfolio and is not impacted by the capital structure of the REIT.

The following is a reconciliation between operating income and EBITDA for the three and six months ended June 30, 2006 and 2005, respectively (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Operating income	$	1,077		$	2,124		$	756		$	5,209
Interest income		92			422			597			434
Other income		—			—			16			—
Real estate related depreciation and amortization		5,179			5,470			10,393			10,941
EBITDA attributable to discontinued operations		920			995			2,431			2,450
Company’s share of EBITDA of unconsolidated joint ventures		503			423			788			500
EBITDA applicable to joint venture minority interest		(104	)		(32	)		(192	)		(64	)

EBITDA	$	7,667		$	9,402		$	14,789		$	19,470

Key Hotel Operating Statistics

The following table illustrates key operating statistics of our portfolio for the three and six months ended June 30, 2006 and 2005:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
All Hotels (17 hotels) (a)
Hotel revenues (in thousands)	$	52,870		$	52,053		$	101,856		$	99,336
RevPAR	$	74.01		$	71.38		$	71.23		$	67.72
Occupancy		69.3	%		72.3	%		67.4	%		68.0	%
Average daily rate	$	106.76		$	98.71		$	105.69		$	99.55
Comparable Hotels (16 hotels) (b)
Hotel revenues (in thousands)	$	50,448		$	49,831		$	97,542		$	95,427
RevPAR	$	72.70		$	70.47		$	70.30		$	67.12
Occupancy		68.6	%		71.7	%		66.9	%		67.6	%
Average daily rate	$	105.96		$	98.34		$	105.06		$	99.23


(a)		Includes all hotels owned or partially owned by Boykin as of August 8, 2006 and for all periods presented, excluding properties not operating during such periods due to damage caused by hurricanes.

(b)		Includes consolidated hotels owned or partially owned by Boykin as of August 8, 2006 and for all periods presented and operated under the TRS structure, excluding properties not operating during such periods due to damage caused by hurricanes.

LIQUIDITY AND CAPITAL RESOURCES

While the merger agreement is in effect, we are required to operate in the ordinary course and are prohibited from taking certain actions without Braveheart Investor’s consent. The merger agreement contains significant limitations on our operations pending the closing of the merger.

Our principal source of cash to meet our cash requirements, including dividends to shareholders, is our share of the Partnership’s cash flow from the operations of the hotels and condominium sales as well as borrowings under our credit facility. Cash flow from hotel operations is subject to all operating risks common to the hotel industry, including, but not limited to:

	•		Competition for guests from other hotels;

	•		Adverse effects of general and local economic conditions;

	•		Dependence on demand from business and leisure travelers, which may be seasonal and which may be adversely impacted by health and safety-related concerns;

	•		Increases in energy costs, airline fares, and other expenses related to travel, which may deter traveling;

	•		Impact of the financial difficulties of the airline industry;

	•		Increases in operating costs related to inflation and other factors, including wages, benefits, insurance and energy;

	•		Weather-related issues;

	•		Increases in supply of rooms as a result of the construction of new hotels; and

	•		Actual or threatened acts of terrorism and actions taken against terrorists that causes public concern about travel safety.

The cash flow from condominium development is subject to risk factors common to real estate sales and development, including, but not limited to:

	•		Competition from other condominium projects;

	•		Construction delays;

	•		Reliance on contractors and subcontractors;

	•		Construction cost overruns;

	•		Market pressures surrounding pricing of condominium units and their effect on condominium purchasers willingness to close on the sales; and

	•		The ability of the condominium purchasers to secure financing.

As of June 30, 2006, we had $12.2 million of unrestricted cash and cash equivalents, $7.1 million of restricted cash for the payment of capital expenditures, real estate taxes, interest and insurance and $2.4 million of restricted cash representing deposits on condominium sales.

We have a $100.0 million credit facility ($34.0 million outstanding as of June 30, 2006) to fund acquisitions of additional hotels, renovations and capital expenditures, and for our working capital needs, subject to limitations contained in the credit agreement. The borrowing base availability under the credit facility was $99.2 million at June 30, 2006. The facility was reduced to $60.0 million effective July 1, 2006, and the outstanding balance was repaid in full on July 20, 2006. For information relating to the terms of our credit facility and our term note please see Notes 6 and 7, respectively, of the Notes to Consolidated Financial Statements of Boykin Lodging Company included in this Quarterly Report on Form 10-Q.

