Summit Hotel Properties (INN) $265mm IPO with a market capitalization of $363 million at the price range mid-point of $11.50, scheduled for the week of February 7, 2011.

CONCLUSION

An ‘up REIT" putting existing properties into an IPO to use proceeds to pay debt The problem is that the projected dividend rate is to be generated from ‘financing activities’ not operations -- not good for public investors

Cash estimates for the 12-month period ending September 30, 2011
From operating activities					$22,871
Used in investing activities					-$11,500
Used in financing activities					-$18,519
Available for distribution (before estimated cash provided by financing activities)					-$7,148
Provided by financing activities					$24,264
Available for distribution (after estimated cash provided by financing activities)					$17,116

BUSINESS

Initial portfolio is composed of 65 hotels located in 19 states with an average age of ten years, and 6,533 guestrooms

. ‘Seasoned’: 46 seasoned hotels with established track records and strong positions within their markets. . "Unseasoned": the other 19 hotels, which were either built after January 1, 2007 or experienced a brand conversion since January 1, 2008.

DIVIDEND PAYOUT

. Expected to be $.50 per year

. 4.35% rate at the price range midpoint of $11.5

CASH FLOW

However, according to INN’s projected cash flow for the 12 months ending September 30, 2012, there is a $7mm shortfall to pay dividends that is ‘expected’ to be made up from financing activities.

EMPLOYEES: 20

USE OF PROCEEDS

$252mm from sale of 23mm IPO shares plus 1.1mm private placement shares at $10.95

$227.0 million to repay debt & formation transactions of $3.2 million

. $86mm to Fortress Credit plus an ‘exit fee’ . $77mm to Lehman Bros

. $10.0 million to fund capital improvements at hotels; and

. Balance for general corporate and working capital purposes, including potential future hotel acquisitions

Summit Hotel Properties	INN, C, 4					Post IPO shares: 34mm
REIT
Sioux Falls SD						IPO Mkt
						Cap (mm)
Cash estimates for the 12-month period ending September 30, 2011						$393
From operating activities					$22,871	@$11.50
Used in investing activities					-$11,500
Used in financing activities					-$18,519
Available for distribution (before estimated cash provided by financing activities)					-$7,148
Provided by financing activities					$24,264
Available for distribution (after estimated cash provided by financing activities)					$17,116
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
annualizing Sept 9 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Summit Hotel Prop (INN)	$393	n/a	n/a	1.3	1.3	67%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		1	1	1	1	4