Interstate Hotels & Resorts, Inc. (Form: 8-K)

Wholly owned subsidiary of Interstate Hotels & Resorts, offering fully furnished one, two and three-bedroom apartments for stays of 30+ days

2. Offers more than 8,500 corporate apartments including network of Global Partners


	2004			2005
	(actual)			(forecast)
Revenue^*	$	192		$	211
Adjusted EBITDA, excluding non recurring items, special charges and discontinued operations^**	$	28		$	32
Diluted EPS	$	(.19	)	$	.27
Diluted EPS, excluding non recurring items, special charges and discontinued operations^**	$	.30		$	.35
					2005
*Adjusted EBITDA and certain cash related items:*				(forecast)
Adjusted EBITDA, excluding non recurring items, special charges and discontinued operations^**				$	32
Cash Interest				$	(5	)
Principal Amortization				$	(5	)
Cash Taxes				$	(2	)
Capital Expenditures				$	(2	)

^* Revenue presented excludes other revenue from managed properties (reimbursable costs)

^** See Schedule A attached at the end of this presentation for a reconciliation of non-GAAP financial measures.


Market Capitalization:	Debt		Maturity	Rate
Sr Term Loan	$	51.8	Jan 2008	LIBOR + 550
Sr Revolver	$	25.0	Jan 2008	LIBOR + 550
Non-recourse Note	$	3.7	Dec 2010		12	%
Promissory Note	$	2.0	Dec 2005		—
Mortgage Debt	$	19.0	Mar 2008	LIBOR + 225

Total Debt	$	101.5
Equity Market Cap (current)	$	139.4

Total Capitalization	$	240.9
Projected EBITDA	$	32.0
EBITDA Multiple		7.5x

2005 RevPAR expected to increase 7.5% to 8.5% over 2004, resulting mostly from increases in ADR

Interstate receives a portion of every incremental dollar of gross hotel revenue, whether from increases in ADR or occupancy

a. Increases in ADR will drive incentive fee growth
b. 2004 incentive fees $10.2, up to $3.8 over 2003
c. 2005 incentive fees expected to be $11
d. Incremental $1 in EBITDA from incentive fees adds to $0.02 to EPS

a. Operational/marketing expertise
b. Economies of scale
c. Re-branding capabilities
d. Product repositioning

Underperforming hotels where intensive management, selective capital improvements and re-branding can create incremental value


	Stabilized
Acquisition Price	$	20,000
Cap Ex		1,500

Total Acquisition		21,500

Debt (60%)		13,000
Equity		8,500

Total Acquisition		21,500

Net Operating Income		2,300
Less: Debt Service		(1,200	)
Addback: Management Fee		350

	$	1,450

ROE		17	%
ROE (excluding management fee add back)		13	%

⁽¹⁾

This chart is meant to be illustrative of a theoretical acquisition. There can be no assurance that such investments can be sourced or, if they are, that these financial results will be achieved.

•

Strong RevPAR growth expected, increasing Interstate’s base and incentive fee revenue

•

Incentive fee potential for Sunstone and Goldman Sachs portfolio expected to increase

•

Expansive resources will result in state-of-the-art services for hotel owners


	Year Ended
	December 31,2004
Reconciliation of Non-GAAP financial measures
Net Income (loss)		$	(5,663	)
Adjustments:
Depreciation and Amortization			9,635
Interest expense, net			7,600
Equity in gains (losses) of affiliates			1,056
Discontinued operations			1,744
Income tax expense (benefit)			(1,781	)
Minority interests (expense) benefit			(45	)

Adjusted EBITDA			12,546
Restructuring charges			4,048
Asset impairments and other write-offs (3)			11,807
Other			(55	)

Adjusted EBITDA, excluding non-recurring items, special charges and discontinued operations		$	28,346

Net Income (loss)		$	(5,663	)
Adjustments to net income (loss):
Restructuring charges			4,048
Asset impairments and other write-offs (3)			11,807
Discontinued operations			1,237
Other			(55	)
Minority interests (expense) benefit			(91	)
Income tax rate adjustment (5)			(1,962	)

Net income (loss), excluding non-recurring items, special charges and discontinued operations		$	9,321

Basic earning (loss) per share, excluding non-recurring items, special charges and discontinued operations		$	0.31
Diluted earnings (loss) per share, excluding non-recurring items, special charges and discontinued operations		$	0.30
Weighted average shares outstanding (in thousands):

Basic			30,473
Diluted (1)			30,793


	Forecast
	Year Ended
	December 31, 2005
Outlook Reconciliation (2)
Net Income (loss)		$	8,500
Depreciation and Amortization			9,200
Interest expense, net (4)			8,150
Equity in losses of affiliates			(2,100	)
Minority interest expense (benefit)			150
Income tax expense (benefit)			5,500

Adjusted EBITDA			29,400
Restructuring expenses			2,000
Asset impairments and write-offs (3)			1,000
Gain on sale of investments			(400	)

Adjusted EBITDA, excluding non-recurring items and special charges		$	32,000

Net Income (loss)		$	8,500
Adjustments to net income (loss), net of income taxes:
Restructuring expenses			2,000
Asset impairments and write-offs (3)			1,000
Gain on sale of investments			(400	)
Deferred financing costs write-offs (4)			1,850
Equity interest in the gain on sale of Hilton San Diego (6)			(3,650	)
MIP deferred financing costs write-off (7)			300
Income tax rate adjustment (5)			1,300

Net income, excluding non-recurring items and special charges		$	10,900

Income per diluted share, excluding non-recurring items and special charges		$	0.35

(1)

Diluted shares outstanding are calculated as well as the weighted average number of shares of common stock outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under our stock incentive plans and operating partnership units held by minority partners. No effect is shown for any securities that are anti-dilutive.

(2)

Our outlook reconciliation uses the mid-point of our estimates of Adjusted EBITDA, net income, and diluted EPS, all excluding non-recurring items, special charges and discontinued operations.

(3)

This amount is included in undistributed operating expenses and primarily represents write-offs of intangible costs associated with terminated management contracts and other terminated activities and other asset impairments.

(4)

For the first quarter of 2005, Interest expense, net, includes $1,847 of deferred financing fees written off in connection with the refinancing of our senior secured credit facility.

(5)

This amount represents adjustment to recorded income tax expense to bring overall effective tax rate to an estimated normalized rate of 28% in 2005, and 40% in 2004. This effective tax rate will differ from the effective tax rate reported in our historical statement of operations.

(6)

This amount is included in equity in earnings (losses) of affiliates and represents our portion of the gain on the sale of the Hilton San Diego Gaslamp, which was owned by one of our joint ventures.

(7)

This amount is included in equity in earnings (losses) of affiliates and represents our portion of deferred financing costs written off in connection with the refinancing of the MIP join venture’s senior debt.


Delaware	1-14331	52-2101815
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

4501 North Fairfax Drive, Suite 800, Arlington, Virginia		22203
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Interstate Hotels & Resorts, Inc.

June 15, 2005	By:	/s/ Christopher L. Bennett

		Name: Christopher L. Bennett
		Title: Senior Vice President, General Counsel and Secretary


Exhibit No.		Description

99.1		Investor Presentation


Date of Report (Date of Earliest Event Reported):		June 15, 2005


Registrant’s telephone number, including area code:		(703) 387-3100


Hilton Concord •		329-room hotel in San Francisco, California, East Bay area

	•		41 states in USA, DC., Canada, and Russia

			Employees


Sunstone Hotel Properties