The credit facility contains covenants regarding overall leverage and debt service coverage. At June 30, 2006, we were in compliance with the covenants of the credit facility. No assurance can be made that we will comply with such covenants in the future. Our $130.0 million term note payable and our $7.8 million term note payable are comprised of property-specific mortgages and have only financial reporting covenants. There were outstanding borrowings at June 30, 2006 totaling $103.9 million against our term notes payable.

Subject to the terms of the merger agreement, we may seek to negotiate additional credit facilities, replacement credit facilities, or we may issue debt instruments. Any debt incurred or issued by us may be secured or unsecured, long-term, medium-term or short-term, bear interest at a fixed or variable rate, and be subject to such other terms as the Board of Directors considers prudent. The availability of borrowings under the credit facility is constrained by borrowing base and loan-to-value limits, as well as other financial performance covenants contained in the agreement. There can be no assurance that funds will be available in anticipated amounts from the credit facility.

We have considered our short-term (defined as one-year or less) liquidity needs and the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet these needs. We expect our principal short-term liquidity needs will be to fund normal recurring expenses, debt service requirements, development projects, distributions on the preferred shares, expected common share dividends and any distribution required to maintain our REIT status. We anticipate that these needs will be met with cash on hand, cash flows provided by operating activities, cash availability under the credit facility, new borrowings, and proceeds from dispositions of non-core assets. We also

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The nature of our operations exposes us to the risk of claims and litigation in the normal course of business.

With regard to the case entitled Boykin Hotel Properties, L.P. vs. Liberty Mutual Fire Insurance Company, filed in the Court of Common Pleas, Cuyahoga County, Ohio on November 16, 2005, Case No. CV 05 577457 and removed to the United States District Court, Northern District of Ohio, Eastern Division on December 22, 2005, Case No. 1:05cv2949 (as further described in our Annual Report on Form 10-K for the year ended December 31, 2005), the initial case management conference occurred on March 22, 2006 and initial discovery has commenced. Although the outcome of the described matter cannot be determined, management does not expect the ultimate resolution of this matter to have a material adverse effect on our financial position, operations or liquidity.

Three shareholder complaints have been filed against each of our directors and the Company, individually and as class actions on behalf of all shareholders of the Company, in the Court of Common Pleas of Cuyahoga County, Ohio. The complaints are captioned Delduco v. Adams, et al., Case No. CV 06 593403 (filed June 6, 2006), Armstrong v. Boykin, et al., Case No. CV 06 593497 (filed June 7, 2006), and Fink v. Boykin Lodging Co., et al., Case No. CV 06 593603 (filed June 9, 2006), respectively. The Delduco complaint, in its derivative aspect, also purports to be brought on behalf of the Company. The plaintiffs in each complaint allege that they are owners of our common shares. The complaints allege, among other things, that the directors of the Company breached their fiduciary duties in connection with the proposed transaction by failing to maximize shareholder value and engaged in self-dealing by approving transactions that purportedly benefit Mr. Boykin, including the sales of the Company’s interests in the Pink Shell Beach Resort and Spa and the Banana Bay Resort & Marina — Marathon, at the expense of our public shareholders. Among other things, the complaints seek to enjoin the Company and its directors from proceeding with or consummating the mergers and to rescind, to the extent already implemented, the merger agreement and related transactions. The current understanding is that the earliest-filed action, Delduco, will be the basis for all further proceedings. Defendants have answered the Delduco complaint, as amended, denying the material allegations and raising affirmative defenses. Discovery has commenced. Based on the facts known to date, the defendants believe that the claims asserted are without merit and intend to defend these suits vigorously.

The Company is not presently subject to any other material litigation nor, to the Company’s knowledge, is any other litigation threatened against the Company, other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the liquidity, results of operations or business or financial condition of the Company.

ITEM 1A. RISK FACTORS

Risks Related to the Mergers

While the merger agreement is in effect, we are subject to business uncertainties and significant restrictions on our business activities that may have a negative impact on our operating results.

Uncertainty about the effect of the mergers on employees and contractors, including management companies, may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is consummated, and could cause contractors and others that deal with us to defer decisions concerning us, or seek to change existing business relationships with us. While the merger agreement is in effect, we are subject to significant restrictions on our business activities and must generally operate our business in the ordinary course (subject to certain exceptions or the consent of Braveheart Investors). These interim operating covenants are described in our proxy statement under the caption, “The Merger Agreement — Conduct of Our Business Pending the Mergers.” Because of these restrictions on our business activities, our ability to capitalize on growth and other business opportunities, to make other capital expenditures except as agreed with Braveheart Investors, and to sell assets will be limited, which could have a material adverse effect on our future results of operations or financial condition.

Failure to complete the mergers may negatively impact our stock price, future business and financial results.

There is no assurance that the merger agreement will be approved and adopted by our common shareholders, and there is no assurance that the other conditions to the completion of the mergers will be satisfied. Many of these conditions precedent are outside of our control. If the mergers are not completed, we will be subject to several risks, including the following:

• under certain circumstances, if the mergers are not completed, we may be required to pay Braveheart Investors a termination fee of $8.0 million or to reimburse Braveheart Investors for its out-of-pocket expenses in connection with the mergers, up to $3.5 million (although any termination fee payable would be net of reimbursed expenses);

ITEM 6. EXHIBITS


2.1	(f)	Agreement and Plan of Merger

3.1	(a)	Amended and Restated Articles of Incorporation, as amended

3.2	(b)	Code of Regulations

3.3	(c)	Amendment to the Company’s Articles of Incorporation for the 10-1/2% Class A Cumulative Preferred shares, Series 2002-A

4.1	(b)	Specimen Share Certificate

4.2	(a)	Dividend Reinvestment and Optional Share Purchase Plan

4.3	(d)	Shareholder Rights Agreement, dated as of May 25, 1999, between Boykin Lodging Company and National City Bank, as rights agent

4.3a	(e)	Amendment to Shareholder Rights Agreement dated as of December 31, 2001, between Boykin Lodging Company and National City Bank

4.3b	(f)	Second Amendment to Shareholder Rights Agreement dated as of May 19, 2006, between Boykin Lodging Company and National City Bank

4.4	(c)	Form of Preferred Share Certificate

4.5	(c)	Form of Depositary Receipt

10.1		Hotel Purchase Agreement between Boykin Marco LLC, as Seller and Marriott Ownership Resorts, Inc., as Buyer

10.2	(f)	First Amendment to Third Amended and Restated Agreement of Limited Partnership of Boykin Hotel Properties, L.P.

10.3	(f)	Directors’ Deferred Compensation Plan (As Amended and Restated Effective May 19, 2006)*

10.4	(f)	Limited Liability Company Interests and Asset Purchase Agreement related to the Pink Shell Beach Resort & Spa

10.5	(f)	Limited Liability Company Interests Purchase Agreement related to Marathon Partners Manager LLC

10.6	(f)	Agreement and Guaranty by Westbridge Hospitality Management Limited, as general partner of Westbridge Hospitality Fund, L.P., in favor of Boykin Lodging Company

10.7	(g)	Amendment to Boykin Lodging Company Long-Term Incentive Plan dated June 20, 2006*

31.1		Certification Pursuant to Rule 13a-14(a), in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification Pursuant to Rule 13a-14(a), in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(a)	Incorporated by reference from Boykin’s Form 10-Q for the quarter ended June 30, 1999.

(b)	Incorporated by reference from Amendment No. 3 to Boykin’s Registration Statement on Form S-11 (Registration No. 333-6341) (the “Form S-11”) filed on October 24, 1996. Each of the above exhibits has the same exhibit number in the Form S-11.

(c)	Incorporated by reference from Boykin’s Registration Statement on Form 8-A filed on October 3, 2002.

(d)	Incorporated by reference as Exhibit 1 from Boykin’s Registration Statement on Form 8-A filed on June 10, 1999.

(e)	Incorporated by reference from Boykin’s Form 8-K filed on January 14, 2002.

(f)	Incorporated by reference from Boykin’s Form 8-K filed on May 22, 2006.

(g)	Incorporated by reference from Boykin’s Form 8-K filed on June 23, 2006.

*	Compensatory plan or arrangement

EXHIBIT INDEX


2.1	(f)	Agreement and Plan of Merger

3.1	(a)	Amended and Restated Articles of Incorporation, as amended

3.2	(b)	Code of Regulations

3.3	(c)	Amendment to the Company’s Articles of Incorporation for the 10-1/2% Class A Cumulative Preferred shares, Series 2002-A

4.6	(b)	Specimen Share Certificate

4.7	(a)	Dividend Reinvestment and Optional Share Purchase Plan

4.8	(d)	Shareholder Rights Agreement, dated as of May 25, 1999, between Boykin Lodging Company and National City Bank, as rights agent

4.3a	(e)	Amendment to Shareholder Rights Agreement dated as of December 31, 2001, between Boykin Lodging Company and National City Bank

4.3b	(f)	Second Amendment to Shareholder Rights Agreement dated as of May 19, 2006, between Boykin Lodging Company and National City Bank

4.9	(c)	Form of Preferred Share Certificate

4.10	(c)	Form of Depositary Receipt

10.1		Hotel Purchase Agreement between Boykin Marco LLC, as Seller and Marriott Ownership Resorts, Inc., as Buyer

10.2	(f)	First Amendment to Third Amended and Restated Agreement of Limited Partnership of Boykin Hotel Properties, L.P.

10.3	(f)	Directors’ Deferred Compensation Plan (As Amended and Restated Effective May 19, 2006)*

10.4	(f)	Limited Liability Company Interests and Asset Purchase Agreement related to the Pink Shell Beach Resort & Spa

10.5	(f)	Limited Liability Company Interests Purchase Agreement related to Marathon Partners Manager LLC

10.6	(f)	Agreement and Guaranty by Westbridge Hospitality Management Limited, as general partner of Westbridge Hospitality Fund, L.P., in favor of Boykin Lodging Company

10.7	(g)	Amendment to Boykin Lodging Company Long-Term Incentive Plan dated June 20, 2006*

31.1		Certification Pursuant to Rule 13a-14(a), in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification Pursuant to Rule 13a-14(a), in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(a)	Incorporated by reference from Boykin’s Form 10-Q for the quarter ended June 30, 1999.

(b)	Incorporated by reference from Amendment No. 3 to Boykin’s Registration Statement on Form S-11 (Registration No. 333-6341) (the “Form S-11”) filed on October 24, 1996. Each of the above exhibits has the same exhibit number in the Form S-11.

(c)	Incorporated by reference from Boykin’s Registration Statement on Form 8-A filed on October 3, 2002.

(d)	Incorporated by reference as Exhibit 1 from Boykin’s Registration Statement on Form 8-A filed on June 10, 1999.

(e)	Incorporated by reference from Boykin’s Form 8-K filed on January 14, 2002.

(f)	Incorporated by reference from Boykin’s Form 8-K filed on May 22, 2006.

(g)	Incorporated by reference from Boykin’s Form 8-K filed on June 23, 2006.

*	Compensatory plan or arrangement

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Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents


									Distributions
						Additional			and Losses
	Preferred		Common			Paid-In			In Excess of			Unearned
	Shares		Shares			Capital			Income			Compensation			Total
Balance at December 31, 2005		181,000		17,594,081		$	361,309		$	(104,261	)	$	(2,498	)	$	254,550
Vesting of restricted common share grants		—		113,327			—			—			—			—
Common share purchases for treasury		—		(19,841	)		(241	)		—			—			(241	)
Dividends declared — $13.125 per Class A preferred share		—		—			—			(2,376	)		—			(2,376	)
Amortization of unearned compensation		—		—			—			—			432			432
Net loss		—		—			—			(1,327	)		—			(1,327	)

Balance at June 30, 2006		181,000		17,687,567		$	361,068		$	(107,964	)	$	(2,066	)	$	251,038



August 8, 2006	/s/ Robert W. Boykin
	Robert W. Boykin
	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)



August 8, 2006	/s/ Shereen P. Jones
	Shereen P. Jones Executive Vice President, Chief Financial and Investment Officer (Principal Accounting Officer)